Short Sale vs. Foreclosure
Losing your home to foreclosure is one of life’s most unpleasant experiences. It can also affect you long after your home is history by devastating your credit. Regrettably, most people cannot be sure that they will remain safe from foreclosure because they can’t foresee the unexpected. Situations such as a serious illness, a major accident, divorce or job loss can happen to anyone. Understanding the available alternatives, should the worst occur, is always a good idea.
Foreclosure Should Be Your Last Option
Despite what some people might say, foreclosure should always be your last option. The end result of a foreclosure is the lender taking your house. If that isn’t enough, your credit report will be in terminal condition for many years to come, worsening an already bad financial situation and making it very difficult to obtain any other kind of credit. There is no upside to foreclosure. It should be avoided at all costs. A short sale is a popular option for homeowners mired down with financial problems. In this case, you would sell your home for less than what you owe your lender; the biggest problem you could face is getting your lender to agree to a short sale, but that's where I come in.. I'd advise pursuing this option the minute you realize that you are falling behind in your payments and most likely won’t be able to catch up. The longer you wait and the greater the amount you are in arrears, the less likely it becomes that your lender will cooperate.
A short sale may also have a negative effect on your credit score, sometimes lowering it by 100 to 200 points. However, This can be overcome much more quickly than a foreclosure, especially if you manage to retain one or two credit cards and keep them current. Perhaps equally distressing, until recently, the Internal Revenue Service frequently deemed the difference between the mortgage balance and the amount realized from the short sale to be taxable as income despite the fact that the debtor never saw a dime of it. There is new federal legislation called the Mortgage Forgiveness Debt Relief Act 0f 2007 that just went into effect on January 1st, 2008. The new act essentially eliminates this problem.
Don’t Do This Alone
Having a professional work on your behalf is crucial. Facing foreclosure is a scary thing, and you need someone that knows who to talk to, when to talk to them, and how to handle all the paperwork to get the deal done.
You Need An Experienced Short Sale Agent (Like Me!)
$3,000 HAFA Seller Credit
The Federal Government recently began its first program to offer a short sale, or a deed-in-lieu, to rescue homeowners from foreclosure, while forgiving the difference between the sale price and the amount owed on mortgages.
Home Affordable Foreclosure Alternatives, or HAFA, is intended to reduce the need for potentially lengthy and expensive foreclosure proceedings.
Administrators see it as a substantially better outcome than a foreclosure sale for borrowers, investors and communities. The program’s goals include minimizing the time a property may sit vacant and subject to deterioration, a problem that has plagued the worst hit neighborhoods in some states.
But its greatest benefit is to the desperate homeowner who could not be helped by the more common foreclosure prevention method: a reduction in mortgage payments. Those eligible for HAFA have either failed to qualify or were not able to finish a trial with the government’s primary $75 billion Home Affordable Modification Program, or HAMP.
The main mortgage relief program continues to be revised as criticism mounts that too few homeowners have received permanent relief, and even fewer have been granted mortgage write-downs.
In a short sale, the servicer allows the borrower to list and sell the mortgaged property with the understanding that the net proceeds may be less than the total amount due on the primary mortgage and any subordinate lien. But with HAFA, the difference is forgiven, and the seller can even qualify for up to $3,000 in relocation assistance.
In a deed-in-lieu of foreclosure (DIL), the borrower voluntarily transfers ownership of the mortgaged property to the servicer in full satisfaction of the total amount due.
The servicer will be paid $1,500 to cover administrative and processing costs for a short sale or DIL. The investor will be paid a maximum of $2,000 for allowing a portion of the short-sale proceeds to pay subordinate lien holders.
Under HAFA, a list price will be determined for the home and the seller is provided an “acceptable sale proceeds” figure – the minimum amount that the lender must receive after sales costs – from the sale of the home.
When an offer is made on the home, the seller will submit the required documentation for approval.
Once the sale closes, the seller will be released from all responsibilities for repaying the mortgage. In addition, the seller will receive up to $3,000 to help pay some expenses. The check will be paid by the settlement agent as part of the closing.
If there is money left over from the sale after paying the amount owed on the mortgage, plus the approved sale costs, the seller will not be eligible to receive the $3,000.
The short sale must be “at arm’s length.” The property cannot be listed with or sold to a relative, friend or business colleague.
The seller must also agree to share information about outstanding mortgages, liens, credit history and relocation plans with brokers and other third parties that could be involved in the transaction, including U.S. Treasury employees and its financial agents, Fannie Mae and Freddie Mac.
The HAFA servicer will follow “standard industry practice” and report to the major credit reporting agencies that the mortgage was settled for less than the full payment. “We have no control over, or responsibility for the impact of this report on your credit score,” HAFA program literature states.
For more information: http://makinghomeaffordable.gov/hafa.html
Fast Track Short Sales
With the increasing number of short sales hitting the market today, some banks are beginning to streamline the process. One bank that has improved the process dramatically is Wachovia (Now Wells Fargo). Wachovia also services loans under World Savings and Golden West. I'm sure you have heard the horror stories with regards to the Loan Modification & Short Sales process and may be confused about the ramifications associated with doing these types of transactions. Wachovia understands the position this market has created and now offers homeowners a program to streamline the short sale process and approve these transactions within traditional time lines.
I have been trained to process Wachovia Serviced Short Sales, directly by the manager of Wachovia's Loss Mitigation division, who has been assigned to handle short sales in North Los Angeles County, and Ventura County.
Here are some of the programs highlights:
*Must have financial hardship or emanate default pending. (Stated Hardship OK.. NOT PAGES OF PAPERWORK AND YOU DON'T NESSESARILY NEED TO BE BEHIND IN PAYMENTS!)
*One local point of contact for homeowners, Realtors and buyers to submit offers to and close the transaction
*On-site property and seller interviews by a Loss Mitigation Manager if necessary
*Approvals in 7-10 days
*Average closing from start to finish: 48 business days
*$2500 up to $5000 cash for cooperation/moving expenses
* A Wachovia manager (not a clerk) will discuss your situation
* A full release of lien with no deficiency
This is a great opportunity for homeowners with Neg Am or interest only loans, who will not qualify for loan modification due to their negative equity position and debt to income ratios. Don't miss out on the opportunity to speak directly with the Loss Mitigation Manager who can explain your options and show you how this program can help your family.
Homeowners with Wachovia, Golden West or World Savings loans who are considering a short sale, this is the time to take advantage of this program, with limited inventory and low interest rates, your house will sell fast, and you move on with your life. Position yourself to minimize your financial loss, limit the damage to your credit history and shorten your recovery period. Homeowner's don't need to be behind on payments to qualify for this program, which can be most damaging to your credit when short selling.
Contact me today for more Details!