1. The FHA Appraisal
Servicer must obtain the appraisal at their cost and will be reimbursed through HUDs claim filing process
Appraisals obtained by the Buyer, Seller, Real Estate Agent or other interested parties may not be used to establish FMV of the property
Servicer will provide a copy of the appraisal to the Homeowner, Agent or HUD, upon request
The appraised value becomes the listing price
To ensure the most current FMV is used, Mortgagee may obtain a new FHA appraisal, even if the property was appraised by and FHA Roster Appraiser within the preceding 6 months.
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2. 2
FHA PFS Basics:
Program is for people with a hardship that have to sell their home and cant due to loan being greater than the value
To participate the seller must be willing to market the home with a Realtor for at least 90 days
During the 90 days the Servicer will delay foreclosure
If the property is sold in the 90 day period the seller will receive a $1000 incentive.$750 after that.
If the property doesnt sell then the Seller is encouraged to participate in the DIL process.
No deficiency judgment will be sought if the Seller complies with the program in good faith
HECM mortgages reverse mortgages are not eligible for the PFS program
In order to participate in the PFS the Seller must be delinquent at least 30 days!(this excludes them from entering back into the market for 2 years on a conventional loan and 3 years using FHA again ((from time of claim paid))
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FHA PFS Basics:
Qualifying:
Are in default due to adverse and unforeseeable circumstances
Have negative equity
Are owner occupants ( non-owner exceptions are granted)
Have only one FHA loan*
Are not a corporation or partnership
On the 32-60 day of default consumers will be sent HUD PA-426 How to avoid foreclosure in encourage initiation into the PFS program
HUD-90035 Form information disclosure will be mailed to seller along with disclosures.
Financial information will be furnished to the Servicer and upon approval of financial distress HUD-90045 Form approval to participate will be sent
*Mortgagees are authorized to make reasonable exceptions for mortgagors who have
acquired and FHA insured property through inheritance or co-signed to enhance
the credit of another mortgagor.
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FHA PFS Basics:
Financial Analysis:
All documentation and statements either supplied electronically or on the phone will be verified.
Sellers with additional assets will be required to exhaust those assets wherever possible to make the mortgagee as whole as possible
Calculations will be entered into to examine borrowers fixed monthly expenses including food, bills, utilities outstanding debts, etc)
Calculations to verify monthly net income including anticipation of fluctuations in income
Calculating the surplus income from net that remains to offset the mortgage
During this process if the seller is deemed not eligible for the PFS or another mitigation solution then they must be given a detailed denial and 7 days to refute
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FHA PFS Basics:
Property Value:
Must be listed at the as-is appraised value completed by HUD per the HUD handbook 4150-2 (195 page manual)
Must be valid for 6 months
Distressed sales cannot be used unless that is all the comps available
Property Condition:
Any and all repairs must be approved prior to approval of FMV.
Repairs require a HUD 90041 Request for variance to be completed and approved
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FHA PFS Basics::
Title:
A title search must be performed prior to issuance of the approval to participate.
If the issues conveyed on the Prelim can be resolved they must be resolved
If discharging of a junior lien is necessary then the max contribution will be $2500 .This is $1500 from the Mortgagor/Mortgagee and $1000 from the Mortgagee that they would have given to the Mortgagor as the incentive for helping sell the home.If a promissory note is requested the Seller must do all they can to comply with those terms.Mortgagors who have the ability to do so must satisfy or obtain release of liens.
Upon completion of all of the aforementioned steps a form 90045 approval to participate will be issued.
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FHA PFS Basics:
Use of a Real Estate Broker
(page 11 of 18of ml 2008-43)
Must be engaged with Broker within 7 days of the approval to participate HUD-90045
No conflict of interest allowed for Listing Agent
No commission to be paid to Agent on their own property if doing a PFS
If FSBO Seller had already entered into a contract there is no need for a Realtor
Listing agreement must include the following language:"Seller may cancel this Agreement prior to the ending date of the listing period without advance notice to the Broker, and without payment of a commission or any other consideration if the property is conveyed to the mortgage insurer or the mortgage holder.The sale completion is subject to approval by the mortgagee.
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FHA PFS Basics :
Use of a Real Estate Broker, cont.
(page 11 of 18of ml 2008-43)
Seller must maintain the property
Arms length transaction at all times
Contract will be approved within 5 business days of receiving it and a HUD-90051 Sales Contract review form will be sent to the Seller after ensuring no hidden terms or special agreements have been entered into
Sale must occur within 4 months of approval and an extension of 2 months may be given if loan is a tier 1 http://www.hud.gov/offices/hsg/sfh/nsc/trsovrvw.cfm) or there is a signed contract that cannot perform within the 4 months
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Net Sale Proceeds and Marketing :
First 30 days offers will be approved at Minimum Net Proceeds of 88% of FMV
30-60 days offers will be approved at MNP of 86% of FMV
61 days offers will be approved at MNP of 84% of FMV
Max period is 6 months for marketing for participating if PFS they want the homes sold with in the first 90days ~ after that DIL is offered to seller.
NET SALE PROCEEDS is defined as:
Net Sale Proceeds
(FMV minus
marketing time)
The Sales Price
The Closing/Settlement Costs
Net Sale Proceeds
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More on Net Sale Proceeds: FHA PFC
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Costs Affecting NSP
Commissions not to exceed 6%
Taxes are prorated to date of closing
Sellers costs for title transfer taxes
$1000 incentive for selling home within 90 days
Up to $2500 for releasing a junior lien after 90 days max is $2250
Up to 1% of buyers closing cost contributions
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How to Qualify for a VA Compromise Agreement
Property must be sold at fair market value
Closing costs must be reasonable and customary
Must be less costly to Servicer/Investor than a foreclosure
Financial Hardship must be demonstrated by the Seller
Loans funded prior to Dec 31st 1989, the seller must sign a promissory note
No second liens!Where there are 2nd Liens, Seller must pay them or accept a promissory note
Must obtain a sales contract prior to being considered for the program
Realtors must protect the Seller by ensuring the contract states: Sales contract is contingent and/or subject to the approval of a VA Compromise Sale
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Rules for the Realtor and Seller(VACSP)
Seller should contact their Servicer or their local VA asking them to participate in the VA Compromise Sale Program (VACSP)
Seller to provide a written financial statement provided by their Servicer
Seller must complete a letter of request to participate in VACSP
Compromise Agreement Sale Application needs be completed by the Seller, obtained from the Servicer
Seller needs be prepared to sign a promissory note to the VA for the loss incurred if they had a home loan prior to 12/31/1989
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Rules for the Realtor and Seller(VACSP)
Sales contract submitted must include all signatures and state: offer contingent upon approval of a VA compromise sale
GFE Needs be provided of all costs of the loan
Letter to Servicer and VA asking to be considered for VACSP
All supporting documentation of the hardship
Compromise agreement sale Application submitted
A current VA appraisal must be acquired by Sellers Servicer and ordered by them exception is if buyer is a VA applicant that appraisal may be used instead ( note VA has a 10 day turn around window)
A compromise assumption agreement from the Servicer to the VA agreeing to modify their claim
Review of the buyer to ensure that they do indeed qualify before finalizing the process