FHA recently released a letter that provides standards regarding when borrowers who are purchasing a home but have a short-sale on their credit record can quality for a new FHA loan. FHA clearly indicated that that homeowners who used short sale to walk away from their primary residence which has gone down in value and then attempt to purchase a new residence at a lower price to take advantage of the soft real estate market are ineligible for a new FHA loan. Borrowers who sold and repurchased for other reasons and were current on their home loan and installment debts at the time of the short sale and purchase of the new home are eligible for FHA financing as long as the short sale proceeds were accepted by the previous lender as payment in full. A borrower who was in default on the mortgage at the time of the short sale cannot qualify for an FHA loan within three years of the pre-foreclosure sale. However, there are some exceptions in this regard with extraordinary circumstances such the death of the primary wage owner. But lenders have some flexibility in this area. FHA will also allow “short-refinances in which the existing lender writes down the balance because of a decline in the property's value or a reduction in income. Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America.