Unless advised by their attorney, there is no reason to let your home go into foreclosure- and this is my opinion. I have heard sellers say many a times that realtors try to push for short sales only for the commissions. But knowing what I know, a Short sale is a far more viable option thee days, as compared to last year. I agree there are commissions involved but I have seen many times where the sellers have walked away happy and relieved from their burden.

Big Secret( or is it?)- Hardship + No Equity= Short sale candidate. Let's be very clear about this next point...Yes, there is damage to your credit. According to national experts, after a short sale, a person's credit will go down by 300 + or - points and then prevent them from buying using a government backed mortgage for up to 24 months. With a foreclosure, the credit is damaged for up to 4 years preventing someone from obtaining a government-backed mortgage.

Why are lenders more eager now to take such a huge discount on their mortgages?  Banks do not like bad loans. If they see an opportunity where they can sell the property without the huge loss of a foreclosure, they will do it. Some lenders report that if the home goes into foreclosure by the time the home actually closes with the new buyer, the lender will be lucky to net 50% of the original loan balance.

Also with the new government mandates, a primary residence qualifies under the Mortgage debt relief act and especially now California conforming to the federal mandate- it makes no sense to just let the house go into foreclosure. Now with the senate having voted for SB 1178-The Senate voted on extending anti-deficiency protections to homeowners who have refinanced "purchase money" loans and now are facing foreclosure. 

A loophole in the law had allowed California homeowners, already facing the possibility of foreclosure, to be sued by their lender for the difference between the value of the foreclosed property and the outstanding balance on the mortgage loan.

Currently, if a homeowner defaults on a mortgage used to purchase their home, the homeowner's liability on the mortgage is limited to the property itself.  While this law has helped protect borrowers since its inception in the 1930s, it does not extend the protection for purchase money mortgages to loans that refinance the original purchase debt-even in cases where the loan was refinanced to achieve a lower interest rate.  Resulting from years of low interest rates, tens of thousands of homeowners refinanced their mortgages.  Additionally, the majority of these borrowers did not realize that by doing so they were forfeiting their protections and becoming personally liable for the balance of the loan.

So with lenders now cooperating, new laws protecting homeowners- why is it that people still foreclose without giving it a serious thought? I have come to the conclusion that people do that because either they lack the knowledge on their rights or just have a No care attitude.I have an abandoned home behind my house in Windemere and one across the street that went into foreclosure- they could have atleast tried but just chose to give up. If you are in a similar situation, please use this blog or email me to get more information on the help that can be provided.