Foreclosure in 20744>Question Details

Tuan, Home Seller in Fort Washington, MD

During short sale review process, skip mortgage payments or keep paying?

Asked by Tuan, Fort Washington, MD Thu Dec 27, 2007

While my short sale is being reviewed by the lender, should I continue skipping payment or should I keep making payments on the mortgage? I am currently 30-day delinquent (skipped November payment) and approaching 60-day delinquency at the end of December. Should I make a payment or not? What effect will it have on the short sale being approved? I estimate the short sale to take another month or two. Thanks for your input.

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There are lots of considerations to look at when trying to decide whether it makes sense to continue paying the mortgage or not. See the link below for a summary of what you need to know.…
1 vote Thank Flag Link Mon Mar 8, 2010
Tuan... I am confused. Can you afford the mortgage payments? Are you asking for a short sale because you cannot afford the payments or are you asking for a short sale because you are upside down?

Falling further and further behind on your mortgage payments can have devastating effects on your credit... this can even keep you from renting a home or an apartment in some cases.

In many ways... when you say you skipped your November payment asking if you should skip more makes is appear that you have the money and can afford the home. That you are choosing to skip and not forces to skip due to financial hardships.

Regardless, if the banks feel that you will let the house go into foreclosure then they are more likely to work with you on a short sale.
1 vote Thank Flag Link Thu Dec 27, 2007
You don't have to default on your mortgage to ask for a short sale, but the truth is that there needs to be a financial hardship. With that said, you cant just want to stop paying your mortgage because the property is worth less than what you owe. You need to be going through some hardship that it's making it difficult to make your mortgage payments, because your income somehow decreased (due to medical bills, loss of employment, relocation, divorce, death of a borrower) etc. The point about not making your mortgage payments will impact mostly on your credit report and credit score, which it's more the point of your question. The more missed payments the more your credit will be affected. Hope this was helpful.
Franches Schnell, REALTOR SFR
813 784-2663
Future Home Realty
0 votes Thank Flag Link Mon Oct 21, 2013
I see you received your short sale approval and it looks quite favorable based on what you presented below. My first question would be, who is your agent and how come he/she cannot find a buyer that would agree to some but not all the seller concessions? With every short sale, the selling agent needs to make it clear to the buyer that the seller concession is not guaranteed. You can request 6% all day long, but you don't always get it. The buyer should be prepared to close with some or no seller concession. Otherwise, find another buyer. That way you are not dealing with the issue after the short sale is approved. I'm amazed you are asking this question here and not of your agent. He/she gets paid to find these solutions for you. I'm sorry to be so blunt, but you probably need to find a new agent if this short sale doesn't go through. It seems like a big waste of everyone's time. Finally, you don't need to be late or in foreclosure to have a short sale approved. You proved it here, yourself. Also, it is a big misconception that just because you have a short sale on your credit you cannot obtain financing on another home. If you went four or more months late then you will fall into the forecosure status and will need to wait three full years before you can apply for a new FHA mortgage. However, if you never went late during the short sale process, then you don't need to wait at all. Good luck!
0 votes Thank Flag Link Sun Nov 18, 2012
The answer for me would depend on how big a short sale on the first Countrywide is accepting.
They don't want the notes or you to assist because technically you are cash poor and that is why you are doing the short. Very common that lenders will require excess cash to go to them...not the buyer, realtor, or anyone else.

The buyer theoretically should be getting a good deal without the 3%...and possibly I would be negotiating more with them to take it or lose it...if there is enough equity, they won't want to lose it. However, I would be negotiating more on Countrywide to pay the extra 3%. They stand to lose a lot more than 3% if they kill the deal and have to carry the house through foreclosure. Depends a lot on their sense of urgency.
0 votes Thank Flag Link Tue Jan 8, 2008
Ok, I finally got approval from both Countrywide and Chase for the short sale. But I have the following issue:
Countrywide is giving us up to 10% for closing costs (5% realtor fees, 3% buyer's closing costs, 2% seller's closing costs). As you can see, they are only approving seller concessions/buyer's closing costs of 3% and does not allow me the seller to assist in closing costs in cash or promissory note, otherwise any money I bring in at closing would have to go to Countrywide. The buyers are insisting on getting 6% concession otherwise they will walk away. I am trying to find a way to get that missing 3% if we can not convince the buyer to lower their demands. We initially thought about reducing my realtor's commission and transfer it to closing costs as realtor's concession. Then I would pay my agent outside but my agent says that is against the law and her realtor will not allow it. So we are stuggling to find ways to get that missing 3%. Some ideas we thought of are:
- ask the buyers to increase the loan amount and roll the extra 3% in there. They don't want to do it.
- ask both realtors to reduce their commissions but the buyers' agent does not want to give up more than $1000. That's too little.

I'm willing to do anything to get this done but I am tied by Countrywide's requirements. If anyone can think of a solution, please let me know.
Thank you for your feedback.
0 votes Thank Flag Link Sun Jan 6, 2008
Answers to this problem will depend on the specifics to this case - which I still don't know enough about. While there are guidelines, "anything" is negotiable with a lender depending on how the short sale is presented. My very first short sale was back in 1994, with a homeowner who lived in a refurbished home, got married, then bought a bigger house while trying to sell the original home...The problem is the homeowner could not sell the house or get any offers. Despite the listing agent and closing attorney saying not to bother asking the lender about accepting a short sale because the homeowner had excellent credit and was not late with payments, we pursued the short sale and got the bank to accept an 85K contract on a home owing 119K. While not common, working shorts before default notices come out is still being done today...just depends on what you say and don't say when making the case for the short. In this case, it was not hard for the loss mit negotiator to see that the homeowner did not want to pursue options that would destroy his credit...and was looking for a solution that would eliminate the problem of paying 2 mortgages (which could not continue forever), and save the bank money in the long run by selling NOW short of the owed mortgage. The other neat thing about this case is that we settled on a 10 year interest free note for the deficiency amount (couldn't get it all relieved since the homeowner did have excellent credit and savings..) but we did a double short and got that note waived with more negotiating 1 month later.
If you are a homeowner doing this kind of stuff yourself, you have to swallow your pride, educate yourself, ask, and be reasonable.
0 votes Thank Flag Link Wed Jan 2, 2008

Have you recevied a notice of default, most banks will not accept short sale, unless you are 3 months behind on your payments and they have mailed you notice of default.
0 votes Thank Flag Link Wed Jan 2, 2008
Tuan, you do not have a fully accepted short sale unless the second mortgage company agrees to the amount offered by the first mortgage or buyer. I have seen companies holding the second mortgage hurt the entire process holding out for more money. This is interesting to me because they typically get 0 dollars if the property is foreclosed on.

If Chase declines Countrywides offer then you can go back to Countrywide to see if they can offer addiitonal money. An agreement has to be reached with both of your mortgage companies for a short sale to close. You could also try to seek additional money from the buyer.
0 votes Thank Flag Link Tue Jan 1, 2008
Ok... The simple fact is: negotiating with the 2nd is always easier once you get the primary lien holder to agree to the short sale. What Countrywide is proposing to Chase is well short of the 10% guideline for a maximum offer to a junior lien holder. Chase may accept the short sale terms, but may still pursue you for the relieved amount...thus, they go after you with a deficiency judgement.

There are options here that you could take depending on th numbers...
What is your home listed for? At what price are houses like yours selling for when they finally sell? What is your current mortgage balance with Countrywide and what short sale amount are they agreeing to?
0 votes Thank Flag Link Tue Jan 1, 2008
I do not live in the property anymore. I have been trying to sell it for 6 months so I have no intention to keep it. Renting it would not even cover the mortgage. I will most likely skip a 2nd payment and let it go to 60-day delinquent.

There is new development as of today: the first lender (Countrywide) has approved the short sale. They are telling me that they will offer the second lien holder (Chase) $3000 and will not negotiate with them (is that true?). I owe the second lien holder $99K. They tell me that I am to send the offer to Chase and negotiate with them to get their approval.
Can someone with experience with these negotiations advise me on how to negotiate with the second lender? What should I tell Chase and what should I expect? What if the second lender does not want to accept the $3000 offer from the 1st lender? Thank you for your input.
0 votes Thank Flag Link Mon Dec 31, 2007
Tuan - without all the information to provide the right answer, here are evaluations I use with clients when helping them through the short sale process...

Evaluation #1: do you want to stay in the house, or do you care if you have to move?
If you want to stay, you should try to make other payment arrangements with your lender(s). For example if you have a conventional loan, ask to make interest only payments for a period of time...the payment is lower, and can help you get on your feet... and still keep your loan current because of the new terms you worked out...

Evaluation #2: Could you afford any financing alternatives by the lender to keep your loan current? If NO due to financial, physical or employment hardships, you should stop making any payments because you are probably throwing any money you may need for survival (e.g. medical bills) down the drain...Comes down to is easier to rebuild wealth than to rebuild your health!

Evaluation #3: Has someone explained all possible alternative besides a short sale solution? If you are considering making payments, I question how well you understand the process and how it could impact you depending on the action you are taking. Making payments after you've missed one will likely keep your case in collections vs. loss mitigation where you need it to go if negotiating a short sale. I advise my clients to first convince me of the hardship they are facing to determine the best course of action...including the other professionals (tax or bankruptcy attorney, CPAs, etc) they should consult with.

Evaluation #4: Do you have savings or checking accounts with the same lender that holds your mortgage?
If YES, you should consider closing the accounts immediately if pursuing a short sale..they will likely begin debiting your account for missed payments...and you may need that money to live on through the hardship you are facing. Also, if you have automatic payroll payments going into these accounts, you might want to consider changing that.

Evaluation #5: Are you prepared for the alternatives if the short sale is not accepted by the lender?
This could mean being foreclosed and kicked out of the home, being pursued for the deficiency amount after the sheriff's sale, etc. You should also consult with an attorney about possibly filing for bankruptcy.
All of this means your credit WILL have serious dings on it. The short sale can also produce minor dings on your credit, but nothing you can't overcome with some credit repair tactics - and certainly nothing as bad as showing foreclosure.

Evaluation #6: Are you prepared for the financial outcome if the short sale is approved? The relieved amount would be considered income, and thus income taxes would be due. Although, there are exceptions to paying income taxes following a short sale depending on the severity of the hardship. Whether you receive a 1099 for the relieved amount or not, you should pay the tax...Also, while I make my short sale packages contingent on waiving any deficiency judgements against my clients, there are no guarantees. I always insist on seeing a written acknowledgement from the loss mitigation negotiator that the short sale acceptance is considered full settlement, with no deficiency judgements for the relieved amount.

If you have specific questions in reply to this post, don't hesitate to email me directly at
0 votes Thank Flag Link Sun Dec 30, 2007
Lorie, to answer your question, I cannot afford the mortgage payment - as I am digging into my savings - and I am also upside down. I have been trying to sell for 6 months now. I could make another payment by digging one last time into my savings but that would be it. Is it worth it, considering that if the short sale is not approved, I will most likely let it go through foreclosure?
0 votes Thank Flag Link Fri Dec 28, 2007
Generally speaking, most people turn to a short sale in order to keep their credit intact, otherwise would probably just go into foreclosure instead. The best advice would be to consult a real estate attorney. I am sure your listing agent would be able to refer you to one who handles settlements in your area. John Brennan of Brennan Title would be an excellent resource. Good Luck, hope things go well for you in 2008.
0 votes Thank Flag Link Thu Dec 27, 2007
This is a hard question to answer, if you have the money to pay, pay it. That being said, if your further behind the bank might be more willing to settle for less if your more than one payment behind.
Web Reference:
0 votes Thank Flag Link Thu Dec 27, 2007
Thank you for your answer, Lavy. Yes, all those items have been completed. The appraisal and BPO were done last week and the lender is currently reviewing the file. If I don't make a payment by December 31st, I will be 60-day delinquent. What should I do?
0 votes Thank Flag Link Thu Dec 27, 2007
This is what is required of borrower before a Loan servicers agrees to short sale.

1. Actively market the property for 3-6 months
2. Personal financial information for analysis (In depth Interview)
3. BPO or full appraisal
4. Listing agreement, contract, and estimated HUD settlement statement.

Tuan, have you completed the above listed items ????
0 votes Thank Flag Link Thu Dec 27, 2007
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