The next most common type of loan that does not usually have a deficiency is an FHA loan. But how do you determine whether or not you have an FHA loan?

Here is the best way that I have found to do this. Look up your mortgage on the public records in your county. You can usually access the public records online. Just Google, "County, State Public Records." For example, if we Google "Cook County Illinois Public Records", then you will get the clerk of court's website on the second link.

Most Realtors will know how to look up this information. If not, then they will know a title company that can do the research for you. Once you access the public records you will want to pull up your mortgage. If you have an FHA loan, then on the first page of the mortgage, there should be a small square and inside the square, it will say "FHA Case Number 091-4242640-703."

FHA's Short Sale Guidelines are covered in a letter they end out to all the lenders that are handling their loan. Whenever they make a change to the guidelines, they send out a Mortgagee Letter. They issued a new Mortgage Letter at the beginning of the financial crisis that made a lot of changes to how they handle short sales. That letter was called, "Mortgagee Letter 2008-43."

You can Google that if you want to look at a copy yourself. On page 5 of Mortgage Letter 2008-43, it specifically states that if you short sale or attempt to short sale, then you will be released from the debt.

Here is an excerpt from the letter:

Mortgagors, acting in good faith, who successfully sell their properties using this option are relieved of their mortgage obligation and are entitled to a consideration of $750.  If the closing occurs within 3 months of the approval to participate, the mortgagor will be entitled to $1,000. Unless the mortgagor’s consideration is required to release junior liens, the mortgagor may elect to accept cash paid at closing.  The mortgagor may also apply a portion of or the entire amount of consideration to offset sales costs not paid by HUD; including a home warranty plan fee, costs of optional repairs, and buyer’s closing expenses.  If the PFS is unsuccessful and foreclosure occurs, mortgagors who participate in the PFS Program in good faith will not be pursued for deficiency judgments by the mortgagee or HUD.

The main requirement to being allowed to participate in the program is that the property cannot be an investment property and that the homeowner has to have a genuine hardship. Looks like a good way to wipe out some upside down mortgage debt.

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