The link below identifies the Fannie Mae loss mitigation options that are available to assist borrowers experiencing financial hardship.
It is 19 pages and goes through a temporary and a long-term hardship. I am not an expert when it comes to this because I don’t do modifications but I wanted to make sure to share it with you.
https://www.efanniemae.com/sf/servicing/pdf/loanworkoutfactsheet.pdf
I think anyone in the real estate business will tell you that a short sale is better. Both of them affect your credit about the same amount but if you are trying to buy another home you will be able to do so earlier when you have a short sale on your credit versus a foreclosure.
Also, with a short sale you can get away with not having a deficiency balance so on your credit report it shows nothing is owed but with a foreclosure there will be a balance owed.
The article below goes into detail about this and also comments on how it can affect your family http://kcmblog.com/2011/05/04/is-a-short-sale-or-a-foreclosure-my-best-option/
Most people do not know that the release date that banks have to go off of is not the date that you are foreclosed upon and they take title from you. The release date is the date that the bank disposes of the property.
It can take a bank months or years to finally sell your property and that is when your waiting period begins. Typically the bank won’t allow you to buy again for another 4 years but there were new rules that Fannie Mae came out:
- Deed-in-Lieu of Forecloure is 2 years with a minimum of 20% down.
- Preforeclosure sale is 4 years with a minimum of 10% down
- A short sale is 7 years and the down payment will depend.
If you can show an extenuating circumstance than all of the above goes to 2 years and a minimum of 10% down. Fannie Mae defines a unique hard ship as:
- is unlikely to re-occur and is not a natural or manmade disaster;
- is temporary in nature or of limited scope, but impacts many borrowers;
- may involve property damage, hazard in the dwelling, or other adverse property conditions;
- creates financial hardship that impacts the ability of the borrower to continue making payments on the mortgage loan;
- may involve uncertainty regarding whether insurance will cover the losses incurred; and
- has been designated as a “unique hardship” by Fannie Mae.
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/svc1011.pdf
FHA requires 3 years and VA is 2 years. The years and guidelines mentioned above are subject to change without notice and can vary from bank to bank.
An example of it taking years would be if your bankruptcy was discharged in January of 2008 and the property wasn’t sold until January 2010 you have to wait 2 years from January of 2010. Just because the property was included in the bankruptcy doesn’t matter.
If you know of anyone in need of a loan modification I would recommend for them to attend this event.
The nonprofit Neighborhood Assistance Corporation of America — hero to the struggling homeowner, bully to big banks — said it will conduct its third South Florida mortgage counseling extravaganza Aug. 27-31 in West Palm Beach.
The Boston-based group touts an 80 percent success rate, crediting much of the achievement to hundreds of bank representatives who attend its programs and meet face-to-face with homeowners.
http://articles.sun-sentinel.com/2010-08-13/business/fl-mortgage-modification-event-20100813_1_naca-neighborhood-assistance-corporation-loan-modification
There was an article back in December about this and 80% that were expected to receive workouts within weeks according to CNNMoney.
“Wynn was able to get his modification at a “Save the Dream” event offered by the Neighborhood Assistance Corporation of America (NACA) in New York City last Friday. Lenders from nearly all the major banks and servicers were in attendance and promising to restructure loans based on what borrowers could afford. As a result, many homeowners walked in with their mortgage problems and walked out with solutions. In fact, according to Bruce Marks, NACA’s founder, 40% of attendees left with decisions the same day. About 80% are expected to receive workouts within weeks. His organization has already hosted about 400,000 borrowers at more than a dozen of these events.”
http://money.cnn.com/2009/12/16/real_estate/great_mortgage_modifications/index.htm?section=money_realestate&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_realestate+%28Real+Estate%29
This was sent to me by Rob Chrisman. “A study put out by Deutsche Bank ranked GMAC ranked as the top servicer among all prime mortgage servicers based on short sale timelines – six months! The investment bank’s survey showed that a short sale generated a higher recovery than an REO sale. For “prime” short sales, GMAC was the fastest, followed by CitiMortgage (7.5 months) and Wells (8 months). DB’s study showed that BofA was the slowest with a 13 month short sale timeline. For “subprime” Wells came in first (15 months), followed by HomEq and then Saxon. Option ARM short sale speedsters were EMC, Aurora, and GMAC. ShortSales”
Where should I begin? Well, don’t let the name fool you because there is nothing short about them. I am working on one right now that is going on it’s 10th month. Lucky for me as a Mortgage Professional I just have to pre-qualify you and then sit back and wait. Unfortunately the buyer, realtors, and attorneys can’t say the same.
The reason I wanted to write about this topic is because so many times we, including myself, will complain about how slow the banks are but we sometimes forget that there might be some explanation for it. The article does a good job of bringing up those reasons
I can’t tell you exactly why the bank is dragging its feet, but I do know that lenders want to make absolutely certain that their borrowers aren’t trying to get out of mortgages they still can afford. Many people are hiding assets and otherwise lying to their lenders to get out from under loans on which they can still make the payments but choose not to.
http://www.marketwatch.com/story/when-buying-a-short-sale-there-are-no-easy-answers-2010-06-04?siteid=rss&rss=1
This is very real and I am sure there will be many that will buy the deficiency judgments from the banks for pennies on the dollar and then go after the homeowners.
Lenders will file a tidal wave of lawsuits against homeowners in the next few years as a way to recoup losses when home sales or foreclosure auctions don’t result in enough money to pay the mortgages in full, real estate and legal analysts say.
Under Florida law, banks have five years from the date of the sale to file for so-called deficiency judgments and up to 20 years to collect. Lenders can garnish wages or make claims on borrowers’ assets.
http://articles.sun-sentinel.com/2010-05-22/business/fl-short-sale-debt-20100521_1_mortgages-lender-homeowners
This was interesting and something I did not know.
“While canceled debt originally used to buy or build a house can be exempted from tax filings, debt used for other purposes cannot. “I just thought I’d get out from under the house and that would be that,” she says.”
Make sure to always consult a CPA. Another thing that is happening in South Florida right now is that they are going after people who claimed their property as a Homestead property, meaning they occupy the property as their primary residence, but it really wasn’t. State and local governments are looking for ways to make up for lost revenue so you better be careful.
http://online.wsj.com/article/SB20001424052748703686304575228783947789118.html?mod=djemITP_h
That’s quite a headline. Unfortunately it is true and I am sure it is making people irate. I would guess that this can happen because the banks are so unstaffed. I have to imagine that it is pretty hard to staff up and take on more employees to handle foreclosures and short sales when the distressed sales are exactly why everyone had to let go of their employees.
Apparently another reason this happens is due to disorganization. “Communication breakdowns occur because of the way the servicers are structured. One division typically deals with modifications and another with foreclosures. Servicers also hire a local trustee or attorney to actually pursue foreclosure.”
I think it’s a combination of being understaffed, disorganized, and having employees who just don’t’ know what they are doing. Everything to do with the mortgage business right now is a learning curve even for those who have been in the business for over 20 years. You could never begin to understand this unless you were in the business so next time instead of yelling and screaming, try being more sympathetic. Whether you are right or wrong you will get much further with that mindset.
http://www.usatoday.com/money/economy/housing/2010-05-05-foreclosures05_CV_N.htm
This is just a proposal but it’s a bill filed in the US House of Representatives would allow mortgage borrowers to remain in their homes, as renters, for up to five years after receiving a foreclosure notice.
I guess it’s not a bad idea if the borrower who is not making their mortgage payments decides to make their rent payments. It would create cash flow for the bank and allow home values to regain some value assuming that the market does stabilize.
There are stipulations in order to qualify for this. Yep, always a catch and you always need to read the fine print. The right to rent program would be limited to homes purchased at or below the median price for its metropolitan statistical area, and must have been the borrower’s principal residence for no less than 2 years. Only mortgages originated before July 1, 2007 will be eligible.
http://www.housingwire.com/2010/04/29/house-democrats-introduce-right-to-rent-bill-for-borrowers-facing-foreclosure/?utm_source=rss&utm_medium=rss&utm_campaign=house-democrats-introduce-right-to-rent-bill-for-borrowers-facing-foreclosure
