Fannie Mae has launched a consumer education website to help struggling homeowners understand their options.The site, KnowYourOptions.com,
offers tools and calculators to help borrowers understand options such
as refinancing and modification, as well as checklists to help borrowers
prepare for conversations with mortgage companies.Click HERE for more information.
the Federal government introduced the Home Affordable Modification
Program (HAMP) as part of the Making Homes Afforable initiative in order
to help struggling homeowners save their homes and lower their
payments. HAMP has set out to save from 7 to 9 million homes, but
currently only a small fraction of eligible borrowers are getting
successfully modified due to failure to provide adequate paperwork.Find out more about the Home Affordable Modification Program (HAMP) by clicking HERE
3 Must Have Qualifications for a Short-Sale Homeowner
The 7 Most Dangerous Short Sale Myths
The 7 Most Dangerous Short Sale Pitfalls
Foreclosure Vs. Short Sale: Homeowner Consequences
Options and Solutions for Homeowners in Foreclosure
A Consumer's Guide to Defending Florida Foreclosures
Foreclosure vs. Short SaleAre Foreclosure or Short Sale your only options?If
your mortgage loan is owned by Fannie Mae or Freddie Mac, you may be
eligible for a Home Affordable Refinance to take advantage of lower
interest rates. Only loans owned or guaranteed by Fannie Mae or Freddie
Mac are eligible. Your mortgage company can tell you who owns your loan,
or you can contact Fannie Mae and Freddie Mac directly by clicking on
the links below and completing the forms for each company Fannie Mae• 1-800-7FANNIE (8am to 8pm EST) Freddie Mac• 1-800-FREDDIE (8am to 8pm EST) After
finding out that your mortgage is owned or guaranteed by Fannie Mae or
Freddie Mac, see if you are eligible for a Home Affordable Refinance by
clicking on the button below.Understanding your Mortgage StatementFREQUENTLY ASKED QUESTIONS ABOUT SHORT SALESA
"Short Sale" is a relatively new phrase to many homeowners, but this
type of sale has been part of the real estate market for many years.
Most Realtors are not up to date with the process and that has caused
much confusion in the community with homeowners and even real estate
agents. Since I'm a "Certified Distressed Property Expert," I would
like to explain and dispel many misunderstandings. What is a Short Sale? It's when: • A homeowner is authorized to sell for less than what is owed on the mortgage. • The lender authorizes or accepts the sales price as a payoff. • The seller avoids foreclosure and many times they can also avoid a judgment. • The seller avoids a negative report, by the lender, to the credit bureaus. The
seller won't get any money at closing, but they will avoid the
emotional toll a foreclosure can cause. The negotiations include a
favorable wording for the forgiven debt on the mortgage that can help
the recovery of the homeowner. Why would a lender agree to lose money? • Financially, it's a smaller loss to accept a short sale than it would be to incur the additional expenses of a foreclosure. • Lenders
are in the business to lend money not home ownership. The more
resources they have tied up on a property the less they have to lend
out. • With prices dropping so rapidly, even if the lenders decides
to foreclose they will lose even more money when they finally try to
sell the property later rather than sooner. How Do I Qualify for a Short Sale?
There are four criteria a homeowner must meet to qualify for consideration by the lender for a short sale. These are:• There must be a demonstrable financial hardship, e.g., a lost job or material change in the financial situation; • There must be a monthly shortfall; • There must be insolvency, meaning that the owner does not have the money to pay down the mortgage; and • The owner does not have any assets to sell to pay for the shortfall.
What is Considered an Acceptable Hardship to Qualify for a Short Sale?
There must be a hardship that is preventing the owner from being able to pay their mortgage. Examples include: • Loss of job • Business failure • Damage to property • Death of a spouse • Death of family members • Severe illness • Divorce • Mandatory job relocation, • Medical bills • Military service • Payment increase or Mortgage adjustment • Insurance or tax increase • Reduced income • Separation • Too much debt • Incarceration What is the insolvency requirement to qualify for a short sale?
The owner must not be able to pay down their mortgage. To
qualify for a short sale, the homeowner must be financially insolvent.
This means that they owe more than they have or that they do not have
liquid cash or assets that could be used to buy-down their mortgage.
If the owner does have liquid cash or assets they will be
expected to use them to pay down their mortgage. There could be a
scenario where an owner made a contribution towards the sale of the
property and the lender covers the shortfall.
A short sale is not a way to get out of a mortgage.
It is a tool for a borrower to use when they truly can’t pay their
mortgage.How does a short sale help me? • It helps you avoid an emotionally draining foreclosure process. • Avoiding
a foreclosure with help save your credit. Typically a foreclosure will
drop your credit score more than 200 points per loan. • You will
avoid having a foreclosure on your credit report for anywhere from 7 to
10+ years, which affects your future purchasing power and interest
rates. • It could help you avoid a "deficiency judgment" from the lender after the foreclosure as they try to recuperate their loses. I've already received my foreclosure notice, is it too late for a short sale? • The short answer is no, but there are a few variables that can affect the foreclosure timeline. • A
qualified Realtor or better yet, a Certified Distresses Property Expert
can help you extend the foreclosure timeline up to 6 months and in many
circumstances up to 7 or 8 months. • A sale of a home can be done and approved up to the day of the bank sale or auction of the home. I haven't missed any mortgage payments; can I still do a short sale? • Typically
the lender will not consider a short sale if there have not been any
missed payments but can be overcome if we can show a compelling reason
why the payments have been made but the payments are not sustainable
into the near future. • We would need to show if the payments were
made with your credit cards, by borrowing from family members or even if
the money came from retirement accounts, as an example. This will not
guarantee the lender will accept but there are instances where they have
done so. How do I pay the Realtor commissions, taxes and other expenses associated with a home sale? • The
homeowner does not pay any of the expenses associated with the sale of
the home, such as commissions and other closing costs. Those expenses
are also paid by the lender. • In December 2007, President Bush
signed into law the Mortgage Forgiveness Debt Relief Act which
eliminates the income tax that used to be levied on the forgiven portion
of the primary home's sale. The tax is still in force for second homes
and investment properties. FORECLOSURE VS. SUCCESSFUL SHORT SALEHomeowner ConsequencesSecurity ClearancesForeclosure
is the most challenging issue against a security clearance outside of a
conviction of a serious misdemeanor or felony. If a client has a
foreclosure and is a police officer, in the military, in the CIA,
Security of any other position that requires a security clearance in
almost all cases clearance will be revoked and position will be
terminated. A Short Sale on its own does not challenge most security clearances. Current EmploymentEmployers
have the right and are actively checking the credit regularly of all
employees who are in sensitive positions. A foreclosure in many cases is
ground for immediate reassignment or termination.A Short Sale is not reported on a credit report and is therefore no a challenge to employment.Future EmploymentMany
employers are requiring credit checks on all job applicants. A
foreclosure is one of the most detrimental credit items an applicant can
have and in most cases will challenge employment.A Short Sale is not reported on a credit report and is therefore no a challenge to employment.Deficiency Judgment In 100% of foreclosures the bank has the right to pursue a deficiency judgment.In
some successful Short Sales it is possible to convince the lender to
give up the right to pursue a deficiency judgment against the homeowner.Deficiency Judgment (amount) In
a foreclosure the home will have to go through an REO process if it
does not sell at auction. In most cases this will result in a lower
sales price and longer time to sell in a declining market. This will
result in a higher possible deficiency judgment.Future Fannie Mae Loan – Primary Residence (effective May 21, 2008) A homeowner who loses a home in foreclosure is ineligible for a FNMA backed mortgage for a period of 5 years.A homeowner who successfully negotiates and closes a Short Sale will be eligible for a FNMA backed mortgage after only 2 years.Future Fannie Mae Loan – Non Primary (effective May 21, 2008) An
investor who allows a property to go to foreclosure is ineligible for a
FNMA backed investment mortgage for a period of 7 years.In
investor who successfully negotiates and closes a short sale will be
eligible for a FNMA backed investment mortgage after only 2 years.Future Loan with any Mortgage CompanyOn
any future 1003 application, a prospective borrower will have to answer
YES to question C in section VII of the standard 1003 which asks, “Have
you had property foreclosed upon or given title or deed in lieu thereof
in the last 7 years?” which will affect future rates.There is no similar declaration or question regarding Short Sale.Credit ScoreScore may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years.Only
late payments on mortgages will show and after sale mortgage will be
reported as paid or negotiated. This will lower the score as little as
50 points, if all other payments are being made. A short sale’s affect
can be as brief as 12 to 18 months.Credit HistoryForeclosures will remain as a public record on a person’s credit history for 7 years or more.Short
Sale is not reported on a credit history. There is no specific
reporting item for ‘Short Sale’. The loan is typically reported ‘paid in
full, settled’. What is a Certified Distressed Property Expert (CDPE)?
The Developers of the Certified Distressed Property Expert
Designation believe that in almost all cases the best person for a
homeowner in distress to speak with is a well informed Licensed Realtor
that has the tools needed to help that homeowner find the best solution
for their situation.
Foreclosure is a devastating financial and emotional process for a
homeowner to go through, and in many cases they do so alone and without
help of any kind.
A Licensed REALTOR who has earned the Certified Distressed
Property Expert (CDPE) designation has dedicated their time and effort
to understanding the issues distressed homeowners are currently facing.
The Certified Distressed Property Expert (CDPE) is a professional who
understands the full range of solutions and is ready to help.