Short Sale - Please help

[ramapo]

To give you a brief background my husband and I bought our home in 2006 in NJ. In 2007, our town put a Dam into operation and since then my home has flooded 6 times. The value of my home has decreased by almost $200K. We have two loans, the first has about $290,000 remaining, the second has about $20K (the second is a Home Equity Line of Credit)
Right now we are current on the mortgage but are trying to decide what to do. We would like to short sale the house, but we are confused. I am hoping to try an sell it for about $200K which would leave $110K balance on the mortgages. We were told that in order to short sale and not have a deficiency judgement against us for the outstanding $110K, we need to show hardship and therefore it would probably be best if we default on the mortgage now. However, we know that if we are in default when the short sales goes thru, we will have two wait two years to buya new home. My question is...if we were to stay current on the mortgage and then short sale, would we be slapped with a deficiency judgement because of no hardship? Has anyone proven hardship with their mortgage being current at short sale?

Please help??

[Evan Bedard]

We were told that in order to short sale and not have a deficiency judgement against us for the outstanding $110K, we need to show hardship and therefore it would probably be best if we default on the mortgage now. However, we know that if we are in default when the short sales goes thru, we will have two wait two years to buya new home. My question is...if we were to stay current on the mortgage and then short sale, would we be slapped with a deficiency judgement because of no hardship? Has anyone proven hardship with their mortgage being current at short sale?

Welcome to the community Ramapo.

It is actually not true that your lender will automatically waive their rights to the deficiency if you are delinquent on the mortgage or showing a hardship prior to completing the short sale. Whether you are current on your payments or not prior to completing the sale you will need to negotiate with your lender to make sure they waive their rights to pursue a deficiency judgement once the sale is finalized.

You are correct that if you fall behind on payments before completing the sale it will be at least two years before you will be eligible to obtain a new mortgage. On the other hand if you are current on your payments and never miss a payment before the sale you may be able to purchase a new property immediately and your credit should only take a small hit (about 40-60 points). But you must still negotiate the deficiency especially being in a recourse state such as NJ..

[ramapo]

Thanks for your quick reply Evan. One other question for you? Do you have any tips on negotiating the deficiency to have it waived if you are current on your mortgage?

[Evan Bedard]

You may want to look into the HAFA short sale because if you are approved for a short sale under this program the lender will automatically give up their rights to any judgement once the sale is finalized.

Here check out some threads with other members who have gone through the HAFA process:

HAFA Short sale success

Best way to proceed...? Short Sale? HAFA? Drain 401k?

Successful HAFA Short Sale w/GMAC

Another (pending) HAFA short sale success!

Any experience with EMC/Chase HAFA short sale success??

Has anyone actually gotten HAFA payment?

You may be eligible for HAFA if you meet all of the following criteria:

• You live in the home or have lived there within the last 12 months.
• You have a documented financial hardship.
• You have not purchased a new house within the last 12 months.
• Your first mortgage is less than $729,750.
• You obtained your mortgage on or before January 1, 2009.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.

*Eligibility criteria are for guidance only. Contact your mortgage servicer to see if you qualify for HAFA.

Home Affordable Foreclosure Alternatives (HAFA) Program

[ramapo]

Thanks so much Evan!!

[Evan Bedard]

No problem, please let us know if you have any more questions about the process.