Short Sale On A Current Loan

[Eyebolt]

So I'm trying to sell my house as a short sale. I had to move for a new job after being laid off from my old one. Paying rent on our current place and paying the mortgage on our last house was fine while both my wife and I were working, but she's on bed rest due to pregnancy complications and now things are getting thin. We've had the house on the market since January and have reduced the price several times and only got any offers after we were $15k under what we owe and those offers were closer to $25k under what we owe. There is no way I can afford to sell this house by paying off the loan and paying all the required closing costs. So I figured a short sale would be my only option.

I have an 80/20 loan with both of them serviced by GMAC, but the 80 is apparently owned by Fannie Mae and the 20 is GMAC. We just got word that the "investor" will not entertain any short sales offers on a house where the loan is current. I was hoping to limit any damage to my credit by keeping current on the loan, but apparently the only way I'm going to be able to sell it is by missing payments. Now since I made my July payment, if I miss my August payment, I won't be in default an eligible until September. I was hoping to be close to having this off my hands by then.

Does anybody have any suggestions or have been in a similar situation?

[Evan Bedard]

Hi eyebolt welcome and thank you for joining.

I have an 80/20 loan with both of them serviced by GMAC, but the 80 is apparently owned by Fannie Mae and the 20 is GMAC. We just got word that the "investor" will not entertain any short sales offers on a house where the loan is current. I was hoping to limit any damage to my credit by keeping current on the loan, but apparently the only way I'm going to be able to sell it is by missing payments. Now since I made my July payment, if I miss my August payment, I won't be in default an eligible until September. I was hoping to be close to having this off my hands by then.

Does anybody have any suggestions or have been in a similar situation?

From my experience short sales will usually only go through if you are deliquent on your mortgage. It most likely will be harder to short sale while current...

[Eyebolt]

I realize that it makes sense on their side...as long as I'm making my payments...they're happy and don't care about what else I have going on...it's just a return on investment to them. I've always had near perfect credit, so canceling my payments for next month basically went against anything I've ever done.

Oh well...so is the new world of real estate. Renting for another year or so shouldn't really hurt anyways...it's not like values are going up and I'm going to miss out by not buying for a bit.

[Moe Bedard]

I agree with Evan. I dont think I have seen just a few and these people had attorneys.

Credit will not do much for a few years. Cash will be king and gold. If you have to, do it now and get the pain over with so you can repair your credit later. I don't see a recovery in real estate for 3-5 years minimum. Maybe 7 plus.

[nal67]

We are currently in process on two short sales and have never been late. My husband is working freelance after being laid off in January so has some income but was able to produce some unemployment checks so I think this helped. I think if you can convince them there is a real risk that you will let the house go and they will end up worse off, they will be much more likely to negotiate. You can tell them you have been advised you might as well let it go into foreclosure if you are going to have late payments but you are willing to work with them to get them the most money possible if you can avoid any late payments on your credit.

One interesting thing to note. I am a real estate appraiser in the SF Bay Area and I am seeing short sales often selling for less than foreclosures. My take on this is because the process is so time consuming, only those doing it for a great deal are willing to buy a short sale. If the banks are intelligent enough to know this, they may consider a short sale and a foreclosure to be a wash unless you can convince them otherwise.

FYI on our situation, one short sale is on a vacant piece of land and has been approved by BofA. I believe this is a portfolio loan so held in house.

The second is for our primary residence and we are hoping for the approval any day now. The first loan with CW/BofA will not be short but the HELOC with National City will. We gave them a compelling hardship letter along withn a "distress sale value" appraisal that showed they would get nothing if we went that route so I think that may have helped convince them as with our offer they would get 30% back. We have an agent that is very experienced in short sales doing the negotiating and she has been great.

Simultaneously, we also requested a loan mod from CW/BofA for our first mortgage. We got a verbal approval of a mod without being short but have yet to receive anything in writing. We may still have to sell the house as the loan mod is not quite good enough so we are still proceeding with both to keep our options open. This is for a true jumbo loan so none of the government programs apply in our situation but we were able to get something offered by emailing the office of the chairman.

NL

[Eyebolt]

So here's an update on my situation...

I went ahead and missed my August payments (that was an odd feeling canceling those out online) so we can move ahead with the short sale on one of the two offers we had received. A few weeks into August we found out that GMAC was going to accept one of the offers (verbally to my agent). We were told for my agent to contact them towards the end of the month to start things moving along. Well, the day came where my agent was going to contact GMAC, and she had received notification that the offer they were going to accept was being retracted because the people had been laid off. So we went from being really close to the sale...to back to hoping they would accept the other offer that needed money towards closing.

So now we're waiting again...one of the original two offers is still on the table that needed $4k towards closing...and we just got another offer for the same price that needs $2500 towards closing. Trying to drum up some more offers.

Meanwhile...I'm getting the calls from GMAC's department responsible for trying to collect late payments. Apparently there isn't much communication between departments because each time I need to tell them that I dealing with "so and so" in loss mitigation on a short sale. The most recent call was fun because after I told her that, she said that I should still try to continue to make payments. I then informed her that I was doing that until the investor of my loan said they wouldn't entertain a short sale on a current loan. She then said that she had never heard of that...apparently the people who make these calls do not need to know how their industry works. Then she was like, "so you have no intentions of paying?" Nope...I do not live in the house and am looking to sell it via short sale and the only way to do that is to not pay on it. Of course the calls trying to collect will continue until I no longer own the place.