Compromise Sale Reporting

[brainysmurf]

I have an odd question on how a VA compromise sale is reported.

I understand that with a traditional compromise if the lender agrees to non-recourse or it is a non-recourse state that the tradeline will report as settled for less than full balance. This makes sense as the lender is taking a loss.

However, in the case of a VA compromise sale the lender will suffer no loss (of principal, yes they lose future interest income but that's no different than an early payoff). There are specific guidelines that the VA issues, and lenders must follow (The net proceeds of the sale must equal 88.3% of home's fair market value). The thing is that THE VA PAYS THE DIFFERENCE! There can be no deficiency judgement as there is no deficiency, and in my mind they cannot in good faith report settled for less than full balance. I would even go as far as to say that the only thing the lender should be allowed to report is closed / paid. At the very worst, closed / unrated. 

I am facing the very real possibility of a VA compromise sale. Not due to financial hardship, but PCS orders to the west coast from Virginia (This is a qualifying hardship for a compromise sale). This program is available and I will use it if I feel that my monthly loss as a long distance landlord would be too great. Because my hardship is not financial I will likely be asked to sign a promissory note to repay the VA. This is fair and equitable, as the compromise claim should not exceed 20k and it is a valid debt that I incurred. I just take issue with the fact that many people are telling me that the tradeline will report as settled or settled for less when in reality BofA is being paid in full and I will have an unsecured debt to the VA.

[webhopper]

Why not list the house for sale and take out a unsecured loan from navy federal to cover the shortage. Is the house marketable?

[brainysmurf]

An unsecured from Navy Fed is a definite possibility. The only downside of that is, from my little bit of research, that interest rates at NFCU are 12% on unsecured. Which is actually decent for a non collateralized debt obligation, but on the amount I expect to need it will be a bit too much. (I'm enlisted E-6, but single. I do okay money wise, but not well enough that I  could take a 20k loan with any term less than likely 48 months)

The VA will charge me interest @ the rate of my mortgage. I know it sounds like I'm trying to have my cake and eat it too. I'm definitively considering some unsecured loan to pay the difference. The most important lesson I've learned with credit is "if you signed you pay (as long as you are capable)."  There are valid hardships, and I know better than to think I'm one of them.

I think the house is marketable (I'll be paying out of pocket for a home inspection before listing, and fixing whatever I can afford to.). I owe 210k, and desktop comps set ask right around 200, but with expected downward price action. I think my loan to value points towards renting it out for 1-2 years and rechecking the market, ugh it's a stressful situation at any rate.

[webhopper]

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@brainysmurf wrote:

An unsecured from Navy Fed is a definite possibility. The only downside of that is, from my little bit of research, that interest rates at NFCU are 12% on unsecured. Which is actually decent for a non collateralized debt obligation, but on the amount I expect to need it will be a bit too much. (I'm enlisted E-6, but single. I do okay money wise, but not well enough that I  could take a 20k loan with any term less than likely 48 months)

@Anonymous VA will charge me interest @ the rate of my mortgage. I know it sounds like I'm trying to have my cake and eat it too. I'm definitively considering some unsecured loan to pay the difference. The most important lesson I've learned with credit is "if you signed you pay (as long as you are capable)."  There are valid hardships, and I know better than to think I'm one of them.

I think the house is marketable (I'll be paying out of pocket for a home inspection before listing, and fixing whatever I can afford to.). I owe 210k, and desktop comps set ask right around 200, but with expected downward price action. I think my loan to value points towards renting it out for 1-2 years and rechecking the market, ugh it's a stressful situation at any rate.

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The item in red:  I wouldn't expect anything less

What about a NFCU Platinum card?    The plat has really low interest rates...      Lower than my NavCheck or Cash Reward card. 

You could ask them to change your existing card over to a Platinum card and give you a really good rate on it.   Also, you can ask for a CLI, they might bump you up to 15k or 20k as a credit limit.   That way you don't have to apply for new credit.

My card with NFCU was opened in march and they started me with 22k which is a crazy number.   My husbands scores were in the toilet and they started him with 4k in June, which was recently increased to 7.5k

My husband was discharged E-5, and was a "grunt"  machine gunner 2nd battallian, 4th marine.      Do you have any retirement funds that you could take a loan against? 

Also, check out Discover Personal Loans...    They sent me a pre-approval flyer for loans up to 25k  at 7.9%       Their term can be as long as 84 months.  

Your scores are very good, there is no reason why you couldn't get a decent rate on a personal loan

[webhopper]

Another thought concerning the long distance landlord issue...   You may be able to hire a "property manager"  and structure the deal so that they get a nice sign up bonus when they stick a tenant in your house and then get an incentive for obtaining a long term tenant.

That way, you can have your cake and eat it too...   You could get by for at least 2 years doing this... and you may not make money, but I think you could break even and hold out until the market rebounds even more in 2 years.     A lot of real estate agents are also property managers on the side... I would find one of these.

You might get lucky and rent to someone who eventually buys your house.

[brainysmurf]

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@webhopper wrote:

Another thought concerning the long distance landlord issue...   You may be able to hire a "property manager"  and structure the deal so that they get a nice sign up bonus when they stick a tenant in your house and then get an incentive for obtaining a long term tenant.

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That would definitiely be the route I take if renting. I wouldn't feel at all comfortable trying to manage a Virginia Beach property from Everett, WA. I'm meeting with a property manager tomorrow for an "estimated rent to estimated expenditure analysis" she sounds very well informed, and most importantly honest. She's saying always budget for 10 months rent annually, and she's very up front about the potential for a loss. I've also found that with rates where they're at I can get a no cost VA IRRRL refinance from 4.25 to 3.65 (not a big change, but no closing and no increase to principal). No cost due to Yield Spread, and selling a point.

I have been getting Discover personnal loan pre-screened offers in the mail. I haven't even been opening them...

...places palm over face to shield eyes from light of blindingly bright light bulb that just came on...

I have tried getting a reduced APR from NavyFed on my cashRewards. If I applied for one today I would most likely get the 9.6% "APR As low as" rate. I got my card when I still had baddies 5k and 18% was amazing at the time. Once credit was clean I asked for better APR for any possible long term purchase, the doubled my limit instead. I could ask about a PC to Plat, since I don't use that line enough for the rewards to matter, but my APR would likely be unchanged. Maybe I'll apply for Plat, and ask them to merge limits.

What I will have to consider if there is a monthly  loss is if it's greater than monthly payments on the unsecured loan I would need in order to sell.

Thanks for your advice webhopper. Some great ideas and different angles to approach this from. More than anything you've helped me to keep calm and carry on.

[webhopper]

Hehe,  no problem, here to help

You might keep the Cash Rewards card open if you get a Plat, and just ask if they can transfer all but 1k of the limit, that way you can keep your cash card open