FORECLOSURES AND SHORT SALES

Many Oregonians who are experiencing financial difficulty are fearful of their situations and do not realize that there are very positive steps that can be taken to avoid foreclosure.

Let’s pursue a dignified solution to your financial crisis through current lender loan modification, loan refinancing (short or long-term) or a short sale ( a lender-approved sale at less than your outstanding loan balance.)

Over 85% of the clients served by CDPE real estate professionals avoid foreclosure. The question and answer section below shows some of the reasons that one must avoid foreclosure at all costs. FAQ’s are answered by the Distressed Property Institute, LLC.*

Question - How soon after losing a home to foreclosure or short sale can I be eligible for a Fannie Mae loan?

Answer - 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 only 2 years.

Question - How soon after I lose an investment property to foreclosure or short sale can I be eligible for a Fannie Mae loan?

Answer - 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 only 2 years.

Question - How does a foreclosure or short sale affect my loan rates on a future mortgage?

Answer - On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” this will adversely affect future rates. There is no similar declaration or question regarding a short sale.

Question - How does a foreclosure or short sale affect my credit score?

Answer - On a foreclosure, your credit score may be lowered anywhere from 250 to over 300 points. Typically this will affect your score for over 3 years. On a successful short sale, only late payments on a mortgage will show and after sale, mortgage will be reported as paid or negotiated. This will lower your score as little as 50 points if all other payments are being made. A short sale’s affect can be as brief as 12 to 18 months.

Question - How does a foreclosure or short sale affect my credit history?

Answer - A foreclosure will remain as a public record 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.’

Question - Will a foreclosure or short sale affect my security clearance?

Answer - A foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. 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. A short sale on its own does not challenge most security clearances.

Question - How does a foreclosure or short sale affect my current employment?

Answer - In the case of foreclosure, employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is grounds for immediate reassignment or termination. A short sale is not reported on a credit report and is therefore is not a challenge to employment.

Question - How does a foreclosure or short sale affect my future employment?

Answer - In the case of foreclosure, many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment. A short sale is not reported on a credit report and is therefore is not a challenge to employment.

Question - Does a foreclosure or short sale affect a deficiency judgment against me?

Answer - In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment. Also 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 some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner. 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.

Question - If my mortgage company loses money on my foreclosure or short sale and my debt is forgiven, will I have to pay income tax on this forgiven amount? I know that in the past any debt forgiven has always been considered to be taxable as though it were income.

Answer - The Mortgage Forgiveness Debt Relief Act of 2007 was originally introduced as HR 3648 and was passed into law on December 20^th 2007 when it was signed by the President. The Bill received an overwhelming support in the House and was seen by many as a major step in the right direction. Prior to the passage of this law, for any debt that was forgiven in a foreclosure or a short sale the homeowner would receive a 1099 and would have to report this forgiven (or cancelled) debt as income. This still holds true for those individuals who do not qualify for the exceptions of this act. From January 1, 2007 to January 1, 2010 (now extended to January 1, 2012), this Act eliminates the phantom tax on debt cancellation in mortgage discharge.

Alex Chafren, founder of the Distressed Property Institute, believes that homeowners surrounded by a strong CDPE real estate agent team including legal and financial referrals have the greatest chance of avoiding foreclosure and at minimal financial investment to the homeowner.

After completing the schooling with the Distressed Property Institute I came away with a different perspective toward my profession.

Since there are so many fine people in so much financial trouble right now, I feel that helping these people needs to be our top priority.

A great number of people out there are either so embarrassed or ashamed of their situation that they are just “walking away” and oftentimes without even knowing their options.

Sometimes a financial crisis just hit us out of nowhere and we don’t have the time to step back and look at the entire situation.

Kind of like the old saying, “When you are up to your waist in alligators, it’s hard to remember that your initial objective was to drain the swamp.”

If you are presently having trouble making your mortgage payments or you have a financial situation that will soon affect your ability to keep current, we need to talk!

Let’s discuss your situation and explore your options. Our first hope is to find a way to keep you in your home. No charge, just spread the word.

Remember this: Foreclosure is not an option! Rather it is the result of having no remaining options.

If we cannot see any other way for you to stay in your home, then we need to act quickly and effectively. I will handle the negotiating with your lender and will work with them to settle for less than you owe and arrange to help them dispose of the property and pay the commissions as well.

Keep in mind that lenders don’t want houses. They appreciate the efficiency that a CDPE broker brings to the table.

Sloppily handled paperwork from real estate brokers or wannabe purchasers and speculators account for delays that neither you nor your lender can afford.

We handle all documentation quickly and efficiently. We are experts at handling not only the marketing of your home, and because of the professionalism that we bring to the table, lenders will oftentimes make much greater concessions to you the homeowner than they otherwise would.

What do you have to lose? Everything! Time is running out!

Let’s get started, call me now,

Gary

Direct: 541-956-5565

Cell: 541-441-4410

Toll Free: 1-866-506-5050

Email: Contact

*Gary Swanson and RE/MAX Ideal Brokers, Inc. assume no responsibility nor guarantee the accuracy of these answers. We are not engaged in the practice of law nor do we give legal advice.