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#452660 - 05/21/16 10:08 AM Short Sales on FHA loans.
Granta Omega Offline
Member

Registered: 04/30/15
Posts: 160
Loc: Cleveland, Ohio
I have a listing I'm contemplating between keeping and taking off the market.

One problem is, we had to reduce the price several times due to the amount if work it needs, and we're wondering if the bank will find it beneficial to accept a short sale over foreclosure, as it's an FHA loan with PMI. Does the bank still get the payout for the insured loan if the short sale is approved?

Another problem is the bank offered a loan modification to bring the mortgage up to date, but given her significant other lost his job and was quit claimed, an offer of only 200 less per month still cannot be justified with her income as she is going to fall behind again soon if she were to accept it. She is also making much less now, so thousands of dollars per month lost and only a 200 dollar payment reduction makes no sense.

The house also has flood damage and needs a lot of repairs that she cannot afford, so if thru don't approve the short sale she is going to let it foreclose.

Does the bank lose less when selling through foreclosure than the insurance would pay out? That's most important I think.

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#452661 - 05/21/16 02:35 PM Re: Short Sales on FHA loans. [Re: Granta Omega]
Grampa Offline
Major Contributor

Registered: 06/30/09
Posts: 2276
Loc: Margaritaville
I do not know where you are but in FL it can take 4 years to do a foreclosure but the average is about 1,000 days. We have been told by
asset managers that in a Judicial Foreclosure State (like in FL) it can cost upwards of $50,000 to foreclose. And Yes, the Title insurance company would have to write a BIG check to the owner of the note.

IMHO, reduce the price until you get a contract and then send it to the Mortgage Services Company and see what happens. But, be aware that the PMI company will also have to approve it.

Good Luck
_________________________
"Be who you are and say what you feel, because those who mind don't matter and those who matter don't mind."
Dr. Seuss

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#459141 - 09/19/17 01:56 PM Re: Short Sales on FHA loans. [Re: Granta Omega]
mreid77 Offline
Junior Member

Registered: 09/19/17
Posts: 2
Loc: CT
FHA is the MI.
All this means is that the servicer will process the short sale per FHA guidelines....which are actually very predictable - Just google them FHA PFS Guidelines.
FHA will make the lender whole which is why FHA runs the short sale -It is FHA who is looking to save money and FHA is generally a very homeowner friendly entity.
Unless the seller does not qualify, there would be no beneficial reason for the lender to foreclose instead of approving a short sale.

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