There May Not Be a Consensus on How Much Better Short Selling is for your Credit Rating, But . . .

Professionals from a variety of industries disagree on the average number of points that your credit rating will crash in:   (1) Foreclosure;  (2)  Deed in Lieu of Foreclosure; and (3)  Short Sales.     But this latest article on the topic is very enlightening:

if one loses his or her home to foreclosure, the waiting period to qualify for another mortgage can easily be another decade.

So if you don’t want to spend the next ten years “paying the man” (i.e., a landlord), choose the short sale option!   Keep your payments current!   If you pay your bills and can cast your short sale as an “attempt to be proactive and to help minimize losses to my lender”, we are seeing former short sale clients purchase real estate again in as little as 24 months.  ( to emulate these successful recoveries from short sales, keep your head out of the sand and analyze your staying power when your personal budget goes negative due to life changes like unemployment.  Take steps to control your “crash” early.   It is better to consult EARLY with some financial professionals and know where your parachute is than to go down with the aircraft!)

The caveat to committing your blood, sweat and tears to short selling is that some lenders have HOLY FEET.  That is, they shoot themselves in the foot on a frequent basis by refusing to accept manageable short sale losses today and place their bets on market recovery in the future sufficient to bring more money and make the bank more profit despite the maintenance and carrying costs, realtor and marketing expenses, and risk of vacancy and vandalism.     In defense of lenders and servicers with Holy Feet, many claim their hands are tied.  They blame the loan investors for unreasonable decisions refusing to authorize short sales.

One friend of our  firm is lender Doug Fleming.   Doug was the first to break the good news that Fannie Mae has reached an agreement with 9 of the biggest investors/private insurers of mortgage loans to leave the short sale decisions to the servicer.    “Agreements were announced on Wednesday with nine private insurance carriers that will make foreclosure alternatives much quicker and easier for some Freddie Mac and Fannie Mae (the GSEs) borrowers to obtain.  Servicers will no longer have to seek approval of private mortgage insurance (PMI) companies when borrowers with mortgages owned or guaranteed by either GSE and carrying PMI seek a short sale . . . “

Hopefully, gone are the days when we must seek short sale approval at as many as 4 different levels:   (1) Servicer;  (2) Bank;  (3) Governmental or private mortgage insurer;  and (4) Investor.    The most difficult part about obtaining approvals from  (3) and (4) was often that the Banks often had policies against identifying them to us or giving us contact information.  Their decision processes were the big “black hole” in many short sale negotiations.    We are hopeful that this development will allow our upside down seller clients to have closure in short sale a little more quickly.

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