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The PFS process must be initiated by the borrower, who must submit an application to exercise the PFS option. Follow these outlined steps to evaluate the PFS request.

Step

Action

Request for the borrower’s financial information such as

a credit report

detailed budget, and

income verification

Provide the defaulted borrower with a copy of the Servicer’s PFS criteria, which
may specify that

the property should be owner occupied

the borrower must maintain the property, utilities, and so on, and

the property must be listed for no longer than 90 days

Ask the borrower to sign and return the application with the required financial
information. This acknowledges the receipt of housing counseling, and documents
that the borrower agrees to

list the property with a licensed real estate broker unrelated to the borrower

make a good faith effort to aggressively market the property, and

perform all normal property maintenance and repairs until closing of the pre-foreclosure sale

Obtain a recent market value appraisal and preliminary title report to determine
the feasibility of the PFS.

Determine the borrower’s capacity to support the mortgage debt by

reviewing the borrower’s present and anticipated financial condition, and

projecting the borrower’s surplus monthly income

Use good business judgment to decide whether to approve or reject the PFS request.

If the request is approved, go to LMG 3.C.1.2.c

If the request is denied, inform the borrower of the decision

The Servicer should retain this in the file should the Agency require them for approval

The Servicer is encouraged to proactively solicit participation by a borrower who is in default on an SFHGLP first mortgage and who is unable to cure the default

If there are no contracts on the subject property after 30 days, but no more than 90 days, the sales price should be reviewed and lowered to reflect current market conditions if appropriate. A BPO may be necessary.

The listing agreement should include a specific cancellation clause in the event the terms of a sale are not acceptable.

For additional information on

market value appraisals, see Loss Mitigation Guide 3.C.1.2.c

title reports, see Loss Mitigation Guide 3.C.1.2.d

The Servicer is responsible for inspection, protection, and preservation of the property between the 45th day of default and the date it approves the borrower’s PFS request
Funds spent for preservation and protection may be reimbursed

The PFS process must be initiated by the borrower, who must submit an application to exercise the PFS option. Follow these outlined steps to evaluate the PFS request.