"When you are ready to participate in the loss, feel free to call me"

[w¡n9Nµ7 §£@¥€r 123]

Reluctantly, banks are agreeing to let some short sales go through. But instead of writing off the unpaid portion of the debt, they want homeowners to sign a note promising to pay some or all of the balance due.

This was the situation confronting Mike and Linda Kelly, who needed to sell their house in the foreclosure-plagued Central Valley of California when Mr. Kelly got a new job 75 miles away.

The Kellys owe $300,000 on their house, which has a pool in the back, crepe myrtle bushes in front and, because Mr. Kelly is a ham radio buff, a 40-foot antenna above it. But the best offer they could get gave the bank $220,000.

CitiMortgage said it would approve a sale at that price, but at the last minute told the Kellys they needed to pay $166 a month for the next 20 years, a total of $40,000.

“When you are ready to participate in the loss, feel free to call me,” a Citi loss mitigation specialist, April Easter, wrote to them in an e-mail message.

http://www.nytimes.com/2008/09/19/business/19short.html

[rocks 494]

they only have to pay back $260k? lucky!

[w¡n9Nµ7 §£@¥€r 123]

they only have to pay back $260k? lucky!

I guess it's fair that Citi ask them to split the loss with them.

[rocks 494]

sounds fair to me, selling your house for less than you paid for it sucks. i wish someone would give me some free money!

[w¡n9Nµ7 §£@¥€r 123]

sounds fair to me, selling your house for less than you paid for it sucks. i wish someone would give me some free money!

Free money?

You're assuming the $300k balance had a cash equity component to it. It may not have, in most cases I believe it won't. Most likely, it was all tied up in the house and once they lose the house, that value is lost as well. All they'll have is no house + a $166/month bill for the next 20 years.

[rocks 494]

oh i know, i was just kidding. i just mean that normally if you bought a house for 300k you would have to repay it all, they are lucky they are getting a break

[rocks 494]

i wish someone would compensate the sale of my house!

any offers?

[rebeccajo 14]

It's a far more fair deal than attaching their wages for the unsatisfied balance.

[Mags 112]

sounds fair to me, selling your house for less than you paid for it sucks. i wish someone would give me some free money!

Free money?

You're assuming the $300k balance had a cash equity component to it. It may not have, in most cases I believe it won't. Most likely, it was all tied up in the house and once they lose the house, that value is lost as well. All they'll have is no house + a $166/month bill for the next 20 years.

When the housing market took a dive in the UK in the 90s there were thousands of people with negative equity on their homes. They were able to sell at prices much lower than they were purchased for, but had to pay an additional amount on the mortgage payment for their new home, which helped cover the loss in equity on their previous home.

It may seem unfair, but someone has to cover the loss and I don't necessarily feel it should always be the lenders.

[*JG* 2]

Of course, if they no longer own the house and file for bankruptcy, it won't make a bit of difference.

[rocks 494]

well, i'm glad some people are getting a bit of help

Edited September 19, 2008 by rocks

[rebeccajo 14]

Of course, if they no longer own the house and file for bankruptcy, it won't make a bit of difference.

Most folks don't lose their home in bankruptcy.

In fact, bankruptcy is usually the tool that protects the home from foreclosure, and enables the borrower to re-negotiate the terms of the loan with the lender (if the borrower wants to keep the house).

Despite all the fuss about people losing their homes to foreclosure, the bitter truth is that people who lose their homes usually have other debt driving them into a downward spiral. Bankruptcy can help these people reorganize their debts (if they don't wait until the last minute, that is).

Edited September 19, 2008 by rebeccajo

[kaydee457 13]

It's a far more fair deal than attaching their wages for the unsatisfied balance.

Or the negative repurcussions of having it foreclosed. Short sales don't show up in ones credit.....

I just bought, and closed on, a short sale in Florida.....The seller took a bath on it and of course lost all equity in the through the short sale and was charged some pretty hefty closing fees; everything from a Home Warranty for me to the banks legal fees....plus both seller and buyer real estate fees.

The bank held out on the bidding price, and turned down two previous bids, until these costs were covered by the sale. The seller walked away with nothing but the brokers, lawyers, and the bank walked away with costs.....

I looked at what I paid, and subsequently looked at the balance of the mortgage owed and figured that they accepted when they were, or at break even.

I also learned that sellers that are approved for short sales are oftentimes putting up their properties for prices well below market. If there's anyway that the sale can make break even they will force a higher sale price. The banks do "mini market appraisals" to assure that the house is sold reasonably.

Unfortunately, sellers get offers that are subsequently turned down by the bank because they are too far from break even.

Edited September 19, 2008 by kaydee457

[rebeccajo 14]

Or the negative repurcussions of having it foreclosed. Short sales don't show up in ones credit.....

That's not true.

If you have turned the keys back in, but there is a buyer before the actual foreclosure takes place, there's an adverse rating that can be given. It's just one mark above a total default, so it still hacks a BUNCH of points off the credit score.

Banks have always been able to go back after the borrower for the amount they don't recover, whether it be from a full foreclosure or otherwise.

If you have your property for sale, and you've kept your payments up to date, and you get a below sales price offer that is still enough to pay off your loan, that's only a 'short sale' in your mind. What you THOUGHT your home was worth is not necessarily what the market will bear. Sellers who walk away having earned no equity but never made a late payment and cost the bank no foreclosure fees, etc. may have suffered a short-sale from a market standpoint, but they haven't breached the terms of the loan agreement. Those folks WILL be ok credit-score wise.

On the other hand, if you are selling your house and you get a below loan-balance offer and the lender accepts to 'settle' with you for something less than your loan balance, you may be better off pocket-book wise, but don't be mistaken in thinking it WON'T affect your credit score. The bank is going to report the hit they took. Even if you never made a late payment.

Edited September 19, 2008 by rebeccajo