by Dan Krell ©2012
A March 2012 Housing Wire piece (housingwire.com) indicated that CoreLogic recently reported that there were 11.1 million home owners who owed more on their mortgages than what their home is worth, which roughly translates to 22.8% of all mortgages being underwater. At one time, most home sellers applying for a short sale were experiencing hardships and foreclosure. However, as the housing market continues to recover- an increasing number of short sale listings are from sellers who are current on their mortgage and are not experiencing hardships.
For home owners who are experiencing financial difficulty, there are a number of options available to keep your home; however often a last resort- the short sale is one alternative to losing your home to foreclosure. However, home owners who need to sell their homes (because of a job transfer, divorce, or other reason), but are not otherwise experiencing a financial difficulty nor hardship, are also turning to the short sale process because of depressed home sale prices.
Although short sale horror stories still circulate, much has changed and many lenders have attempted to “streamline” their short sale process. Still, this has not prevented Congress from attempting to force lenders to provide speedy short sale decisions. In 2010, H.R. 6133 H.R.: Prompt Decision for Qualification of Short Sale Act of 2010 was introduced to require a 45 day response from lenders, however it “died” in committee. A recent form of this legislation was introduced in 2011 (H.R. 1498: Prompt Decision for Qualification of Short Sale Act of 2011), but GovTrack (govtrack.us) gives the bill an 8% chance of becoming law. Another bill, S. 2120: Prompt Notification of Short Sales Act, was introduced in February; GovTrack gives that a 2% chance of being enacted.
Beware of the circulated “wisdom” regarding short sales, because it is not always reliable or accurate (e.g., hardships and delinquencies). If your home has negative equity (underwater) and you want to sell, consult with an attorney; there are financial and legal issues that may affect you presently and in the future. The short sale process may seem straightforward, but it can get complicated quickly (especially if there are multiple mortgages involved). Many experienced short sale agents work in tandem with attorneys to make the process much smoother than otherwise would be expected.
If you’re an underwater home seller, but have assets and are not experiencing a hardship, your attorney can advise you on the short sale process. The issue pertaining to a successful short sale is not always about the seller’s financial status; but rather, a short sale is more about the amount the lender will accept as payoff for the existing mortgage. Yes, the lender will collect your financial information to use in their short sale determination; but a skilled negotiator may be able to reduce the overall mortgage payoff (even if you have to bring funds to closing).
Finally, an attorney is the only person who can provide you legal advice. Real estate agents advising you to stop making payments on your mortgage or to “fudge” your short sale application could be putting you in a precarious position: your credit can be affected, or your home can go to foreclosure when payments are stopped; providing false or misleading information to your lender is fraud (lenders and law enforcement are working together to stop short sale fraud).
Additional information about short sales:
Short sale is an option
Don’t be pushed into a short sale
House bill proposes 45 day lender response on short sale
Mortgage fraud on the rise
More news and articles on “the Blog”
This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of April 30, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.