New FHA Short Sale Guidelines effective 10/1/2013. FRUSTRATING!!! I have clients that have been unemployed on and off for the past 3 years. Tried to do a loan mod and of course told to stop making payments. Denied the loan mod. Advised that home was going into foreclosure and they would have to move out. They did so. When I got involved the foreclosure process was postponed. We again tried the loan mod to go through the waterfall process, loan mod denied again, and moved to qualify for the short sale process. We were progressing until last week. Notified that as of 10/1/13, new FHA guidelines do not allow a short sale if the property is vacant and the borrowers have a credit score of 620+, and because they can't go through the short sale motions, they don't qualify for deed in lieu. How these people have a credit score that is too high to qualify for a short sale is crazy. They haven't made a house payment for years, in part due to the advice they were getting and lack of help extended to them. I escalated this with HUD, and they said they couldn't do anything unless the borrowers move back into the home. It was difficult for them to find housing, the move was stressful, and draining. Moving back in is not an option. Any Advice out there??
I initially glanced at the guidelines in Sep, I don't recall any change in that area. My introduction to FHA years ago was with a negotiator who complained that the property was not in "show condition". She already had the pictures of damage all over. I hit the ceiling. Estate, owner doesn't care (he's dead), we have a buyer, etc. Well, that was my introduction to the crazy side of HUD. She finally stopped complaining after 3 or so times.
HUD considers a short sale to be a gift to the seller (release of debt) with no consideration with the best outcome for the investor. If you put on the form that it is not being maintained, you just killed the short sale, another HUD rule.
The value of the property is supposed to be accurate from the appraisal, and with the rule change, now a BPO is added. That should take into account the condition of the property to a large extent. Since my last FHA appraisal, I no longer trust them to be fairly accurate - my property started on the market at $300K, down to $240K (per previous appraisal) for 16 months with 2 offers about $200K. When this 2nd appraisal was done, and I told him that I had an engineering report with $43K foundation repairs, the offers, the last appraisal of $260K (w/o that appraiser knowing about the foundation problems), etc., this pinhead-should-be-shot FHA appraiser came in with $400K. After objecting, giving comps, the bank brought it down to $360K. So much for rules, licenses and FHA appraisers. (It's a joke, right?)
If you get an objection from the bank, ask for a HUD variance. Anything that doesn't follow rules must be OK'd by HUD. Frequently, the negotiator won't do that and will just deny the sale. "Show condition" is one of those, for instance.
BOA sucks. How do I escalate to HUD? Anyone thought about filing a lawsuit for restraint of trade and interference with contractual relationships. Does the new guidelines say that they can be applied retroactively? I have a seller who has been trying to sell since November last year. BOA sent a "preferred agent" to his house and tried to steal the listing out from under me by offering him a greater incentive if he dropped me and went with her. He refused. Got an all cash offer that was $21,000 OVER the amount that they agreed to take under the streamline short sale program. Even so, they refused to give the seller the incentives and cut my commission in half (it was "non negotiable). When that did not work, they transferred the file to a non HAFA investor and told the seller that he was not entitled to any incentive because the investor did not participate in HAFA. When that did not work they told him that they would not pay his back taxes, a valid lien against the property. Since that time they came up that the buyer and seller were not arms length (one is black and the other is a Chinese national so no relation). After 10/01/2013 They finally told my seller that the "real" reason is that he and I were married 21 years ago something that we disclosed on our first phone call to DTS and so WE now violate the non arms length transaction since we have a "close relationship." We have been divorced for 21 years. We are not close. Last week they sent me a letter saying that I AND MY ENTIRE COMPANY was banned from doing any business of BOA because I did not disclose my relationship with the seller (my name is on the original deed of trust) forcing my seller to go find another agent and all of my agent to think about switching brokerages so that they can still do business with BOFA. Im not going to lay down that easy. What should I do?
Of course big banks are loaded with lawyers and wallow happily in lawsuits, so I would expect that to be a tough direction. I would complain to the OCC and your state attorney general. I doubt that the banking commission cares or the real estate commission.
Thanks so much for Stephen name. I have already reached out to him.