If I do a Short Sale, What Will Happen to my Credit?
This is a very important question for anyone considering a short sale to prevent foreclosure. The effect on your credit can affect you life for many years down the road.
There is no clear answer for this question, because each situation is different. There can be little effect and and there can be a dramatic change in scores from beginning to end. Things that can effect how your credit is changed are: How the bank records the sale; How many late payments did you have, if any; did you fall behind on your HOA and did they place a judgement on you. And that is just the short list.
You may want to consider talking to your tax adviser, your lawyer and your real estate professional before move forward with a short sale.
Trial loan modifications are being canceled at an increasing rate
March 2, 2011 by
Filed under
Buying
Trial loan modifications are being canceled at an increasing rate
* August 30th, 2010 6:40 pm PT
There are still far too many of these signs out there as numbers of home sales continue to drop
Photo: http://www.flickr.com/photos/respres/2539334956/
Lenders are canceling trial loan modifications at an alarming rate. In fact, the number continues to rise so much that Citigroup has canceled the program altogether.
Citigroup, along with B of A had also been offering principal reductions to try to help home owners in trouble, but that program also seems to be offered at a reduced rate as this housing problem continues to plague, not just the U.S., but the world. Stock markets around the world have been in dive mode – the DOW dropped below 10,000 again today. The reason most often cited is the housing problem here in the U.S. which is not only not improving, but seems to be getting worse. People are not buying – while banks are sitting on cash, and tightening lending guidelines at the same time. The rationale, of course, is the fear of more bad loans.
What is a Short Sale?
I still get this question all the time, even though short sales are a common thing in the Portland Metro Area. So I thought I would answer it in my blog so that all of you searching for home (and possibly selling a home) will have the correct information.
Short Sale: A Definition
Simply put, a short sale is when a homeowner is trying to sell a home when he owes more on the mortgage than the home is worth. The homeowner (seller) is going to ask the bank to take loss, in an attempt to forgo the foreclosure process.
Let’s look at an imaginary scenario to explain it further. Let’s say that homeowner Smith bought his home in 2005 for $300k. He took out one of those 100% loans that were the rage back then. Well, things were going fine until he got laid off 6 months ago. And he hasn’t been able to find a job since. Mr. Smith’s savings are dwindling fast so he has decided to sell his home. To make matters worse, the value of the homes in his neighborhood (and most of the city) have gone down 20%. His Realtor told him he could only get $240k for his home right now.
Mr. Smith owes a little under $300k and can only sell his home for $240k. Mr. Smith will put his home for sale as a short sale and try to get the bank to take payment in full for $240k.
Will the bank take the short payoff? The short answer is: it depends. See my next post to get the long answer and why I never recommend short sales to my buyers.
Why Won’t the Bank Do My Loan Modification?
If you got your home loan from Indymac Bank and are hoping to get a Loan Modification from them, you need to look at this video:
The IndyMac Slap in the Face
It’s an eye opening look at why OneWest (they took over IndyMac’s assets) might not have any desire or motivation to do your loan mod and help you stay in your home.
This may not be true for all banks. Take this video with a grain of salt. Some banks are doing right by their customers.
Take a look, and make sure your volume isn’t turned up too high, these guys have had way too much coffee!
The New Short Sale Rules – It’s About Freakin’ Time!
If you have ever been a party in a short sale transaction, or even know someone that has, you know what kind of nightmare it can be. For the last few years, the banks have been doing everything they can to make a short sale as difficult as humanly possible. They just don’t want to do them, it’s that simple. I have heard that only one in ten short sales are actually completed. Those are bad odds in any casino you go to.
But there is help on the way. The Home Affordable Alternatives Program (HAFA) has just released some new guidelines that are set to take effect in April of 2010. The new rules are designed to help homeowners get out of their property if they are underwater (they owe more on the mortgage than the house it worth). This is great news for all.
Here is summary of some of the points that will have the greatest impact.
- A homeowner will be able to get a short sale approval in advance. This is huge! In the past, the banks wouldn’t even look at a short sale unless there was a buyer with a signed contract. The homeowner, real estate agent and the buyer never even knew if the bank would consider the short sale. The new guideline allows the owner to receive a pre-approval from the bank that includes the minimum net amount it will accept.