If I am current on my loan can I do a short sale?
I am not behind on my mortgage payment; can I apply for a short sale?
Many people who are not behind on their mortgage and not interested in retaining thier home wonder if they can apply for a short sale, and if so will they be accepted for a short sale. The answer varies greatly depending on whom your investor is for your loan, not specific to a “servicer” of the loan such as Bank of America, Wells Fargo, Chase, US Bank, Ocwen, Nationstar, Homestreet, etc. but specific to investor aka Fannie Mae, Freddie Mac, FHA, VA, USDA, or Private label Mortgage Backed Securities (MBS).
In some recent cases you CAN be current on your mortgage and still get accepted for a short sale. Every servicer (usually the entity you make your mortgage payment to) and every investor (the entity that actually owns your loan) have strict guidelines they follow when evaluating someone for acceptance in a short sale program. They will make exceptions for good reasons in some cases, and every short sale is looked at on a case by case basis even though there are set standards and guidelines.
Besides who the investor is on the loan, one of the biggest factors to determine if you can do a short sale if you are current is if you have a true financial hardship. In an earlier blog I shared what a bank considers as a hardship at http://activerain.com/blogs/fund4u
Basically, some type of hardship needs to have occurred since you took out the loan that will prevent you from paying even though you may be current. The hardship has to be documented and the bank will look into this pretty thoroughly. One potential exception that is pretty common (although not the only one) is job relocation. Financially you may be relocating to make a higher income, but if you currently own an underwater home and have to move and pay on two residences this potentially could put you into a hardship situation. The bank/servicer is going to look at your full financial picture, and if they feel, based on the information you supplied them, that you do have some type of potential hardship, they may proceed with the short sale even if you are current.
The bank is basically looking for a situation they call “imminent default”-meaning that with your current income, expenses, and assets you are going to run out of money at some point and get behind on your mortgage. Every investor is different and as mentioned above you have to research your investor’s guidelines before starting the short sale process; although I have seen teams have success on a few short sales where the investor “bent” the guidelines a bit for a homeowner who was current to get the short sale done.
Recently Freddie Mac and Fannie Mae adjusted their guidelines to look at homeowners who were still current. If you qualify to be able to get one of these short sales you can get immediately work on a new FHA purchase loan without having to wait the normal timelines- APPLY HERE.
FHA requires homeowners to be 31 days delinquent at time of short sale settlement (meaning when the buyers actually settle on the home) but I have seen them make exceptions when warranted and documented correctly. If you have an FHA you cannot buy another FHA after a short sale without waiting the required timelines.
If you do not have a financial hardship this does not mean they will not let you participate in a short sale, but chances are the bank/investor is going to ask you for some type of monetary concession for the deficiency amount on the loan balance vs. what is sells for at short sale. Fannie Mae and Freddie Mac own a majority of the mortgages in the country so if you have a loan with them you have a good chance of staying current and still doing a short sale.
If you would like more information on this subject contact me anytime bill@billcblack.com or 360-910-3290.
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