FHA loans NO short sale after sheriff sale

I have been working with a wonderful couple trying to sell their home. We finally received an offer we could work with. After much delay from Countrywide and a slight delay from the sellers the sheriff sale happened without being postponed. (Normally in a short sale transaction we can get the bank to delay the sheriff sale while they review a purchase agreement/ short sale package.)

Since the sheriff sale has happened Countrywide has said they will not consider a short sale after sheriff sale and that is an FHA guideline. I called HUD and their national servicing center and was told that that information is TRUE!

Using my very best logic, I can not understand why the government would allow this (much less it be THEIR own policy!). So after sheriff sale in Minnesota, homeowners have a six month redemption period. So now Countrywide won't have this property back for 6 more months, plus a couple extra months to get it back on the market--- WHEN THEY HAVE A WILLING, READY AND ABLE buyer now!

Come on! This is a ridiculous policy and going to surely cost all of us in lost property values and wasted tax payer dollars!