July 8, 2009

Let Me Out! My Loan-To-Value is 322 Percent!

Filed under: FHA Loan,Short Sale

We bought a house in Brevard County, FL in 2005 with an FHA backed loan. It has recently been pointed out to us that our house should not have been approved for financing because it has no heat. I contacted FHA, they confirmed houses outside of a few South Florida counties are required to have a permanent heat source.

Do we have any recourse in this situation?  We are now trying to get out of the house by way of short sale, we owe $129,000 and the home is valued at $40,000.  We need to move to pursue work opportunities in other parts of the country.

Thanks for your help!


Hi Melissa,

I’m not sure about recourse since you are short selling with those numbers.  Let’s look at short selling FHA.

A PFS is the FHA short sale program which is also known as the Pre-Foreclosure Sale.  Per HUD ML 2008-43:

“A PFS sale must be an outright sale of the property.  If a foreclosure occurs after the mortgagor unsuccessfully participated in the PFS process in good faith, neither the mortgagee nor HUD will pursue the mortgagor for a deficiency judgment.”

Also, the FHA PFS program allows a borrower to get a $1,000 check at closing.

A $1,000 check and a full release of liability sound like a nice exit out of a property that has a 322.50% LTV.

Thanks for the questions and hope this helps.


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