HUD Handbook 4000.1 III.A.2.j — Home Disposition Options

HUD Handbook 4000.1 III.A.2.j

j. Home Disposition Options (12/30/2025) The Mortgagee must review Borrowers for Home Disposition Options who are unable to sustain the Mortgage with the assistance of a Loss Mitigation Home Retention Option. The Home Disposition Options include: • Pre-Foreclosure Sale (PFS); and • Deed-in-Lieu (DIL). The Mortgagee must notify the Borrower that they may be able to avoid foreclosure by selling their home with a traditional sale or a PFS Option. If the Borrower advises that their financial situation has improved during the PFS or DIL process and wants to retain the Property, the Mortgagee must review the Borrower for one additional Loss Mitigation Home Retention Option. ii. Pre-Foreclosure Sales A Pre-Foreclosure Sale (PFS), also known as a Short Sale, refers to the sale of real estate that generates proceeds that are less than the amount owed on the Property and in which the lien holders agree to release their liens and forgive the deficiency balance on the real estate. There are two PFS Options: • Standard PFS; and • PFS for Servicemembers. (B) Requirements for all PFS Options (1) PFS Outreach Requirements (a) Form HUD-90035, Information Sheet: Pre-foreclosure Sale Procedure When the Mortgagee has identified a Borrower as a qualified candidate for a PFS or a Borrower has expressed an interest in participating, the Mortgagee must provide to the Borrower, electronically or by mail, form HUD-90035, Information Sheet: Pre-foreclosure Sale Procedure, adding its toll-free or collect telephone number to the form. (b) Disclosure Requirements for PFS Transactions Prior to approving the Borrower for the PFS Option, the Mortgagee must notify the Borrower of the following in writing: • The Mortgage must be three or more full monthly payment due and unpaid (61 Days or more past due) on the date the Mortgagee approves the Borrower’s participation in a Standard PFS. • On the date the PFS for Servicemembers transaction closes, the Mortgage must be in Default status (minimum 31 Days Delinquent). • Until the PFS transaction has closed, the Borrower must maintain the Property in “ready to show” condition, make basic property repairs, and perform all normal property maintenance activities (e.g., interior cleaning, lawn maintenance, etc.).

Source: HUD Handbook 4000.1 III.A.2.j.i — Standard · source URL · snapshot 8c03836f77f317e1