Donna, Keep going towards the short-sale. Once approved you can decide then to pull the trigger on it. But I would also pursue the Settlement option and delve deeper into the programs which qualify. The terms of the settlement are on the web site I gave in a previous post. But YOU must be proactive!! Massive Action is the way you get out of these life problems. Head in the sand ain't gonna cut it. They have found 80% of those who lost their homes to foreclosure NEVER called their lender!! Sad but true.

Thank for all the information! We don't have an adjustable rate loan, or sub-prime. we're just 100 % financing, with fixed for 5 years on the 1st and prime + 3% on the second. Will they modify those loans too? My health and work situation have changed(on temp. disability right now) Should I back out of the short-sale process?(the buyers have already been waiting 4 months for answer.)

Thanks, Donna

Donna,
Since you have Countrywide loans have you looked at the recent settlement with BofA, Countrywide and the Attorney General of California? The Billion dollar agreement with the AG allows those with owner occupied Countrywide Home Loans which are Adjustable Rate Mortages to re-write their current loans to 90% of CURRENT MARKET VALUE and STAY IN THEIR HOMES!
I see you have a first and a second but this is a course of action WORTH PURSUING!! Here is the annoucement from the Attorney General's Office!!

Attorney General Brown Announces Landmark $8.68 Billion Settlement with Countrywide
Attorney General Edmund G. Brown Jr. today announced a landmark, multi-state settlement with Countrywide Home Loans, Countrywide Financial Corporation and Full Spectrum Lending that is expected to provide up to $8.68 billion of home loan and foreclosure relief nationally, including $3.5 billion to California borrowers.

“With this settlement, homeowners will receive direct relief from the catastrophic damage caused by Countrywide,” said Attorney General Brown. “Countrywide’s lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn’t understand and ultimately couldn’t afford.”

The Countrywide settlement will likely become the largest predatory lending settlement in history, dwarfing the nationwide $484 million settlement with Household Finance Corporation in 2002, under which California received approximately $91 million.

The settlement marks a swift resolution of the Attorney General’s June 30, 2008 lawsuit alleging that Countrywide, the nation’s largest mortgage lender prior to its July 2008 acquisition by Bank of America, deceived borrowers by misrepresenting loan terms, loan payment increases, and borrowers’ ability to afford loans.

In a nutshell, this settlement will enable eligible subprime and pay-option mortgage borrowers to avoid foreclosure by obtaining a modified and affordable loan. The loans covered by the settlement are among the riskiest and highest defaulting loans at the center of America’s foreclosure crisis. Assuming every eligible borrower and investor participates, this loan modification program will provide up to $3.5 billion to California borrowers as follows:

• Suspension of foreclosures for eligible borrowers with subprime and pay-option adjustable rate loans pending determination of borrower ability to afford loan modifications;

• Loan modifications valued at up to $3.4 billion worth of reduced interest payments and, for certain borrowers, reduction of their principal balances;

• Waiver of late fees of up to $33.6 million;

• Waiver of prepayment penalties of up to $25.6 million for borrowers who receive modifications, pay off, or refinance their loans;

• $27.9 million in payments to borrowers who are 120 or more days delinquent or whose homes have already been foreclosed; and

• Approximately $25.2 million in additional payments to borrowers who, in the future, cannot afford monthly payments under the loan modification program and lose their homes to foreclosure.

More specifically, the modification program covers subprime and pay-option adjustable-rate mortgage loans in which the borrower’s first payment was due between January 1, 2004 and December 31, 2007. The program will be available for loans in default that are secured by owner-occupied property and serviced by Countrywide Financial or one of its affiliates. In addition, the borrower’s loan balance must be 75% or more of the current value of the home, and the borrower must be able to afford adjusted monthly payments under the terms of the modification.

The terms of the modification will vary based on the type of loan, including:

• “Pay-option ARM loans,” in which loan balances increase each month if a borrower makes only a minimum payment. Borrowers may be eligible to have their principal reduced to 95% of their home’s current value and may also qualify for an interest-rate reduction or conversion to an interest-only payment.

• Subprime adjustable-rate loans, such as 2/28 loans. Borrowers may have their interest rate reduced to the initial rate. If the borrower still cannot afford it, the borrower may be eligible for further interest-rate reductions to as low as 3.5%.

• Subprime fixed loans. Borrowers may be eligible for interest-rate reductions.

• “Hope for Homeowners Program.” If they qualify, some borrowers may be placed in loans made through this federal program.

• Alt-A and prime loans. Borrowers who are in default, but have Alt-A and prime loans, may also be considered for modifications, depending on circumstances.

Here is the link to the Attorney General's office and the full new release as well as more details.
http://www.ag.ca.gov/newsalerts/release.php?id=1618

Dear Donna, Even the "great" Donald Trump says "stay in your homes, don't move out early". I heard him say that in an interview recently and I always hear his voice whenever this question comes up. Don't volunteer any information you don't have to to the lender specifically that you intend on moving out at a certain time and date prior to being vacated.

Also, if you were to pursue a mortgage modification of some sort with the lender the likelihood of that happening is much less if you are not occupying the home or have leased it out. Possession is an important factor in negotiating terms to allow you to stay whether short term or long term.

And you mention a deal in your question. What deal are you risking that your Realtor has warned you about? Is she working on a short sale approval for you in lieu of foreclosure? Yes, a short sale may appear rosier than a foreclosure in the eyes of a future lender but as this point I wouldn't give that much credit. You've missed payments already. Your credit is damaged already. A foreclosure will be looked upon as more forgivable in today's economic times than times gone by. Poor credit is poor credit. It's like saying you’re just a little bit pregnant. (Pardon my candor).

You do everything you can to stay in your home as long possible and do not worry about your credit cards, unsecured loans, etc. either. Just be sure to pay your essentials such as utilities, food, child care, income tax, medical if needed then save as much money as possible from the money you are now not paying towards your mortgage and credit cards for your future. A bank is not willing to work out a modification to your mortgage if you are insolvent. This money will enable you to work out a modification on your existing mortgage or allow you to pay for several months lease payments in advance to procure a roof over your head if and when you do need to relocate.

That's a lot to swallow. Sorry if it sounds harsh. But tough times call for tough measures. You need to deal with the realities and strategies now rather than later. A real estate attorney would be your #1 authority on how to proceed in a direction that best suits your needs. Have a real estate attorney review all of your mortgage notes, RESPA agreements, closing statements and any paperwork you have received from the lenders to date.

Also, one final ray of hope for you from me and my resources is that Countrywide just announced this week that they are placing a three month stay on all properties currently facing foreclosure as a measure to assist the homeowners in their attempts to restructure and modify their current financial situations in order to stay in their homes, not leave them. This is fact! Good luck!!

Donna, This property is YOUR home. Until the Notice of Default is filed by the lender you are NOT IN FORECLOSURE! And even if you ARE in foreclosure the lender cannot send some one around to LOCK YOU OUT OF YOUR HOUSE!! And I got news for you--in California the lenders don't have the manpower to be sending out folks once a week to monitor your house!! The gentleman from New Hampshire is mistaken as to procedures here in the greatest state of California!! We have a population 27 times that of New Hampshire!! Plus we use a Deed of Trust versus a Mortage.

Hello Donna. My question to you is what happens if you don't move out. Will you be able to get current on the mortgage? The answer is most likely no. There's no need for you to inform your lender that you are moving out. While it is true that there is a possibility that the bank will order lock changes for properties that appear vacant, there are ways to make a home look occupied. Appraisers and agents who do broker price opinions have to report whether a property is vacant and many times the lenders find out through those sources whether a property is still occupied. I have seen short sale listings that were still furnished and closing in the closets but I knew that the property owners had already moved to a new location. As far as I know, there's no rule that says that you can't have more than one residence. In the end, you have to do what's best for you. I am not telling you to lie to the bank. I would definitely not recommend that. But there's a difference between calling the bank and letting them know that you are moving out and just finding a new place to live. You being homeless does not serve a legitimate purpose. Let your agent handle the negotiations with the bank and you focus on doing what you need to do to move forward with your life after all of this is over. You'll need a roof over your head and unless you can work out a suitable loan modification with the lender, it will involve a move.

If the bank approves the short sale, you'll have to move pretty soon anyway. If the bank rejects the short sale, they'll either foreclose (and you'll have to move) or they'll offer a loan modification that allows you to keep your home.

On July 8, 2008, SB 1137 was signed into law, requiring lendesr to make contact with a borrower 30 days before filing a Notice of Default. The contact with the borrower is for the purpose of assessing the borrower's financial situation and exploring options to avoid foreclosure. The law also requires that notices of sale filed for properties that had received a Notice of Default before the law was enacted include a declaration that the borrower was contacted to expore options to avoid foreclosure. These provisions in the law took effect September 8, 2008 and the law remains in effect through January 1, 2013.

As you can see, CA law has made it a little bit more difficult for lenders to initiate foreclosure and I hope the new law will benefit you.

Good luck to you.

I fyou move out the bank will consider the property abondoned and order a lock change to secure it. this may kill your short sale immediately. the bank only loses with a short sale so they look for any reason to foreclose. even if you do not etll the bank you are moving, they are sending someone by monthly to check you rproperty so they will find out.

Donna, I share Keith's opinion. You did not mention if a Notice of Default was filed as that would make it a more "time is of the esscence" issue. Check with your Realtor/Agent and an attorney.

Donna
You need to listen to your Realtor. They are closest to the situation and can best advise you.

If you need legal advice talk with an attorney.