FHA Loan Modification Review Before A Short Sale
When encountered many people will ask “is this a new policy?” The answer is no, this is not a new policy and it has been a requirement by HUD for all FHA loans. HUD guidelines require that all borrowers be reviewed for all home retention options prior to being reviewed for a short sale. If a borrower is denied for a loan modification then they will be able to proceed with a short sale. If a borrower is approved for deemed qualified for a loan modification they must sign and return the FHA loan modification review paperwork. If the paperwork isn’t signed and returned in a timely manner it will not result in an incomplete review and the borrower will likely be reviewed again for a loan modification. We were advised by HUD that if the borrower accepts the modification but can not make the payments then that would result in a denial after the modification trail period expired.
We have encountered cases were a FHA loan modification review was not required before going into a short sale. This may happen due to some mortgage servicers not fully enforcing HUD guidelines. It may also depend on hardship and other factors. A variance may even be able to be placed to circumvent a FHA loan modification review. It is not guaranteed you will be required to be reviewed for a loan modification before a short sale, but don’t be surprised if it happens. This is often considered a burden to agents and homeowners who don’t intend to keep the home, but it is a hurdle that must be overcome if it presents itself. To have the best chances of getting into a short sale quickly or being approved for a loan modification please fill out the form below. For more information on the FHA loan modification program click here.