Effective October 1, 2013 U.S. Department of Housing and Urban Development (HUD) has announced the following changes to their Federal Housing Administration (FHA) Short Sale requirements:
• New or different documentation requirements for verifying assets, income, and expenses
• Deficit Income Test (DIT) will be used to determine a homeowner’s financial hardship
• Possible elimination of the financial hardship/deficit income preforeclosure sale requirement for:
– service members who have received Permanent Change of Station (PCS) Orders, or
– homeowners who are deemed eligible for a streamlined preforeclosure sale option
• New validation requirements for appraisals
• Different dual agency/brokerage requirement: to meet the new short sale purchase contract addendum requirements, brokers and their agents may represent either the buyer or the seller, but not both parties
Not only are short sale changes coming as of Oct 1st, but please be reminded that the Federal Debt Relief Act of 2007 will expire at the end of 2013. While it initially expired in 2012, it was extended for another year. It is unknown if Congress will extend it again. The Federal Debt Relief Act generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
As a result of these looming changes, time is now to pursue a short sale. If you have not already started the process, you may lose out on some of the biggest benefits of a short sale if you continue to delay.