Short Sale Hardship Reasons
Short sales were designed for homeowners with real hardships. Below are some reasons that cause property owners to either have a financial hardship, a monthly income shortfall or become insolvent. Please note that lenders do not consider delinquency alone to be a hardship. If you can afford the payment but you are upside down on your mortgage, this is not considered a hardship by the bank.
Pre-determined Hardship FOR HAFA SHORT SALES: If you are 90 days or more delinquent and have a FICO score that is less than 620, you will be deemed to have a “pre-determined” hardship. Your servicer does not need to further validate the hardship to approve the HAFA short sale. However, they must execute a Hardship Affidavit prior to closing.
Death of Principal Mortgagor The delinquency is attributable to the death of the principal mortgagor.
Illness of Principal Mortgagor The delinquency is attributable to a prolonged illness that keeps the principal mortgagor from working and generating income.
Illness of Mortgagor’s Family Member The delinquency is attributable to the principal borrower having incurred extraordinary expenses as the result of the illness of a family member (or having taken on the sole responsibility for repayment of the mortgage debt as the result of the co-mortgagor’s illness).
Death of Mortgagor’s Family Member The delinquency is attributable to the principal borrower having incurred extraordinary expenses as the result of the death of a family member (or having taken on the sole responsibility for repayment of the mortgage debt as the result of the co-mortgagor’s death).
Marital Difficulties The delinquency is attributable to problems associated with a separation or divorce, such as a dispute over ownership of the property, a decision not to make payments until the divorce settlement is finalized, a reduction in the income to repay the mortgage debt, etc.
Curtailment of Income The delinquency is attributable to a reduction in the mortgagor’s income, such as a garnishment of wages, a change to a lower paying job, reduced commissions or overtime pay, loss of a part-time job, etc.
Excessive Obligations Same Income, Including Habitual Nonpayment of Debts The delinquency is attributable to the mortgagors(s) having incurred excessive debts(either in a single instance or as a matter of habit) that prevent him or her from making payments on both those debts and the mortgage debt.
Abandonment of Property The delinquency is attributable to the mortgagor(s) having abandoned the property for reason(s) that are not known by the servicer (because the servicer has not been able to locate the mortgagor).
Distant Employment Transfer The delinquency is attributable to the principal mortgagor being transferred or relocated to a distant job location and incurring additional expenses for moving and housing in the new location, which affects his or her ability to pay both those expenses and the mortgage debt.
Property Problem The delinquency is attributable to the condition of the improvements of the property (substandard construction, expensive and extensive repairs needed, etc) that defers funds that would have been available for the mortgage payment; mortgagor’s dissatisfaction with the property or neighborhood.
Inability to Sell Property Following an employment related transfer.
Inability to Rent Property Delinquency is attributable to mortgagor needing rental income to make the mortgage payments and having difficulty in finding a tenant following an employment related transfer.
Military Service The delinquency is attributable to the principal mortgagor having entered active duty status and his or her military pay not being sufficient to enable the continued payment of the existing mortgage debt.
Unemployment The delinquency is attributable to a reduction in income resulting from the principal mortgagor having lost his or her job.
Business Failure The delinquency is attributable to a self-employed principal mortgagor having a reduction in income and/or excessive obligations that are the direct result of the failure of his or her business to remain a viable entity or, at least, to generate sufficient profit that the borrower can rely on to meet his or her personal obligations.
Casualty Loss The delinquency is attributable to the mortgagor having incurred a sudden, unexpected property loss as the result of an accident, fire, storm, theft, earthquake, etc.
Energy-Environment Cost All other factors remained the same, but sharp increase in utility cost(s) deferred funds that would have been available for the mortgage payment or costs associated with the removal of environmental hazards in, or near the property.
Servicing Problems The delinquency is attributable to the mortgagor being dissatisfied with the way the mortgage servicer is servicing the loan or with the fact that the servicing of the loan has been transferred to a new mortgage servicer.
Payment Adjustment Delinquency began after either increase in P&I for ARM mortgage or after escrow analysis where one or more escrow item increased, including the spreading of the amount needed to repay an escrow shortage over the next year.
Payment Dispute The delinquency is attributable to a disagreement between the mortgagor and the mortgage servicer about the amount of the mortgage payment, the acceptance of a partial payment, or the application of previous payments that results in the mortgagor’s refusal to make the payment(s) until the dispute is resolved. Transfer of Ownership Pending The delinquency is attributable to the mortgagor having agreed to sell the property and deciding not to make any additional payments.
Fraud The delinquency is attributable to a legal dispute arising out of a fraudulent or illegal action that occurred in connection with the origination of the mortgage (or later).
Incarceration The delinquency is attributable to the principal mortgagor having been jailed of imprisoned (regardless or whether he or she is still incarcerated).
Buying a short-sale
Today’s homebuyers will inevitably come across one or more properties currently classified as a short sale. A short sale is an attempt by the current owner to pro-actively sell a home with the seller’s mortgage company before foreclosure, thus partially salvaging their credit rating and lifting the burden of heavy mortgage debt. The entire process hinges on the seller’s mortgage company’s due diligence where the seller’s mortgage company is determining whether they would lose less money through a short-sale or foreclosure – making it a win-win situation for both is the goal.
Selling as a Short Sale
If you’ve fallen behind on your mortgage, you will receive information from all walks of life – and lots of not so subtle suggestions – from investors and other organizations who want to take advantage of your temporary misfortune. That will normally be followed by a proposal to solve your problem by selling or deeding the property to an investor. Take heed when considering such proposals; bonafide helpers will welcome an attorney to authenticate the transaction. Make sure you understand your options and surround yourself around informed professionals.