Yes, in some cases you can sell your home for less than the amount you still owe on the mortgage. This situation is known as a "short sale," more and more lenders are seeing the wisdom of accepting a short sell rather than foreclosing, because the long foreclosure process in Ohio may end up costing them 30-50% more.
A short sale becomes complicated if the loan has been sold to the secondary market because the lender will have to get permission from Freddie Mac or Fannie Mae, the two major secondary-market players. And, if the loan was a low down payment mortgage with private mortgage insurance, the lender must also involve the mortgage insurance company that insured the low-down loan. It may even involve a secondary mortgage lender. However, new guidelines now in place (see below) set rules to help ensure that these hurdles that made short sales so difficult and more often than not, unsuccessful in the past, can be cleared. See (Real Estate Guide: Owning Your Home; Foreclosure - What is the Home Affordable Modification Program?) for a full discussion of the Home Affordable Modification Program.
Your lender could also recommend that you seek a loan modification before accepting a short-sale arrangement. If your loan is held by Fannie Mae or Freddie Mac, a Home Affordable Refinance or Modification will help borrowers refinance into a more affordable loan or modify the existing loan depending on your circumstances.
The Making Home Affordable program offers at-risk homeowners a chance to modify mortgages to avoid foreclosure on their homes. Read
The Making Home Affordable program offers financially stable homeowners the chance to refinance mortgages to lower rates. Read
Another possibility is to ask your lender to take the house back in what is called a "deed-in-lieu" of foreclosure. In a deed-in-lieu, the lender forgives your obligation to repay the remainder of the debt in exchange for the property. Under new guidelines (see below) if the lender accepts a deed-in-lieu they may not require a cash contribution or promissory note from you and must forfeit the ability bring a "deficiency judgment" against you. Lenders, however, will normally only consider a deed-in-lieu if there are no other liens against the property and it is vacant. These new guidelines only apply to Fannie Mae and Freddie Mac held loans, but it is hoped that other underwriters will follow the guidelines as well.
We do not advise that you take on the complexities of a short sale on your own. RE/MAX Valley Real Estate and it's agents are well versed in closing successful short sales. They are never easy and demand the skill and persistence of dedicated REALTORS. We'll put together a professional team of experts to get the deal made. Get the facts about short sales from a source you can trust.
RE/MAX Valley Real Estate is not associated with the government, and our service is not approved by the government or your lender, Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
This disclosure is made pursuant to the FTC MARS Rule (16 C.F.R. §322 et.seq.)
See Also ►
The Home Affordable Foreclosure Program is many faceted:
75 Percent of Borrowers Fall Under the Plan
The plan, part of the Foreclosure Alternatives Program, applies to mortgages backed by Freddie Mac and Fannie Mae, as well as those held by 14 mortgage servicers, including the five largest. These amount to 75 percent of all loans in the U.S.
Incentives to Borrowers
Under the plan, borrowers who complete a short sale are released from all mortgage debt. Additionally, they receive $1,500 for moving expenses.
Incentives for Lenders
The plan provides for payments of $1,000 to mortgage servicers and investors for completing a short sale - or a deed-in-lieu transaction, in which the deed is simply turned over to the lender.
The program will publish streamlined and standardized documentation for short sales, including a Short Sale Agreement and Offer Acceptance Letter. Creating one standard set of documents will minimize the complexity of short sales, which should significantly increase use of the option.
Payments Capped to Subordinate Lien-Holders
Some holders of second mortgages have blocked short sales by seeking steep payment in exchange for releasing their claim. Under the plan, subordinate lien-holders as a group can receive no more than $3,000 from proceeds of the sale.
Time Limits for Short Sales
Lenders will have only 10 days to approve or reject a short sale once a complete package is presented - a significant step, since the process often takes so long to complete that the transaction falls through. Borrowers will be allowed at least 120 days to market and sell their home, with the possibility of additional time based on local market conditions. Marketing can run at the same time as the foreclosure process, but no foreclosure can take place during the marketing period as long as the borrower is acting in good faith to sell the property.
How To Get Help
RE/MAX has been training its agents to help homeowners avoid foreclosure by offering courses on short sales. More than 8,300 RE/MAX Affiliates hold the Certified Distressed Properties Expert designation - 58 percent of the total U.S. CDPE-holders. Many other RE/MAX Associates have extensive experience with foreclosures and pre-foreclosures.
If you've fallen behind in your mortgage payments or received a pre-foreclosure letter from your lender, a RE/MAX Associate can help.
Find a RE/MAX agent to help with a short sale or pre-foreclosure. Under Designations, select "Certified Distressed Property Expert" or "Short Sales and Foreclosures Resource." Or, under Residential Sub-Specialties, select "Short Sales" or "Foreclosure Property."
Get more details at MakingHomeAffordable.gov.
See Also ►
Read details of the Mortgage Debt Cancellation Relief Act here.
See ► Real Estate Guide: Owning Your Home - Foreclosure