Since the National Mortgage Settlement was approved in February, 2012, some banks are making a concerted effort to modify mortgages. But what if your lender rejects your application, claiming you don’t qualify for a modification? You have options other than foreclosure such as a deed in lieu of foreclosure which turns the property back over to the lender, or a short sale. Often times, lenders will postpone foreclosure to allow you to complete a short sale. Many of us remember the nightmares associated with short sales a few years ago. Lenders were taking sometimes close to a year to approve a short sale offer. Since 2009, lenders’ response time to short sale applications is much quicker. Generally, short sales are approved within 60 days of making the application.
A short sale is a good way to get a house sold. The bank agrees to take the sale proceeds and, in most instances, agrees to forgive any balance remaining on the loan. Since you sold the house, there is no foreclosure on your credit and most borrowers are able to buy a house again in two years. However, there are pitfalls associated with short sales such as deficiencies and tax consequences. This is especially true if you have a second mortgage. These lenders are much more difficult to work with in the short sale process. This is just one reason why you need an attorney experienced in short sales to help you negotiate with your lender. If you are considering a short sale, call me to discuss a short sale and the impacts and risks it can have based on your particular circumstances.
Attorney Profile: Janet M. Spears