Fannie Mae and Freddie Mac, mortgage finance companies, have suspended foreclosures and evictions for about two weeks, which will give a small break to borrowers during this holiday season. It’s a nice thing to do, but they could do so much more by working harder to help people out of their mortgage situations.

The suspension will run through January 3, 2010. “No family should have to face the prospect of being evicted during the holiday season,” says Michael Williams, who is Fannie Mae’s chief executive. They do not have an estimate of how many people this will affect.

Thursday, Citigroup Inc. gave a 30 day suspension to about 4,000 of their borrowers. Many people are in this situation this year and need help.

Atlanta short sales

9 Ways to Avoid Foreclosure

In today’s economy, many people are finding it hard to make their mortgage payments on their Atlanta home.

Here are 9 ways that might help you and what each means.

1. Reinstatement- Bring the loan current  with all past due payments made.

2. Forebearance-Temporary repayment plan

3. Refinance-New loan that will reduce your monthly payments

4. Loan Modification-Modify the original terms of the loan

5. Sell the property-You would use your equity to pay off the balance of the loan.

6.Rent the property-Must keep the loan current in order to do this.

7. Short Sale-Negotiate with the bank to accept a sale under the current amount you owe on the loan

8. Deed in lieu of foreclosure-”friendly foreclosure” you give the home back to the bank

9. Bankruptcy-Will stall foreclosure but no prevent it.

Criteria 4:

The Homeowner Must Be Cooperative

Short sales are not a simple process to go through. It is important that the homeowner is willing to cooperate with the lender, agent working to sell the house, and the new buyer. The owners will not make anything from the sale, which is the definition of the short sale, but they have to provide private documents to the necessary parties and they must wait to hear the answers from the lender.

What alternatives does a homeowner have? They can let the property go to foreclosure, which many do. Of course, this affects their credit more severely than a short sale will. It is important that a homeowner discusses their options with an attorney to know and understand the consequences of each alternative.

Criteria 3: The Homeowner Must Demonstrate A Hardship

Atlanta Short Sales

I know, everyone is having a hardship these days.  But the lender wants to know exactly what your hardship is and why you can’t make your payments. You must have documentation to show this. This documentation is added to the package that is sent to the lender to approve whether they will allow the home being sold for less than the amount owed. The lender will not take your word for it. If you lost your job, your variable interest rate adjusted upward and now it is impossible to make the payment, any medical issues will need bills as proof.

The homeowner must verify they do not have the means to make the payments any longer. Good documentation is the key to having the lender understand your situation.

Criteria 2

The Homeowner Must be Financially Insolvent

What does that mean? Do you have assets other than your home? If you do, then the lender will want to get his money through another means and may not be willing to negotiate a short sale. The short sale usually costs the lender less money than a foreclosure, but they also want their money and are willing to get it from any method.

It is important to be honest with yourself and your agent before going through the steps to work on selling your home as a short sale.  It takes time and money to negotiate the short sale and if there are funds available to pay the lender, you will be much better off to pay and go on your way.

What Does It All Mean?

Criteria 1:

Market Pricing Must Be Less Than the Amount Owed on the Loan

Market value is the driving factor for pricing. The market value of the Atlanta home must be less than the loan amount. If the market value is more than the loan amount, but this amount is less than the owner paid for the home, the home will still need to be listed and sold on the market to pay off the mortgage. It doesn’t matter what the owner paid for the house, it is how much the house is worth in the current market. The lender wants to recoup their money and if they can get the balance of the loan with a sale, they want to do that.

Atlanta Homeowners-Situation for a Short Sale

The Atlanta real estate market has been very slow for the past two years now. We seem to be seeing a few signs of movement in the market with buyers taking advantage of the $8,000 First Time Homebuyer Tax Credit, but this doesn’t help a lot of the sellers in the middle and higher price ranges.

Many sellers listen to the news and hear rumors they can just sell their home for any price with a “short sale” and walk away from their mortgage. They even think they can turn right around a buy a lower priced house that might have the same amenities. This is not true.

Four Criteria for Selling Short

1. Market pricing must be less than the loan amount.
2. The home owner must be financially insolvent.
3. The homeowner must demonstrate hardship.
4. The homeowner must be coorperative

And another to add to this list, the lender must approve the sale at the amount of the sale before sale can go through. If the lender does not approve, the home may be forced to go to foreclosure.

Part 2:  What Are Some Of Your Risks With a Short Sale?

It is important to know what the risks are before entering into a contract for property that is a short sale in Atlanta, Virginia Highland, Buckhead or Snellville.  Some of those risks are

1.  It is important that you are patient. I already discussed that it could take 2-4 months or longer to get a decision if your offer is accepted. You will then have another 30-45 days for the loan to be processed, in most cases. If you have to be out of an apartment and need to be in your next home at a specified time, a short sale is not the way to go.

2. You need to make sure your financing is in order.  Cash is always king. Lenders like to have cash buyers that have no contingencies on the offer.  You need to be pre-approved for a loan and know that your lender can close on the loan in the specfied time period. Lenders like to know they are getting paid and what day “payday” will be.

3. If your offer is contingent on your home selling, the lender will probably reject it right away.  Lenders like to know you can be flexible on the closing date.

4. Understand that a lender may decide not to do any repairs or provide any repair credit. I always tell buyers that a home is worth what they are willing to pay for it and not a penny more. Recently I had a buyer that was very interested in a short sale that was destroyed with light fixtures and cabinets removed. They were not willing to repair the property, nor were they willing to reduce the price. They would make no concessions to the buyer and the property needed extensive work. They were selling it as a short sale. The property is now in the process of foreclosure. They could not get a buyer to pay the price they wanted in the condition the property was in.

5. You might get a broken heart.  Don’t fall in love with a property too quickly. You might be very patient and wait 5 months for an answer to your offer, only to find out it is rejected. Short sales are not for the tender hearted.