Foreclosure Vs Short Sales

There is always options available for us but sometimes we lack the knowledge that we need to make a good informed decision. A foreclosure can be very devastating to our credit and our ability to purchase a home in the future compared to a Short Sale. There are many benefits to doing a short sale if you cannot afford your home because of lack of work, unemployment, medical issues, Change of location of employment ect… I can go on and on. Only you can decide whether a Shortsale Is the best option for you. Please review the short sale content provided in this website. It is located on the nav bar. Theirs is information out there that give good examples of the benefits and disadvantages on the topic of Foreclosure VS Shortsale. In this blog I will give you some examples the benefits of a short sale compared to a foreclosure. For example in a successful short sale you are eligible for a Fannie Mae, FHA VA or Conventional loan within 2-3 years. Under the HAFFA program you can receive up to 3 thousand in home relocation cost if you qualify. Your credit score can be lowered from 150 to even more than 300 points in a foreclosure. In a successful Short Sale it can be lowered as little as 50 points if you were current on mortgage. Not always the case but possible every case is different. Foreclosure could remain 10 years or more on public record. Short Sales are not reported on a credit report. As jobs become scarce many employers are using credit reports as a means to help qualify someone for employment and using their credit score as an example of how responsible this potential new employee might be to the company. This would be a perfect example of protecting your future and your position in trying to obtain job employment. In some cases someone having a security clearance will have their clearance revoked and even quite possibly their position terminated. A short sale is not reported on the credit report. So please review all the disadvantages of a foreclosure instead giving up. This doesn’t even take into the account of the more interest you will pay in your lifetime for having to do a foreclosure. It’s quite simple to explain. You give up and let yourself set get foreclosed. You suffer an above average credit rating loss on your credit report. Now you start this long process of rebuilding you credit. This will take make many many years. As you apply for credit cards or get re-evaluated on your existing you will find out that you are being quoted a higher interest rate. This is because your new credit score has shown you to be a higher risk. The higher risk you are to a creditor the more interest you will pay during the life of that credit until your credit scores reach a satisfactory rating and your foreclosure doesn’t show on your credit report. In a foreclosure as well as a short sale lenders do have the right to pursue a deficiency judgment against you, but in some successful short sales it is possible to convince the lender to give up the right to pursuit a deficiency judgment against the homeowner. Another benefit of a short sale using the HAFFA plan you may receive up to 3k in relocation money if you qualify. For easy reference I have included a summary below Please visit our CDPE Maryann’s website to see if you qualify (doiqualifyforhaffa.com) or give us a call and we will be glad to assist you.

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Summary

Foreclosure

In a foreclosure homeowners are ineligible for Fannie Mae, FHA, VA, Conventional loans for a period of 5 years.

Foreclosure can remain 10+ years on you public record.

In some cases someone having a security clearance will have their clearance revoked and even quite possibly their position terminated. Employers are checking their employee’s credit regularly. Employers are requiring credit reports with applications.

In a foreclosure lenders do have the right to pursue a deficiency judgment against you.

Short Sale

Can get a loan from Fannie Mae , VA, Conventional, FHA within 2-3 years

A short sale is not reported on a person’s credit report.

A short sale is not reported on a person’s credit report.

In a foreclosure as well as a short sale lenders do have the right to pursue a deficiency judgment against you, but in some successful short sales it is possible to convince the lender to give up the right to pursuit a deficiency judgment against the homeowner.

HAFA Requirements

Loan Eligibility Criteria for HAFA:

1. The loan must be secured by borrower’s principal residence (unless borrower had to relocate more than 100 miles away for employment reasons and have not purchased another property).
2. It must be a first lien mortgage originated prior to January 1, 2009.
3. The mortgage is delinquent or delinquency is reasonably foreseeable.
4. The unpaid principal balance is no more than $729,750, for a single-family residence (higher limits apply for 2-4 unit multi-family dwellings).
5. The borrower’s total monthly mortgage payment exceeds 31% of the borrower’s gross income.
6. After notification of potential HAFA eligibility, borrower has 14 days to ask for HAFA consideration.

HAFA Incentive Compensation:

• Borrowers: $3,000 (relocation assistance)
• Servicers: $1,500
• Investors: $2,000 (maximum reimbursement for payments to junior liens)
• Junior Liens: $6,000 (but can be no more than 6% of the unpaid principal balance)

All lien holders who agree to participate in the HAFA short sale must release the borrower from all deficiency liability if the HAFA short sale closes.

Borrowers are eligible for HAFA if they are eligible for the HAMP program, but:

1. Do not qualify for HAMP.
2. Fail to complete a HAMP modification.
3. Do not accept a HAMP loan modification

HAFA Short Sale Process:

1. If the borrower qualifies for HAFA, the servicer will send a Short Sale Agreement (SSA) to borrower, which is required to specify the minimum amount the lender must receive from the short sale.
2. The borrower has 14 days to return a signed SSA to servicer.
3. The listing period must be a minimum of 120 days and can be extended up to a maximum of one year.
4. When an offer is received, a Request for Approval of Short Sale (RASS) form must be submitted within three days, along with a copy of the offer and proof of funds for the buyer.
5. Servicers must accept or reject the offer within 10 days.
6. The buyer may not sell the property within 90 calendar days of closing of the short sale.
7. If an offer is received prior to a HAFA SSA being signed by the servicer and borrower, the borrower must submit an Alternative RASS form with the offer.