Requirements for Financially Distressed Homeowners - Shorting Your Own Property

Hi Friends,

We have been getting so many emails from homeowners and investors who are in trouble. Many of you are wanting to do your own short sale. Here are some guidelines to help...

Assuming you are at least one payment late, we’ll qualify you under financially distressed homeowners. In the next section, we will talk about what to do if you haven’t missed any payments yet.

The number one thing the bank always requires is proof that your story is true. Anyone can call and state that they can’t afford their house anymore and that they want to walk away from it. With proof, banks can be surprisingly easy to work with. Here are the cold, hard facts that the banks have to consider:

 Markets are down.
 It is taking months to sell properties.
 Property values have dropped over 30 percent in most states.
 Insurance rates are rising.
 Taxes are going up.
 Gas is out of control.
 Interest rates are up.
 Payments are resetting at record increases.
 Unemployment is high.
 Bankruptcies have never been higher in our countries history.
 Banks are painfully aware that these circumstances can lead to increased foreclosures.

If you are behind in payments, but not yet in foreclosure, a short sale is definitely possible. You’ll start by contacting the work-out department. Your property would not yet be in the loss mitigation department. Typically, loss mitigation comes into the picture once the foreclosure paperwork has been filed. People are often confused about what a foreclosure is and what a pre-foreclosure is. Here is how we classify the terminology:

 A pre-foreclosure is a property where the payments are late, but the foreclosure papers have not been filed.
 A foreclosure is a property where the foreclosure papers have been filed, but the homeowners still own the house.
 A bank-owned property is where the payments were late, the foreclosure papers were filed, the house went to the sale, and the bank now owns the property.

Many people consider a foreclosure a property that already went through the entire process and is now owned by the bank. We want to make sure you use the proper terminology so that when you are reading the papers, watching the news or talking to loss mitigation, you know what everyone is really talking about.

Since financial hardship typically does not happen overnight, gather information from the past two years. Typically, a homeowner begins by missing a payment here and there: being 30 days late on a mortgage payment, missing an insurance payment, being late on a credit card, paying two months of electric at once, and so on. Once the foreclosure is filed, things seem to spin out of control. This is why we want you to gather information from the past two years. It shows the unravel of your finances.

If you are an investor and bought properties at the top of the market, find articles that show the beginning of the market decline, when your tenants moved out, copies of late payments and all of the other items we mentioned above.

Since you are financially distressed, again, proof is your best bet. Start putting your “Proof of Hardship Package” together. The last chapter in this section has a complete hardship package that we have put together for you – letters, websites, forms, and so on. Some of the information we can’t put together for you; it is information only you can provide. Here is a list of information you will need. Gather and photo copy as much of these items as possible:

 Two years of tax returns that show your income has dropped.
 Copies of lay-off notices or proof that you were let go.
 Copies of late electric bills.
 If you are involved in a divorce, provide proof.
 Copy any medical bills you have had in the past two years.
 Articles of market declines in your area.
 Copies of any investment properties you bought that have dropped in value.
 Proof of empty rentals.
 Proof of any rentals that were trashed by tenants.
 If you are not getting child support, show proof.
 Write a letter explaining your hardship – a sample letter is in the last section of this chapter.
 If you or anyone in your family has been to counseling, show proof. Counseling shows emotional distress.
 If there is a probate situation, get a copy of the death certificate.
 Copies of your bank statements – savings and checking. We are assuming that your cash flow is very low right now. If the bank sees that you have cash, it will want it.
 If you have tapped into your 401 or any retirement fund, show that as well. We are going to talk about this later – not going broke over a property.
 If you have cashed out a life insurance policy to make mortgage payments, show proof.
 Maybe you have used the college fund to keep up with the mortgage payments.
 If you have pawned something, show proof.
 If you are in jail or know the owner of any property who is in jail – definite hardship.
 If you have refinanced any property and used the money to make mortgage payments, show proof.

We’re sure you get the idea. The more financial hardship you can prove, the deeper the short sale. The deeper the short sale, the easier it will be for you to sell the property and start over.

* Something to remember – whether investor or homeowner – whether in distress or not – once a bank accepts a short sale, you must sell the property. The bank wants the property off the books.

We hope this helps. The most important thing to remember is that the banks are in just as much trouble as you are...

Have a Blessed Day,

Dwan
www.theieu.com