Real Estate Short Sales, Government Help
In this part 2 of my Short Sales post I will discuss government programs related to short sales, short sales and your credit rating and scams related to short sales.
The short sale process is a confusing and long process as it is, add to that government involvement and the stress and strain can increase. To those who qualify though, these government programs may be of benefit in the short sale process. The two main government programs are the Home Affordable Foreclosures Alternative Program (HAFA) and a program for Veterans Administration (VA) guaranteed loans.
HAFA
The HAFA program is run by the U.S. Treasury Department in conjunction with U.S. Housing and Urban Development (HUD). HAFA allows a homeowner to do a short sale or to do a deed-in-lieu of foreclosure in order to leave their current house that they can no longer afford. HAFA may even provide money for relocation assistance after your current house has been dealt with.
To qualify for a HAFA short sale your loan must be owned or guaranteed by Freddie Mac, Fannie Mae or be serviced by one of the 100 or so Home Affordable Modification Program (HAMP) mortgage providers. The easiest way to determine if you qualify for this program is to contact your mortgage company and ask them if they participate in the HAMP or HAFA programs and get the ball rolling from there.
Other requirements of the HAFA program are that you document your financial hardship, not owe more than $729,750 on your first mortgage, have obtained your mortgage on or before January 1, 2009 and not have been convicted of certain criminal charges within the last 10 years. This link to the HAFA program will give you the finer details on the requirements and provides...
This is part 1 of a 2 part series covering short sales.
What is a short sale?
Short sales can be a tricky puzzle when we don't have a good understaning of the big picture. Understanding where all the pieces fit and the time involved can cause plenty of confusion and frustration for everyone involved. Add to that a lender who operates behind a veil with no rhyme or reason as to what they want or need to get the short sale done and the path quickly takes a bad turn.
As with any serious undertaking someone pursuing a short sale should become familiar with that big picture so that they can get out from under that debt that prevents them from moving forward. In this post I hope to explain some of the puzzle pieces of a short sale and how they fit into the big picture for a seller.
The first thing to understanding short sales is to define what exactly a short sale is. In non-technical terms a short sale is a sale where a particular house is being sold for less than what is owed for it. An example being someone with a house they paid $200,000.00 for, but they owe $175,000.00 to the mortgage company. Due to market conditions or lack of upkeep on the house the home owner is only able to sell it on the open market for $150,000.00. Under normal circumstances that shortfall of $25,000.00 is the responsibility of the home owner to pay back to the lender. The $25,000.00 is also immediately due upon sale, there is no financing or payment plan to pay it off over time. Once the house is sold, language in the mortgage document requires that the lender be paid back in full whatever the outstanding balance is and whether or not the home owner had extra money to cover it.
Where the home owner knows they will be unable to pay everything that they owe back because of job loss, medical emergency, death, divorce or other situations they can ask their lender to...