Effective November 1, 2012, anyone with a government-sponsored-enterprise (GSE) mortgage home loan that can prove one of the hardships recognized by the federal government may short sell their home even if they are current in their mortgage payments — and the federal government will not ask for them to cover any deficiency amount, either by cash or by a note or by the government getting a deficiency judgment against them.
Which means that Freddie Mac and Fannie Mae won’t sue for deficiencies on home mortgages if the borrower short sells his or her home and gets a sales price that is less than the amount due on their home loan – and that borrower was always current on their mortgage payment.
The hardships that qualify a borrower for this new government benefit are key here: they must be serious events, like the borrower died or got divorced, or the borrower has been transferred in his or her job to someplace that is at least 50 miles distance from the home.
Larry Tolchinsky’s Tip:
There are banks that are offering similar short sale deals in negotiations with their borrowers: it depends upon the lender and the borrower’s circumstances to determine if someone with a non-GSE mortgage can get this kind of short sale deal. If you are curious about what your bank’s position might be here, any experienced Florida short sale attorney in your area will know the reputation and current position of the lenders serving their community.
Most home loan mortgages in this country are government-sponsored mortgages (GSEs)(i.e., Fannie Mae, Freddie Mac). This new program, going into effect on November 1, 2012, should help a lot of people. However, it’s not going to do much help for anyone if the federal tax benefit that blocks waived deficiencies from being considered as income under the federal income tax laws isn’t extended past December 31, 2012. (Read our earlier posts with their links for details here.)
Short sales are going to be very important to Florida home owners in Fall 2012. Here are some key considerations for a short sale:
- A short sale is better on your credit report than a foreclosure. It is a negative that will lower your FICA score, but it’s less of a hit than a “strategic default” or “foreclosure” note on your record.
- A short sale while you are current on your mortgage is better for you than a short sale after you’ve fallen behind, from the perspective of your future home loan lender.
- A short sale, especially with a GSE mortgage (federal government is involved in the lending), can mean that you can buy a house with another GSE mortgage as soon as two (2) years after the short sale, in some circumstances, under current FNMA guidelines.
- Lenders are much more open to short sales in 2012 than ever before.
- Historically, short sales are not that fast to close – sometimes, they can take months to close after a deal has been made.
- Short sales are still hampered by lenders taking their time to approve the deal.
- Short sales can be seriously injured by real estate agents and brokers who may not be as experienced or aggressive as they could be in getting a home sold and closed in a Florida short sale.
- Since 2010, the Federal Housing Administration has insisted upon minimum credit scores for anyone getting a home loan with an FHA guarantee. Right now, according to their website, you need 580 or better for maximum financing on new homes; 500 – 579, you are eligible for 90% (you’ll need 10% down); less than 500 credit score and you are not eligible for FHA mortgage financing.
For Florida home owners deciding on whether or not to short sale their home, or for Florida home buyers with a short sale or foreclosure on their FICA report and credit history, things are different now than they were as early as two years ago. Lenders are making deals, government agencies are issuing polices and changing them, federal and state laws impact what happens depending upon which road you take.
Florida real estate attorneys who are experienced at short sale counseling and foreclosure defense can be vital to making the best decision because there are simply so many variables on the table, depending upon the person’s situation, and because those variables just keep changing. For example, a short sale this month may be a great idea but in six months it may be a bad call, tax-wise. Many Florida short sale lawyers and foreclosure defense attorneys, like our law firm, understand the current economy and offer financial deals that are usually a nice surprise to members of the public that assume all lawyers are too expensive. However, no one knows this unless they call and ask — and most of these firms, like ours, offer a free initial consulation.
Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at firstname.lastname@example.org, or (954) 458-8655. If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments. He’s happy to take your call.