Short Sale vs Foreclosure - Agony of Homeownership
by Deborah from Missouri
Deborah asks Kate if short sale or mortgage foreclosure is a better choice, the all-too-common agony of 21st century homeownership: Deborah's very personal story will move you to tears, if not in empathy, then for the overwhelming frustration homeowners are experiencing today.
Deborah asks Kate about Short Sale vs Mortgage Foreclosure
Hello, Kate. Gosh, you're a Godsend... This a very personal inquiry. I have been up to my eyeballs in trouble with my mortgage company -- which happens to be one of the BIG BANKS. You may know the one -- SUPER greedy, SUPER rich and SUPER incompetent.
Over the course of nearly 4 years (I got my home refinanced that long ago and rue the day 'cause I was saddled with this monster...), I have applied for mortgage assistance a total of 14 times.
Prior to a layoff, which occurred Sept. 2010, I had been in a fight for this BIG BANK to straighten out my credit with the agencies. When I got my home refinanced, my payments were not due until July of 2009.
The bank started billing me for June 2009, and they reported me late for more than a year. It took until August 2010 to straighten out this mess.
In the meantime and in the same year of my refinance (2009), my 30-year-old daughter was diagnosed schizophrenic/bipolar and was placed on a harsh regimen of drugs. We didn't discover until months after her second hospitalization and more harsh medicines that she was pregnant.
THEN in Sept. 2010, I got laid off and got behind in payments FOR REAL. So I went from being laid off, to being unemployed for a LONG time 'cause I got sick and had to be hospitalized from the stress of it all; was diagnosed with major depression, severe; unemployment benefits ran out in March 2012; had NO income for four months; started receiving $700 a month in SSI; started receiving SSD in October 2012.
Sooooo, during all this time I constantly applied for financial help from the BIG BANK. I wrote the CEO, President Obama, Shaun Donovan of HUD, Matt Martin of HUD, the Treasury Department, etc. for programs to help. I applied for HARP, HAMP, HEMP, EHLP--but got no HELP.
I faxed, mailed, walked to various branches in my area to give the bank every piece of info they requested--somehow it got lost or in some way, was just never enough.
The last modification was approved: but instead of lowering my payments, the BIG BANK increased by nearly $400 per month my mortgage payments, starting this month. Instead of paying $835 I will be paying $1,190 per month, which is completely unaffordable. I have, therefore, decided to give up my home of nearly 18 years.
Even though I started receiving income in Oct. 2012, I am behind in EVERYthing. I have been considering a short sale, but I read the info you gave another inquirer that a short sale would jack up their credit probably as bad as a foreclosure and would remain on their credit for at least two years.
Plus, a short sale wouldn't take care of all the OTHER bills I have -- medical bills, car payments, sewer, water, trash bills -- that I can't pay because SSD is my sole income.
My question to you, Kate, is this: would I be better off walking away or doing a Chapter 7? I just want some measure of PEACE and relief from this financial stress, finally.
Any information you give will be more than appreciated, Kate. And thanks for providing so much REAL help to us hapless individuals.
Kate Answers: Short Sale vs Mortgage Foreclosure
Yes, I know THAT bank. I know it well as do many homeowners today.
It's the same bank tax payers bailed out.
It's one of the banks listed in the 2013 National Mortgage Settlement Update
and fined substantial financial penalties for their blatant servicing violations.
At this point, I suggest you do what is good for your family, putting issues such as credit on the back-burner. It takes a lot for me to say that. I don't say it lightly.
The Agony of Homeownership vs Peace of Mind
Here is the recap:
- Beyond your control and in a relatively short period of time, circumstances in your life tanked.
- You exhausted available assistance for paying your mortgage and saving your home from foreclosure.
- In spite of your tremendous effort, the system failed you.
Now it is time for you to focus on peace of mind and relief from this financial stress. Finally. If this means bankruptcy and mortgage foreclosure, go about it with your head held high.
Home Affordable Foreclosure Alternatives (HAFA)
But first look into the foreclosure alternatives offered by Home Affordable Foreclosure Alternatives. You can get the scoop on Trevor's accidental discovery at Deed-in-Lieu of Foreclosure and $10,000 HAFA Relocation Assistance
where I explain the program.
Keep in mind that Making Home Affordable provides monetary assistance to qualified homeowners for using their foreclosure alternatives (deed-in-lieu of foreclosure and real estate short sale) instead of choosing to walk away from the mortgaged home allowing it to seep into foreclosure proceedings (strategic default).
Deed-in-Lieu of Foreclosure and Short Sale vs Mortgage Foreclosure
You may be wondering why MHA pays homeowners to deed the house to the lender (deed-in-lieu
) or sell it for less than is owed (short sale
Foreclosure proceedings are expensive for lenders. So MHA offers $10,000 as an incentive to homeowners for leaving the house in a decent condition. This carrot-on-the-stick often ends up saving the lender from paying to rehab a house.
I have heard of some homeowners who receive more than $3000 (base amount later raised to $10,000) based on severe hardships. Generally, the money is presented as relocation cost for transitioning to new living arrangements. But I've heard of large medical bills being paid also. So be sure to ask. Don't be shy.
Most of all, pat yourself on the back. You've survived.
Good luck and best wishes,
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