Distressed New Jersey Homeowners with FHA Loans should know that there are alternatives to foreclosure.  Here are some key steps if you have an FHA Loan and want to Short Sale your New Jersey home.

FHA Short Sales in NJ

NJ FHA Short Sales

FHA borrowers wishing to avoid foreclosure fall into the HUD Pre-Foreclosure Sale (PFS) Program.  No matter whom your servicer is – Bank of America, Wells Fargo, Chase, Citi or otherwise – if you have an FHA Loan and want to explore Short Sale possibilities, HUD PFS guidelines are going to be the road map.

FHA NJ Short Sales are not like traditional NJ Short Sales.  One key difference is that FHA Short Sales require homeowners review home retention options prior to being considered for the HUD PFS program.  Most commonly, this means having your NJ FHA Loan reviewed for loan modification.  In some cases, this can also mean loan forbearance or partial claim.

In my experience, very few of my clients (almost none) have had their New Jersey FHA Loans modified successfully.  By successfully, I mean permanently and with long-lasting benefits to the homeowner.  Nevertheless, this step must be taken to initiate what is known as the “Waterfall” or “Cascade” process of the HUD PFS program; until the first step (home retention) is considered, the second step (Short Sale) is not possible.

Assuming your NJ FHA Loan is not approved for a loan modification, the borrower will receive the Welcome Package, describing the HUD PFS program and its requirements.  The borrower, with assistance from his or her NJ Short Sale Realtor, must then complete the welcome package and submit income and asset documentation and send back to the servicer for review.mmDuring this step, an appraisal and title work will also be ordered by the servicer.  

Once the appraisal and title are in, and the Welcome Package returned, the borrower will be issued an Approval to Participate (ATP) (HUD-90045) in the HUD PFS program for their NJ FHA Short Sale.  The ATP must be signed and returned to the servicer within 7 days.  The ATP will also indicate the value that the NJ FHA Short Sale property should be listed at, and the amount of the FHA Seller Incentive.

Only after the ATP is issued can an offer for a NJ FHA Short Sale be evaluated.  After the offer is evaluated, the homeowner will receive a Sales Contract Review (SCR) letter, HUD-90051.  The SCR will specify the approved sale price, acceptable closing costs and net proceeds required by the servicer in order to approve the NJ FHA Short Sale.

Last but not least, the borrower will receive the Closing Worksheet Form, HUD-90052.  The homeowner, listing agent and settlement agent must all sign this form, which must be returned to the servicer after the NJ FHA Short Sale is closed.  Closing cannot occur until the final HUD-1 is approved, which should be submitted 3-5 days prior to the settlement date.

Those are your four major milestone documents for New Jersey FHA Short Sales: Welcome Package, Approval to Participate, Sales Contract Review and Closing Worksheet. 

If you have a specific question about your NJ FHA Short Sale, please contact me for a confidential appointment to discuss your situation.