Tough Decision: Loan Modification, Short Sale or Foreclosure

Many homeowners are facing a tough decision about their home loan.  Unemployment, under employment, illness, accidents and unexpected expenses have left may home owners without the means to pay their mortgage loan payment in full each month.  What should you do if you find yourself unable to make a full loan payment this month?

Loan Modification May Be The Right Path For You

The Obama Administration has touted the Home Affordable Modification Program (HAMP) as the answer for consumers who need mortgage loan help.  In this program the lender agrees to lower the monthly payment by either lowering the interest rate on the loan or extending the period of time over which the loan must be repaid.  You apparently have to be behind in your mortgage payments to qualify.

The big problem with this program is that the lender representatives who answer the phone are often unaware of the program or do not know how to put you in contact with someone in the organization who can get you relief.

And then there is the total incompettency of the lendes once you actually find out how the program works.  Lenders lose documents, often more than once.  Communication is poor with both the home owner and within lending organizations.

And your credit score is going to take a hit.  It all depends on how the lender reports the loan modification to the credit bureaus.  Some lenders report you as delinquent and others report it as a partial payment.  Others see this as "paid as agreed"  Talk to your lender.  If you have great credit, expect your score to drop sharply.  If your credit was already suspect, it may not be a significant blow.

Short Sale is an Excellent Option For Some Homeowners

As a Certified Distressed Property Expert I work with many home owners If you are "upside down" in your mortgage loan.  That is if you owe a lot more than your home is worth, a loan modification will not answer your problems.  You need to contact your lender and get started with a short sale.

In a short sale your lender agrees to take a payoff for your mortgage loan that is less than the amount you owe.  Some lenders consider the short sale as payment in full.  Other lenders go after a deficiency judgment through the court system for the amount of your loan you were unable to payoff.  The deficiency judgment is especially damaging to your credit and hangs around for a numbner of years.  Your credit score may also plunge 140 points or more.  How lenders report your short sale to credit bureaus is negotiable.

For more information on short sales see Sally English Is A Certified Distressed Property Expert (CDPE)

Foreclosure is Unavoidable for Some Home Owners

If you can't make your house payments and your house does not "short sale" you may be on a collision course with foreclosure.  Many owners in foreclosure also file for personal bankruptcy.  What is the effect on your credit?

"A bankruptcy can hurt your credit for up to 10 years, a foreclosure and other serious delinquencies for up to seven years. FICO, for example, classifies bankruptcies and foreclosures as negative items and treats them in a similar manner. Loan modifications and short sales can also be negatively classified, although that ultimately depends on how those items are reported on a credit profile, says FICO's Mr. (Tom) Quinn. Under the VantageScore-an emerging competitor to FICO developed by the three major credit bureaus-scores can fall by as much as 140 points in a short sale or foreclosure and can plummet by as much as 350 in a bankruptcy, says Sarah Davies, head of analytics and product development at VantageScore Solutions LLC.  Borrowers with short sales and loan modifications should see their credit recover more rapidly if they keep making their payments on time, keep balances low and refrain from applying from new credit, said FICO's Mr. Quinn."  Digging Yourself Out of a Mortgage Mess By Jane Kim and M.P. McQueen, Wall Street Journal

SALLY ENGLISH IS AN ATLANTA GEORGIA CERTIFIED DISTRESSED PROPERTY EXPERT

If you are looking for est unbiased advice about your distressed property in Atlanta, Call Sally English at 770-939-3174  OR  EMAIL Sally English and the English Team at sallyenglish@englishteam.com  

We have experience with short sales and lender contacts.  You don't have to go through this alone!