Short Sale CASE STUDY: 004

Our First Bump In The Road

So the existing loan is apparently and FHA loan.

You can read a previous post about FHA Short Sales to get some of the details regarding some of the unique characteristics of this type of short sale but the bottom line is that this just got a little more complicated.

Not harder.  Just a little more complex.

I didn’t want to do an FHA short sale as part of the case study because it adds that extra wrinkle that doesn’t apply to other short sales. But that pretty much sums up the nature of short sales doesn’t it?  You have to role with the punches.

Specific Language Required

FHA requires there to be specific language in both the listing agreement and the purchase agreement in order to complete a short sale. For the listing agreement it needs to have this 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 considerations, if the property is conveyed to the mortgage insurer or the mortgage holder.”

I would recommend creating a listing template in ZipForms or whatever software package you use to process your listing paperwork and include this verbiage on a Listing Addendum.

The last FHA short sale I closed for Wells Fargo was just 2 months ago and they required the following language to be in the purchase agreement.

“Closing will occur within 30 days of 3rd party approval of the short sale. Buyer will not assign this contract to any other party”.

I have emailed the listing agent to let her know about the changes that need to be made to our offer and listing agreement.  I hope that the buyer (an LLC) doesn’t have an issue with not being able to assign the contract.  Hopefully their intention is to just rent the property out.

A Short Fuse

Today we get an email from the negotiator that said we have 24 hours to have the homeowner fill out a 4 page questionnaire and have it uploaded into Equator.  Here is the message:

PLEASE READ ENTIRE EMAIL CAREFULLY
               
Two documents must be uploaded within the next 24 hours. The first is the borrower’s authorization which has its own upload task, the second is the borrower verification questionnaire upload that will have a comment for hardship but is really for the borrower verification form upload.  Attached is a Borrower Verification Questionnaire Form that must be completed and uploaded through Resubmit Document Task (agent) within 24 hours. The task name will beHardship Reasons (Agent ) but this is the place to upload the completed borrower verification document. The borrower can complete the form and then you upload it or you can call the borrowers and complete the form and then upload it.  Once received and accepted, this will trigger several other tasks and we can proceed with the processing. Please do not be confused about comments indicating hardship; it is a quirk in the system. We need the attached BV form completed, the hardship letter comes later. The Realtor checklist is just to let you know what some of the items we will need as the process continues. The appraisal contact is the person the Wells Fargo appraiser can contact to gain access to the property for the interior appraisal inspection.
 
Please upload items by: 5 PM CST on 10/24/12.
Huh?
You will find that you will be given 24-48 hours to complete most tasks while they take 7-10 days.  They will often threaten to close a file out if things are not received by a certain deadline but are usually too busy to follow through with those threats.  Still, it’s best that I get this form filled out quickly and get it uploaded.
Half the battle in a short sale is having a seller that is responsive.  In this case, the seller is on top of it and engaged in the process.  We will get this completed by the deadline.

Retention Options

FHA requires the seller to explore ALL retention options before agreeing to do a short sale.  This means the seller must be screened for a Loan Modification, Forbearance Agreement or any other avenues that would allow him to retain the house.  In this case study, the seller has been turned down for those options so we should get the FHA Approval to Participate shortly.

The next update should have me completing tasks in Equator and receiving the last of the documentation I need to have a complete package.

Stay Tuned…

 

Trackbacks

  1. […] hit our first bump in the road when I found out the existing loan was an FHA loan which caused us to need to get the Approval To […]

  2. […] days were caused by not knowing up front that the existing loan was FHA.  I mentioned the specific FHA short sale requirements earlier.Obviously, losing our first buyer was a setback or this file would have been […]

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