Short Sale Questions?

[jjamm7667]

Hello....I need some advice. I live in a home with a balance of about 145k that I purchased using my VA loan benefits. I no longer can afford the home and have been paying my note late every month (not over 30 days). All my bills far exceeds my income. According to the guy at the VA when a short sale is done the lender files a claim for the $36,000.00 guranteed money that comes with any VA loan and no other action is taken by the VA (collections).

My questions are:

Based on the amount owed and the guaranteed VA money would selling the home at $109,000.00 hurt my scores since the lender is getting the full amount of the loan?

How would it be reported since the lender is basically being paid in full?

Thanks

[Anonymous]

No.  that fact that the "insurance" on the loan paid off the balance will not change the fact that you defaulted on the loan.  It will lower your score alot as well as have some other negative affects for future lending/etc.

Also, here is some better math....To actually make up the total 145, you would need to sell the house for more like 120K or so, not 109.  This is because all of the expenses to sell the home come out of the proceeds prior to it counting towards your loan.

In any case, the fact that there is a gurantee, PMI, or any other entity that pays towards the balance, will not change the details of the short sale.  It iwll just make the owner of the loan a little better off.

[jjamm7667]

Thanks for responding..If it would still be considered defaulting on the loan do you know how it would be reported to the CRA's if they actually got all the money owed for the loan?

I can't think of what  or how would be reported if the note was paid up to the sale and whatever was left over from the short sale was paid.

[Anonymous]

It would be reported as defaulted/settled for less than owed.  It is your credit file, not the banks, so the fact that you defualted on the agreement would be entered.  The fact that they got paid by an insurance policy is irrelevant.  If you are driving and total someone elses car, they may get there car fixed by insurance, but you are still faulted for destroying their car and have to pay the money and take the hit to your driving record.  Same principle.  Insurance coverage does not save you from being held accountable for the actions that require its use.  The guarantee on the loan is a guarnatee for the bank, not a guarantee to protect you.