FHA says 40 payments behind is the limit for Short Sales!

Posted on 25. May, 2018 by ctlms in Blog, Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

I have said it many times.  There are more reasons a seller can be denied for a short sale on an FHA loan than on any other type of mortgage!

Unlike many of FHA's rules for short sales, this one is simple and straightforward.

Once the loan is 40 payments delinquent, a short sale is no longer an option.

Simply put, FHA will deny any request for a short sale if the file is 40 payments or more behind.  That sounds like a long time and you could think that the homeowner "dragged it out" long enough.  The truth is that many homeowners can find themselves in this situation because they have been struggling for years to try to save the home.  Having gone through years of running around with their lender and still not having a resolution, they find themselves this far behind on payments and then someone finally suggests a short sale.  But by then it is too late if the loan is FHA.

Another challenge with this rule is that many of the mortgage servicers do not know it. Chase for instance, will have you go through the whole application and review process which can easily take 4 months and not till they send it to FHA for the final approval, do they learn that FHA rejects it for being over 40 payments behind.  This is partially due to how convoluted the FHA guidelines are.  This particular rule is actually not written in the guidelines.  But if you call the HUD National Servicing Center, they will confirm that it is, in fact, a rule.

So the take away here is that you need to find out what kind of loan you are working with and the current status of payments.  If it is FHA and over 40 payments behind, a short sale is not an option.  If it is FHA and nearing 40 payments behind, then you have very little time to get a short sale done.

As always, feel free to reach out to me with any questions.

Sean Wilder

Loss Mit Services


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