Untrue about Loan Modifications.? Your credit is affected!? Ask a reputable lender about doing anything for at least 2 years after a loan modification.
Great advice Mike!? As I write this, I have heard rumblings that the credit scoring systems may begin to rate loan modifications differently on a person’s credit profile. I don’t have anything more than rumblings, but it doesn’t hurt to know that the credit might be affected. I would still go ahead with a loan mod rather than a foreclosure; big hit to credit scores or not. Two years of good payment history after a loan mod would heal any hit that MIGHT happen due to any change in credit scoring to rate modifications in the scoring models. Mary Supinger Loan officer and credit analyst in San Diego, CA ?
Hi Richard, Would you speak more about your experience in getting Settled for Less than Agreed off of a person’s credit report after a few years? That would be a cool tool to have! Thanks!
From reading all this messages seems like not
everybody knows or understands the legal issue on?short sale or foreclosures. Lets not get the consumers more?confused. Don’t go by heresay…get the actual source. We should just refer them to their Tax Preparer, CPA or Tax Lawyer.
See the following link for info directly from the government who is the actual source.
http://www.irs.gov/irs/article/0,id=179073,00.html
Even though the consumer will or might ?recieve a 1099, it can be offset and Zero out by filling out Form 982.
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As for Calif Lic Realtors check the following link for the CAR legal.
http://www.car.org/legal/2009-qa/credit-aft-forecl-bankrup-short/
As it states, a consumer can be eligible to obtain credit to purchase a home?
Five years from the date the foreclosure sale was completed. Unless “extenuating circumstances” that led to the foreclosure? It is Three years.
Four years from the date the?deed-in-lieu was executed.
As for Short sale /Preforeclosure it is Two years from the completion date.
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Thanks Art - I have to agree and I also take some issue with Mary’s position that there is no benefit to a short sale. Perhaps not with regard to FICO scores - I don’t know - but I was aware of the 2 year repurchase rule, and any way you slice it that is a big benefit given that prices are now far more reasonable than they have been in years, and that prices and rates won’t stay this low forever.
I am about to short sale my home. Are lenders only willing to approve the home owner to qualify for their short sale program only if they have deliquencies of at least 2-3 months late mortgage payments? I am still current on my payments b/c I want to cause the least damage to my credit report after the short sale is done.
Something no one has touched on is the fact that a if you work with a bank on a short sale they may ask you to pay some of the balance on a no interest loan over a 5 year period. For example, if your balance is $200,000 and the offer is $150,000 but the bank wants $155,000 they may ask you to pay the $5000 difference over a 5 year period.
Yes, it is possible to complete a short sale while being on time on your payments. It just depends on your situation. I’m a Realtor and just helped a client through a short sale even though he was never late on a payment with either lender. He had a first and a second and was upside down on both loans.
Short Sale can damage the ability to obtain new financing for 0-5, Foreclosure 2-5 years. Short Sale shows that you took responsibility in rectifying the problem instead of just walking for someone else to deal with your mess
You Can look at the difference here: http://www.shortsalesandiego.org/faq.html
Good find… I read through it and now, for Bankruptcy: what’s the difference between a discharge date and a dismissal date? Going from the discharge date, it actually ends up competing with Pre-Foreclosures (also at 1 yr)
I have a couple question for the Realtors or Investors who are purchasing these short sales:
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what % of FMV do you target?
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how do you get the banks to accept a much lower purchase price. Typically, I am haggling with a bank over closing costs and getting the buyers to pay FMV?
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What % of these deals close?
We close over 90%, yet, deliver a ready, willing and able buyer at FMV to the bank and we have to fight every step of the way to get our short sales completed. I just dont see how a bank will take 60-70% of FMV.
Please let me know.
BOB, MBA, CDPE, ePro
bob@inspiragroup.com
I understand that as long as you can remain current on your mortgage payments, settle without a payment plan to the lender, and started with decent credit, you can qualify for an FHA loan on a house closing immediately after the short sale is complete. This is according to a few reputable lenders, who actually gave prequalifications based on the short sale.
Bravo Sean! You are absolutely correct!
Is a Short Sale Better than a Foreclosure? YES. Of all available options, foreclosure is the worst! In addition to being a better solution for you, a short sale can also be better for your lender. While a foreclosure could reduce your credit rating (FICO score) by more than 250 points, a short sale will usually only result in an fraction of that. A foreclosure could prevent you from buying another house for many years to come. With a short sale, homebuyers with otherwise good credit can usually buy another home within 18 months. Also, after a foreclosure, your lender may have the right to collect their loss from you, but according to the new laws in California your short sale balance will most likely be forgiven without further consequence.
Copied from www.LACashBuyer.com website.
Nick, I have been told otherwise by credit experts. Do you have data to support your FICO claims? I’m not an expert, but from everything I’ve found on the subject, I’ve deduced that there’s really no difference in their effect on credit scores.
Mike you are correct to say that ‘if you have a deficiency judgement’, based on a 2nd loan/encumbrance, this will create an unsecured debt that the borrower is responsible for. That said, and as Sean noted, at least within the short sale process the borrower has the opportunity to negotiate. Currently many banks are fast tracking these negotiations, for better than in the recent past, and allowing up to 6% of the 2nd mortgage lien to be paid/negotiated. This is certainly not “ALL OF THEM” as you wrote, but it’s better than nothing. In a bankruptcy the borrower will be hit with 100%. I agree, a loan modification is best if 1). you can get the lender to do so, 2) if you can truly afford to continue to pay the modified price. Of the rather small number of homeowners that were able to modify their mortgage loans many/some found they could not keep up with their new payments. That said, if a homeowner can successfully modify their mortgage loan, and feel reasonably secure they will be able to sustain on-time payments for the foreseeable future, that is a best case scenario! Lastly, bankruptcy is a harder negative hit than a short sale. True in both cases your FICO/credit score takes a substantial hit, but as others have stated 1) bankruptcy stays on your record for 10 years where short sale are up to 7 years (maybe less depending on the lender and YOUR negotiations. 2) Depending on where the amount of days (less days 60) in arrears, FNMA may allow the homeowner to move into a new loan allowing that homeowner to take advantage of current market values. 3) under Fannie Mae current guidelines many non-bankruptcy borrowers can buy another home in 2 years instead of 5 to 7 years. As many of us are trying to create the best possible outcome in what is–no doubt–a bad situation, the above trifecta are as good as it gets. I too wish people well, and hope they can ‘keep their homes’. I also warn those whose can not afford to do so–do not bury your heads in the sand. Put yourselves in the best position possible to negotiate for the best possible outcome. Remember: just because walking away is easy, does not mean it is the best route out. Good luck to all, me included, as I am in the same place/situation as many of you. Suerte!
Wrong. A bankrupty is not the worst thing. You can purchase a home 2 yrs after a bankruptcy discharge with FHA. 3 years with a foreclosure. Bankruptcy also protects you from any personal liability such as deficiencies if you do not reaffirm. You can recover your FICO pretty quickly too after discharge and get cars, credit, etc…
Loan guidelines are changing all the time and it will depend on which chapter you file. The bottom line is that you may qualify for a loan 2 years after a chapter 7 and 1year after discharge from a chapter 13 but you are going to have to answer for this for the next 10 years since that is how long it will appear on your credit report. It is much easier to buy cars and rebuild credit than it is to get a home loan.
That’s true. Foreclosure might show that the owner didn’t try to do anything. It stays on your credit 7-10 years. Renting might be harder as prospective landlords run credit before they rent to you. There are also some employers who run credit before they hire you. Short sale is viewed better and shows the homeowner is responsibel but lost the house due to hardship.