Short sale on FHA loan - Posted by Wayne

Posted by rm on October 13, 2003 at 16:09:13:

Is this true for VA firsts as well?

One other question: if you’re paying off the FHA/VA first in full, then I’d imagine this limitation does NOT apply, correct?

Many thanks.

Short sale on FHA loan - Posted by Wayne

Posted by Wayne on October 13, 2003 at 08:11:36:

The property I’m looking at to buy and rehab has a first mortgage of 107k and a second of 12k. The current owners skipped to another state, but I have contact with the mother inlaw who was given power of attorney for this property. The value of this home if restored is 150k. I believe I can get the second mortgage reduced to 5k. The rehab work has been estimated at 20k. With closing cost and the money for rehab we do not see a gain significant enough to try this unless we get the bank to discount the pay off.
Will the lender of a FHA loan even consider a short sale. It is my understanding that this loan is gauranteed by the gov. to the lender. If this is the case is there some other method to purchase this property before it goes to foreclosure? We thought of a land contract, but these people we feel are to risky to get in that type of deal with. I was told we could apply to the lender for an assuption of the loan, If we were able to assume the loan we still would be looking at a small margin of profit.

Thank you,

Re: Short sale on FHA loan - Posted by TheShortSalePro

Posted by TheShortSalePro on October 13, 2003 at 13:57:24:

Primary consideration is given by FHA criteria to the Homeowner’s financial condition. They’ll have to make application for, and be approved for short sale consideration.

Your problem with this scenario will the second mortgage. I’d recommend that you plan on purchasing the second if the 1st mortgagee agrees, in writing, to a short sale. Why? Because in the case of a short sale, if a second is behind an FHA insured first, the second is limited to a maximum payoff of $1,000. If you’ve already been approved by the second, you may have to purchase (via an assignment)it for $5,000, then, on the HUD1 to the FHA 1st, list the payoff to the second (you) for $1,000.

The FHA short has 2 ratios to consider. They’ll want to net at least 82% of the confirmed, appraised value.

Re: Short sale on FHA loan - Posted by Eric - GA

Posted by Eric - GA on October 13, 2003 at 10:04:06:

I ended up in the office of the Loss Mitigation manager for State Home Mortgage last week. In speaking with her, she told me that she IS ALLOWED to submit shortsale offers on FHA backed loans…the offers have to be at least 80% of the AS-IS appriased value. Then HUD will consider.

Eric - GA