The U.S. Department of Housing and Urban Development (HUD) has released an update on its rules for deeds-in-lieu of foreclosure (DIL) and pre-foreclosure sales (PFS) of FHA single-family properties in Mortgagee Letter 2014-15 released on July 10, 2014.
The guidelines set a priority order for FHA mortgagees in default or at imminent risk of default, stating that the borrower must be considered first for a PFS transaction before being evaluated for a DIL transaction.
Other modifications of existing policy include:
- Requirements for real estate agents and brokers participating in PFS transactions;
- An initial listing period requirement for PFS transactions;
- Updated sample language for the PFS Addendum;
- Documentation requirements for verifying assets, income, and expenses;
- Use of the Deficit Income Test (DIT);
- The elimination of the financial hardship/deficit income PFS requirement for a servicemember who has received Permanent Change of Station (PCS) Orders;
- Validation requirements for appraisals;
- The criteria under which the Department will permit non-arms-length PFS transactions; and
- The minimum marketing period for all PFS transactions.
The new regulations will go into effect October 1, 2014, although lenders can opt to implement them before the deadline.
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