Short Sale with Freddie as Investor? Anyone?

[TrappedFL]

Just curious if anyone out there has completed a short sale with Freddie as the investor/owner of the loan, and how it went as far as deficiency payment etc. I am a young person who made the mistake of buying my own home at peak, as a single professional. I could afford the payments but not all the repairs and updates needed on the fixer of a home. I am drastically upside down $130,000 or so, and in the process of moving to short sale. Hardship is that I am getting married and cannot afford to carry this property as a rental (huge difference between monthly rent payment expected and mtg payment, plus it is an older house with numerous big repairs needed) once I join my fiance. 1st mortgage with Citi with Freddie as investor, still making payments now but prepared to stop payments as it becomes necessary.

[Evan Bedard]

Hi Trapped,

Just curious if anyone out there has completed a short sale with Freddie as the investor/owner of the loan, and how it went as far as deficiency payment etc. I am a young person who made the mistake of buying my own home at peak, as a single professional. I could afford the payments but not all the repairs and updates needed on the fixer of a home. I am drastically upside down $130,000 or so, and in the process of moving to short sale. Hardship is that I am getting married and cannot afford to carry this property as a rental (huge difference between monthly rent payment expected and mtg payment, plus it is an older house with numerous big repairs needed) once I join my fiance. 1st mortgage with Citi with Freddie as investor, still making payments now but prepared to stop payments as it becomes necessary.

There is a possibility that through the short sale your lender will issue a 1099 for the deficiency balance. But that does not always happen..

Do you already have your home listed for sale?

[cmcgreanor]

Originally Posted by TrappedFL

Just curious if anyone out there has completed a short sale with Freddie as the investor/owner of the loan, and how it went as far as deficiency payment etc. I am a young person who made the mistake of buying my own home at peak, as a single professional. I could afford the payments but not all the repairs and updates needed on the fixer of a home. I am drastically upside down $130,000 or so, and in the process of moving to short sale. Hardship is that I am getting married and cannot afford to carry this property as a rental (huge difference between monthly rent payment expected and mtg payment, plus it is an older house with numerous big repairs needed) once I join my fiance. 1st mortgage with Citi with Freddie as investor, still making payments now but prepared to stop payments as it becomes necessary.

Get an experienced Short Sale agent. I know everyone is experienced these days. I found a great agent, listed the property and accepted an offer in 4 days. They submitted the short sale packet to Wells Fargo and about 35-40 days later Wells Fargo/Investor Freddie Mac approved the short sale.

First Loan was about 330000
2nd was 85000

Sale price of the home was 235000

[Evan Bedard]

Congratulations cmcgreanor on the short sale!

[TrappedFL]

Originally Posted by Evan Bedard

Hi Trapped,



There is a possibility that through the short sale your lender will issue a 1099 for the deficiency balance. But that does not always happen..

Do you already have your home listed for sale?

I am in the process of listing the home- it should be officially listed within a week or so.

Honestly, I would be ecstatic if the only thing I had to worry about was a 1099. I reside in the home however, so as a primary residence, wouldn't the 2007 legislation apply?

Anyway, the likelihood of a substantial deficiency payment is more of concern to me.

[TrappedFL]

Originally Posted by cmcgreanor

Get an experienced Short Sale agent. I know everyone is experienced these days. I found a great agent, listed the property and accepted an offer in 4 days. They submitted the short sale packet to Wells Fargo and about 35-40 days later Wells Fargo/Investor Freddie Mac approved the short sale.

First Loan was about 330000
2nd was 85000

Sale price of the home was 235000

Hi CMcGreanor - Wow that was a quick approval.
Were you delinquent on your payments? What was your hardship, if you don't mind?

I've got the house listed. I don't want to take the first low offer to submit to Citi. The higher the offer, the less of a deficiency.

[scottp999]

I had a short sale approved from Freddie Mac today. What percent down payment did you make? I ask because you may have mortgage insurance (even if there was no mention of it at closing).

In our case Freddie had no problem with the approval because the MI company agreed to cover the losses to them. The issue then becomes that the MI company will become partner to the approval process and they will usualy ask for you to sign a promissory note to make up all or part of the shortgage before the short sale will be approved. The promissory note amounts are based on you income statment, what your credit report, and FICO score look like. If you have room to pay a few hundred per month after the mortgage is paid off, they will ask for it. They normally do these promissory notes at 0% interest and over 20-30 years so the monthly payment allows you to afford it. There is a little negotiating room, and there is usually some room to negotiate after the promissory note goes into effect if you either want to pay right away, or have a hardship from additional issues.

You are probably right about the 1099C. If it is your primary residence then you most likely won't have to consider any written off amount as income. See IRS publication 4681. They have a short sale example in that publication.

This shortsale is going to have taken 4 months since the day we listed the property to the closing date. Unless you have a very patient buyer that understands the process you will lose at least one offer and have to get another during the process. We got lucky and the 2nd buyer really liked the house and stuck in there for 2+ months.

My biggest concern with your post is that they may not see getting married as a hardship. A hardship would be something like your income being down 50% from when you got the loan, being laid off, medical bills, not something you do volutarily like deciding to get married. Something to think about.

Good luck. After I close on this process I may post a generic view of all my discussions with the bank to give people an idea of the process. It takes alot of patience.

If you want to see how involved the MI companies get, I can show you online where on of there servicing guides is located showing their standard practices in approving short sales.

[cmcgreanor]

Originally Posted by TrappedFL

Hi CMcGreanor - Wow that was a quick approval.
Were you delinquent on your payments? What was your hardship, if you don't mind?

I've got the house listed. I don't want to take the first low offer to submit to Citi. The higher the offer, the less of a deficiency.

I was not delinquent. I had a job transfer as the hardship. You are going to want to make sure the offer that is accepted is in line with the BPO that is going to be orderd by the bank. Make sure your agent has completed short sales before. Also dont trust them to call and check in with the bank. I called in multiple times a week to get an update working hand in hand with the real estate company.

[TrappedFL]

Originally Posted by scottp999

My biggest concern with your post is that they may not see getting married as a hardship. A hardship would be something like your income being down 50% from when you got the loan, being laid off, medical bills, not something you do volutarily like deciding to get married. Something to think about.

Good luck. After I close on this process I may post a generic view of all my discussions with the bank to give people an idea of the process. It takes alot of patience.

If you want to see how involved the MI companies get, I can show you online where on of there servicing guides is located showing their standard practices in approving short sales.

That is a good point, and I certainly have thought about this. The upshot is that my home is about $140,000 upside down and dropping, with no options for a refi or mod, in a declining neighborhood with awful schools and rising crime, and I *will* walk if not approved for the short sale. I can't move on with my life and get married with this burden, and I can't force this burden on my partner. If the SS is not accepted, walking away will take considerable preparation and a planned bankruptcy, which I would prefer to avoid, but it is at that point now.

I do have PMI - I put down around 11%. I would like the reference to the info on the PMI companies if you have it. Thanks.

[scottp999]

Originally Posted by TrappedFL

That is a good point, and I certainly have thought about this. The upshot is that my home is about $140,000 upside down and dropping, with no options for a refi or mod, in a declining neighborhood with awful schools and rising crime, and I *will* walk if not approved for the short sale. I can't move on with my life and get married with this burden, and I can't force this burden on my partner. If the SS is not accepted, walking away will take considerable preparation and a planned bankruptcy, which I would prefer to avoid, but it is at that point now.

I do have PMI - I put down around 11%. I would like the reference to the info on the PMI companies if you have it. Thanks.

Radian is one of the largest, they had the loan I worked on that was 5% down. No mention of MI at closing, it was purchased by the lender after closing so they could sell the loan to Freddie. Not sure if it was an individual loan policy or a pool of loans policy, but it was one or the other.

They are real sticklers for details, and try to get you to agree to the largest possible promissory note in order to give you approval for the short sale. They will pull your credit report to see who else you are paying, and verify your debt levels and minimum payment amounts against a current income statement you will want to provide to argue the promissory note payment amount that you can afford. I was only able to talk them down 23% from the original promissory note they proposed.

I posted the link in another thread with some references to page numbers:

Mortgage Insurance Servicer Guide (Radian)