Q: What guidance was recently published by FHA about short sales? What changes will you be making and when will they be introduced?

A: FHA issued new guidance to help responsible borrowers who did not fully payoff their mortgage due to extenuating circumstances gain access to FHA financing.

On December 16, we released a Mortgagee Letter (09-52) to lenders and underwriters regarding borrower eligibility for a new FHA mortgage after pursuing a short sale (when a previously owned property is sold for less than what is owed) or a short payoff, when there is a principal write down of indebtedness that cannot be refinanced into a new mortgage. In the letter, which took effect immediately, we stated that borrowers are considered eligible for a new FHA-insured mortgage if: 1) they were current on their previous mortgage and other debts at the time of the short sale and 2) if the proceeds from the short sale serve as payment in full. We also stated that borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement to take advantage of declining market conditions, or to purchase another property at a reduced price. Additionally, borrowers who execute a short sale while in default on their mortgage are not eligible for a FHA-insured mortgage for three years from the date of the sale. Lenders, however, can make exceptions if the default was due to circumstances beyond the borrower’s control, such as the death of the primary wage earner.

In layman’s terms, if you paid your mortgage on time even while performing a short sale, you may be able to qualify for a purchase. Please call us today with any questions you may have in regards to short sales in Phoenix Arizona and buying a new home after performing a short sale of your home.