Quote from @David Randolph:
Quote from @Minna Reid:
I handle a ton of sales with HUD partial claims. Over the last 4 years they have been giving out these claims like candy to make their Covid workouts possible, and sellers are always surprised at the amounts owed. You can never get the partial claim reduced or forgiven. They must be paid in full.
You have two options: Pay the partial claim off out of pocket or do a short sale. In a short sale with a partial claim, your first lien position with the FHA loan takes the loss so the claim can be paid in full. Currently FHA is offering no doc short sales through 4/2025, so you wont even have to provide any financials to get your short sale approved. Just a standard borrower hardship form. Pennymac is one of the better lenders to work short sales with right now. I have done a few FHA shorts with Pennymac over the last year, and you are looking at maybe a month or two from application to approval, if the person handling the sale knows what they are doing.
However, you would have to rework your current contract to be subject to SS approval (which the buyer may or may not be into),or sell to another party, and if you are getting financing for the new house, that will likely fall apart as well.
If you have the cash to complete the transaction as is, I would recommend simply paying the balance.
Great reply. I agree with everything except the very last statement about paying cash to pay it off. The whole reason FHA developed a short sale method is to reduce the loan balance down to reality, down to what the home is worth, down to the value of the collateral at the bank accepted. if they had the cash, they wouldn't be behind on their monthly payments.
You're right I overlooked that part. OP's only option is to short sell or foreclose. The lender wont approve a DIL wihout OP trying a short sale anyway.
Threats of suing are baseless, as no one sues people without money. What would be the point. Just ignore these threats and move forward.
With a foreclosure auction less than 2 months way, its time to just start the short sale process now with Pennymac. FHA does not even require a buyer in order to start approving your for the PFS ( Preforeclosure sale program). Start now - call them and tell them you want to short sell. It's one packet, and they will have an appraisal. Once approved they will put the foreclosure on hold for a bit - 4 months minimum to be exact which will give you plenty of time to find a buyer (the existing one, or a new one), and get the sale closed. Extensions are likely granted, if needed.
You will receive $3k relocation assistance at the end ( unless you have other liens, back due water/sewer/HOA etc. ) You can also stay in the home until the sale closes, which gives you at least a few months payment free to be able to figure out where you will relocate.
