Strategic Default

The rising costs of living and long daily commute left these CT homeowners tired and scraping change to make ends meet until they decided they had enough. Realizing they would likely never pay their way out of the upside down home they decided to cut their losses and short sell their home to move closer to work.

Originally a Bank of America first and second mortgage, the week we listed the home the first loan got sold to Nationstar, making the process a little more complex than originally anticipated.

It took two months to find a buyer for this home in the dead of winter. A short sale package headed to the lender. Nationstar is hit or miss. They have been known to be on the ball and approve in a few short weeks, and I have also seen the…

Q: Will I still owe the difference after my CT short sale?

A: It all depends on what your short sale approval letter says.

Connecticut is a deficiency state. What that means to any CT homeowner is that your lender can pursue you for a monetary loss resulting from a foreclosure or short sale of your property - unless your short sale approval letter says otherwise. Many people mistakenly believe that letting the home foreclose, walking away or simply sending in the keys absolves them of their responsibility for their mortgage - however this is absolutely not the case.

When you signed up for the loan you agreed:

• To pledge the property as collateral for the loan
• To sign a promissory note to pay back the loan

IN A FORECLOSURE the…

The answer to that can be yes, no or maybe so.

While most lenders have not laid out specific rules saying you must be in default to qualify for a short sale, it has been traditionally more difficult to get a short sale approved for a paying client.

However I have noticed more flexibility in this, especially in the last several months. While some investors will still require a default in order to be approved into a short sale, many will not. Keep in mind your lender - Bank of America, Chase, GMAC, Wells Fargo, Nationstar , etc - usually just services your loan. An investor actually owns it and calls the shots. I have seen Fannie Mae and Freddie Mac owned loans be approved lately for current clients. If your loan is insured by the FHA, they…

Almost 16 months after investigation into robo-signing began, a deal has been reached between feds and 5 of the nation’s major loan servicers: 

• Bank of America
• GMAC/Ally
• Wells Fargo
• Citi
• JP Morgan Chase 

The settlement goes down as the largest consumer financial protection settlement in US history and settles state and federal findings that servicers violated state foreclosure laws. Borrowers in 49 states (Oklahoma did not join the settlement) will be eligible for relief including: 

Principal reduction for eligible borrowers:  Homeowners behind on their payments will be eligible for loan modifications, including first and second lien principal reduction. Due to the number of borrowers affected the reduction is expected to…

Do I have to be destitute to qualify for a short sale?

The short answer is…NO. You do not have to be destitute in order to short sell your CT home. In fact, as a CT short sale agent, many of my clients are actually well to do, have good credit, good income and can in fact pay their mortgage. They simply need or want out and a short sale is the only realistic option. I consider these sellers “strategic” short sellers. Not all short sellers are scraping by.

What you can expect as a strategic, as opposed to a “necessary” short seller:

• Extreme scrutiny of your financial documentation
• High likelyhood of being asked to kick in to make the short sale happen
• More difficult, delayed short sale

What you need as a strategic short…

Just wait a minute there! Unfortunately it’s just not that easy. Despite popular belief that you can just slip your keys in an envelope, mail them to your lender and then walk away from your house- it simply doesn’t work that way.

Giving the house to the bank  - known as a deed in lieu of foreclosure, involves a process and the lender does not have to agree to a deed in lieu. You can call the lender and discuss the deed in lieu and they will tell you what the process is and you can apply. However a deed in lieu is usually not a possibility for you:

• If you have more than one lien against your property
• Until you have attempted a short sale

Most lenders will…

I plan to sell short. Should I make my mortgage payment anymore?

This is by far the most popular question asked by my Connecticut short sale clients. It would also rank as my least favorite question as the truth is I do not feel it is my position to advise anyone to, or not to, pay their mortgage. In fact, you'll be hard pressed to find any professional (lawyers included) to directly advise you here. This is a personal decision that you will have to make yourself. I will however give you the consequences of the action either way so that you can make an educated decision for yourself:

If you DO MAKE the mortgage payment:

• Your credit will remain intact and the foreclosure process will not begin 
• You can avoid endless harassing collection…

Is FORECLOSURE really a four letter word? Rate of strategic default continues to grow.

Tired of carrying that house? It seems more and more folks are just saying no to making their mortgage payments and are choosing instead to simply walk away.

It is now estimated that 1 in 5 mortgage defaults is strategic. Strategic default is when the homeowner has the ability to pay, yet chooses not to and walks away simply because they feel that the home is no longer a good investment.

In this recent 60 minutes episode several people openly discuss their strategic default without shame. It is my opinion that this trend will continue to grow for the next several years. With the lingering inventory of overleveraged homes still left out there and…

Deficiency judgements in CT: Will you be held responsible for the shortfall in a short sale?

Connecticut is a deficiency state. This means the lender that suffers a shortage in a foreclosure or a short sale has the right to pursue a deficiency judgement from the borrower.

How does this affect you as the homeowner?

In a foreclosure the lender can handle their shortfall as they wish. They can and sometimes do sue the homeowner for the loss they have suffered. You will have no control over this in a foreclosure.

HOWEVER - If you are involved in a short sale, you (or your agent negotiating the short sale) will have the opportunity to negotiate how the loan is settled. The terms of your short sale will be spelled out in your approval letter which…

What will happen if I don't make my mortgage payment anymore?

Are you considering or have you made the decision that you cannot or will not pay your mortgage any longer?

Here's what you can expect:

What will happen:

• Your credit score will start dropping with the first missed payment and will continue to sink.
• After about a month or two of nonpayment your lender's collection department will start calling you repeatedly at all hours of the day and they will send threatening letters.
• After about 3-6 months of non payment your lender will start foreclosure proceedings. The time between that and the actual foreclosure sale date varies greatly by lender. It could 3 months...it could be a few years.

What will NOT happen:

• No…