Short Sale
Instruction Package
Reverse Mortgage Servicing Department
P.O. Box 40724
Lansing, MI 48901
Phone (866) 446-0026
Fax (866) 557-1224
www.reversedepartment.com
Page 1 of 3 ss-inst_ed_004_202007
Instructions
The following instruction is for HECM products only. This application is not valid for borrowers with properties
located in New York. If you do not have a HUD-Insured HECM loan, or the subject property is located in New York,
please contact the Default Assistance Department at 866-446-0026.
Please see the details below per your request for more information regarding a short sale on your property. There
are strict criteria that must be met for either HUD or the Investor (owner of your loan) to accept a short sale offer.
The following criteria must be met before we can issue a short sale approval:
• A full appraisal (both inside and outside of property) will be obtained. Appraisals are only valid for a period of
120 days.
• The appraisal will be completed by an active, HUD-approved appraiser. You will be contacted by the
appraiser for access to the property.
• Title must transfer from the borrower as a result of the sales transaction. The borrower cannot receive any
cash as a result of this transaction.
• If you have a HUD-insured HECM loan, HUD does not allow any delinquent taxes, homeownership association
dues, or attorney fees to be shown on the Closing Statement (aka HUD-1 Settlement Statement).
• If delinquent taxes of homeownership association dues are owed, please notify us prior to the short sale
commencing. We are required to pay for them and include in the outstanding loan balance.
• Pro-rated, current year taxes can be included on the Closing Statement (aka HUD-1 Settlement Statement)
and need not be paid prior.
• The sales price of the property must be 100% of the current appraised value. If the loan is in a due and
payable status, then the sales price of the property can be 95% of the current appraised value.
o For example, if the appraisal values the property at $100,000, then the property should be sold for
$95,000.
• If the property sells for more than the 95% of the appraised amount, those proceeds cannot be distributed to
the seller and must come back to the servicer to be applied to the remaining outstanding debt.
• To calculate the short payoff on the loan, you would take the sales price, less any customary and regular
closing costs. (Proof needs to be provided.)
o Please note the following restrictions on the closing costs. Sales commission can be no greater than
6%.
o For certain HECM loans with a case number issued after September 19, 2017, closing costs cannot
exceed 11 % of the sales price.
o No seller concession fees are allowed.
• For us to review your short sale application, we would need to receive a copy of the full appraisal report,
proposed HUD-1, purchase contract, and names and locations of all parties associated with the closing of
this transaction for review.
o Examples of potential parties associated with the closing (Buyer’s Attorney, Buyer’s Agent, Seller’s
Attorney, Seller’s Agent, Title and Escrow Companies).
Once we have reviewed the documentation and it appears satisfactory, we will issue a Short Sale Approval Letter. At
this point, the short sale has now been approved.
The approval time period is conditional on the individual loan situation.
We understand that HUD requirements for a short sale can be complicated. Please feel free to contact us at (866) 446-0026 if
you have questions. We are available Mon – Thurs. 8 a.m.- 6 p.m. ET, and Fri. 8 a.m. - 5 p.m. ET.
Regards,
Reverse Mortgage Servicing Department
