Should we suggest to our clients to be late in their mortgage payment for a successful short sale?

Wells Fargo and Chase will be involved in the short sale of a house. I called both banks and asked about their policy to implement a short sale before a client was late... Before they ran out of money. Neither will look at the file prior to an offer. I'd hate to lose a buyer by not being able to process a short sale due to my client not being late. How do you handle this?

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Tom  - Many investors will look at short sales prior to late.  Some exceptions are FHA and Ginnie Mae. If your seller will "imminently" be late, and has one of those loan types proceed. Non-govt investors change their guidelines frequently, so even if they now accept short sales with no lates or vice versa, that can change during your process. I never advise a seller to miss payments. I tell them it's their personal decision.  Can they afford the payment? Can their family still eat and be clothed if they make the payment? Etc.

Wendy is certainly spot on..

I would never advise clients to stop making their mortgage payments. As Wendy mentions concerning the cases where the sellers have to be late on payments in order to process a short sale, that information can generally be found straight from the source and you can send the link directly to them. (For example, FHA - 31 days late minimum by the time it closes that was changed from 60 days. It's right under the guidelines direct from HUD.)

If the sellers are pulling money out of their retirement accounts, racking up credit cards to live (living the debt spiral) then it does not make any sense to continue making payments if they need to get out of a mortgage payment too much to handle for a property they are upside down on but that's their decision to make.


Last thing you want is something coming up and the question is asked "Who told you to stop making your mortgage payments" and their answer is you.

You can initiate the Wells Fargo short sale on Equator and see what happens.

In our offce, we also never advise someone to stop making payments. However, in a great many cases, investors will not consider the short sale unless the seller has demonstrated (to the investor's satisfaction) a hardship. Last week I received a denial on a Fannie Mae loan though Nationstar becasue the payment was current. The seller has been unemployed for more than 15 months and is using his savings to remain current as he is afraid that hurting his credit rating will negatively impact his ability to secure new employment. The Negotiator from Nationstar advised the he needed to be late and then reapply in a "few months" in order to demonstrate the hardship.  In my mind, this is simply adding to the problem. I fully understand the need to have guidelines or everyone with a proeprty that is upside down would simply short sell and move on, but there has be some sort of balance so that sellers that are truly experiencing imminent hardship are n

ot left out in the cold.

  Sellers do not have to be late to get a short sale through. And you can start a file early if you know they will be approved for HAFA. In most cases a HAFA files take an extra 30 days to complete. If my clients are HAFA compliant I always start the file early before I get an offer and I tell the lenders I'm doing so because they could be approved for HAFA. I say that because while they may be HAFA compliant, every lender has their own HAFA rules and regulations. 

Good Morning Tom,

Get your Client's file through the HAFA short sale program, as of June 1st of this year Homeowners do not need to be late on their payments.

Good Luck!

Tom -

You didn't say which lender was 1st and which is 2nd.  Both BofA and Wells are using Equator now so I would initiate the short sale now with both lenders.

 

Best of luck,

IF, and only if the servicer has stated the borrower must be late, you can merely communicate that statement to the borrower and let them decide what they want to do. You should also add, "At no time will I or any agent recommend you not pay your mortgage."

UNLESS YOU WANNA GAMBLE WITH LOSING YOUR LICENSE .....OR HAVE THE SHEER POSSIBILITY OF GOING TO "REAL ESTATE JAIL"(on the back of state wide RE quarterly booklets)...

I do not EVER say "GO AHEAD, STOP PAYING", HOLD ON...Can I get a "Hell's No"...not ever...SOOOOO what I say is 1-what a Negotiator and Team Executive from a Big Bank told me to use, and 2-My take on that old "Do I stop Paying" question

1-In your Borrower's Hardship & call in to the bank...they need to state..."while I may be current, in the near FORSEABLE FUTURE I will be unable to continue paying my Mortgage, I would like to do a Short Sale"...believe it or not, those 2 words send a crucial note when enetered into the banking system that flags that loan and allows a process to start moving forward....

 

2-Everyone who does these wonderfuls jewels of Real Estate gets that question ALOT...I always say, while I could not and will not ever tell you to stop paying, do what you need to do, I can't help with that, but if you need that amount to go towards other expenses, if you need that payment to be put away for moving expenses, that is up to you...just know, once you make that decision to NOT PAY, you are stuck with that decision, doing a short sale and going down that path...there is no turning back, doing a short sale...it's no joke, it takes work. :D

Good Luck all you Short Sale agents, I for one, Love This Stuff!

I just had a HAFA one declined because the homeowner is making payments on time and is required to be 60 days late.  Seller could call bank and ask what is the guideline.

Oh wow...In California, you could lose your license to suggest that they stop makng their payments...All that you can do legally is advise them of the consequences of their actions should the question arise.  Most Banks will move forward with a short sale with proof of  the seller's eminent default status due to their hardship.  If Chase is your 2nd, the last thing that you want is to be in their charge-off department,  They are the nastiest of all and take a very hard stance to their charged off loans.  As in they can be deal killers because of the settlement amount they demand to cooperate.  Most 2nd''s will go to charge-off status after 5 months of non-payment.  Good luck...Establish your hardship and the eminent default status and you should be ok...I have short sold both WF and Chase with eminent default hardships...Keep that 2nd current if it is a Chase 2nd...or at least tell your seller what will happen if he does decide to default what will happen if he is late more than 5 months.

I've had short sale approval with both Wells Fargo and Chase with sellers that were still making their payments.  As Wendy suggest it may depend on the investors. And as everyone else has said "Never advise your clients to STOP making payments.".  Your job should you decide to accept it is to prove that your client will not be able to continue making the payments. Good luck!! 

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