Slipping towards foreclosure can lead to feelings of anxiety, depression and loss of self-esteem. Don’t give up. There are options available to help millions of homeowners rescue themselves from the brink. Since it is crucial to act before a foreclosure takes place, now is the most important time for you to review the following options and solutions. |
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Leave vs Stay?
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Benefits of a Shortsale
- Minimize of credit damage (foreclosure often does a 200-300 point hit on one’s credit score. Short sale bears far less impact).
- Able to qualify for the purchase of a new home within 2 years as opposed to 5-7 years after foreclosure
- Cash incentive/relocation fee
- Clearing of financial debt
- Avoiding foreclosure top
To Qualify for a Shortsale
- Undergoing divorce
- Inability to work due to medical condition/illnesses
- Recently unemployed
- Death within the family (spouse, family member etc.)
- Reduced income
- Business failure
- Separation
- Insurance or tax increase
- Payment increase due to mortgage adjustment
- Excessive debt (credit card, loans, medical bills etc.) top
Required Documentation
- Two months most recent mortgage statements
- Two months checking accounts statements
- Two months savings accounts statements
- Last two pay stubs
- IRS Form 4506 Request for copy of tax returnhip Letter
- Financial Worksheet detailing monthly expenses and incomes (some lenders have their own form) top
Legal Statutes Pertaining to Debt Forgiveness
In 2007 The Mortgage Debt Relief Forgiveness Act was signed. This Act stated that an outstanding and leftover debt remaining after a short-sale will be wiped out and forgiven. The lender will not pursue the deficient amount in the form of a judgment. This statute however, has expired on December of 2013.
In place of the Mortgage Forgiveness Relief Act is The Anti-Deficiency Act that is currently active. Under this regulation after a short-sale, as long as the remaining debt is from the loan that was borrowed by the Homeowner for the purpose of purchasing their primary, principal residence, then it can be forgiven. If however, the loan was taken out and used for other personal purposes (for instance a loan was taken out to put one’s children through college), then such an outstanding balance after the sale will not be forgiven. In addition, for the remaining debt to be wiped out and not be turned into a deficiency judgment by the Lender the real estate agent handling the sale must make it clear during the transaction (written with an addendum and submitted for the Lender’s approval) that the Homeowners are filing for the debt to be cleared after the short-sale’s closing. Otherwise, though a deficiency judgment cannot be filed and pursued by the Lender, the bank however can still have the remaining amount be put on the distressed homeowner’s credit report in the form of a consumer debt (similar to a credit card debt). top