What to do if you can’t keep it going……
The New York Times has an interesting and somewhat informative article about the options that a troubled borrower might face if they can’t refinance and need to look at other options.
The troubling thing, for me, is that I’ve had three borrowers (in the last week) who have:
- Admitted to me that they are struggling with making their payments and aren’t sure how much longer they can keep making the payments on their house.
- Said that they are probably under water on their house. They owe more than it’s worth. 2 out of the three had good downpayments when they bought or good equity when they most recently refinanced. One did a cashout refinance 3 years ago.
- All three wanted to put “all of the options on the table” and know exactly what their options might be when it comes to short sales, foreclosure, walking away, etc.
I’ve heard two conflicting stories this week about the affect of a short sale on someone’s credit:
- An article on a Realtor’s facebook page claims that a short sale would result in a 300 point hit to the borrower’s credit score.
- On Thursday, I attended a credit repair seminar and the “consensus” there was that the actual short sale won’t make that much difference, it’s the beating that credit takes before that which is the challenge.
Either way, I’m telling people who ask me about the affect of a short sale to plan that if they go through one, they will be looking at a minimum of 2 to 3 years until they can expect to be able to borrow money at “normal” rates.
Read the entire article, it’s good information…..
Your Money – Thoughts on Walking Away From Your Home Loan – NYTimes.com
n an economic environment like this one, however, the consequences of giving up on your mortgage may not be as painful as they were a few years ago. Yes, it’s almost always preferable to negotiate a better deal on your existing mortgage than to walk away. But if you can’t work things out with your lender, you probably won’t be sued. You shouldn’t receive a major tax bill either. And the damage to your credit will not be permanent or insurmountable.Let’s look at these last three in order.
YOUR LENDER First off, let’s define what we mean by “giving up” on your current mortgage…..
YOUR TAXES You also need to consider the taxman. Often, forgiven debts are taxable as income. Recent legislative changes, however, eliminate the federal tax burden though 2012 on most primary residence debt that a lender has reduced through loan restructuring or forgiven during foreclosure…..
YOUR CREDIT A short sale, deed in lieu or foreclosure itself will almost certainly damage your credit report and score, and the black mark will last for up to seven years. But the amount of damage it does will depend on how much other credit trouble you’ve gotten yourself into with other lenders.
