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You Can Keep a Short Sale Off Your Credit Report
There are short sale sellers in Sacramento who do not know that if they fit the guidelines, it is possible to do a short sale, be current on your mortgage payments, and NOT have a short sale show up on your credit report after closing. In fact, there can be no ding to credit whatsoever and a seller can go out the next day and buy a new home, if she so desires. They don’t know this because a) their Sacramento short sale agent doesn’t know it, or b) their short sale agent doesn’t want to bother with it because the agent just wants to close the deal the fastest and easiest way possible.
Everybody knows that if a seller is in default, that short sale has a greater chance of being approved, even if there is no hardship. That’s the easy road for lots of agents with short vision. They tell their sellers to stop making mortgage payments so they can do the short sale, but that is not always necessary.
Granted, I don’t have a lot of sellers who fit the parameters to be current, but when it’s a possibility, it’s often worth it to give it a shot. I have to do what is best for my sellers — as hokey as that might sound to some of you, it’s the truth.
Sometimes, it doesn’t work out. When it doesn’t, then the alternative is to go into default. Of course, the bank won’t tell you that. The bank will almost always never directly say that a seller needs to stop making her mortgage payment. Think about being a shareholder of that bank. Do you want that bank telling customers to go into default? No, you don’t. A bank will instead say there is no hardship.
You will look at the hardship letter you wrote and say yes, there is a hardship. What is wrong? The key is the seller is not in default. Stop paying at that point and, when the seller is 30 to 60 days in arrears, that short sale will most likely get approved. But if you want to try to do a short sale while you are current, hire a smart Sacramento short sale agent who knows how to do it.
Feds to Allow Current Mortgage Payments for Short Sales
I realize how horrible it sounds when our government tells a seller that she cannot be current on her mortgage payments if she hopes to do a short sale. For years, the government has been telling people to stop making mortgage payments, if you can believe that. It’s true. Fannie Mae and Freddie Mac, government-sponsored entities, require a default for a short sale. Come November 1, though, all of that changes. The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, yesterday announced new streamlined short sale guidelines, effective November 1, to permit a short sale in eligible cases of hardships without a delinquency. It’s about time!
This means the feds will allow current mortgage payments for short sales. What a relief for sellers worried about delinquencies. The thing people don’t realize is there are different types of short sales. The type of short sale depends on the investor. Rules that govern a traditional short sale do not apply to Fannie Mae and Freddie Mac, including other types of short sales such as FHA or VA or CalVet. And let’s not even talk about the grandmother and granddaddy of all short sales: the Fannie Mae HAFA short sale or Freddie Mac HAFA short sale. Many short sale agents would rather be forced to walk barefoot across hot coals than to do a Fannie Mae HAFA short sale or a Freddie Mac HAFA short sale because those are painful enough for everybody.
Not only will a seller be able to remain current on her mortgage if she has a Fannie Mae or Freddie Mac loan, but the new guidelines give servicers delegated authority. Banks that service these loans can determine whether the seller’s hardship will qualify for a short sale. Common hardship reasons are:
- death
- divorce
- unemployment
- relocation
- medical
Plus, if a borrower must relocate due to a commute of more than 50 miles to work, which is a fact of life for many of us in California, that constitutes a hardship as well. This is a welcome relief for this Sacramento short sale agent and my sellers in Sacramento. Being current on mortgage payments for a short sale is a huge improvement. It’s like we’ve been beating our heads back and forth in the doorway for years. You know how good it feels to stop!
Now if we can just get Fannie Mae to stop sending short sales to auction because the short sale can’t close prior to the trustee’s auction date, we’ll have something to truly celebrate. We need a way to postpone the auction in a Fannie Mae short sale. Come on, FHFA, I know you can do it. We’re rooting for ya in Sacramento. But for now, us hungry little squirrels, we’ll take the peanuts you toss.
