This is awesome! On December 24, 2008, The U.S. Department of Housing and Urban Development released the “Mortgagee Letter 2008-43″. What does this mean to you, the real estate investor? Well, to summarize:

1. Change in NET to lender. First, let’s cover the “bad” part. Well, it’s sort of bad, but if you play this right, it’s going to be irrelevent to you. The original NET of 82% has changed. The new NET is 88% if sold within 30 days, 86% percent if sold within 60 days, and 84% if sold after 60 days. Why does this not REALLY matter? See #2.

2. Removal of 63% or greater property appraisal versus debt. This will help everybody! The old FHA guidelines called for the appraisal to come in at or above 63% of the loan balance plus past due interest and late fees not including attorney fees. This guideline has been removed, which opens up FHA short sales for those areas that have seen huge depreciation as well as those properties that require massive repairs!

3. Property (by exception) no longer needs to be owner occupied. What this means is that FHA will still allow a short sale, even if the property in not owner occupied. The details are in section B (Mortgagor Qualifications) in the mortgagee letter. It will be interesting to see how the lenders interpret this section over time.

4. Increased amount to Junior Liens. FHA now allows up to $2500 to Junior liens ($1000 of this comes from the Seller Incentive).

5. Up to $1000 in seller incentives. FHA will allow the homeowner to receive up to $1000 at closing as an incentive for participating in the short sale program. However, the NET to the lender must still be at or above the 88%, 86%, or 84% as discussed above.

6. Lender MUST e-mail or fax the appraisal if requested. Ever wonder if the loss mitigator is lying to you about what the appraisal came in at? Guess what, if the homeowner or the real estate agent request a copy of the appraisal, the lender MUST disclose it! Wow, this takes ALL the guesswork out of the numbers required to pay for the property. Cool, huh!

7. The discount comes off the as-is value, not the full retail. Ever wonder what number drives your discount? This isn’t necessarily a change in the guidelines, but the mortgagee letter clearly states that the lender is to take their discount off the as-is value, not the full retail value!

Holy smoke, do you see why this is so cool!?!?!? All the guesswork for your FHA deal is now gone! From now forward, you know:

- What the appraisal came in at (lender required to send you a copy of the appraisal)
- What your number is that you must pay for the property
- That the appraisal can come in at ANY number (old 63% guesswork is gone)
- You can even get vacant FHA deals done

If you haven’t done an FHA deal ever, it’s time you got one!

To your success!

Marty Schulting
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