Archive for month August, 2009

Short Sales with FHA Backed Loans

Monday, August 24th, 2009

For the last six months (yes, we have been waiting 4 months for a response), I have been representing one of my clients in Mableton, GA, to do a Short Sale on his property.

My client gave me all the documentation I needed to make the Short Sale packet, we received an offer, and sent the complete package to the lender.  Then we sat back and waited…. And waited…. And waited…  This Big O bAnk took all the time they wanted in processing the short sale.  In one of the 100 phone calls I made, they told me that since the loan was FHA, I would be assigned to a “Special” negotiator (Man, did I feel “Special” that day), but since they had so few negotiators that managed the FHA process, I would need to be patient (More than I already had been?).

When I finally got the negotiator to look at the file, he told me that he needed a “Vacancy Letter” from my client explaining the reason why he was not living in the house.  My client explained *honestly* that he had lost his job and after several months without work, he received an offer of work in another state, so he had to move with his family.  My client, trying to be responsible, kept paying the mortgage on the “vacant” house for almost a year – all the while attempting to sell it without any luck.  When he ran out of savings, his only option was to call me and begin the short sale process.

After receiving this letter, the “special” negotiator sent me an email saying that she had declined the file.  I called and asked why???  She told me it was because the client had “Abandoned” the property.  I responded with a copy of the FHA guidelines (which they should know better than I, they are the rules they must operate by) where it states:

The property must be owner-occupied, no “walk-a ways” or investment properties. Exceptions: when it is verifiable that the need to vacate was related to the cause of default (job loss, transfer, divorce, death), and the subject property was not purchased as rental investment, or used as a rental for more than 18 months.

When this “special” negotiator understood that I knew the rules, she stated that she had proof that my client had rented the property, and FHA properties cannot be rentals…  When I asked for copies of this “proof”, the call magically was dropped, and suddenly, no one returned my calls.

My client and I appealed the case with HUD, and their response was that the only thing they were able to do was to ask the lender to review the file again. Supposedly, the bank did so, and denied the Short Sale yet again.

After this long story, I ask myself: How important is it for the Big O bAnks to pay these negotiators out of their pocket to review loans that are backed by HUD?  How much effort will this bank tell their negotiators to spend when, at the end of the day, all they are doing is servicing the loan and they won’t be the ones losing the money with a Foreclosure?

The buyer is still there, with an offer better than what HUD will get selling the house after foreclosure in a couple of months…

Does anyone have any answers or advice to share with my audience on how to respond to these disasters that happen every day with the few remaining banks that have not collapsed?