Revised “ February 4, 2009

The Preforeclosure Sale Program allows a Mortgagor in default to sell his or her home and use

the sales proceeds to satisfy the mortgage debt, even if the proceeds are less than the amount

owed. Ref: Mortgagee Letters 2003-19 and 2008-43.

transaction.

Partial Claim (if applicable).

date of application; thereafter, the incentive is reduced to $750.

the Mortgagor™s incentive has been applied.

local/state transfer tax stamp and other customary closing cost.

the œSeller™s Costs on the HUD-1 for all transactions that involve a new FHA-insured

mortgage.

ï‚· Tiered Net Sales Proceeds requirement is applicable as follows:

result in minimum net sale proceeds of 88% of the œAs-Is appraised Fair Market

Value.

will result in minimum net sale proceeds of 86% of the œAs-Is appraised Fair

Market Value.

only approve offers that will result in minimum net sale proceeds of 84% of the

œAs-Is appraised Fair Market Value.

ï‚· Unacceptable Settlement Costs:

o Repair reimbursements or allowances;

o Home Warranty Fees;

o Discount points or loan fees for non FHA-financing; and

o Lender™s title Insurance fee.

o Properties that have sustained damage may be eligible for the PFS option.

condominium™s only) or mortgagee neglect (i.e., surchargeable damages as defined

in 24 CFR Part § 203.378) mortgagees must obtain prior approval from the NSC at

the address above.

Revised “ February 4, 2009

of the cost to repair the surchargeable damage by contacting the HUD Management

and Marketing (M&M) Contractor with jurisdiction for the geographic area where

the property is located.

o A list of M&M Contractors can be found on the Internet at:

mortgage for the purpose of participating in the Preforeclosure Sale Program.

Exceptions: when it is verifiable that the need to vacate was related to the cause of default

(job loss, transfer, divorce, death), and the subject property was not purchased as rental

investment, or used as a rental for more than 18months.

closing.

increase in living expense, and documentation that verifies the Mortgagors need to vacate

the property (if applicable).

(1) Mortgagors who express an interest in the Preforeclosure Sale Option or who have been

identified by the Mortgagee as a qualified candidate for the Preforeclosure Sale Program must be

(2) The Mortgagee must obtain a standard œAs Is FHA appraisal which has been completed in

accordance with the requirements of HUD Handbook 4150.2 (Valuation Analysis for Single Family

One-to Four-Unit Dwellings). To this end, Mortgagees must:

Appraiser Roster. The selected appraiser must not share any business interest with

the Mortgagor or the Mortgagor™s agent. Appraisals obtained by the buyer, seller,

real estate agent, or other interested parties may not be used to establish the Fair

Market Value of the property for the Preforeclosure Sale Program. It is also

important to note that:

â—‹ The appraisal must contain an œAs-Is Fair Market Value for the subject property;

â—‹ The appraisal will be valid for six (6) months; and

unless they represent the only comparables within reasonable proximity of the

subject property.

ï‚· Provide a copy of the appraisal to the homeowner, sales agent, or HUD, upon request.

203.365 (c) they are responsible for the accuracy of all documentation used in the

PFS decision, including accurate and complete appraisal information.

In an effort to ensure that the most current Fair Market Value is used for the Preforeclosure Sale,

a Mortgagee may obtain a new FHA appraisal, even if the property was appraised by an FHA

Roster Appraiser within the preceding six (6) months.

Revised “ February 4, 2009

To be reimbursed through HUD™s claim filing process, the cost of the appraisal must be

reasonable and customary for the market area where the appraisal is performed. The appraisal

must be retained in the claim/servicing file, even if the Preforeclosure Sale is not approved or

completed.

(3) The Mortgagee must obtain a title search or preliminary report verifying that the title is not

impaired with un-resolvable title problems or with junior liens that cannot be discharged as

permitted by HUD.

include the date by which a signed contract for sale must be obtained and minimum acceptable

net sales price.

ï‚· The Mortgagor agrees to show good faith in attempting to market and sell the property.

the Preforeclosure Sale.

Mortgagor. The listing agreement must include a specific cancellation clause in the event

the terms of the sale are not acceptable to HUD.

(5) The Mortgagee delays foreclosure to allow pursuit of the Preforeclosure Sale.

(6) The Preforeclosure Sale period shall be four (4) months beginning upon Mortgagee approval

(automatically extended two months for Mortgagees in Tier 1; or there is a signed Contract of

Sale, but settlement can not occurred by the end of the fourth month).

(7) The Mortgagee should review marketing efforts with the Mortgagor and/or the Real Estate

Broker/Agent on a monthly basis.

(8) The sale closing must occur within six months (6), eight (8) months if Mortgagee is in Tier 1,

from the date the Mortgagee notified the Mortgagor in writing of approval to participate in the

Preforeclosure Sale Program.

If you have any question you may contact NSC at: