Hope for Home Owners Act will undoubtedly effect short sales and foreclosure properties in Las Vegas. To what extent? Lord knows.
Unfortunately many distressed home owners firmly believe that if they can’t pay their mortgage for a few months, they just should walk away and accept the fact that their credit is ruined for a number of years.
While the first course of action for those who are in trouble with law is to seek a lawyer’s advice, a distressed home owner should consult a Realtor, a CPA and a bankruptcy attorney.
The following three part series was thought in a class by Scott Gillespie who is a mortgage planner with First Horizon Home Loans. I believe you will find it worthwhile and well written.
Unfortunately this is a dilemma facing many southern Nevada home owners this year. The difference between a short sale and a foreclosure is pretty negligible when it comes to your credit report. Both of them are likely to prevent you from qualifying for a new Conventional or FHA loan for at least 3 years, and they will both have a dramatic affect on your credit scores. Regardless of how great your credit may have been before you let either of these events occur, don’t expect your credit score to climb out of the 500′s for at least a year after you complete a short sale or a foreclosure, and that assumes you keep the rest of your credit paid on time. So what’s the difference?
Foreclosure-As most home owners are aware, a foreclosure occurs when the lien holder takes your home back for lack of payment. This can occur in as little as 4 months after you stop paying. However it is usually a longer process taking between 8 months and one year. The date that the foreclose starts for the borrower’s credit report that lost their home is the date that the bank’s name who foreclosed goes onto the title of the property. So while the home owner may have moved out of the house and moved on with their life and is just waiting for their credit to improve to the point where they can be home owners once again, it could be months later before this nasty foreclosure date even begins on their credit. In the state of Nevada mortgage lenders are permitted to file a deficiency judgment against the borrower for the losses they occurred. They have 90 days to do this. While we have not seen a lot of mortgage lenders going after the home owner for the losses they realized due to the foreclosure, they have the ability to sell the right to collect this money to collection agencies for a fraction of what they are owed. The only way a home owner can get out of paying that debt would be to file for bankruptcy.
Bottom Line: While this option may be the easiest for the home owner up front, just stop paying, this will be the worst in the long run, both from a credit stand point, as it will take longer to recover from, and from the risk of a future loss from a deficiency judgment.
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