Section 8 Housing popping up all over the place(thinking about walking away) (Tucson: for rent, crime rate)

[Captain Bill]

I erred on the low side for the foreclosure. The number I used was actually for the short sale, and I accidentally used it for the foreclosure.

This information below is from the CDPE course material provided by the Distressed Property Institute. They are the company who developed and provides training for the CDPE designation. The pages are copyrighted so I can't post them.

The Fico loss on a Foreclosure will be 250 to over 300 points.

The Fico loss on a short sale can be from 50 to 150 points.

A foreclosure can affect the score for over 3 years.
It will remain as a public record on the credit history for 10 years or more.

A short sale is not reported on a credit history.

Only late payments on the mortgage show on the credit report for a short sale. There is no report of short sale on the credit report so there is no ding for it.

The ding is only for the late payments. The effect on the credit history can be as short as 12-18 months.

A homeowner losing a home to foreclosure is not eligible for a Fannie May backed mortgage for 5 years.

A short sale owner will be eligible for a Fannie Mae mortgage after 2 years

In a foreclosure a security clearance, in almost all cases, will be revoked. That can cause a job loss for a police officer, CIA, Security personnel, military, and any other position requiring a security clearance.

An owner in a sensitive job situation, where employers actively check credit on employees, may be terminated, or reassigned in the case of foreclosure.

A short sale is not reported on a credit report and is not a challenge to employment, nor to a security clearance.

Agents, and other short sale negotiators will negotiate with the lenders to have the debt forgiven as paid in full, or settled, so that there is no recourse.

The Arizona Association of Realtors Short Sale Sellers Advisory is a 6 page advisory that is required to be given to the seller, and explained.

It's a 6 page advisory that among other things advises the seller to get professional legal and tax advise, and provides all of the options the seller should consider.

The seller has to sign the document and initial each page.

So every seller has plenty of information to consider before deciding what is best for them.

While it's my general opinion that the short sale is usually better than a foreclosure, I cannot make that decision for the client. When I interview a short sale candidate, I have to explain the alternatives and they make the decisions after doing the research, and after determining what is best for their situation.

[Captain Bill]

Originally Posted by EnicAZ

Captain,

You must not have run across this in the field yet. People who do short sales are getting bills for the difference, which is something not applicable by the mortgage tax relief bill. Cathorine Reagor from the Arizona Republic actually did a story on it a few days ago.

I'm well aware that if the short sale isn't negotiated so that it shows paid in full, discharged, or settled, that the banks have the ability to try to collect the deficiency. And all homeowners involved in a short sale are advised of that possibility before they make their final decision.

The banks may just write the deficiency off.

They may issue a demand note, which is unsecured, so they will have a very difficult time collecting. They may try to sell the unsecured note to a collection agency for a deep discount, because it's unsecured. Then the collection agency can try to collect. At that point the debtor can elect to negotiate a deep discount with the collection agency, or use any of the other available options.

Again, homeowners going into short sales are advised of that possibility.

However, every short sale negotiator attempts to get the deficiency wiped out; and many are successful.

When the home is sold in a foreclosure at the trustee sale, if the homeowner has damaged the home, the law allows the bank to proceed against the homeowner for the damages they caused.

What I'm trying to impress on you is that the decision to try to modify, short sale, deed in lieu, (which many banks will not accept) foreclosure, or bankruptcy, is a decision that each homeowner in that position must make themselves after studying all the alternatives and seeking legal and tax advice.

While my personal opinion is that, in most (not all) cases, the short sale is the better alternative than the foreclosure, it is not my decision to make. I cannot (and will not) tell a homeowner what is best for their situation. No one can do that except their professional legal and tax consultants.

My job is to provide them with information, which includes the Short Sale Buyers Advisory, and advise them to review all the available options and seek legal and tax advice before making their final decision.

[penguin_kernel]

Get out while you still can.

[keninaz]

Originally Posted by Juram

I've noticed recently and had ongoing discussions with some of my neighbors regarding the widespread occurrence of Section 8 housing popping up in our North Phoenix neighborhood over the past 6-8 months.

Apparently people who were unable to sell their homes, had some sort of deal with a government agency that was purchasing them or renting them and then transferring them to Section 8 recipients. Now in the past 4 months, we've had more issues with home break-ins then at anytime in the past 8 years combined. We see the police more frequently in the neighborhood than ever before and with my home being $12K underwater, I'm almost contemplating the possibility of simply walking away from the house altogether as I don't see the value climbing much, nor the old safe nature of the neighborhood returning.

I used to feel incredibly safe in my neighborhood, amazingly safe, nice quiet, suburban area, families with children, now we're getting so many issues with crime and assorted problems that I'm not feeling comfortable here anymore.

Has anyone else experienced this in their neighborhood?

You can just walk away, but it will most likely include a bankruptcy for you down the road so think about it. That will show on your records for 10 years and if you are lucky enough that you are under the income limit all will be discharged. If not the court will take all of your extra money that is left and it will be give to your creditors for 5 years under chapter 13. You will be living a managed life by the court's trustees.
And you may just find yourself in another area where the same problems exist.

[EnicAZ]

Originally Posted by penguin_kernel

Get out while you still can.

This is good financial sense, to be honest. The quicker people get out of from their financial burdens and start over, the better they will be in the long run.

On the Section 8 aspect, it continues to push down rental values in neighborhoods, which has been hurting a lot of landlords that I have been in contact with.

[khuntrevor]

They are still going to need a place to live.....

[ji603]

12 grand underwater is nothing. If you're going to walk away and trash your credit, it'd take more than a few K to make it worth it to me.

You'll still need a place to live, and an apt or single family home in an area in which it sounds like you'd want to live would probably be close to your mortgage payment anyway.

Were I you, if I didn't NEED to move, I wouldn't. Sit tight, wait out the market for a year or two, keep making mortgage payments, and re-evaluate then.

The only reasons I see for folding up the tent and foreclosing are if you need to sell (moving, job loss, divorce, can't refi out of an ARM or interest only loan because of equity probs) but can't.

Otherwise, as the other poster said - you still need to live somewhere... 2 more years of mortgage payments and a little bump in the housing market might just put you at 'break even' if and when you need to sell.

[azjack]

"Apparently people who were unable to sell their homes, had some sort of deal with a government agency that was purchasing them or renting them and then transferring them to Section 8 recipients. Now in the past 4 months, we've had more issues with home break-ins then at anytime in the past 8 years combined. We see the police more frequently in the neighborhood than ever before and with my home being $12K underwater, I'm almost contemplating the possibility of simply walking away from the house altogether as I don't see the value climbing much, nor the old safe nature of the neighborhood returning."

I figured that there would be many folks falling into your category at some point. Maybe not terribly underwater on their loan, but frustrated by neighborhood deterioration following large-scale foreclosures, vacancies, and section 8 conversions. $12K under, if that is accurate, may not be worth the foreclosure, but stuck is stuck if you do not have the means to bring the difference to the table.

Logically, a relatively small amount underwater would place you at the head of the line for short sale approval, but that dangerously assumes that you are dealing with intelligent life.

Best of luck with your decision.

[madmmac]

You have not lost a dime until you try to sell.

But, if the neighborhood is bringing you down and you don't want to live there anymore...then you have some choices to make. Think it through

[EnicAZ]

The competition by landlords because of these increasing Section 8 rentals is getting fierce. They keep trying to cut and cut the rents to try to bring people in to try and deal with the vacancies. The ones who do not do Section 8 are at a competitive disadvantage and they have to cut and cut, and even then they sit empty for a significant portion of the year unfortunately.