Pam Marron Home Lending

Short Sale Hardship

July 28, 2013 by · Leave a Comment 

Explaining what is really happening is like reliving a bad divorce all over again.

Recently, I was told that lenders have a perception that underwater homeowners simply stop making their mortgage payments when they are set to leave a negative equity property. The assumption is that the lender will take months before they come knocking to serve foreclosure papers, so this can be months of no payments made, preparing for a home exit. There is an opinion that the vast number of underwater homeowners wanting to exit with a short sale are doing this.

Further, it was stated that these same underwater homeowners are misinformed about requirements of lenders that imply underwater homeowners need to go delinquent to get a short sale approval. When the frustration was voiced that only the 4 D’s, Divorce, Disability, Death and Distant Relocation, seem to be evaluated as hardships, the opinion was that it is hard to distinguish hardship.

I have heard lenders state to homeowners that they had to be delinquent in order to get a short sale approval consideration on 3-way calls.

I work daily with homeowners across the U.S. who are trying desperately to exit their home in a short sale while staying current on their mortgage.

And I have read their letters of hardship. The person was right. It is hard to distinguish hardship with what lenders are given.

So I went back to the past and some current short seller documents and took a look at their hardship letters again.

Nearly all of the letters are one page in length, quickly consolidating problems ranging from loss of job to death in short paragraphs. This must be the template requested by lenders. Or, expressing hardship was too difficult for most affected to put in writing.

Most of these letters glaze over hardships and voice words of great humility, pleading to allow an exit from their home without further economic damage than already endured.

Clear Definition of Hardships, Where Applied, and Where to Find Lists for Short Sale Approval

First, the hardships need to be noted. And, there are two lists of hardships.

Below is a list of each:

hardships list2

The only way to show what is really happening with short sellers is for them to tell their stories.

Initial Hardship Letter to get Short Sale Approval

The hardship letter given to lenders for an initial short sale process is part of the paperwork I request when helping past and currently applying short sellers. This usually, but not always, tells what the final straw was that broke the camel’s back.

Past short sellers don’t tell the whole story on these hardship letters. It’s not because they don’t know how, but because it is incredibly hard for them to do so. In every case, the short seller has taken the blame for what happened. They are humiliated that they can’t pay back the debt, and feel stupid that they didn’t see this whole housing downturn coming.

Past short sellers often label themselves as strategic defaulters. There has been so much hype about strategically defaulting, that most short sellers think that they are a strategic defaulter. And, an army worth of short sellers have been reluctant to come forward and state that it was the lender who told them to be delinquent in order to get short sale approval. Either way, they could not win. Delinquency required to proceed with a short sale was (and is still being!) implied to proceed. Staying current is looked at with suspicion and not “proving hardship” enough.

Amending Hardship Letters

So, I went back to the 43 cases I have worked with over the past 2 years. I reread the hardship letters, spoke with many of these short sellers again, and asked them for more information. I probed about lengths of time where it might be assumed that these folks were stalling on purpose so that they would not have to pay their mortgage.

This was harder than initially thought. Major medical problems were learned of, where relocations to any job was necessary to keep insurance. Divorce explanations often included moving back in with family members because credit was shot and a new lease could not be obtained. Reductions in income and an escalation in debt happened often.

Though a glimmer of the hardship was on their initial lender letter, it was briskly glossed over, probably because it would have taken too much room on the paper to explain.

So I asked these past short sellers if they would take the time to really explain what their hardship was, leading up to it, and then after the short sale. I asked them to explain how they weren’t taking advantage of the bank, and the number of times they had to resubmit paperwork that seemed to get lost over and over again. I ask them to explain that even when they suffered a reduction in income, that their priority to make the mortgage payment was 1st. I ask them to state if and who told them they needed to be delinquent in order to get short sale approval. I ask them to explain how they exhausted all of their financial assets before throwing in the towel. I ask them to explain how they worried how the negative credit would affect them if they needed to relocate elsewhere, and if they could make the move at all with damaged credit. I ask them to explain how the problems of exiting an underwater home stalled them from getting on with their lives. I ask them to explain how the stress sometimes destroyed their marriages and affected their families.

Maybe it is not worth the painful effort to see what really happened, and what continues to happen to those trying to exit an underwater home. It is the only way it can be proven that we are not paying nearly enough attention to existing problems still surrounding 12 million underwater homeowners, and 2.2 million past short sellers now trying to reenter the housing market.

It’s like reliving a bad divorce all over again.

It is because of what is in their expanded letters, that I want to help them even more.

People Network to Assist Underwater Homeowners and Past Short Sellers

July 24, 2013 by · Leave a Comment 

Information coming soon! Contact Pam Marron, Sr. Loan Originator at Bankers Mortgage of Pasco County, Inc. at 727-375-8986 or email pmarron@tampabay.rr.com.

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