Finally on shortsale and some venting

**buildmybudget** · 08-17-2009, 07:28 AM

Wow, that's so incredibly unrealistic! But I've had a few friends who have been in the same situation and have heard the exact same results. The lender expects you to do whatever it takes to make the payment--and they don't care about the circumstances at all! It's crazy!

To my friends I recommended they just get out asap. Even if your credit is adversely affected, you can build a budget and get your life back on track. Good luck to you!

**DC Metro Crab** · 08-17-2009, 07:21 PM

Think of it this way. You're asking the lender permission for you to default on the loan. If you let a friend borrow 10k from you to buy a car, then they call asking permission to sell the car for 3k because they can't pay you back the full 10k, what would you say? What would you think if you knew for a fact they still had 5k in savings? I'm pretty sure you'd want them to continue making payments to you until they had spent down their 5k. Otherwise, you're agreeing to let them reneg on 7k owed to you.

**sandrark** · 08-17-2009, 07:37 PM

Be aware also that they may ask you to liquidate any retirement savings, such as IRAs and 401(k)'s. I'm not sure that legally they can ATTACH it, but they can certainly ask you to liquidate it voluntarily.

I know of someone in this situation, and the mortgage company asked for $50K, $25K and $10K from the retirement accounts. My acquaintance said No, it's the only thing keeping my kids off the streets, should it come to that. When the company kept pressing, my acquaintance threatened to file BK, and eventually they stopped asking.

FYI.

Sandi

**Radiance** · 08-18-2009, 06:26 AM

I understand the bank's position, really.
But I am not asking permission to default, I am forced to default because I just don't have anough money for it anymore.
Forcing people into an spiral of debt doesn't help anybody, including the banks. It actually promotes more bankrupcies.

Now, I am not asking for the bank not to come after my savings (if I had any), I understand that, what is happening is that for the bank to even consider allowing me to do shortsale I had to prepare a financial statement, in which I am not allowed to allocate any moneys for emergency fund, not even $50. When my first financial statement came at -7 I was told it was not bad enough. "Tahnkfully" my son tuition increased, so I am at -150 .

If a friend borrowed 10k and can not pay me back, I would work a plan with him, maybe he needs more time to pay me back (extend duration of loan) May be he needs me to reduce the interests I was charching (loan modification). Maybe he needs a combination of both.

I proposed the bank to reduce my interest not to prime interest, just to current one, at 5.5 or 6%. They did that for 6 months and for 6 months I paid. When they stopped doing that and and they refused to extend duration of mortgage, and I didn't win the lottery

, I had no option to default. Then , in 12 days, they call me and asked me to shortsale the house....

If they decline the amount offered by a buyer, I'll have to go foreclose and if they ask for my 12k on my 401k, I'll say no. I have no savings because I've used them all in trying to pay them (dumb mistake).
The dumb mistake I didn't make was to use my credit cards to pay for mortgage. That is not a sustainable solution. I only have 6000 in available credit limit so that would have last just 2 months with a mortgage of 2800.

I am trying to pay 290k for a hosue that is worth 150k at 6.6% but they won't work with me. My concience is clean.

Thank you Sandi, yes, lawyer says they can not force me to touch those. Don't have much but I won't touch them.

**Justice44** · 08-18-2009, 11:34 AM

Re: Finally on Shortsale And Some Venting

Originally posted by Radiance View Post

Another thing that is wrong, in my opinion, is that the financial statement they allow does not have a space for savings or emergency fund, you are soupoused to have zero, nada. That is not realistic, what family can count with as much as 3 months without unexpected expenses? The realtor tells me you are expected to go into debt when there is an emergency.

Hi Radiance,

If you pay your mortgage promptly, you are still not required to generate emergency savings? Does this apply to mortgages of all banks? This may be another reason why I prefer purchasing my house outright.

**Radiance** · 08-18-2009, 06:15 PM

Justice, you are never required to generate emergency savings. I wouldn't want for anybody to think you need to prove you have emergency savings to buy a house/

I am asked to present a financial statement because I have difficulties paying and I want to short sale. they want to see proof that I can not afford the payments.
my frustration is that I am not allowed to include any emergency funds on the financial statement.
In other words, If I have any money left after paying expenses, they will not approve me to go short sale.

While having moneys left might sound like a luxury, I think it is a need.
I have a kid and two parents that depend on me, do you think I can pay a mortgage if it means I won't have even a dollar left for unexpected expenses? they think so. I disagree.

That's all. See? just some venting. It is what it is.

**Justice44** · 08-19-2009, 08:20 AM

RE: Finally on shortsale and some venting

Originally posted by Radiance View Post

my frustration is that I am not allowed to include any emergency funds on the financial statement.

Now I understand. I think that is unfortunate.

I have a kid and two parents that depend on me, do you think I can pay a mortgage if it means I won't have even a dollar left for unexpected expenses? they think so. I disagree.

I agree with you. You should be able to have an emergency fund that reflects 8 months of expenses.

**Justice44** · 08-19-2009, 08:24 AM

RE: Finally on shortsale and some venting

Originally posted by DC Metro Crab View Post

Think of it this way. You're asking the lender permission for you to default on the loan. If you let a friend borrow 10k from you to buy a car, then they call asking permission to sell the car for 3k because they can't pay you back the full 10k, what would you say? What would you think if you knew for a fact they still had 5k in savings? I'm pretty sure you'd want them to continue making payments to you until they had spent down their 5k. Otherwise, you're agreeing to let them reneg on 7k owed to you.

That's a great point. Although I side with Radiance, I do understand where the banks are coming from.

**grammie** · 08-19-2009, 07:39 PM

What is the benefit to a short sale over a foreclosure? Does it really make that much difference on your credit? Can they bank attach future assets if you forclose? Radiance, my story is so much like yours. I do wish you luck and the peace of knowing, "this too, shall pass". If I lose my home, I think I will happily rent for the rest of my life.

**Radiance** · 08-20-2009, 10:49 AM

I think a shortsale is mainly a shorter process and less traumatic than a foreclosure. I would personally prefer it.

The impact on credit depends on who is reading your credit report.

Some creditors will not mind much about a shortsale but would freakout over a foreclosure.

Some creditors will freak out at both the same.

Some will not freak out an any of them.

The sooner I shortsale, the sooner I can move on with my life. (and rent hapilly ever after ) well, I would buy again if I have a big lot in the middle of the bunnies, but that is another story, I plan to rent as long as I am living in the city.
While it is true that foreclosure might mean a longer period rent free and savings, I don't think the stress attached is worth the monies.

I personally, very personally, believe that is more moral for ME to do my best to achieve a shortsale and avoid foreclosure. But I do not judge others who have jump into the foreclosure path from the start.

**Radiance** · 08-20-2009, 10:51 AM

Regarding assets, yes they can go after you and to protect assets you would need to file bankrupsy in top of foreclosure. I have no assets so no worries here.

They can not go after any retirement fund (IRA, 401k) or prepaid college funds. But this varies by state, my statements are Florida validated..

**grammie** · 08-20-2009, 07:43 PM

Thank you, Radience. I have also been told that in some cases the bank will accept the deed in lieu of payment. This is better on your credit report and helps the bank save the legal costs of a foreclosure. I have not personally heard of anyone doing this...have you?

**Radiance** · 08-21-2009, 05:50 AM

Banks tipically prefer a short sale because that way the borrower takes care of selling the house, showing it, maintainint it while it sells, etc.

Only if you are unable to proceed with a shortsale and/or the house doesn't sell for over a period of time (during which you have to prove you are really trying to sell) will they explore the posibility of a deed in Lieu. With a deed in lieu they end up with a vacant property THEY need to sell. A royal pain for them since most don't have a property management department.

As per your credit, as much as I read and asked the lawyer the impact is not lessen by a deed in lieu vs short sale.

If I am a creditor I would consider a short sale an indication of the person's commitment to look for a mutually beneficial solution.
A deed in lieu is easier on the borrower but not on the lender (creditor).

Now, faced with a foreclosure, banks will definitively prefer a deed in lieu
so, for my bank it is:

1) Account paid as agreed - Cannot do
2) Short sale - This is where I am right now
3) Deed In lieu
4) Foreclosure
5) Bankrupcy

Loan modification they wont even look at in my case...

Finally on shortsale and some venting