Please advise - Covid-19 partial claim, Preforeclosure auction and home sale

[Sahara Faughn]

I am currently in Preforeclosure with a scheduled auction on August 20th, and I am under a special forebearance due to medical issues and having 2 small children under the age of 7. I found a buyer for my home, got a payoff statement from the mortgage company stating the payoff was $247,000 (principal at $233,000 + fees and charges), the buyer was willing to pay $271,000. I signed a commitment to sell based off of those figures. I also found somewhere to relocate my family, the seller has taken the property off market and agreed to wait for cash until I receive the funds from the sale, with a post possession 5 days out from closing. The issue presented itself about 30 minutes before we were scheduled to sign and closed the sale yesterday, HUD showed up with a partial claim that I received during the COVID-19 pandemic which brought the closing amount to $289,000, thus putting everything upside down, no cash from the sale and I would owe money. I have reached out to the mortgage company, the agent I spoke with said that the payoff is non-negotiable, I asked to speak with a supervisor and am waiting on a call back. I have contacted a HUD counseling representative and am also waiting on a response from them. From everything that I have been able to find, HUD does not forgive or back down, my mortgage company so far appears to be unwilling to back off the price, I doubt the buyer is willing to come up on their offer and I feel I am faced with 3 options: 1) I let the sale proceed and end up with no money, owing money, and no where to go, 2) The buyer proceeds to sue for the property because I signed a commitment to sell, I will end up with no way to relocate my family and nowhere to go, or 3) the home goes to auction and again, no way to relocate and nowhere to go. Is there any way to get PennyMac to lower the payoff amount, at least to just the principal amount, enough to cover the partial claim, satisfy the mortgage lender and be able to afford to relocate my family (I only need $7,000 to $10,000 to get a vehicle/uhual and move my family, and that includes the new place)? Is there a way to defer or waive the HUD partial claim? Is there anything I can do, the home is valued at $356,000 however it needs some repairs so personally, I'd put it closer to $290,000 to $300,000. I've considered a short sale, but am under contract, I think, with a buyer already due to the commitment to sell document I signed... And I've considered a deed in luie of foreclosure, but that would leave me under to relocate as well. Please any help or advise would be greatly appreciated!

Thank you 

[Bill B.]

Did you receive the $40k in Covid assistance they are asking you to repay? If so do you still have it? 

Personally I’d let it go to auction. Buyer can’t make you sell if you don’t have the funds needed to close. Worst case with auction you get to live in it for 2 more months and don’t have to pay to sell. Best case is they get more than this buyer was willing to pay. Hopefully that “buyer” was a flipper and the property is worth closer to what you think it is. But it’s all upside no downside to let it go to auction. 

Tell buyer, 1) I don’t have funds required to close. 2) you can raise your offer to the amount needed to pay off both debts or walk away. 3) it’s going to auction in 2 months. You can buy it then if you think thsi price is too high. 

Meanwhile I assume you have been and will continue to live “rent free” for 2 more months. Use that savings to move your family to a much more affordable situation. Hopefully with relatives that have spare room to rent affordable. But zero chance I would pay the extra to sell to this one buyer or expect debt to be forgiven. Good luck.