PMI & Short Sales

[joekwood]

Hello and first of all thanks for any help anyone can give.

I currently live in NC due to a job transfer. I still have my home outside of Tampa, Fl. I have tried to sell it for 2 years for well under value. I am current on payments but at my witts end and need some direction.

I have a 30 year fixed (FHA) and a second home equity line of credit. If I was to short sell the home will the PMI cover the differance? I owe between the 1st and 2nd $225,000. I am thinking about trying to short sell it for about $180,000 so will the PMI cover the $45,000 differance?

Also, if it does cover the differance of $45,000 will that still be reported on my credit report as a negative item?

[joekwood]

Forgot one thing...the PMI is on the first mortg not the 2nd line of equity which is with another bank.

Helpo!!

Welcome to the forum and thank you for joining.....

With FHA is MIP, Mortgage Insurance Premium, very different from PMI (that is Private Mortgage Insurance and is only on Conventional Loans). Since this is an FHA loan yes the MIP will cover a percentage of the loss to the LENDER, not to the borrower, only to the lender. They have a high coverage on FHA loans, however, you need to find a realtor that is experienced in Short Sales and have the Short Sale negotiated with your Lender and with FHA, they both have to agree to the situation due to the type of loan that it is.

You will have to provide a financial package and demonstrate serious hardship that you can no longer afford the property....other wise FHA will not agree to the Short Sale. The problem is that FHA will not recognize relocation due to job as a hardship...that is right in their manual. So....be aware that this will be an uphill battle with both the lender and with FHA. The fact that there is a Second on the Property will also cause some problems with FHA as they are aware that the second HELOC was placed on there after their loan for a cash situation. They are not fond of those situations....just an fyi.

So your first step is identify a very experienced Short Sale Realtor, then yourself call FHA and then your Lender/Servicer and start the process. The MIP will not in any way affect/effect any insurance against loss with the Second.....that MIP is not for the second, it is for the lender on the First Mortgage ONLY. The second is waving in the Wind. The MIP will not cover any of your losses, again it is for the LENDER ONLY to cover any losses that they may experience.

You will have to have your Realtor or yourself negotiate with the Second directly and hope for the best with that HELOC....my suggestion is get an agent that is really experienced on Short Sale.

Who is your lender servicer on the First and Second.

[kshel02]

Poppy, please see me earlier post about the judge denying a postponement of sheriff sale. The sale is scheduled for Tuesday. Litton loan is the servicer and they scare me to death, Thanks, Kerry

I have done it and yes these morons are scary people....very...

[joekwood]

Poppy,

Thanks for the information.

To answer your question:

My first mortg. is with Chase.

My second mortg. is with Regions bank (Use to be Amsouth Bank)

First thing Monday AM you need to contact, both Chase and FHA to start the process, there will be some pretty high hurdles to cross. The fact that this is a job related relocation will not necessarily allow the Short Sale and forgiveness of the short amount by either Chase or FHA on the first, hopefully there is not a shortage to the first.

Regions will be the one truly taking the Hair Cut, that is where the Realtor is so important, a good one can negotiate this for you and assist in minimal impact to you financially.

The aspect of having the funds that are short forgiven are truly in the balance of how good the negotiator is on your behalf, the market and the overall attitude of the Lender/Servicer and the Investor. FHA as I said does not have a policy of allowing relocation as an extenuating reason for forgiveness and hardship. They are fairly emphatic in their guidelines in that respect. However things are topsy turvy in this market and you will never know if you do not ask. I do know that Chase is very flexible at this point.

I would expect that you are going to have some exposure and liability for the short amount, just due to the reasons that are compelling you in this transaction. Find a really good Agent to represent you and have them do the tough as nails negotiating. You will need to fill out the financial packages and the hardship stuff for FHA, Chase and Regions....be forthright and tell them the story....let the Realtor do the negotiating....and cross your fingers and toes that you come out the other side with the best deal that you can.

Please keep us posted, I am always curious how FHA is treating things in other regions...they are different from region to region, here a few years back they were very rigid, today....off and on..hot and cold, very situationally dependent as far as their decisioning is concerned.

[joekwood]

One more question...

Would you recomend a realestate attorney to start the process/negotiating and just sit back and wait?

In other words let them handle it all?

Or do it myself?

Thanks a million for your help...

Joe

A good Agent is a lot cheaper than a Real Estate Attorney, and for that matter they are Real Estate Attorneys, not always versed in the Mortgage End of the world, however there are some that are. If you can find one, that is versed in the Mortgage end of the world, then if the Agent can not make headway with them, yes....

You are not in this alone, the Attorneys are just getting geared up to understand lender and loan information. Some of them are there, some not yet, all in all if the Agent is really, really good at the Short Sale process you may not need an attorney....

You are in NC, so I do not know how seriously the market has eroded there across the board, however, if you are upside down then there are others, as such there should be some good Agents there to assist.

The issues that you deal with are not that uncommon, Chase is very geared to these issues, FHA may be the tough cookie on this one, not Chase if you are offering a Short Sale. They do require the hardship package, but they are doing some fairly good and serious workout with their borrowers.

Since you are in an FHA loan they can not modify, but they can approach in conjunction with you FHA to see if that would be a solution to the situation. Trust me the second already knows how far under water they are, so there you and the Agent will be preaching to the choir.