My mom bought her town house approximately 7 years ago for 435,000 plus some 30,000 in improvements. With the depleting real estate industry in California the fair market value of the house is 189,000. She went to see her realtor to do a short sale, since the loan modification didn’t worked out (it only reduce the monthly payment for around $200). Everything was alright until the Credit Union calls the realtor and told her that they were not going to do any kind of negotiation. They also told the realtor that they do not have any foreclosures because they are very selective with their clients. The realtor told my mom that is the first time a bank calls her saying no to any king of negotiation. The realtor had sold over 10 houses in same neighborhood on Short Sales and all banks she’s been dealing, they have been open to negotiations. In addition, my mom is 60 right now and in the past year she’s been having some serious health problems (heart, cholesterol, etc.). And a lot of them are related with the stress of the mortgage payments. She has two jobs to support her self, which is not recommended due to her age and heath conditions.
What my mom should do?? Please help! If you have some websites with laws or laws interpretation related with this will be helpful!! Thanks
Note: She bought the townhouse as an investment. Seven years ago things were great in the area she’s living, so the plans were buy it, live it for a few years a sell it. With the supposedly gain, she was going to build her retire home in her home country and live from the pension she’s receiving.
The 2007 Mortgage Forgiveness Debt Relief Act (Public Law 110-142, HR 3648), amended the tax laws to allow borrowers negotiating the loan on their primary residence to avoid having to declare this debt as income (limited to debts of $2 million or less.).
goldshire1 said:
Jun 27, 09 at 3:36 amThere are no laws that can force the bank to do a short sale. Your mom needs to document her hardship to the lender and document her inability to continue paying on the loan. Why would the bank be willing to negotiate (and take a big loss) if they feel that your mom can continue to keep paying? Her Realtor should be able to help her with her hardship letter and documentation. If her Realtor is inexperienced with short sales there are professional negotiation companies that tend to have a higher success rate with short sale approval and the Realtor should hire them to help.
golferwhoworks said:
Jun 27, 09 at 4:02 amThe bank has that right. There is nothing she can do except foreclose and then she is not buying any home.
Kris said:
Jun 27, 09 at 4:19 amYou could always try working with an attorney to do the negotiating for you but it will probably end up being a waste of money. Your mom’s situation is rough and I’m sorry to hear this. The reality is the bank does not have to negotiate. If the terms are not fulfilled as stated in the note they can take the house back. Unfortunate and sad but true. Good luck.
DAN_DRUFF said:
Jun 27, 09 at 5:31 ameither way your mom is out of the house.
A short sale means she is out sooner.
Foreclosure means bigger credit ding
either way she gets no money and is out of the house
things happen in life and rather than spend a ton of time fighting embrace reality and look at the new chapter in life as an opportunity.
kbk823 said:
Jun 27, 09 at 5:36 amThe bank doesn’t have to negotiate. Looks like your Mom is headed for Foreclosure.
satarnag01 said:
Jun 27, 09 at 4:38 pmI am a licensed real estate broker in CA and I specialize in short sales and foreclosures.
As others mentioned, there is no law to force a short sale. The credit union probably doesn’t believe a hardship exists (she makes good money, she is not late, etc.) to accept a short sale. Maybe she has mortgage insurance and will need to net 81% of the loan value. Who knows unless you ask why they are denying even looking at a short sale.
Your mother can fedex a short sale package along with a letter to the president or CEO of the credit union and plead her case. If local, she can visit them. I was able to pull off a couple of short sales where the negotiator shot it down.
Whatever you guys do, don’t let her stress over this. If they won’t do a short sale, just live there for as long as possible without paying a dime. She can always rent after it gets foreclosed on and they issue her 60 days to vacate.
Also, look at http://www.hud.gov for a foreclosure counselor near her. Their services are free.
Good Luck!
goz1111 said:
Jun 27, 09 at 6:41 pmYour main problem lies in the fact there are no laws that require a lender to accept a short sale,
kat said:
Jun 27, 09 at 7:06 pmwas your mom trying to do the short sale for less than was owed on the house if so that is why they said no she would of still been liable for the remainder of the loan and in some states the lender can not or will not foreclose on a home that is owing more than it is worth.Sometimes they just sit and wait till the value goes back up and then they take action
If your mom is current try and refinance or find some one who will buy the house for what is owed if that is what she did before and they said no than either let the house go and be stuck having to pay taxes on the amount foreclosed on keep paying the high amount and just deal with it or file bankruptcy and let the trusty work out a new payment or you can try to hire a negotiator to try to make a deal with her lender those are the only things I know to do
edit: Also when you do a mod they take your finances so they think that your mom can afford her new payment if her finances have changed since she did the mod then she needs to call the lender and have them do a new financial assessment and see if they have and other things that she qualifies for but most lenders will only allow one mod per loan but some will let you do it more than once
Joey said:
Jun 27, 09 at 7:27 pmIf the bank tells your mom they won’t negotiate then they are working intentionally to hurt her and take the home back for themselves. There is an ebook you can get called "There is No Place Like Your Home" at http://www.release-me.org/ that you should get her that shows her how to deal with them including laws and everything else they have to go through.
I had the same problem and was able to stay in my house for fifteen months before the bank realized I was on to them and helped me setup payments I could afford.
Get her this book and get her the help she needs.
I hope this helps. and Good Luck
Janet_P said:
Jun 27, 09 at 9:17 pmThere aren’t any laws requiring banks to allow a short sale, which is them agreeing to take a loss instead of the homeowner. Often a foreclosure is in the banks best interest. In this case you are asking them to eat over a quarter of a million bucks, and a 57% loss.
Your mother is going to have to either cover the loss, stay in the home, or allow the foreclosure. If this is her original loan she will only owe state and federal income tax on the 246k that she earned.
David_Z said:
Jun 27, 09 at 11:40 pmIf she is going to keep making payments then the credit union was correct. They will eventually get paid and there was no reason to take a loss on a short sale.
Most lenders will not consider short sales unless borrowers are 60-90 days past due.
If mom stops making payments then this will be a foreclosure.