Can a home seller
sell a home for less
than its mortgage?
A:
This situation is
known as a "short sale."
Sometimes home owners
can negotiate with
lenders and have them
split the difference
between the sale price
and loan amount, which
still must be paid.
A short sale may be
complicated if the loan
has been sold to the
secondary market because
then the lender will
have to get permission
from Fannie Mae or
Freddie Mac, the two
major secondary-market
players.
If the loan was a
low-down-payment
mortgage with private
mortgage insurance, then
the lender also must
involve the mortgage
insurance company that
insured the low-down
loan.
Resources:
* "How to Fight
Foreclosure," Jeff
Jensen, Jensen
Publications, 200 Main
Street, Suite 104-201,
Huntington Beach, CA
92648; (714) 843-0321.
Q:
How does a home go
into foreclosure?
A:
Foreclosure
proceedings usually
begin after a borrower
has skipped three
mortgage payments. The
lender will record a
notice of default
against the property.
Unless the debt is
satisfied, the lender
will foreclose on the
mortgage and proceed to
set up a trustee sale.
Q:
What happens at a
trustee sale?
A:
Trustee sales are
advertised in advance
and require an all-cash
bid. The sale is usually
conducted by a sheriff,
a constable or lawyer
acting as trustee. This
kind of sale, which
usually attracts savvy
investors, is not for
the novice.
In a trustee sale,
the lender who holds the
first loan on the
property starts the
bidding at the amount of
the loan being
foreclosed. Successful
bidders receive a
trustee's deed.
Q:
When does foreclosure
begin?
A:
Lenders will initiate
foreclosure proceedings
when homeowners become
delinquent in their
mortgage obligations,
usually after three
payments are missed. The
lender will then notify
the buyer in writing
that he or she is in
default. The lender can
request a trustee's sale
or a judicial
foreclosure, in which
the property is sold at
public auction.
A borrower can cure
the default by paying
the overdue amount and
the pending payment
after the notice of
default is recorded,
usually no later than a
few days before the
property's sale.
Some sales allow the
successful bidder to
take possession
immediately. If the
former owner refuses to
vacate the premises, the
court can issue an
unlawful detainer that
allows the sheriff to
come out and evict them.
Borrowers should do
everything they can to
avoid foreclosure, which
is one of the most
damaging events that can
occur in an individual's
credit history.
Q:
How bad is a previous
foreclosure on credit?
A:
A property
foreclosure is one of
the most damaging events
in a borrower's credit
history. In terms of the
effect on credit
history, a deed in lieu
of foreclosure or a
short sale is not as
adverse an event as is a
forced foreclosure.
Q:
Can I protect my home
from creditors?
A:
Your state may
provide you with special
protection from
creditors through the
filing of a homestead
exemption, which exempts
some or all of the value
of the owner's equity in
the homestead from
claims of unsecured
creditors.
Deciding whether or
not to file a homestead
exemption often depends
on an individual's
situation. Contact your
county recorder's office
for details.
