A couple of years ago our Loss Mitigation Department presented a Workshop on the FHA Short Sale Process so other departments could be more aware of the process from start to finish. I attended the workshop because I wanted to have a better understanding of the FHA Short Sale Process.
Even though I am in the Loan Origination side of the business and do not have anything to do with the Short Sale process, I am affected by mortgages I do for Borrowers who are purchasing a short sale property. Also I am impacted by Short Sales when a Realtor I partner with is listing a property for a Seller who is going through a FHA Short Sale with us. Even though the Seller is a homeowner who did not originate the loan with me, the Realtor's experience with our Short Sale Process ends up affecting my relationship with the Realtor. Therefore, it is in my interest to at least have a basic understanding of the process a homeowner will go through before a Short Sales is granted or denied.
We basically only service FHA Insured Loans, and up until attending this workshop I was under the impression a homeowner who wanted to do a Short Sale was able to apply for a Short Sale from the very beginning. I was surprised to find out that is not the case. Homeowners need to go through a number of steps which are referred to as The FHA Short Sale Waterfall" before a homeowner can be considered a FHA Short Sale.
The purpose of "The Waterfall" is because the FIRST goal of the Loss Mitigation Department is to make it possible for the homeowner to stay in their home. So before a FHA Short Sale is granted FHA requires the Loss Mitigation Department to see if the homeowner qualifies for any of the four other options first which would keep them in their home:
- Repayment Plan
- Forbearance
- HAMP (Home Affordable Modification Program)
- Partial Claim
Once these options are explored & documented, and the homeowner does not qualify for one of these four options, then the homeowner can be considered for a FHA Short Sale. However, there are situations a homeowner can go right to Short Sale such as in the case of job relocation, or when the homeowner's financial and credit history can quickly be identified as not having any chance of qualifying for one of the first four options. But If the homeowner does qualify for one of the first four "Waterfall" options, the Loss Mitigation Department will attempt to help the homeowner retain their home.
NOTE: Before a property to be eligible for a FHA Short Sale, the property MUST be listed in the MLS with a LICENSED Realtor. FSBO's (For Sale By Owner) are NOT eligible for a FHA Short Sale.
The intention of this series of blogs is not to go into all of the details of the FHA Short Sale process, but to provide a glimpse of the road to a FHA Short Sale. Hopefully I will be able to shed some light on why the FHA Short Sale Process in many cases takes so long. In the next two blogs I will explain the requirements for an FHA Standard and Streamline Short Sale.
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Info about the author:
George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@mccuemortgage.com
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