Short Sale on investment property with Citi. Agent suggests stop making payments to show hardship. Should I?

Hi,
I have an investment property in North Cal and the mortgage is with CitiMortgage. I do not have a second loan on the property so it's just CitiMortgage to deal with. The house is currently leased on a month to month basis and the rent barely covers the monthly mortgage payment but no other expenses. I also have a second house that's my primary house that I currently live in.

 

I initiated the Short Sale on the investment property thru a local agent. The bank assigned the Processor and the bank also did the appraisal (I guess BPO process) recently.

 

We both have jobs and also have little bit of savings. I am bleeding money on the investment property but making payments regularly to avoid other consequences. Now my agent suggests me that I should stop making mortgage payments to show the hardship.

 

Could you please suggest if I should follow my agent's instructions and stop making payments? If I shouldn’t, what should I do? Or is it a standard procedure to do Short Sale?

 

Thanks a lot for your help and feedback.

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Permalink Reply by Chanakya on August 29, 2012 at 9:38am

Just to add to the same...

Since I started the SS process, I received 3 letters from Citi.

 

1. Loan Mod denial.

Reason: "Citi Supplemental Modification requirements not met: loan must be in default or in imminent danger of default."

2. Loan Mod denial under HAMP.

Reason: We consider a number of factors in making credit decisions. In your case, we were unable to approve a HAMP loan modification of your mortgage terms because:
- Default Not Imminent: We are unable to offer you a Home Affordable Modification because you are current on your mortgage loan and after reviewing the financial information you provided us we have determined that you are not at risk of default because you have sufficient net income to pay your current mortgage payment.

 

3. Short Sale Denial under HAFA program.

Reason: We consider a number of factors in making credit decisions. In your case, we were unable to approve a short sale or deed-in-lieu under the government's HAFA program because:

- Default Not Imminent. We are unable to offer you a short sale or deed-in-lieu of foreclosure under the government's Home Affordable Foreclosure Alternative because you are current on your mortgage loan and after reviewing the financial information you provided us we have determined that you are not at risk of default because: You have the ability to pay your current mortgage payment using cash reserves or other assets.

Do you think any of the above made my agent to suggest on stop making payments? What these letters mean anyway?

Permalink Reply by Edwin Baloloy on August 29, 2012 at 10:16am

If you've been declined and continue to make payments with over 3 months of reserves in the bank, do you really think you have a hardship?

Permalink Reply by Chanakya on August 29, 2012 at 10:25am

Thanks Edwin.

As mentioned, I have the house on lease for month-to-month and not sure how long my tenants stick around in that setup.

If they move out, then things get really painful and would take out all my savings in a couple of months as you hinted. Then that's a real hardship but Citi is not looking at it that way. They are not even considering my mortgage on primary house, property taxes, warranty & insurance on both houses.

I really don't understand the definition of hardship if the bank doesn't consider my day-day living expenses and expenses on the house to see the hardship. But they do when I ask for a loan.

Permalink Reply by Chanakya on August 29, 2012 at 9:58am

How much of savings that the bank sees as potential asset to deny SS? Say $40K or $60K or $100K? Not that I have but would really appreciate your feedback on what you have seen in your experience.

Permalink Reply by Chanakya on August 29, 2012 at 11:49am

Thanks Brian.

The loan is with Citi. They didn't sell it to Fan or Freddie if that's your question. No other bank involved. This is the only loan on the property and it is with Citi only.

Would that make a difference?

Permalink Reply by Chanakya on August 29, 2012 at 1:34pm

Thanks Brian.


I thought Citi was my investor but I asked my agent to confirm the same.

Again, I am not sure if my agent asking me to stop the payments based on those 3 letters/responses (given above) I received from Citi. Or the agent thinks that it would help make a better case for hardship or make the bank move quick on the short sale. But the bank seems to be moving fast enough because we already have a processor and also did an appraisal in ~4 weeks of starting the process.

I am not sure if I have to stop the payments to make a hardship case. I have been losing money for past 6 years but still keeping up with the payments. Then am I not eligible to make a case for hardship? Am I doing anything wrong?

Really appreciate your response.

Permalink Reply by Edwin Baloloy on August 29, 2012 at 1:34pm
Brian,

I think she IS the client. Even if payments are missied, Don't you think it will get declined based on liquid assets?
Permalink Reply by Chanakya on August 29, 2012 at 1:42pm

You are right, Edwin. I am the client and not an agent.

But what is considered a reasonable liquid asset to get SS declined?$30K or $40K or 100K?

I don't have enough money or savings to pay the difference amount (Loan value - Property value = the diff amount). If that's what you are referring to liquid assets.

Then the bank can still deny my request? Or do they deny based on my salary?

Permalink Reply by Edwin Baloloy on August 29, 2012 at 2:06pm
It can be discretionary. As much as negotiators use the term "guidelines", it sometimes doesn't come down to that. This is where having a good SS negotiator would be in a homeowners best interests.

I recently had a file declined where they formally claimed, "we believe the seller has the means to make the payments based on review of his financials." After a rebuttal, they were able to approve the SS. This was also an investment property that was turned down for a mod.
Permalink Reply by Chanakya on August 29, 2012 at 2:16pm

Thanks Edwin for a prompt response and a valuable feedback.

How did the bank got convinced on a rebuttal?

I am not sure if I am phrasing the question correctly but trying to know how things turned around to benefit the property owner? May be it could help me if I come to know I am in the situation.

Permalink Reply by Jeff Payne on August 30, 2012 at 3:37am

that was funny.  Good laugh today

Permalink Reply by Chanakya on August 29, 2012 at 1:53pm

Thanks a lot Brian for your time & a valuable suggestion(s).

My agent suggested I shouldn't talk to the bank directly unless they really want to talk to me to get to the next step.

Thought RE agents are trained or experienced to do this and that's why I thought people in my situation approach RE agents.

But you suggest, I should talk to Citi Processor directly to find out what my options are? But I don't know anything about SS process if the Processor asks me to do or don't do something. I have to fall back to an agent, right?

I guess I am in a tough situation then?

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