There has been a very important change in U.S. Housing and Urban Development (HUD): they have changed the definition of "foreclosed". Below I have copied the definition of "foreclosed", as well as "abandoned", from their website (you can check it out for yourself).
WHY IS THIS IMPORTANT YOU MAY ASK?
I recently heard from one of my clients whose lender told him his house was "foreclosed," when in fact, the foreclosure process had not yet been completed. This is important because a homeowner, who may have been denied a loan modification by their lender, to avoid foreclosure, has the option to short sale their home. [For those who do not know: a short sale is when the homeowner's lender accepts a payoff amount less than what is owed on the mortgage.]
By law, lenders will be able to tell their borrowers who are late in their mortgage payments, that their home is "foreclosed." It will be crucial for homeowners/borrowers to verify, outside the information given by their lender, where they are in the foreclosure process. Please do not be fooled by this change in definition.
THE FOLLOWING IS FROM THE U.S. HOUSING AND URBAN DEVELOPMENT (HUD) WEBSITE:
HUD previously defined the term foreclosed to apply only to properties where the foreclosure process was completed. Local communities suggested this narrow definition was not a good fit for market conditions since many properties were lingering in the foreclosure process and beyond the reach of NSP. The original definition limited a grantee's ability to intervene strategically when a lender initiates but does not complete foreclosure, or where a default is allowed to linger. In addition, many lenders are transferring properties to aggregators or loan servicers, which then arrange for final disposition. In some of these cases, the previous policy did not consider the properties to retain their foreclosed status after title is transferred to the aggregator or servicer.
Properties will now be eligible for NSP assistance if any of the following conditions apply: The property is at least 60 days delinquent on its mortgage and the owner has been notified; or the property owner is 90 days or more delinquent on tax payments; or under state or local law, foreclosure proceedings have been initiated or completed; or foreclosure proceedings have been completed and title has been transferred to an intermediary aggregator or servicer that is not an NSP grantee, subrecipient, developer, or end user.
When the NSP program was originally designed following passage of the Housing and Economic Recovery Act of 2008, the term abandoned was defined as a property that had been foreclosed upon and was vacant for at least 90 days. This definition effectively excludes properties abandoned by owners but where tenants are still in place thereby precluding local communities from assisting the properties with NSP funding or protecting the tenants' occupancy. HUD determined this limitation was a substantial barrier to the preservation of existing affordable housing.
To address this limitation, HUD is expanding the definition of an abandoned property to include homes where no mortgage or tax payments have been made by the property owner for at least 90 days or a code enforcement inspection has determined that the property is not habitable and the owner has taken no corrective actions within 90 days of notification of the deficiencies.
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