Utah Housing Corporation Short Sale Approval
I've completed dozens of short sales over the past two years for clients who've had FHA loans with (Utah Housing Corporation). Utah Housing 'first' mortgages are typically FHA loans and insured by HUD (the U.S. Department of Housing and Urban Development). Since this is the case, the process is extremely cut and dry and these are some of the easiest short sales out there. I wish all of my short sale transactions were Utah Housing short sales.
When lisitng Utah Housing Corp short sales it typically takes 2-4 weeks for them to review the short sale packet after submission. If the packet looks good and the borrower/seller meets the Hud Preforeclosure Sale eligibility guidlines, Utah Housing Corp will then move forward with the process by ordering an appraisal. Once the appraisal is back, Utah Housing will then issue what is referred to as an 'Approval to Participate.' The Approval to Participate will state the approved price which they will accept for the short sale as well as an outline of the approval details. You will notice that I haven't even mentioned having an offer in on the property yet! Utah Housing Corp is one of the few lenders out there that will actually allow you to get approved for your short sale and give you an approved price without an offer on the table. I have noticed however, that Utah Housing does move a little faster through the process if an offer is submitted with the short sale packet and the property is listed. The approved price that is issued is simply the appraised value with a little room for flexibility. Botton line is that Utah Housing Corp must net out 88% of the 'as is' appraised value after factoring in all closing costs i.e. if the offer is brought within the first 30 days of the approval. If an offer is not received until 30 to 60 days after the approval Utah Housing Corp will reduce the required net down to 86% of the 'as-is' appraised value.
Here is a link to a quick 3 page summary of Hud's Preforeclosure Sales Program also referred to as the PFT Program with much more detail. Utah Housing Corp follows these guidlines.
If you have a FHA loan of any kind and would like to do a short sale, your lender/servicer is required to follow these guidlines. FHA short sales are great because the requirements are very clear and the process is very clear. These guidelines are also valuable if you are looking to buy a short sale that is insured by Hud. The percentages that must be netted by the lender are set in stone so there is no point in waisting your time with a low ball offer. However, if you know that they must net 86% of the appraised value and the listing agent will tell you what the lender's appraisal came in at, then you can figure out the lowest price you can purchase the property while still getting the sale approved by the underlying lender.
What many people don't realize is that if you don't meet the exact terms of the PFS program guildines you can always request a variance! Over half of the Utah Housing and FHA short sales I've completed have been for borrowers who did not meet all of the guildines, however, Utah Housing Corp was great about helping us get variances. This is one reason why it is good to have an experienced short sale agent that has worked with UHC handle your short sale.
Short Sale Approval Letter:
The short sale approval letters that are received from Utah Housing do not have a clause that releases the seller from the deficiency. There is not a clause in the letter because Hud does not go after deficiencies on those who participate in the Pre-foreclosure Sale Program in Good Faith. Here is a link to an 18 page set if guidelines sent to lenders who are process short sales of HUD insured loans. This document puts most borrowers at ease in regards to a deficiency judgement.
Here are a couple section from the guidelines that discuss deficiency judgments.
Section from Intro
'A PFS sale must be an outright sale of the property. If a foreclosure occurs after the mortgagor unsuccessfully participated in the PFS process in good faith, neither the mortgagee nor HUD will pursue the mortgagor for a deficiency judgment.'
Section P. Mortgagor Consideration
Mortgagors, acting in good faith, who successfully sell their properties using this option are relieved of their mortgage obligation and are entitled to a consideration of $750. If the closing occurs within 3 months of the approval to participate, the mortgagor will be entitled to $1,000. Unless the mortgagor’s consideration is required to release junior liens, the mortgagor may elect to accept cash paid at closing. The mortgagor may also apply a portion of or the entire amount of consideration to offset sales costs not paid by HUD; including a home warranty plan fee, costs of optional repairs, and buyer’s closing expenses. If the PFS is unsuccessful and foreclosure occurs, mortgagors who participate in the PFS Program in good faith will not be pursued for deficiency judgments by the mortgagee or HUD.
Joseph MillsPrincipal Broker
Investment Realty Advisors, LLC
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