"The sad reality is that loan modifications are not helping most troubled homeowners save their mortgages from foreclosure. Alternatives are needed. The government has seen this, and is putting all its leverage on servicers, junior lien holders, and lenders to fast track short sales. However, many troubled homeowners are asking: Why Should I Even Try to Get a Short Sale? I am Going to Lose my Home Whatever I Do? This is a fair question."


kindandgentlejd at 13:32 2010-04-06 said:
This article is self-serving promoting the profit of doing a short sale for the real estate industry and not doing what is best for the consumer. For most, the risks of engaging in a short sale for the consumer way exceed any real benefit. The credit impact is minimal between a foreclosure and a short sale, those in the credit field clearly articulate that. As for getting a loan, you can buy FHA with a foreclosure, bankruptcy or short sale all at similar times and in much shorter time than FNMA/FHLMC. The only reason not to mention FHA as an option is only self serving as a consumer can buy a home, using FHA, which is all that matters to the consumer, not the source of funding.

The bigger issue is that agents are not properly analyzing the circumstances of the consumer in total.

First, does the consumer have many other financial problems? If so, they may need to file a bankruptcy to address the entire picture of which the credit impact must be weighed not just for the short sale but the intervention of a bankruptcy... thereby rendering a short sale ineffective and not beneficial.

Second, if the credit impact is similar, letting the lender foreclose may be way more beneficial financially as the homeowner can live in the property longer. While they are foreclosing, no payments are made which puts that money in the consumers pocket.

Third, in states that do not allow a deficiency, doing a short sale and incurring any deficiency liability for the consumer is negligent. In those states, the benefit of letting the lender foreclose are a great advantage.

Fourth, taxes. A credit bid by a foreclosing lender may be sufficient to prevent any capital gains tax for forgiven debt.

Fifth, fraud. Many borrowers, especially in California and Florida did stated income loans and intentionally or not, overstated their incomes. Giving the lender now information that reveals that is negligent and may expose the consumer to civil and criminal liability for fraud. Fraud generally survives the anti-deficiency statutes in most states that have them. Fraud also survives bankruptcy. That risk is not worth pursuing and the only way the lender gets the information is by cooperating in a short sale (or modification).

In conclusion, most in the business lack the core competency to properly advise and counsel a consumer on the true pitfalls on doing short sales and loan modifications. This article clearly reveals this lack of core competency to do what is best for the client, not just earn a commission. Permalink

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