Consumer complaint received 2019-10-29
Company: PENNYMAC LOAN SERVICES, LLC.
State: IL
Product: Mortgage
Sub-product: FHA mortgage
Issue: Struggling to pay mortgage

Complaint:
We have been working with PennyMac ( account # XXXX ) to gain approval on a short sale. PennyMac has repeatedly reviewed material submitted and made decision contrary to written FHA regulations and recently ruled in a required net proceeds from a hopeful sale that contradicts FHA 's written decision to us about FHA required net proceeds - and even THAT written response, from FHA, is against FHA 's written regulation. 

Sections cited are within FHA SIngle Family Housing Handbook rev123016, under III. Servicing and Loss Mitigation A. Title II Insured Housing Programs Forward Mortgage 2. Default Servicing i. Loss Mitigation Count 1 : ( see page labeled 600 ) iii. Evaluating Borrower 's Financial Condition ( B ) Determining Surplus VIOLATED : Step 2 : " making necessary adjustments for income fluctuations '' PennyMac did not adjust as FHA requires for XXXX XXXX 's seasonal income fluctuation. ( See page 216 of  same handbook, which defines seasonally fluctuating " effective income '' as the average of 2 years of income divided evenly by the period specified, such as yearly for annual income, or by 24 months for monthly income. PennyMac averaged just the ( then ) last 5.87 months - his highest earning season - this resulted in actual " effective income '' falsely inflated by 40 %. Short sale was denied due to borrowers " excess income ''. On appeal, I supplied 2 years of bank statements and 2 years earning history that clearly showed fluctuation. The evidence was not considered. 
" Count 2 : ( see page labeled 641 ) vii : Deficit Income Test for Standard PFS VIOLATED * DIT calculation " subtract borrower 's total expenses from total net income '' PennyMac used XXXX XXXX 's GROSS income, contributing to ruling of " excess income '' issue, above. On appeal, evidence of all of XXXX 's bills were submitted supporting a finding minimal excess. The evidence was not considered. 

Count 3 : ( see page labeled 641 ) VIOLATED ii :  Streamlined PFS Standards " The Mortgagee must ensure that Owner-Occupant Borrowers meet the following requirements : ... the Borrower has been deemed eligible for and offered a Loss Mitigation Home Retention Option. However, each Borrower with a credit score below 580 must provide written documentation that they choose not to accept the Loss Mitigation Home Retention Option offered by the Mortgagee. '' In addition to both borrowers showing low credit score, and evidence provided that divorce decree ordered house sold - borrowers vacated property AND submitted letter rejecting home retention option. All these circumstances supported a streamlined short sale review. PennyMac did not abide, and forced fully documented hardship review, then appeal, while ignoring submitted appeal evidence. 

Count 4 : ( see page labeled 655-656 ) ( 3 ) Net Proceeds VIOLATED ( b ) Standard " HUDs requirements for minimum Tiered Net Sale Proceeds, as based on the length of time a Property has been competitively marketed ... The Mortgagee may only approve offers that will result in minimum Net Sale Proceeds of 84 percent of the as-is appraised FMV. '' The XXXX 's property had been on the market over 60 days, thus net proceeds should be 84 % of appraised FMV. On XX/XX/2019, in response to FHA escalation ticket # XXXX ( wherein I complained PennyMac was violating " 84 % '' rule ), FHA rep, XXXX XXXX issued an email stating FHA would take no less than 85 %. Despite violation, buyer came up in price to meet 85 % requirement. On XX/XX/19, PennyMac came back stating FHA wanted 86 % no exception. I supplied PennyMac FHA 's written XX/XX/19 decision on on XX/XX/2019, as of today PennyMac is still refusing to honor FHA 's decision.

Company response to consumer: Closed with explanation