With the housing market on the decline for so many years, and unemployment continually on the rise, short sales have become a much needed way for homeowners to get out from under a house they can’t afford. Letting a bank foreclose on your property opens you up to a possible deficiency judgment, if the bank sells the house at auction for less than you owed on the note. It also shows up as a foreclosure on your credit report, which is used to determine when you can qualify for a loan to buy another home.
Many homeowners have taken the short sale route, where they find a buyer for the home (who is willing to pay less than is owed to the bank). The homeowner then submits the offer to the bank to get their approval. If approved, the house is sold for that amount, the bank does not have to foreclose, and there is no deficiency judgment against the first homeowner. Your credit report isn’t spared the hit, but having a short sale on your credit tends to be viewed more favorably than a foreclosure.
This all sounds like great deal, but I’m sure you won’t be surprised to hear that many mortgage servicers have been less than helpful when borrowers approach them regarding a short sale. I have personally heard horror stories about borrowers getting the run around, not getting call backs from their bank, and continually sending in updated documents that the lender says are outdated. (You can imagine how long the lenders have been sitting on these documents if they have become outdated.) In many cases, while this is all going on, the lender is still continuing with the foreclosure process.
In many states, attorneys general have been suing mortgage servicers to try to get relief for borrowers. A settlement was recently reached in which the top 5 mortgage services are now required to comply with timelines and guidelines set out in the settlement. These timelines are the same that were set out by the Treasury Department in 2010 in the Home Affordable Foreclosure Alternatives Program.
The main benefit of the new rules hinges on response time. The servicer is now required to respond to the borrower with a decision within 30 days of receipt of a completed short sale package. If the package isn’t complete, they have 30 days to let the borrower know of any missing documents. Anyone who has ever attempted a short sale knows how huge these requirements are. Just getting a response from the servicer will be a great improvement from how things have been running.
Hopefully these changes will help give many borrowers the relief they need. Even if a short sale is not approved, knowing of the denial allows the borrower to move on to Plan B. They can then decide if it’s a smart move to allow a foreclosure to go through and if they eventually may need to file for bankruptcy.
Submitted by:
No comments:
Post a Comment