On June 8, 2009 The Fund issued an “Underwriting Alert” regarding Short Sale Transactions. The Alert indicated that certain transactions involving an intermediary purchasing, negotiating and flipping a short sale property where the “true sales price/value” has not been disclosed to the original lender should not be insured. While these transactions are still an area of concern, it is no longer required that the “true sales price/value” be disclosed to the original lender as long as the intermediary’s “right to sell” is disclosed in the purchase contract. Before you insure any kind of transaction involving a short payoff to the existing lender, or a simultaneous closing, make sure that the following requirements have been met:

1. There are no violations of any restrictions listed in the short sale payoff letter or closing instructions.
2. There have been no misrepresentations as to the value or ownership of the property to the existing lender, the new lender, or the purchaser.
3. All disbursements must be made exactly as stated on the HUD-1 settlement statement, and only to the parties involved in this specific transaction.
4. Each half of the simultaneous closing must be kept separate and stand on its own. The sale from A to B must be fully funded and disbursed with money coming from and going to all appropriate parties. The sale from B to C must also stand on its own. The money from C’s lender must not be used to fund any portion of the A to B transaction.
5. The intermediary’s “right to sell for profit” is appropriately disclosed in the purchase contract.
6. The short sale lender is an institutional lender.

If the circumstances of your transaction do not meet the above requirements, you must contact a Fund underwriting attorney for prior approval.

If you have any questions or experience any difficulties in regards to this Bulletin please call The Fund’s Underwriting Department at 800-432-9594 For Georgia call 877-770-1819; for South Carolina call 800-561-1151.

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