SUCCESSFUL SHORT SALES
Future Fannie Mae Loan - Primary Residence
A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae-backed mortgage for a period of 5 years
A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed mortgage after 2 years
Future Fannie Mae Loan - Non-Primary Residence
An investor who allows a property to go to foreclosure is ineligible for a Fannie Mae-backed investment mortgage for a period of 7 years
An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed investment mortgage after 2 years
Score may be lowered anywhere from 250 to more than 300 points. Typically will affect a credit score for over 3 years
Late payments on mortgage will show, and after sale, mortgage is normally reported as "paid as agreed", "paid as negotiated" or "settled." This can lower the score as little as 50 points if all other payments are being made. A short sale's effect can be as brief as 12 to 18 months.
Foreclosure will remain as a public record permanently, and on a person's credit history for 10 years or more
A short sale is not reported on a credit history. There is no specific reporting item for "short "sale." The loan is typically reported "paid in full, settled."
Foreclosure is the most challenging issue against a security clearance outside a serious misdemeanor or felony conviction. If a client has a foreclosure and is a police officer, in the military, in the CIA, security or any other position that requires a security clearance, in almost all cases clearance will be revoked and position will be terminated.
On its own, a short sale does not challenge most security clearances
Employers have the right and are actively checking the credit of all employees who are in sensitive positions. In many cases, a foreclosure is reason for immediate reassignment or termination
A short sale is not reported on a credit report and is therefore not a challenge to employment
Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have (besides bankruptcy/charge off) and in most cases will challenge employment
A short sale is not reported on a credit report and is therefore not a challenge to future employment
In 100% of foreclosures (except in those non-deficiency judgment states), the bank has the right to pursue a deficiency judgment
In some successful short sales, it is possible to convince the lender to sign a release and give up their right to pursue a deficiency judgment against the homeowner
Deficiency Judgment (amount)
In a foreclosure, the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgment
In a properly managed short sale, the home is sold at a price that should be close to market value, and in almost all cases will be better than an REO sale resulting in a lower deficiency
Deficiency Judgment (statute of limitations)
In a foreclosure, the first mortgage holder has 6 months to file for a deficiency judgment (the second mortgage holder has 6 years).
If the mortgage holder does not release their right to pursue a deficiency judgment they have up to 6 years to file and seek a deficiency judgment.
Windermere Prestige Properties 702-275-2192
The Mortgage will be taken care of by the Lender, whether you do a Shortsale, a Foreclosure or a Deed-in-Lieu.
The Heloc will be taken care of by the First Lender, the Bank. With the legislation that Jerry Brown just signed; the HELOC people cannot come after you.
The IRS will not pursue you thanks to the "Debt Forgiveness Act signed by President Obama in 2009.
You have only two worries:
If you have an HOA where this home is; they will want their dues.
If y6ou are behind on Property Taxes, the County will want their money; it will not be disolved just because you are gone.
I am sorry for your loss, and I wish you God bless and good luck
Clearly, you do need to look at the implications of walking away which would be
Not a prudent step.
Prudent to talk to you accountant or a Realtor.
Feel free to call me and I will be able to guide you.
Ruth and Perry
You might want to do a short sale where the HELOC lender agrees to take less for the home (the market value) and this saves you a foreclosure on your record. A realtor can take a listing for your home (the one that is a mess and has a 500K loan hanging on its head). Then, when the offer comes, the realtor negotiates with the bank to accept the offer (market value offer).
Because you have no income, you should have no trouble qualifying for a short sale!
Consult someone before taking out more debt that you cannot pay off. That sounds like a good recipe for being miserable.
Erica M Nelson
Short Sale Specialist
Well it sounds like you're in a great position! Don't get a loan on your paid off house yet. Find out if the HELOC would pursue a traditional Non-Judicial Foreclosure or a Jucicial Foreclosure.
If the HELOC pursue's a non-judicial foreclosure, you are protected; California Civil Code of Procedure 580d, prohibits them from seeking a deficiency judgment from you, because they took the house back and sold it. This doesn't work on homes with two mortgages, because usually the 1st mortgage forecloses and loses their right, but the 2nd who didn't foreclose retains their right to seek a judgment.
What to look for:
A Non-Judicial Foreclosure is the traditional foreclosure process used on the West coast, where the lender is the beneficiary, a third party trustee holds the note and you're the trustor. If you fail to make payments, a Notice of Default is recorded on title, then a Notice of Sale is recorded on title and finally the trustee exercises his power of sale and has the foreclosure auction on the court house steps. Get a copy of your deed and note, it will outline who the trustee is and affirm if they have the power of sale. This is VERY common, because it's way cheaper than seeking a judicial foreclosure.
A judicial foreclosure, was more common on the East coast, where the lender has to petition the court to foreclose. The entire process can take 6+ months. If for some odd reason your HELOC pursues this route, then they can get a judgment for the difference.
If your HELOC is in your husbands name only, then it's not being reported on your credit report; only on his. So one would be lead to think, that if they foreclosed, it would be reported only on his credit report and not on yours. I don't know if you'd even want to seek rights to the HELOC property through probate, if there's no equity and you're not able to make the payments. Unless you're willing to help them short sale the property and limit the lenders losses. If they're going Non Judicial, then you really have a bargaining chip for them to work with you and allow you to help them short sell the property. Plus, if you get HAFA short sale approved, you may be entitled to $3,000 cash for keys type funds.
Thanks for the good question! I like helping people through difficult scenarios.
The house with the HELOC was purchased by my husband before we were married, but my name was added to the title. I have to go through probate just to get half of this property. The house that is free and clear I do not have to go through probate.
I did talk to the lender and they will not forgive my debt. Nor will they allow me to refinance without some sort of income coming in. The HELOC is the only loan that my husband took out (it is not a second).
Renting out both homes does sound good, but the home with the HELOC is in major disrepair, needing about $50k of work before it can be inhabitable by a renter.
I am not 62 yet (many years to go),
Thanks again...you are very knowledgable, and I appreciate your advice and others on this board.
Iâ€™ll attempt to answer your question:
If you walk away and allow the HELOC home to foreclose, you may be liable and the lender may seek a deficiency judgment, since California is a Community property state.
The Good: If the home was bought before you were married and you are not on the loan and the title was held in your husbandâ€™s name as â€œmarried man sole and separate propertyâ€; you may be safe. Also, if your HELOC is the only loan, and is in 1st position, and they foreclose; they cannot seek a deficiency judgment. Youâ€™ll be fine.
The Bad: If the HELOC is a 2nd mortgage that wasn't used to purchase the home; and your 1st mortgage forecloses; then the 2nd mortgage HELOC has recourse and can seek a deficiency judgment from you in court. If they know you have $500k in equity in another property (ie: assets), they are likely to seek the judgment, because they know you can pay just by doing a title search.
Negotiate: Talk to your lender, tell them your spouse died, show them the death certificate and tell them you can't afford the payments and see what they'll do. They may forgive the debt or allow you to short sale and limit their loss. Although, if your HELOC has recourse and is playing hardball, then you should figure a way to satisfy those debts.
You own a home free and clear, which gives you a lot of options. You can get a loan on that property with no income/credit check up to 65% of the value and use those funds to purchase something else or pay down the HELOC property. Renting out the HELOC property and maintaining the two homes, would probably be ideal. If you are 62 or older, you can get a loan without any payment requirements.
This is a lot of information. If I can be of any further assistance, donâ€™t hesitate to call.