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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Replies to This Discussion

I would NEVER advise my client to stop making their payments.  My advice to you would be as long as you possibly can - make your payments.  If you stop there will be other consequences!  There have been MANY successful short sales completed while the client was still making their payments.  I would continue to make my payments and move forward with the short sale.  Make sure that you have a good hardship letter to explain the situation to your bank.

Chanakya,

Did Citi tell your agent the payments need to be behind in order to be considered for a short sale?  No Real Estate Agent or Broker should be advising you about making your payments or not unless they are an Attorney.  My recommendation is you speak with an Attorney and gather their advice before taking any action.

Best of luck,

Thanks a lot for your time & feedback.

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?

I would never advise my clients to stop making their payments...but do share with them the feedback I get from lenders that I work which is...if the borrower is current on their payments that the file may not receive immediate attention. 

But it always my clients choice as to whether they continue making their payments or not. It is your credit...your decision.

No RE Professional one can officially tell you to stop making your payments, or they can have regulatory compliance problems. The regs say we have to say that "not making payments can have credit consequences and can result in foreclosure". Some lenders refuse to negotiate a short sale if the loan is current (hint it starts with Wells), but will deny that is the case. I know others differ on this forum, but I've never been successful with a short sale if the client is not at least 30-days behind. 

Thanks a lot for all your time & feedback.

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?

  • Its pretty plain english: "why should we take a loss on your loan when you are otherwise paying your mortgage? We'll prefer to take the payments, thank you". What is funny is how straightforward they are. 

 

Understandable.

 

But I am also trying to see how I can bail myself out of a mistake that happened. That's getting tougher.

As you all suggest, stop making payments would have other bad consequences and I am worried.

 

Could you or anyone tell me where I am in this process in terms of if the bank closed the doors for me?? And I cannot continue with my SS?? Or ??

 

Also, could anyone suggest how much of $$ in savings that the bank sees as an asset to deny SS? Say $30K or $50K? or $200K? Not that I have but would like to get an idea.

 

You can continue with a short sale...just not a HAFA short sale. It can be processed as a Traditional short sale. I have had short sales declined for HAFA but they go thru as traditional short sales just fine.

Thanks a lot Tammy Davis.


Sorry; I think edited my earlier reply right around when you replied to mine.

could you suggest how much of $$ in savings that the bank sees as an asset to deny SS? Say $30K or $50K? or $200K? Not that I have but would like to get an idea.

I have a very young toddler and I cannot completely deplete all my savings so appreciate your experience on this questions, please.

Every lender is different...but I have not had a short sale denied because the seller has too much in the bank. But keep in mind if they see that you have liquid funds...they can ask that you make a contribution at close...I emphasize "ask".

I am in Northern California as well...if you have any questions, please feel free to contact me via email: [email protected].

Tammy -

If you are in CA, you should know CA Law prevents a lender from asking for a contribution from the borrower as a condition of short sale approved.  They can eother approve it or deny it, period.  No contribution, and No Promissory Note.

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