Well that's a great question. Making a cash contribution and/or signing a promissory note is called "Participating in the loss". Whether or not you are asked to participate in the loss is based on several factors. Your.....
As of November 1, 2012 the Federal Housing Finance Authority intiated new Streamlined Short Sale Guidelines that apply to all Fannie Mae and Freddie Mac mortgages.
In a nutshell:
Cash Contributions - Borrowers that are less than 31 days delinquent MUST make a cash contribution to the loss. And borrowers more than 90 days delinquent and a credit score of less than 620 at the time of the evaluation are not required to make a contribution. Specific guidance on “borrower contributions” where required, including how to calculate the contribution amount and making contributions MANDATORY where the borrower is 31 days or less delinquent. The guideline here is cash reserves of greater than $10,000 or 6 times the total monthly mortgage payment will trigger a contribution by the borrower.
Here are the Fannie Mae Standard Short Sales/HAFA II Short Sale Gui...
Here are the Freddie MacStandard Short Sales/HAFA II Short Sale Gui...
Other Investors and Lenders may have their own guidelines. Hopefully most will follow suit and implement the FHFA Guidelines.If you asked to make a contribution it can be negotiated. However my experience is that of they ask for a cash contribution and/or promissory note you will have to give them something.
One thing to remember is that you signed a promissory note when you took out the loan. This document is your promise to pay. If the lender is willing to forgive the Deficiency and relieve you of any future liabilty then signing a new promissory note of say $20,000 (with zero interest) to replace an existing note of a much higher value is a good deal.
Don't let a lender's request for you to "participate in their loss" throw you for a loop. Just negotiate the best deal you can get and then move forward. Aslo, remember that if you truly do not have the financial ability to pay..... they probably will not ask you to.
I hope this helps.
© 2024 Created by Short Sale Superstars LLC. Powered by
Short Sale Superstars, LLC and www.ShortSaleSuperstars.com does not endorse the real estate agents, loan officers, attorneys, real estate brokers and other participants listed on this site. These real estate profiles, blogs, blog entries and forums are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a short sale. Short Sale Superstars, LLC takes no responsibility for the content on these pages that are written by the members of this community.
You need to be a member of Short Sale Superstars to add comments!
Join Short Sale Superstars