Compromise Sale Reporting[ Edited ]
11-15-2012 07:46 PM - edited 11-15-2012 07:50 PM
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.
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