Foreclosure in Rutherford>Question Details

Anne, Home Seller in New Jersey

I own a home in NJ which has been in the market for 18 months. I have both first and the seond mortage. I

Asked by Anne, New Jersey Sun Sep 21, 2008

currently have 2 offers from the buyers with the amount exceeding my first mortgage but not sufficient to pay the second mortgage. Banks are not responding to these offers since I have been trying to make some payments. I can no longer pay these mortgage payments. I am willing to go through the foreclosure process. What would be the best approach? Should I not make any payments so the banks will respond? What happens to the balance of the second mortgage? Please help!!

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Keep making payments - you may not have to sell! You may be able to get your home refinanced with affordable payments under the Housing & Economic Recovery Act. See someone today - the program goes into effect on October 1st.

From the HUD website:

Homeowners or a servicer of an existing eligible loan need to contact an FHA-approved lender.

The program offers government insurance to lenders who voluntarily reduce mortgages for at-risk homeowners to at least 90% of the property's current value.

The FHA-approved lender will determine the size of a loan that a borrower can reasonably repay and that meets the requirements of the program.

If the current lender or mortgage holder agrees to write-down the amount of the existing mortgage and make the new loan affordable, the FHA lender will pay off the discounted existing mortgage.

Loans provided under this program must be 30-year fixed rate loans.

Please don't wait - as your agent or bank even mentioned this option to you?
1 vote Thank Flag Link Mon Sep 22, 2008
If the best offer that your property can bring in today’s market is less than the amount needed to fulfill all liens (mortgages and/or other liens), then it is in the bank’s best interest to accept an amount “short” of the full amount due instead of foreclosing many months later with additional expense and no income.

Your role, either yourself, or with the assistance of an agent, is to document and show the bank why it is in their best interest to approve a short sale. Some short sales result in all debt not paid being forgiven. There are times when a bank will seek some or all repayment of the shortage from you after closing. Your documentation and financial status and the bank’s policy and current workload will determine the outcome.

Some banks will supply a package with a list of documents required and their forms for you to fill out and return for review for a short sale. Other banks will leave it up to you to create your own package by the documents you gather and submit. More often, banks have specific requirements. To learn what your lenders will require, contact the loss mitigation department and ask. Expect to be on hold a long time for most banks.

It is in your best interest to pursue a short sale over a foreclosure action. Both will negatively impact your credit, but a foreclosure has a longer life on your credit history and can be more damaging.

The “short sale package” consists of tax returns, bank and any investment statements, income verification, financial statements of all assets and liabilities, and your explanation of your personal circumstances that explain why a short sale is necessary. This explanation is often called the “hardship letter” and is common to all short sale packages.

A preliminary HUD is typically required before final approval of a short sale. Depending upon the bank, many will discuss offers and review hardship packages without the HUD, but only withhold approval pending receipt of the preliminary HUD. When you speak with the loss mitigation departments of the lenders, ask if it is mandatory that a preliminary HUD be submitted with the offer, or if an offer will be reviewed without one. Be compliant with the bank’s requests and policies; it is your goal to get this short sale approved.

It will be harder to get approval from the secondary lender without some payment. In a foreclosure action, that secondary lender stands to receive nothing. Therefore, anything is better than nothing. If the secondary lender will receive nothing from the short sale, they have no incentive to approve it.

In your submission to the banks, include a short, bullet pointed recap of the marketing efforts and status of the current market. The bank needs to understand and believe that the offer submitted is the best the market can bring.

Good luck.

Deborah Madey - Broker
New Jersey
1 vote Thank Flag Link Mon Sep 22, 2008
Deborah Madey, Real Estate Pro in Brick, NJ
Jacqueline, It could be called a 'Workable Solutions PacKage, as it is with Citi Mortgage and with Chase it's called a short sale package. Without getting into to much here, every short sale I've done in NJ, the bank has requireD a preliminary HUD 1 to consider a contract. The bank must know what it will walk away with before it agrees to a particular contract. That means here in NJ, the bank will know what the Realty Transfer Fee is, the amount of unpaid assessments and the real estate commission, all of which come out of the amount due to the bank..
And you're right, the primary lien holder doesn't care about the 2ndary lien holder, but if you want clear title you must satisfy both.
I think we're both saying similar things, and it just goes to show that every short sale is different, there's no one size fits all.

Laura Giannotta
Keller Williams Atlantic Shore
0 votes Thank Flag Link Mon Sep 22, 2008
Before going foreclosure or short sale, contact a FHA approved lender to see if the Housing & Recovery Act could be a better way out of your situation.
0 votes Thank Flag Link Mon Sep 22, 2008

Let me ask you a couple of questions:

1. Is your property listed with an agent?

2. Does this agent have Real Short Sale Experience?

As Jacqueline mentioned most short sales fail but the reason usally is a lack of knowledge between the agents. It is not a complicated process but it must be folled exactly. Because of the number of foreclosures currenly taking place all over the country lendors have little time to babbysit agents through the process.

If you are currently using an agent then I think you need to have a serious conversation about their knowledge in this area.

In regards to your specific question remember you are the only one who can control what happens to your credit report. The more proactive you are, the more you try to meet the obligation the better off you should be.

If you are not using an agent you can send me an e-mail and I will refer you to several that you can interview.
Stay ahead of this the best you can, knowbody has at much at stake as you do.
Best of Luck!
0 votes Thank Flag Link Mon Sep 22, 2008

I don't know of a "short sale package". The lender will send a package to the homeowner who is in pre-foreclosure and include the forms you are referring to; hardship, request copies of bank statements, etc., but as I said, I haven't seen a bank send a seller a short sale package that says include a HUD-1 form, make sure you pay something to the second lienholder, etc. but everything else you said in your post I know is true.

I've seen many short sales go by the wayside because there is no package. I had one agent tell me they had a good offer they sent to the lender and it wasn't looked at. I asked her was the package complete and she said yes, but when I asked her about HUD, etc. she hadn't sent that form so I know the package wasn't complete so the offer was probably never reviewed. Also, just because the homeowner may have sent information in earlier, you still need to include it in the package with the offer.
Web Reference:
0 votes Thank Flag Link Mon Sep 22, 2008
I'm not sure what bank Jacqueline is refering to. All banks I've dealt with require submission of certain documents. How else can a bank determine if your financial situation qualifies you for a short sale.

You must document your fiscal sitution (a Hardship letter).

Generally, the mortgage companies I've dealt with require these documents in a short sale package. They can be submitted along with a contract. Remember, not all mortgagees will agree to a short sale. The required package should include a hardship letter, your bank statements for the last two months, (some banks require tax returns), pay stubs for the last two months, outstanding loan payments (cars etc) and your monthly expenses. They usually want to know how long the home has been on the market also. Each bank is different and has different requirements, so you'll have to check.

When that information is recieved the bank will determine how to proceed. With any contract sent to the bank, you will also need to include a preliminary HUD 1 statement.

You'll also need to know if the primary lien holder will pay anything to the 2ndary lien holder. For example, Chase allows only $1,000 to the 2ndary. You'll then need to follow the same process with the 2ndary lien holder.

Here are a few websites that might help...…

Laura Giannotta
Keller Williams Atlantic Shore
0 votes Thank Flag Link Mon Sep 22, 2008

The bank will not send a short sale package, they will tell you to send the offer in and that starts the short sale process. You need an agent an/or company who understand the short sale process because if the package isn't put together right, the offer will not be reviewed. You'll be waiting for an answer on an offer that will never be reviewed because all the information isn't there. It's very important in the short sale process to work with someone who knows exactly what the bank needs.

Good luck!
Web Reference:
0 votes Thank Flag Link Mon Sep 22, 2008
What you will need to do is begin the short sale process. What that means is you are selling your home for less than is owed. I applaud you efforts to keep up with the payments.

Contact each bank ask for the loss mitigation department and ask for a short sale package to begin the process. This can be long and entailed. If you found buyers on your own, you might try a short sale management company. They'll do most of the work. If your working with an agent, they can work this process for you.

Understand and make your buyers understand this process can take anywhere from 2 months to 6 months to close.

Contact me if you'd like the names of some of these companies or if you require further information.

Laura Giannotta
Keller Williams Atlantic Shore
0 votes Thank Flag Link Mon Sep 22, 2008
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