I have had a client go through the loan modification process and then end up short selling the home in the end because she still could not afford the payments. For one, I applaud you for going through the loan modification process as I understand it can be quite tedious and long so congrats to you for your diligence.
Secondly, as long as you have a financial hardship that is causing you to be insolvent (not have enough to make ends meet), you should be able to do a short sale. What you should do is find your area short sale expert (if you need help I can help refer you to someone) and sit down and do a consultation.
It definitely is not out of the question at this point.
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But if you're convinced that you can't qualify for a loan mod this time around, then you would want to know if they participate in the HAFA program. Under HAFA, you can short sell your home and receive moving costs incentive from the government for $3,000, Deed in lieu is also possible but the program requires that you attempt to list the property for at least 90 days and if short sale is not successful only then may you apply for deed in lieu and still get $3,000 moving costs incentive.
Essentially, banks look at short sales as a way to lose a lot less compared to a foreclosure, however they would rather you stay around and pay.
How long do you have with a foreclosure? It could be years before the bank kicks you out. Depending on the bank, some are more aggressive at filing foreclosures and others are pretty passive and wait a little while.