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This is exactly why Fannie Mae recently announced that they would penalize(no mortgage for you) folks with past foreclosures 5yrs and up to 7yrs for some. I don't know the criteria, but it has been discussed that the voluntary foreclosure crowd deserves a longer penalty
izoid wrote:If you can pay for the home, which you say you can, you should not voluntarily go into foreclosure. The bank will likely sue you for the difference between what you owe and what they sell the house for so you will end up paying anyway. Foreclosure does not alleviate your responsibility to pay what you owe, it will only take your home from you.I reaaly do not think that you should be using foreclosure as a tool to avoid a market decline. Foreclosure happens when you can't afford to pay your bills, it is not a strategy to avoid an investment loss. Just my opion, but I am struggleing with what you are proposing.
@ShanetheMortgageMan wrote:....the only way to get away from your current home and into a less expensive home is if you can buy a new home while qualifying with your current mortgage as well... or do a deed in lieu/short sale and then buy in 3 years (since deed in lieu/short sale would be considered a foreclosure to a new mortgage lender and they need 3 years from a foreclosure). Not really any way to avoid the damage on your credit, however a deed in lieu or short sale would keep things to a minimal by only having a foreclosure listed on the credit rather than you sending "jingle mail" and having months of late payments and then a foreclosure. Keep in mind the debt forgiveness portion of the act only applies to acquisition indebtness, refinance mortgages that were solely for better rate/term (no cash out), or cash out refinance mortgages that were used solely to do home improvement (better have cancelled checks/receipts to prove that).
Hi ShanetheMortgageMan,
I was surprised to see you say the Short Sale would be treated the same as a Foreclosure.
I'm currently in Short Sale negotiation with my loan servicer (Carrington). The Short Sale has a buyer making an offer above the home's fair market value. The servicer has refused to approve the Short Sale unless I come up with another $4K toward my indebtedness. I plan to come up with the money to pay this if the servicer agrees to two contingencies (they say they will):
1) All remaining indebtedness is forgiven
2) The sale is not reported as a Foreclosure
Note; I was not late on payments until after I went into negotiation with the servicer and they told me I must be late to negotiate. So now I'm 3 months late.
Based on your comments, now I'm not sure if paying the $4k would really make any difference at all and I might be better off to just let it go into Foreclosure. My thoughts regarding the contingencies above are now:
1) All remaining indebtedness is forgiven - I'm in Arizona, so based on what I've read in multiple posts here, I'm not sure they would be able to pursue a 'subsequent deficiency suit' regardless, even without this contingency.2) The sale is not reported as a Foreclosure - Based on your comments, would the Short Sale impact my credit score the same as if I had just let it go to Foreclosure (and thereby save me the $4k)?
Any thoughts are greatly appreciated.
there are some differences, but generally it is not going tobe much difference. Also, since you have now it seems hit 90 days late and are approaching 120, it is considered for all intents and purposes a foreclosure for waiting period to re-purchase. Some banks go by 90 days past due and some go 120 days as the amount of time, but they look at severe delinquencies as a foreclosure. With the lates, you are probably not going to get much worse credit score either way since you are going to end up with either settled for less than owed or foreclosed upon.
Not sure about what impact a short sale vs. foreclosure has on ones credit score - although like mickie pointed out, since you are late on the mortgage when the short sale happened, as far as qualifying for a new mortgage, it will be considered the same as a foreclosure.