Short Sale for your home - Page 2

DeAnna · January 30th, 2010, 08:15 AM

I just got this from the lender we use:

SHORT SALE/FORECLOSURE WARNING! N Ifyou have done a short sale or foreclosure, are thinking about it or know someone who is consider the following. Banks have become increasingly aggressive in collection efforts against borrowers who do a short sale or foreclosure where a balance remains. The primary targets so far seem to be borrowers who did a strategic default (walked away from the home even though they could afford it). The banks are converting the secured debt to unsecured and then pursuing the borrower. According to the FDIC from January 2009 thru September 2009 banks collected $1.01 Billion or 48% more than the same period a year earlier. This is all bottom line profit folks! The banks are being very careful in the short sale agreements to preserve their rights. The good news is that Arizona and California have anti deficiency laws that protect the homeowner from collection activity but only on a primary residence. Given the huge number of dollars involved and the related risk if you are considering a short sale or foreclosure get the best advice you can.

Loan Modification Help: For homeowners with a Freddie Mac loanthey can contact the City of Phoenix NHS office at (602) 258-1659 for assistance with their loan modification, debt counseling and other mortgage related matters. The service is new and it is free!

More Loan Modification: The Hope for Homeowners program is back in the news this week. Apparently the Treasury Department has finally figured out that lowering payments is fine but reducing loan balances is even better. Some 15 million homeowners are upside down in their homes and the concern is an increasing number of them may throw in the towel and move on. Yah think!

Shane H · January 30th, 2010, 08:57 AM

Quote:

Originally Posted by DeAnna

I just got this from the lender we use:

[size=3]SHORT SALE/FORECLOSURE WARNING! N Ifyou have done a short sale or foreclosure, are thinking about it or know someone who is consider the following. Banks have become increasingly aggressive in collection efforts against borrowers who do a short sale or foreclosure where a balance remains. The primary targets so far seem to be borrowers who did a strategic default (walked away from the home even though they could afford it). The banks are converting the secured debt to unsecured and then pursuing the borrower. According to the FDIC from January 2009 thru September 2009 banks collected $1.01 Billion or 48% more than the same period a year earlier. This is all bottom line profit folks! The banks are being very careful in the short sale agreements to preserve their rights. The good news is that Arizona and California have anti deficiency laws that protect the homeowner from collection activity but only on a primary residence. Given the huge number of dollars involved and the related risk if you are considering a short sale or foreclosure get the best advice you can.

The bolded is whats important. I agree with the banks. They should go after them.

HeavyB3 · January 30th, 2010, 10:13 AM

I PM'd you Scott, but for everyone else... There is a nonprofit organization through naca.com that will help people with a loan modification. I know some people who have used them to get their loans reduced and they seem to be good at what they do. My neighbor got his loan permanently changed from 1300 a month to 800.

ASUCHRIS · January 30th, 2010, 06:12 PM

Quote:

Originally Posted by HeavyB3

I PM'd you Scott, but for everyone else... There is a nonprofit organization through naca.com that will help people with a loan modification. I know some people who have used them to get their loans reduced and they seem to be good at what they do. My neighbor got his loan permanently changed from 1300 a month to 800.

While it's good they are a non-profit, I'd love to know what their success rate is. Most projections show only 10-12% of homeowners qualify for loan mods, which for most just takes up valuable time. The problem with a loan modification is that banks are almost never doing principle reductions, so while the payment may be lowered for a period of time (or in the rare occasion for the life of the loan) you are just increasing the amount of the loan on a property that can be more than 100k underwater. In that case, a short sale, or even foreclosure could be viewed as a better option.

HeavyB3 · January 30th, 2010, 09:45 PM

Quote:

Originally Posted by ASUCHRIS

While it's good they are a non-profit, I'd love to know what their success rate is. Most projections show only 10-12% of homeowners qualify for loan mods, which for most just takes up valuable time. The problem with a loan modification is that banks are almost never doing principle reductions, so while the payment may be lowered for a period of time (or in the rare occasion for the life of the loan) you are just increasing the amount of the loan on a property that can be more than 100k underwater. In that case, a short sale, or even foreclosure could be viewed as a better option.

Not sure what their success rate is, but I do know they have agreements with most major lenders so that they at least look at their suggestions. But if you want to save your house, why would you not do everything to try to save it. Seems to me that people are pretty proud of their houses. Short selling it would suck. Also seems to me that the banks would want to work with people in the houses. Even if you get your interest rate reduced heavily, they still make an assload off the house. Just not as big of a load as they were going to make before.

DeAnna · January 31st, 2010, 07:31 AM

The problem with most of these loans is that people started using their homes as an ATM. Taking out equity, getting second mortgages, etc. for material things (ie, vacations, new cars) and not putting it back into their homes (as improvements).

A house should be viewed as a long term investment, not a get rich quick scheme.

I agree with the banks - they should go after those that walked away but could still afford it. Unfortunately, it's a bit late since tens of thousands already did it (which in turn increases the REO inventory on the market). It does have a trickle effect.

ASUCHRIS · January 31st, 2010, 04:25 PM

Quote:

Originally Posted by HeavyB3

Not sure what their success rate is, but I do know they have agreements with most major lenders so that they at least look at their suggestions.

I know that most loan mod companies are submitting information to the banks, but I'd be more concerned with their success rate. The vast majority of loan mods don't work, and just take up time and limited resources. Even worse, of the small percentage that actually get approved, the majority of approved loan mods go into default in the first 6 months anyway.

Quote:

Originally Posted by HeavyB3

But if you want to save your house, why would you not do everything to try to save it. Seems to me that people are pretty proud of their houses. Short selling it would suck.

Of course it "sucks". People usually don't do it because they want to, they do it because they have to.

Quote:

Originally Posted by HeavyB3

Just not as big of a load as they were going to make before.

Actually it is more than they would have made before. Even with a rate reduction, it just pushes more of the principle amount out further which will extend the length of the loan. Again, principle reduction is rarely a part of a loan modification, just a lowered payment. (Which again most can't even afford within the first 6 months)

TJ · February 3rd, 2010, 05:30 PM

The misconception here is that banks can come after the money lost between the note amount and the depreciated value. By law in the state of Arizona, they cannot attempt to collect on the lost value. It's like taping a dry well anyway. There is a reason why people walk away from their houses on a regular basis.

Another misconception is the affect on credit. A foreclosure can hammer your FICO score between 200-300 and a demerit will stay on your credit for 7 years. A short sale is a little less taxing as they can only dock you 150 points and leave a demerit for 3 years. Both options suck however. But consider the following options:

If you can, hire an attorney. If this is an option you can do one of the following:

Soft-sale - lender reduces the principal balance to where the property owner can immediately sell and liquidate the property

Short-refinance - where they negotiate the principal amount down to a level where the property owner is able to obtain new financing. This assumes the client qualifies for a new loan.

Both options require being current with your loan

Neither of which affect your credit score and the lender cannot put any derogatory notes there either

82CardsGrad · February 3rd, 2010, 07:33 PM

Quote:

Originally Posted by TJ UofA2004

The misconception here is that banks can come after the money lost between the note amount and the depreciated value. By law in the state of Arizona, they cannot attempt to collect on the lost value. It's like taping a dry well anyway. There is a reason why people walk away from their houses on a regular basis.

Another misconception is the affect on credit. A foreclosure can hammer your FICO score between 200-300 and a demerit will stay on your credit for 7 years. A short sale is a little less taxing as they can only dock you 150 points and leave a demerit for 3 years. Both options suck however. But consider the following options:

If you can, hire an attorney. If this is an option you can do one of the following:

Soft-sale - lender reduces the principal balance to where the property owner can immediately sell and liquidate the property

Short-refinance - where they negotiate the principal amount down to a level where the property owner is able to obtain new financing. This assumes the client qualifies for a new loan.

Both options require being current with your loan

Neither of which affect your credit score and the lender cannot put any derogatory notes there either

I think this may have already been covered, so perhaps to repeat, in any instance where the home is being sold for less than the existing mortgage balance, the lender will issue a 1099 for the amount forgiven. So, if a home sells for $150k but has a mortgage balance of $200k, you will get a 1099 in the amount of $50k. Be prepared to deal with that in the broader context of filing your taxes...

TJ · February 3rd, 2010, 08:01 PM

Quote:

Originally Posted by 82CardsGrad

I think this may have already been covered, so perhaps to repeat, in any instance where the home is being sold for less than the existing mortgage balance, the lender will issue a 1099 for the amount forgiven. So, if a home sells for $150k but has a mortgage balance of $200k, you will get a 1099 in the amount of $50k. Be prepared to deal with that in the broader context of filing your taxes...

This is true as the IRS considers 1099Cs as "gifts" which is just like income. Again, this is where a lawyer can come in handy. This can be negotiated on the table as a full agreement and the borrower can request to not have the difference reported to the IRS. Of course, they will be more inclined to oblige if you do not foreclose or short sale

Gizmo Williams · February 4th, 2010, 10:09 AM

Another important point is to make sure you do not have a 2nd lien on the property. Arizona is a no-recourse state....but that only applies to the 1st mortgage. If you have a 2nd...they can come after you for a deficiency judgement and make your life hell.

Gizmo Williams · February 4th, 2010, 10:19 AM

Quote:

Originally Posted by 82CardsGrad

I think this may have already been covered, so perhaps to repeat, in any instance where the home is being sold for less than the existing mortgage balance, the lender will issue a 1099 for the amount forgiven. So, if a home sells for $150k but has a mortgage balance of $200k, you will get a 1099 in the amount of $50k. Be prepared to deal with that in the broader context of filing your taxes...

Usually this is not that big of an issue in most cases...at least from the standpoint of your federal taxes. If the home is your principle residence and you are able to prove you are insolvent (debts exceed assets) and the loan is no recourse then there is no tax liablility. Most likely if you are short selling....you meet the insolvent criteria. Typically states follow the Fed on this.

However, one should really talk to an attorney and an accountant prior to short selling or foreclosing.

Yuma · February 4th, 2010, 10:01 PM

One thing you can do if you have gone through a short sale and need to buy a new house later down the road, is some lenders don't worry that much about your credit if you put 30% or more down on a house. I know this sounds stupid, but say you come into money a year or two down the road after going through a short sale, call some lenders and see what their requirements are in this situation. I only bring this up because most people don't think of this. Someone that was going to buy my house in Yuma was coming in with 30% down, and my Realtor called their mortgage lender about their credit worthiness, etc., to see if I should accept their offer, and the mortgage lender told my Realtor they didn't care about the credit score of the lendee because the bank would be in a good position if they defaulted. This was a couple years ago, and I am not sure if all mortgage brokers are this way.

DutchmanAZ · February 8th, 2010, 02:57 PM

Here's a bit more information that anyone in this situation may find interesting.

http://www.azcentral.com/arizonarepu...kaway0131.html