Behind On Your Mortgage?

If you get behind on your mortgage payments, have you contacted your loan servicer and asked them if they?ll consider a short sale?  If at all possible, you should try to avoid a foreclosure which is a legal procedure.

If your loan servicer would agree to a short sale, following are some items your lender may require you to provide them:

1. Last 2 years? Federal Income Tax Returns

2. Last 2 months? bank statements

3. Two most recent pay stubs

4. A completed Financial Statement which they will provide or I can get you a sample of one

5. A very detailed hardship letter explaining why you?ve fallen behind in your payments

6. A completed and signed Authorization to Release Information Form which allows someone (e.g., your REALTOR) to discuss your particular situation with your lender

There may be a tax liability created by a short sale or a foreclosure and the lender may issue you a Federal Tax Form 1099 for the difference between what is owed and what the sale of your home brings.  I would suggest you talk to your tax advisor.

Since your lender is discounting the mortgage on a short sale, you?ll have to discuss with them that you?d want their assurance that they will not sue you for a deficiency judgment.

A Short Sale Is Better For Lenders

Your lender/loan servicer would rather see you work out a solution than go through a foreclosure process. They would lose far more money filing for foreclosure than they would if they would agree to a short sale because there are legal fees and court costs. They realize that bad things happen to good people and life?s circumstances change not always for the better.

If your lender would agree to a short sale, they may wish to have either an appraisal or a broker?s price opinion performed so they know the value of the property. Then, your home would be priced where it will quickly sell.

The lender then releases the mortgage lien against the property and forgives the debt. As a courtesy, and should there be any, they also try to negotiate the payoff of any other liens against the property because if a property goes into foreclosure, any other lien holders (except for property taxes) will not get paid!

As always, should you have questions about the legal and tax ramifications of a short sale or a foreclosure, be sure to contact your attorney and/or your tax accountant.