Helocs, Short Sales and BK's?

[swmorgan7]

Guess what, that guy in CA, had he declared BK 2 years, he would still be able to buy that house in CA.

As I figured, you fear monger the credit report because you don't really understand how BK, foreclosure, AND short sales effect credit reports. If you read our rebuilding credit section of this forum, you will see just how quickly credit reports recover after BK (and foreclosure). A

In any event, you are correct, SS are not for everyone. I think my standards for doing SS are a little more stringent. The only argument you have is that the seller won't get a foreclosure on their credit report, big deal. You are just preying on the over-inflated importance people put on credit reports and the misconceptions out there about how long negative entries "really" effect a persons ability to borrow.

You are correct, that for the scoring models, the missed payment + foreclosure are a bigger negative (but not Far worse) than a short sale, but a short sale is still an adverse entry and when lenders do a subjective review, there is little difference between SS and foreclosure, the debtor still created a loss for the bank and is a high risk borrower. When it comes to BK and Foreclosure, if the 2 events are linked, they are viewed as a single negative.

And you are correct, the Mortgage Relief act makes dealing with the deficiency easier.

And I agree, BK should not be taken lightly, and if the ONLY financial issue a person is facing is a house they can no longer afford, they should look at other options beside BK. But if BK is going to be inevitable, there really is no point in doing a short sale. From a financial perspective, if BK inevitiable and you are going to surrender the house, the debtor should simply stop paying their mortgage, live rent free in their house for the length of the BK and and foreclosure process and allow the BK to resolve the all the debt. I have seen people who haven't made a mortgage or rent payment in over year and are still living in their homes.

I have a good understanding of how the CRA report...I have never told anyone that a S/S is not an adverse entry on their report. Most of my clients have not had to file a BK after the short sale. In some circumstances it may still happen, but it may be worth it. You can still stop making payments to the mortgagor and if the S/S works out great if not foreclosure is still an option. I get sick of the Agents being slammed here when in reality most of us are really trying to help people avoid BKs and Foreclosures and some of us a real understanding of the process.

Those actions hurt not only the borrowers but all of us. Tougher lending guidelines, tougher BK Laws, Values declining and a Recession. Would you agree that these borrowers need to take some freaking responsibility? How about the fact that my client lied on her 1003 to get the HELOC in the first place and spent every penny of the 130K she got? She has not taken any responsibility in this. I marketed her property, found the buyer and got us top dollar in this market. Possibly eliminating the BK all together for a less than full commission. I have done a great job and have her best interest in mind.

[swmorgan7]

I never said ss/forcloseure were bad...in the right circumstances, they could be a good thing.

But 30K worth of debt, an pending job loss, a home that is upside down by $20K, and two lenders on it.....SS or DIL's ain't gonna happen.

And I don't have a BK, both of my mortgages are reporting 0IIB. Even my repo'd car is reporting 0IIB.

What do you mean ain't gonna happen? I have the approval in writing. Yes she may still have to file for BK, but we may be able to negotiate further on what BofA will take avoiding the BK all together. What is the risk? Do you understand that she has a real estate license and she lied on her 1003 to get the HELOC in the first place? A person less educated about real estate may get away with that, but if BofA contests this fact the Judge may not discharge this debt. Instead of a 80K deficiency she may be looking at a
130k deficiency if this were to go to foreclosure. The bank would still report this as a collectible balance. Then what? Do you get the issues here? This is a tricky situation and I am trying to protect my client. By the way she stopped paying her mortgage 3 months ago.

[HHM]

What do you mean ain't gonna happen? I have the approval in writing. Yes she may still have to file for BK, but we may be able to negotiate further on what BofA will take avoiding the BK all together. What is the risk? Do you understand that she has a real estate license and she lied on her 1003 to get the HELOC in the first place? A person less educated about real estate may get away with that, but if BofA contests this fact the Judge may not discharge this debt. Instead of a 80K deficiency she may be looking at a
130k deficiency if this were to go to foreclosure. The bank would still report this as a collectible balance. Then what? Do you get the issues here? This is a tricky situation and I am trying to protect my client. By the way she stopped paying her mortgage 3 months ago.

Well, lets be fair, those are facts (the lie and the license) that you did not share in the original post. As for the deficiency balance, most banks, in foreclosure, are simply forgiving the debt and you should have negotiated for the bank to foregive the debt in this SS. (granted, I understand that the bank will not always agree to that, and I will give you the benefit of the doubt that you tried).

We have two issues going on, (1) should this specific person do an SS (which is not what my post was directed at), (2) and the larger context of whether SS are the greatest thing since sliced bread. My comments are more toward the second issue.

When you say things like "help people avoid BK", it signals to me that you have a misconception of the negative effects of BK. BK is a financial tool like any other and is not something that should be feared. The problem is, too many agents prey on that fear, with the mentality that "no matter what, a person should do anything to avoid BK". The problem is, too many people get suckered into doing things like SS, or debt consolidation, etc, which end up making their situation worse, when they should really be filing BK.

[swmorgan7]

Well, lets be fair, those are facts (the lie and the license) that you did not share in the original post. As for the deficiency balance, most banks, in foreclosure, are simply forgiving the debt and you should have negotiated for the bank to foregive the debt in this SS. (granted, I understand that the bank will not always agree to that, and I will give you the benefit of the doubt that you tried).

We have two issues going on, (1) should this specific person do an SS (which is not what my post was directed at), (2) and the larger context of whether SS are the greatest thing since sliced bread. My comments are more toward the second issue.

When you say things like "help people avoid BK", it signals to me that you have a misconception of the negative effects of BK. BK is a financial tool like any other and is not something that should be feared. The problem is, too many agents prey on that fear, with the mentality that "no matter what, a person should do anything to avoid BK". The problem is, too many people get suckered into doing things like SS, or debt consolidation, etc, which end up making their situation worse, when they should really be filing BK.

I don't think BK's are the end of the world...I feel they should be avoided if possible. What are the consequences if anything in regards to her lying on the 1003? Is that something she should worry about? In speaking to BofA's Loss Recovery Dept I am almost certain we can get her deficiency way down to a comfortable payment for her. Then she can decide what she wants to do. Quite frankly she was told by me from the beginning on what to expect. Now months later when many people have put several hours on this she says screw everyone. It's not quite that simple. I have known her for a few years and she can be unreasonable. Her attorney does not know all the facts in this case. Of course he says file BK, but is unaware of her lying on the 1003 and the fact the Bank has approved the S/S. Buyer's loan is ready to go and this will close this week. Bottom line is that we do have a realistic chance at getting this debt way down and she owes the money. She can afford $150/month payments.

[swmorgan7]

I don't think BK's are the end of the world...I feel they should be avoided if possible. What are the consequences if anything in regards to her lying on the 1003? Is that something she should worry about? In speaking to BofA's Loss Recovery Dept I am almost certain we can get her deficiency way down to a comfortable payment for her. Then she can decide what she wants to do. Quite frankly she was told by me from the beginning on what to expect. Now months later when many people have put several hours on this she says screw everyone. It's not quite that simple. I have known her for a few years and she can be unreasonable. Her attorney does not know all the facts in this case. Of course he says file BK, but is unaware of her lying on the 1003 and the fact the Bank has approved the S/S. Buyer's loan is ready to go and this will close this week. Bottom line is that we do have a realistic chance at getting this debt way down and she owes the money. She can afford $150/month payments.

Any more advice/recommendations..I truly want the best for my client. She is not helping herself by avoiding everything. Only making things worse. Her attitude is garbage considering her blatant misuse of funds and now it's everyone else's fault.