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We had two weeks to pack up and move to another state, as my husband's company said he was gonna be laid off if he didn't take this transfer. Put the house on the market and it sold as a short sale 8 months later. Now we have to wait three years before getting another mortgage. This urks me that- before this short sale we ALWAYS paid on time, this job transfer was not our doing,,but now we cannot get a mortgage due to short sale showing on our credit. We are good people and pay our bills on time(i'm a bookkeeper so i know better not to pay our bills)... but when the company says your being transferred in two weeks - then what are you to do?
Well, consider this, was your short sale debt "forgiven" by the bank. Meaning did you take advantage of the 2007 Mortgage Forgiveness Act where they will waive the debt forgiveness tax you should have paid?
For instance, if you "shorted the bank 100K" on the mortgage, in ordinary cirumstances, the bank would send you a 1099 debt form and you would have had to pay around $30K in ordinary income taxes on that short sell.
So if you got that type of short sale (I'm assuming you did, or you would have tried to save your home), than you would have been "rewarded, not punished" by taking advantage of the temporary short sale.
Did you put 20% down? or even 10% down? and paid into the principal? I did and you know what my reward was? I ended up losing over 130K on the sale of my home. That's my hard earn cash down the drain (it was my first home and I never made any money off the sale of another home). So I ended up losing a huge amount of money. But I covered my own loss. No short sale needed...although my emergency reserves took a hit but I am still ticking because I save, save, save all the time just for these situations.
I'm not saying you were responsible or irresponsible. A lot of being of people "pay their bills on time" but that doesn't mean much. It's your total financial situation. I have a few friends who make 500K a year but they are way over extended. Such they can pay their bills on time but they are like a ticking time bomb in case anything happens to the primary bread winner. Everything is financed. Cars, boats, second homes. It's dangerous. I tell them how dangerous their situation is but it's like they don't care or are in complete denial that they could lose their income. How much liquid reserves you have to be able to cover yourself in case of emergency situations (in this case a job transfer).
So you actually benefited from your short sale since you probably won't owe income tax on the shorted amount to the bank. It's like being given hard cold cash.
So looking at this perspective, do you think you should be able to rebuy a home so soon?
Your story is no different than so many others who lost homes due to unfortunate circumstances, but the answer in short is that yes, you should be "punished."
i don't agree with that at all!!!!!
If a person went into a mortgage that they knew they could not afford (like so many did with an ARM) then yes they should be punished. but someone who was responsible and was just a victim of the economy should not be punished at all. Every circumstance is different, but if I lost my job because I was in an industry that was hard hit, how is it my fault? lol If it was not my fault there should be no punishment!
We also treat short sales as a foreclosure, only it didn't go through the courts. Time limits are 3 & 5 years, but that can very easily (and probably will) change in the next year or two.
Also, anyone that signs up w/ CCCS or any debt management, be prepared for mortgage lenders to view that as a Chapter 13, again, one that did not go through the courts.
I am hearing stories of deficiency judgements and 1098's being issued for the shortages. I know I sent one couple to an attorney before they accepted a shortsale contract and they are no longer going that route.
I have absolutely NO sympathy for anyone who lost their home to short-sale/foreclosure. You are the product of your own irresponsibility & foolishness. And no - you should not be able to finance another home, own one - yes. Everyone has a RIGHT to own property, what you don't have the right to do is be loaned money for one.
I work in a collection firm & we are dealing with releasing lines on property being sold at a short-sale, collecting/suing on second mortgage balances, home equity etc. It is RIDICULOUS the amount of money people are getting AWAY with repaying. When you took out 100k from your house, paid off your credit cards, bought a new car/boat, remodeled your kitchen - then racked them all back up again & took out another 100k a year later then not only should you be UNABLE to be financed for a home again but you should be ashamed of yourself. And that's what the majority did.
I'd bet money that your $2700 mortgage in AZ was for a home that you bought in the last 5-6 years and if you did not have an adjustable rate, you either spent out of your means or refi'd and used your house as a ATM card.
Did you have no savings? Why not rent your home. Why not sell it - oh, you probably couldn't because you owed more than it was worth like ANYONE who took a significant amount of money out of their home or bought at the mid/top of the market. I'd also bet money that you said "well, since we're going to short-sale - then we don't have to pay our mortgage anymore & lived rent free like the other fools who get to live in their home RENT/MTGE free while it's being modified.
Why do we reward people for their bad behavior in this County. Why do people get tax breaks for *stealing* hundreds of thousands of dollars from the banks - which is going to repaid by ME the taxpayer, not by the bank. Because of the lax in consequences we have people that are choosing to walk away from their homes, even when they can afford to repay them.
And someone mentioned the Realtors having to work much harder on short-sales - they SHOULD. They were making more money than you can imagine for doing nothing. Now there is NOTHING wrong with someone jumping on that gravy train - that's the American way - but don't feel sorry for someone that has to actually work for two months to make 4k on a commission sale.
If a person went into a mortgage that they knew they could not afford (like so many did with an ARM) then yes they should be punished. but someone who was responsible and was just a victim of the economy should not be punished at all. Every circumstance is different, but if I lost my job because I was in an industry that was hard hit, how is it my fault? lol If it was not my fault there should be no punishment!
There should be a choice. Take the tax hit for the debt forgiveness, or have to wait five years. The free ride on the backs of the American taxpayer needs to end someplace.
It doesn't matter what the circumstance. People who short sell a home are not feeling any consequence and they should.... Otherwise why would anyone pay a debt they owe???
So looking at the flip side... If a family loses a job and has to sell the home for less than what is owed, but uses all their savings to pay the debt. That family then needs to spend two to five years rebuilding the savings to afford another home, assuming they are purchasing with 20% down. Why should someone who had no savings be eligible to buy in two years when the family that saved, but then used savings to make good on the debt is still having to save to buy a new house?
There should be no way someone who walks away from a debt should be able to purchase a home before the family that makes good on the debt.
I guess the mentality of this country is to spend all you have because those who save and live within their means will be penalized.
Noticed that Fannie/Freddie allow those who have gone through a short sale to rebuy a home in 2 years.
Short sales and Foreclosure should be treated almost identically in terms as risk factors.
The end game is the same:
1. The homeowner failed to pay as originally agreed
2. Their credit hit is the same in both situations (short sale and foreclosure).
Does the government not learn from their mistakes?
There should be legislation barring people from buying another home for at least 5 years with a short sale.
2 years is too short of a time in order to qualify for financing (via the FHA method).
I know there are micro economies being built around pushing people through short sales.
1. Banks: because they can save about 10% on their lost instead of going through foreclosure.
2. Realtors: because they most likely will get paid their full commission (yes I understand short sales involve a lot more work for realtors than regular transactions)
3. The distressed homeowners selling: although their credit can be shot with a short sale, they know with the proper credit maneuvers, they can rent for 2 years and still get their credit scores back to at least the 600s. They won't get the best rate in 2 years but at least they qualify for FHA loans.
Two years as "punishment" for bad financial decisions is not a long enough deterrent. Especially in this housing crisis. Most people believe the housing crisis will be over in 2 years. You will have the same people trying to rebuy similar homes they sold at distressed prices...only this time, they got their 50-150K underwater mortgage fogiven and rebuying at much lower prices.
It is not the homeowners fault that their property depreciated. If they bought the house that was worth 300,000 and had a mortgage for say 250,000 ( they have 50,000 equity) when they took it and the property depreciated to 200,000 because of the real estate crash and they short sale it for 180,000 the bank and the property owner are losing money. They did not just get a mortgage forgiven, they lost equity and likely down payment money. I don't get this punishment bull crap. Why should they have to wait 5 years. Should the bank and appraisers be punished too for "lying" to the property owner about its original value. I don't even think they should have to wait 2 years if they pay on time and always have and their credit score meets criteria. P
It is not the homeowners fault that their property depreciated. If they bought the house that was worth 300,000 and had a mortgage for say 250,000 ( they have 50,000 equity) when they took it and the property depreciated to 200,000 because of the real estate crash and they short sale it for 180,000 the bank and the property owner are losing money. They did not just get a mortgage forgiven, they lost equity and likely down payment money. I don't get this punishment bull crap. Why should they have to wait 5 years. Should the bank and appraisers be punished too for "lying" to the property owner about its original value. I don't even think they should have to wait 2 years if they pay on time and always have and their credit score meets criteria. P
But the problem is this.... Another family who lives below their means and has $70,000 in savings above and beyond what they put into their home (assuming the same exact numbers you give above) must make the bank whole when they short sell the same home for $180,000. The family that lived more conservatively, lost $120,000 on the same home. Is that fair?
Unfortunately, fair is relative. From my perspective 5 years is not too much of a penalty for someone who didn't make good on a loan. Real estate is all about supply and demand, you take a risk when you buy an investment that can go up OR down in price. If I buy a stock with a loan and it goes down, no one is going to forgive that loan. Why do we feel a home investment is any different?
OP, responsibility and fairness has nothing to do with it. The gov wants to prop up housing at any cost. That's what they are paid to do. Common sense says don't guarantee mortgages to people who failed recently. Forget about common sense. You have forgotten that it's free money. FHA is backed by the gov. The gov will get printed money from the fed if they can't cover it and they can't. Inflation and higher taxes will follow. The gov wants to keep people borrowing and buying. That's what our economy is based on. My guess is someone stupid enough to buy with a no doc, no down, adjustable loan in 2005 will buy in 2010 with a FHA 3.5% down loan and pocket the 8k tax credit. How did they get the 3.5% down? By not paying their mortgage for 1 year and living mortgage rent free. I'm sure the borrowers/buyers know that they can stay in the house rent free for a year if they choose to stop paying. Who cares? Realtors and lenders got their fees and lenders got their loans guaranteed. Party on!
Last edited by FelixTheCat; 09-14-2009 at 03:17 AM..
Reason: FelisTheCat
If a person went into a mortgage that they knew they could not afford (like so many did with an ARM) then yes they should be punished. but someone who was responsible and was just a victim of the economy should not be punished at all. Every circumstance is different, but if I lost my job because I was in an industry that was hard hit, how is it my fault? lol If it was not my fault there should be no punishment!
You are a responsible person and you know you should put 20% down, pay closing cost, a have 6 months savings. So don't worry if you aren't given a loan a year after a foreclosure. If you are such a great saver that you can save 30% of a homes value in a year or two then wait a few more and pay cash. No one will tell you you have to wait longer to qualify for a all cash sale.
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