What are the Alternatives to a Los Angeles Short Sale?

By Jenny Durling

Real Estate Agent with L.A. Property Solutions BE# 01342428

May 17, 2012 01:05 PM

Ten years ago hardly anyone had heard of a short sale. Now, since the real estate bubble burst, “short sale” is almost a household word here in the Los Angeles area.

The current situation is the result of several converging factors.

First, when the bubble burst, homeowners who purchased when the market was rising or had reach its peak, lost value. That might not have mattered if two other factors hadn’t come into play at the same time:

Adjustable rate mortgages reset, making mortgage payments double or triple
The economy tanked and people lost jobs

which road to choose What are the Alternatives to a Los Angeles Short Sale?

If you find yourself unable to keep up with monthly payments on your house because of these factors, you do have some choices.

If you don’t mind moving, the short sale is a good choice, but what if you’d like to keep your house? Refinance: Some programs will allow you to refinance up to 125% of your home’s current value – and lower your payments via lower interest rates. The FHA Short Refinance program will reduce your first mortgage to 97.75% of current value. If you are fortunate enough to have a loan that belongs to Fannie Mae and meets the timing criteria, you may be able to refinance without having an appraisal at all!

Reinstatement: If you’re in pre-foreclosure and have come into some extra money, you can reinstate your loan by paying the defaulted balance plus interest and late fees.

Loan Modification: Depending upon who owns your loan, you could be eligible for HARP, HAMP, FHA-HAMP, or the USDA’s Special Loan Servicing. If you are having trouble making making payments but are employed and can still qualify for a loan, it’s possible that your current lender will work with you to lower your rate, lower the principle owed or even both. It can’t hurt for you to call the number on your mortgage statement and ask.

Forbearance: Again depending upon who owns your loan, if you are unemployed you may be eligible for 12 months of forbearance. During this time, you’ll be required to pay from zero up to 31% of your income toward the payments, but the bank will not add late fees or penalties and cannot start foreclosure. The unpaid amounts will be added to your loan balance for later payment.

Here in California, you may also be eligible for assistance from “Keep Your Home California.” For details, call 888.954.KEEP.

Bankruptcy: In some cases, judges allow homeowners to keep their homes – sometimes even reducing the principal balance on investment and vacation property. Do consult a qualified real estate attorney before considering this option. Alot will depend on the type of bankruptcy. Sometimes you can forestall a foreclosure but not be able to keep your home indefinitely. In such a situation, a short sale could be your best course of action.

More Help May be on the Way…

Expanded HAMP programs will be go into effect June 1, 2012. So even if your lender has deemed you ineligible for assistance in the past, it would be wise to check back after the new guidelines are in place.

To learn who owns your mortgage loan, visit Making Home Affordable.

If you own a home in Silver Lake, Los Feliz, Hollywood Hills, Eagle Rock, Pasadena, or surrounding areas and you’ve decided that a short sale is the best option, or if you just need to discuss your options with a real estate professional, get in touch.

I’ll be glad to go over the specifics of your situation with you and help you determine your best course of action.

You can call me directly at 213-215-4758 – but hurry. Don’t wait until the bank makes the decision for you.

Jenny Durling
Broker Associate
LA Property Solutions
213-215-4758

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Jenny Durling

L.A. Property Solutions - Los Angeles, CA

For Los Angeles real estate help 213-215-4758

I mentioned that as one of the loan modification options. I think you are right that we will start to see some principle reduction. I didn't state Foreclosure - thinking that was obvious but perhaps I should add that.

May 17, 2012 01:48 PM

Gene Riemenschneider

Home Point Real Estate - Brentwood, CA

Turning Houses into Homes

Great post and worthy of a Reblog latter this week. Short Sales are starting to work for people.

May 17, 2012 02:57 PM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

Bankruptcy: In some cases, judges allow homeowners to keep their homes – sometimes even reducing the principal balance.

Where is the authority for this?????

My recollection is that Congress specifically precluded principal reduction by bankrutpcy judges about 3 years ago.

http://www.nacba.org/News/BankruptcyNews/tabid/89/articleType/ArticleView/articleId/295/Fannie-Mae-backed-principal-reductions-internal-documents-show.aspx

http://www.countyproperties.net/proposed-bill-home-loan-principal-reduction-bankruptcy-courts/

May 17, 2012 08:01 PM

Teral McDowell

Referral Patners LLC - Murphy, TX

Any one of those options are tough decisions to make and it's good to have the information out there for the public to make a well-informed choice.

May 17, 2012 11:52 PM

Regina P. Brown

MBA Broker Consultants - Carlsbad, CA

M.B.A., Broker, Instructor

Jenny, those were great advice to home owners. They have other choices aside from short sale. Depending on their current situation, they can always contact a real estate professional who will guide them with the details (pros and cons) of each alternative.

Thank you.

~Regina P. Brown

May 18, 2012 02:10 AM

Thanks Gene and Regina

Lenn, I change the word from "home' to"property". In Caliornia, Chapter 13 bankruptcy does allow for principle reduction on vacation and investment property.

http://www.mellorlawfirm.com/bankruptcy-education/mortgage-cram-downs-california-in-chapter-13-bankruptcy/

May 18, 2012 05:20 AM

Joetta Fort

The DiGiorgio Group - Arvada, CO

Independent Broker, Homes Denver to Boulder

Good luck on your short sales! Seems CA still has a large percent of these, they're actually getting rare here.

May 20, 2012 07:59 AM

Hi Joetta - we definitely still have them here. We also have our share of people in distress who seem to be in complete denial. They don't check out any of their options and then it's too late altogether.

May 20, 2012 08:16 AM

Hi Diane- i feel your pain. there are manly of us whose homes will take years to ever reach the prices paid. if you can make the payments you may have a tough time getting a short sale. Refinancing would be great if you have a fannie/freddie loan and bought at the right time OR you have enough equity to qualify for a standard refinance. I'm hoping the HARP program will be modified to include alot more people in your position.

May 24, 2012 04:04 PM

What are the Alternatives to a Los Angeles Short Sale?

Ten years ago hardly anyone had heard of a short sale. Now, since the real estate bubble burst, “short sale” is almost a household word here in the Los Angeles area.

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Jenny Durling

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