Do You Qualify for a Loan Modification?
By Sandy Flores
If you have made many attempts to get a loan modification and did not reach any reasonable agreement that suits you, or perhaps modifying the process is just simply not for you, you have the option to qualify for a short sale , and thus avoid foreclosure.
A short sale occurs when the balance you owe the bank is higher than the current value of your property on the market today, including all of the expenditure of the sale.
If you are eligible, banks could approve the short sale, agreeing to accept less than the full balance of your debt. Note: that not all lenders will accept short sales or discounted payoffs.
Short sales are sales with complex situations. The circumstances that cause these types of sales are tedious and not easy for the owner. The short sale is one alternative for those borrowers who are not eligible under the Capacity and Stability Program to Pay Homeowners in a Modification, or Home Affordable Modification Program (HAMP), but may qualify for Home Alternative to Avoid Foreclosure (HAFA)
HAMP offers incentives to borrowers, servicers and investors to encourage short sales and enable families to avoid the foreclosure process, which is very expensive, and minimize the negative impact of reruns on borrowers, financial institutions and communities.
Short sales are transactions that are processed with careful coordination and close cooperation between a number of parts: servicers, appraisers, borrowers, buyers, Realtor’s, title agents and mortgage insurers, as well as holders of second loans or lines of home equity. A short sale provides a better outcome for borrowers, investors and communities.
The alternative program to avoid foreclosure HAFA simplifies and streamlines the short sale process providing procedures, deadlines and standard documentation, and effective.
Also, selling your short sale property gives you some control with self-monitoring of the sales process. No mortgage payments, unless you choose to make them. You can meet the new owners on better terms. You will be eligible under the rules of Fannie Mae, to buy another home in two years instead of five to seven years, if your credit report does not reflect “reset”.
If your bank approves the short sale, it has the right to issue a 1099 for the difference, due to a provision in the IRS code about debt forgiveness.
As always, it is advisable to seek advice from a professional with experience and knowledge in this type of sales, to help determine and make a more informed decision and advantageous for you.
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