Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

Ten Frequently Used Short Sale Terms: A Guide

Lambros Politis - Wednesday, October 15, 2014

Every day we help consumers facing debt-relief issues. It’s our job to be comfortable with the language of the world of short sales and debt-relief— but not everyone is.

Here’s a resource to make it easier. Below I've briefly explained some frequently used terms. I hope you find this helpful!

Bankruptcy-Chapter 7 – In a Chapter 7 Bankruptcy, assets and debt are surrendered to the control of a Trustee who is capable of canceling most, or all debt. The Trustee may decide to liquidate assets in order to pay creditors. Chapter 7 bankruptcy also called “straight” bankruptcy is so named because debts are discharged and the borrower has the opportunity to receive a debt-free fresh start.

Bankruptcy-Chapter 13 - Often called debt-reorganization. Under Chapter 13, the debtor proposes a plan to pay his creditors over a 3-to-5 year period, to be approved by the Bankruptcy Trustee. A Chapter 13 Bankruptcy is generally suited for individuals who have property they want to keep and for those who have enough income to reorganize and satisfy some of their debt. In contrast to the goals of Chapter 7, which offers immediate and complete relief of many oppressive debts, Chapter 13 is a form of debt consolidation.

Deed In Lieu Of Foreclosure - The voluntary surrender of property by a homeowner to a lien holder done to prevent and eliminate foreclosure. Among the disadvantages to the homeowner (borrower) with this option is the loss of the property, its income, and loss of investment to date in the property. Additionally, the Deed in Lieu of Foreclosure can often be misreported, thus further negatively impacting their future credit.

Discounted Payoff - The payoff of a mortgage loan where the lender accepts a negotiated amount that is less than the actual amount owed. Discounted payoffs are reserved for homeowners with distressed assets.

Distressed Assets – An asset is distressed when the amount owed to satisfy the debt taken out to purchase the asset is greater than what the borrower can recoup from the sale of the asset.

Underwater Mortgage (also known as Equity Deficient) - A property is underwater when, if sold, the proceeds of that sale would not fully pay off the existing mortgage debt. In this situation, the balance owed on the home exceeds its current value.

Notice Of Default (NOD) - An official public notice filed and recorded by a designated trustee at the request of a lender indicating that they have begun foreclosure action. An NOD gives the homeowner a right to mediation in the State of Washington.

Notice Of Trustee Sale (NOTS) - An official public notice that is posted, mailed, published and recorded by the Trustee at the direction of lender indicating the lender's intention to sell the property at public auction after the homeowner has been in default on their mortgage for a certain amount of time. This type of notice includes a specific date, time and location of the foreclosure sale and the amount needed to cure the default. The Notice is issued 120 days before the sale by law. The homeowner can pursue an alternative to foreclosure up to 37 days before the sale, sometimes after depending on your lender. You are entitled to free legal help with a debt relief organization.

Short Sale - The sale of a home which is completed through negotiation with the existing lender where they agree to accept less than the full amount owed, allowing the debt to be 'paid off' short. In a short sale, there is more owed on the home than what it will likely sell for on the market. Lenders use the term to describe this as a loan that is “upside down.” While many short sellers are at-risk of foreclosure, a borrower who bought high and took out equity can also use a short sale should they encounter financial hardship.

Trustee Sale – This is also known as a Foreclosure Sale or Foreclosure Auction. Conducted by the Trustee, the property is sold at auction to the highest bidder, or taken back by a foreclosing lender should nobody bid on the property. If the lender takes the property back, it becomes REO inventory to be sold by the lender.

Millions of HELOCs To Reset: Are Borrowers Prepared?

Seattle Short Sales - Thursday, September 25, 2014

One pressure point coming to light in the up-and-down housing recovery is the reset awaiting millions of Home Equity Line of Credits taken out during the housing boom of the mid 2000s. A big shift is set to occur – and the question keeping analysts guessing is the impact it will have on millions of homeowners and the economy overall.

Black Knight Financial estimates that at least 2.5 million borrowers will face HELOC resets over the next three years.  At issue, increased monthly payments that may “shock” unprepared borrowers, to quote TransUnion.

Millions of HELOCs To Reset to Larger Payments

During the bubble years, HELOCs were especially popular, based on their low monthly payment, and the high home values. Some banks even offered HELOCs where the available credit increased automatically as the equity in the house rose along with the home's value. HELOC payments start low since the typical structure only requires that the homeowner make the interest-only payments for the first ten years of the loan. Then, after ten years the loan matures and fully amortized payments are due in order to begin paying off the loan over time.

Translation, the new “reset” payments can be several times larger than the interest-only payments. The average increase in payments is estimated at $250 per month; potentially causing the homeowner a hardship when faced with paying the higher second mortgage payments. Their budgets are used to one thing – and soon they’ll be facing another. 

Are borrowers prepared? 

Under Consumer Financial Protection Bureau rules, servicers must notify borrowers of a reset 120 days in advance. This notice must include contact information for borrowers to contact housing counselors for advice and assistance. 

Using history as a guide, contacting homeowners is not easy. In fact, there are over a billion reasons for concern. Why? Over a billion dollars in mortgage settlement reparation checks were sent but never cashed. Communication will not be enough. 

Compounding the issue, the majority of HELOC owners have additional loans and credit to manage and little discretionary income to work with. The reality is that poor and middle-income homeowners face challenges even without adjusting to higher payments.   

Unless lenders pro-actively write down the balances, there will absolutely be a portion of the borrowers forced into default. No one knows how many, but according to TransUnion, as much as $79 billion of those outstanding HELOC balances could be at elevated risk of default in the next few years. These defaults will create foreclosures– an inevitable conclusion to a big ticket. 

“These resets are a very serious issue.” said Amy Crews Cutis, chief economist at Equifax. “It’s a nontrivial number of people who will get smacked with a higher payment.” 

The HELOC borrowing boom that enabled spending during the last decade is now set to impede our economic recovery, stalling spending, causing defaults and ultimately leading to more foreclosures; a dynamic certainly to take a bite out of the housing market. 

Foreclosure Alternatives: Home Retention, Home Forfeiture and Bankruptcy. Everything You Need to Know!

Lambros Politis - Wednesday, March 19, 2014

Roughly ten million Americans are underwater on their mortgages. Millions are struggling to make their monthly mortgage payments, whether they are underwater or not, because of wage cuts or unemployment. Around 4% of borrowers are already far behind: 60 or more days delinquent on their mortgages. It is frightening to be in any of these situations. It is easy to feel that you are on the road to foreclosure, and that you don’t have any options.

Too many struggling homeowners don’t realize that there are many ways that you can get off that foreclosure road - even if you have already been served a foreclosure notice by your lender.

Strategies to avoid foreclosure can be classified as “home-retention,” where the goal is to find a way to afford to keep the home, and “home-forfeiture,” where the aim is to get out of home ownership and put that bad mortgage debt behind you. There are advantages and disadvantages to both home-retention and home-forfeiture strategies, so what works best for one homeowner may not be the right solution for another. It is important to be informed about all of your options, so you can act as early as possible, and have the best chance of avoiding foreclosure and everything that goes with it: the financial damage, the stigma, and the long-term effects on your credit rating and ability to get a new mortgage.

Here is a primer on home retention and home forfeiture, with examples and their pros and cons. We will also briefly discuss bankruptcy, since it is another option for avoiding foreclosure.

Home retention:

Home retention means keeping the home: finding a way to be able to afford it. This option may be preferable for parents with young families, who don’t want to disrupt their children with a move, or for people who have an emotional attachment or other reason for wanting to keep the property.

Renting out the property:

This may be an option if the home will rent out for more than what the monthly mortgage payments are, and if the owners can find cheaper rental accommodation to live in. Costs beyond the monthly mortgage payments must be factored in, such as covering the full mortgage if the home is vacant, and extra repair bills. Unfortunately, in today’s economic climate, low rents mean that this option won’t work for the majority struggling homeowners.

Refinance:

This means replacing the existing mortgage with a new loan. The borrower must qualify for refinancing as if for a new mortgage, so refinancing is not usually available to borrowers who are underwater with their mortgages or to those who are already struggling to make mortgage payments. However, it can be an option early on to a vigilant homeowner, who is aware that they may have trouble in the future to continue to afford their mortgage.

Loan Modification:

A loan modification is a permanent adjustment made to one or more of the terms of a borrower’s existing loan. However, many loan modifications fail because borrowers cannot afford the new payments (which, often, are no lower than the old payments). Loan modifications should be approached with caution, because the application process may take many months. If the borrower is not approved, they will have lost valuable time that they could have used trying out other options.

Forbearance/Repayment Plan:

Forbearance is a temporary suspension or reduction of loan payments. It is usually granted only if the hardship causing the missed payments is temporary, e.g. due to a medical condition or a natural disaster, and if there were no missed mortgage payments prior. At the end of the forbearance period (usually three to twelve months) the borrower must make up all of the missed payments, either by paying them out or through a repayment plan.

Home forfeiture:

Home forfeiture means giving up the home. This can be a very attractive option to people who just want to cut their losses and leave their bad investment behind them. It allows for a fresh new start.

Deed in Lieu:

A Deed in Lieu of Foreclosure is also known as voluntary foreclosure: the homeowner voluntarily transfers the deed of the property to the lender. Its only value over foreclosure is that it saves the stress of having to go through the whole foreclosure process, and that the hit to the borrower’s credit score may be less than that of a foreclosure.

Short Sale:

A short sale means giving up the home, but without the stigma and without as much of a hit to the credit score as foreclosure brings. Rather than doing nothing and waiting for your lender to take action, choosing to do a short sale means working with your lender so that you come to a decision together about how to share the losses on a bad investment. Millions of Americans have used a short sale to get out of a mortgage that they could not afford, and walk away from their home completely free of that old mortgage debt.

Bankruptcy:

Bankruptcy is another option for avoiding foreclosure. This is a complicated option, and difficult to explain briefly, because there are several types of bankruptcy (the most common ones for individuals are Chapter 7 and Chapter 13. Either of those options can allow for either keeping the family home or giving up the family home.

Although many people fear the idea of bankruptcy, it can actually be a very good option in certain situations - especially if the homeowner is carrying a lot of other debt in addition to their mortgage(s). However, since everyone’s situation is unique and each person’s goals are different, you would do best to discuss the options around bankruptcy with a bankruptcy attorney who can give you advice based upon your own personal circumstances.

Take Action:

Doing nothing - not making mortgage payments, not making up missed payments, and not communicating with your lender - will lead to foreclosure. To some homeowners, this might seem a good option because they don’t have to do anything, and they can live in the home for free until the day that the sheriff finally boots them out.

However, to most people, this is the most stressful option of all: receiving notices and fielding phone calls from the lender, dealing with the stigma and judgment that surround foreclosure, dealing with the uncertainty of how long they may stay in the home - not to mention the long-term effects of foreclosure (damage to credit rating, and challenges in trying to get a new mortgage).

In most cases, it is possible to avoid foreclosure. Even if you are already delinquent, or have been threatened with foreclosure by your lender... even if you have already been issued a Notice of Trustee Sale (NOTS), in most cases one of the strategies listed above will work for you, so you can avoid foreclosure. The two important things to know are:

  • you must take it upon yourself to be informed about all of your options (a professional team that specializes in debt settlement and foreclosure avoidance can help here)
  • you should act as early as possible - the sooner you take action, the more options you will have as far as home retention or home forfeiture, and the better your chance of success will be.

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At Seattle Short Sales, we know that being in debt is about so much more than just numbers. We understand the pain that debt causes, and the personal toll it takes on families and on relationships. We are here first to listen - because we know that everyone's situation is different. Once we understand your unique circumstances and your individual needs, our team of attorneys and financial professionals will help you find the best and quickest solution to your personal debt problems. For a free, no-obligation consultation, tell us about your situation or call us directly at 1-800-603-3525. Lambros Politis can also be found on Google +.

Recent HAFA Changes Bring it and Freddie Mac's "Standard Short Sale" Programs Closer

Seattle Short Sales - Monday, March 17, 2014

Changes to the Home Affordable Foreclosure Alternatives (HAFA) Short Sale Program (HAFA), which took effect on February 1st this year, bring HAFA in line with the other main government short sale program, Freddie Mac’s “Standard Short Sale.”  Freddie’s Standard Short Sale guidelines apply to mortgage loans where the investor is one of the GSE’s: Freddie Mac or Fannie Mae. The HAFA program is for non-GSE mortgage loans (provided that the homeowner meets the HAFA eligibility requirements).

The aim of the HAFA changes is to make the whole short sale process faster and easier, by reducing the amount of paperwork and by providing guidelines for timing. The recent changes to HAFA are outlined in HAFA Supplemental Directive 12-07.  Key changes to HAFA are:

  • A Short Sale Agreement (SSA), signed and returned by the borrower, is no longer required. It is replaced by a Short Sale Notice (SSN), which does not require the borrower’s signature.
  • The Request for Approval of Short Sale (RASS) and Alternative Request for Approval of Short Sale (ARASS) are also eliminated, and are replaced by the Acknowledgement of Request of Short Sale (ARSS), which no longer requires the borrower’s signature.
  • In most cases, servicers are required to make a decision on the borrower’s HAFA request within 30 days of receiving all required documents.
  • Treasury now requires both the seller and the purchaser to sign an arm’s-length transaction agreement, and an affidavit that affirms that no money is being exchanged that does not appear on the HUD-1 form.
  • The property may not be resold at all for 30 days after closing of the HAFA short sale, and it may not be resold for more than 120% of the short sale purchase price for 90 days after the HAFA short sale.

The changes over the past six months, both to the Freddie Mac/Fannie Mae short sale guidelines and to  HAFA, mean that the short sale process (requirements, guidelines, timelines) are nearly identical for these government short sale programs, regardless of who the investor on the loan is.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/ 

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to the Ark Law Group Blog. 


Negotiating it Right: Three Years Later, One Third of HAMP Loan-Mods are Redefaulting

Seattle Short Sales - Saturday, March 15, 2014

Supposedly permanent loan modifications are defaulting at what the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) calls an “alarming rate". The government’s Home Affordable Modification Program claimed that it would help between 3 and 4 million homeowners to avoid foreclosure via loan modifications. However, according to the SIGTARP quarterly report released last week, after four years of HAMP, only 862,279 homeowners are currently in an active permanent mortgage modification.

The low number of total modifications is not the only bad news about HAMP. As of the end of last month, over 312,000 homeowners have redefaulted on their HAMP modification. As SIGTARP notes, “For these homeowners, the HAMP permanent mortgage modification they received was not sustainable.”

The earliest HAMP permanent modifications, those negotiated in the third and fourth quarters of 2009, are defaulting at rates of 46% and 39% respectively. And HAMP modifications negotiated in 2010 are doing little better, redefaulting at rates of between 29% and 38%.

Loan modifications can work for some homeowners who are threatened with foreclosure, provided that they are negotiated properly to ensure that the homeowners will be able continue to afford the new payments. But loan modifications that eventually redefault often cost people their homes: the lost time spent on a modification doomed to fail means that there is no time left to investigate other options, and foreclosure is the result.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to theArk Law Group Blog. 

Debt Settlement Part 2: Two Real-Life Examples of Creditors Accepting Much Less Than The Total Balance Owing

Seattle Short Sales - Thursday, March 13, 2014

This article is Part 2 of a two-part series on debt settlement. In the first article, we looked at the differences between debt consolidation and debt settlement. In this second article, we examine two recent cases of clients whose debts we have settled by convincing their lenders to accept thousands of dollars less than the balances owing.

Here are two recent cases where we settled our clients’ debts for less than the total amount owed (their names have been changed). The first case involves a $58,000 unsecured debt resulting from the deficiency owing on a second mortgage following a short sale.

David was diagnosed with a degenerative medical condition that would require multiple costly surgeries. He knew he would not be able to continue to pay the mortgages on his Seattle home, and we assisted him in avoiding foreclosure by negotiating a short sale with his lender.

Following the short sale, Wells Fargo relieved him of having to repay the $95,000 deficiency balance remaining on the first mortgage. But Wells Fargo refused to forgive the deficiency balance on the second mortgage, leaving David with with a $58,000 debt on a home that he no longer owned.

He met with a bankruptcy attorney to investigate the possibility of filing bankruptcy. Then he came to us, and met with our debt settlement attorney. Our attorney offered Wells Fargo a cash payment of $8,900 to settle the debt permanently, and Wells Fargo accepted!

Our client was able to permanently settle his financial obligation by paying only 15% of the total $58,000 owed. Without resorting to bankruptcy, he was completely absolved of any further debt relating to the home that he’d had to give up, and able to direct his attention to the future and to raising his young family.

Our second case involves a judgment lien. In this case, our client wanted to do a short sale, but she could not get the sale approved because she had an old debt that had been sold to a debt collector who had placed a lien on the home.

Maria was successfully self-employed when she purchased her home in Lynnwood, WA. However, between the slow economy causing a substantial reduction in her income, and a recurring illness that forced her to take time off work and pay for a surgery, by the end of 2012 she realized she would no longer be able to afford her mortgage payments.

She wanted to avoid foreclosure by negotiating a short sale with her lender. However, an old debt that she had had for $5,500 had been sold to a debt collector, and they had placed a lien on her home. She could not sell the home unless that lien was released.

We negotiated with the debt collector, and they agreed to accept $3,000 as full and final settlement of the debt. The lien was lifted, Maria was able to sell her home, and she was relieved of ever having to repay the remain $2,500 owing to her creditor.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to theArk Law Group Blog. 

Stats for Seattle Area Not Good: Percentage of Homes Underwater and Delinquency Rates Both Higher Than National Averages

Seattle Short Sales - Wednesday, March 12, 2014
As reported in the Puget Sound Business Journal, nearly one third of homes in the Seattle area are underwater on their mortgages.

The report quotes quarterly figures released by Zillow.com. At the end of the first quarter of 2013, 31% of homes in King, Pierce and Snohomish counties were underwater - in other words, the homeowners owed more on their mortgages than the current value of their home. That represents a very slight improvement from the last quarter of 2012, when 34% of homes were underwater.

The situation is worst in Pierce County, where nearly 43% of homeowners are underwater on their mortgages. Snohomish County is not far behind, with 37% of mortgages underwater. Homeowners in King County, however, are faring much better, with only 24% underwater with their mortgages - slightly better than the national rate of 25% (as well as better than the rate across Washington State of 29%).

However, Zillow also notes that nearly half of homeowners in the Seattle area had little or no “effective equity.” They consider homeowners with less than 20% equity in their home to have no “effective equity,” because if they sell their home, by the time they pay agents’ fees and closing costs, they will see little or no cash out of the deal.

Zillow also noted that the rate of three or more months’ delinquency is slightly higher in the Seattle area than the national average. In the Seattle area, 10% of homeowners are three or more months delinquent, compared to the national average of 9%. Homeowners who are both underwater and who are behind on their mortgage payments are at high risk of being foreclosed upon by their lenders, unless they take action to prevent foreclosure, such as by negotiating a short sale or a loan modification.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/ 

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to the Ark Law Group Blog. 

 

New Revised Guidelines for Washington’s Foreclosure Fairness Program

Seattle Short Sales - Tuesday, March 11, 2014

The Foreclosure Fairness Program (FFP) was created in 2011 by the Foreclosure Fairness Act (FFA). The program is developed and administered by the WA Department of Commerce. The aim of the FFP is to reduce foreclosures in Washington state by encouraging mediation between homeowners who are at risk of being foreclosed upon, and their lenders. Its aim is to avoid foreclosure by exploring alternatives, such as loan modifications or short sales.

Through the FFP, a mediator is assigned who will work with the borrower and the lender to find an alternative to foreclosure that is appropriate to their situation. Specifically, the program guidelines aim to coming up with some sort of loan modification. However, if both parties want to work towards a different solution, such as a short sale, the mediator will work with them at their direction

Much of the value of the FFP is that it slows down the pace of foreclosure, providing defined steps and timelines, so that homeowners may have some breathing space and seek guidance about what alternatives are available to them. The FFP mediation process typically occurs over a 70-day timeline (and that period can be extended if both parties agree to the extension). The FFA states specifically that if a borrower has been referred to mediation after a NOTS has been recorded, that Trustee Sale may not take place until the trustee receives a certificate stating that the mediation has been completed. In other words, lenders may not rush a Trustee Sale without taking the time to fully investigate other options with the borrower through the mediator.

FFP guidelines are updated from time to time, and they were most recently updated by the Department of Commerce this month. Click this link for a complete listing of Foreclosure Fairness Program guidelines updated as of June 6, 2013. Following are some of the highlights of the newly revised guidelines:

  • The FFP is for borrowers with a mortgage for “residential real property,” which means a single-family residence, a residential condominium unit, or a residential cooperative unit.  The home must be the principal residence of the borrower at the time that contact under the FFA was made - however, borrowers remain eligible for mediation even if they move after that initial contact.
  • Second mortgages and home equity lines of credit (HELOCs) may be eligible for mediation under the FFP provided that all other eligibility criteria are met.
  • Borrowers must be referred to the program for foreclosure mediation by a housing counselor or by an attorney. Borrowers who received a Notice of Default after July 22, 2011, are eligible to be referred to the program for up to twenty days after the Notice of Trustee Sale (NOTS) was recorded. The referring housing counselor or attorney must screen the homeowner for eligibility.
  • Mediation fees are set at $400 for a session of one to three hours (including mediator’s preparation time) with an additional fourth hour charged at $130 if necessary. Payment of this fee is split equally between both parties.
  • Some lenders are exempt from mediation through the FFP. These are mainly smaller lenders such as many of the smaller credit unions. The Department of Commerce posts a list of exempt lenders for each year on its website; click here to see the list of exempt lenders for 2013.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/

You can also contact Lambros Politis on Google+ or submit a contact request at Ark Law Group.

Debt Settlement Part 1: The Difference Between Debt Settlement and Debt Consolidation

Seattle Short Sales - Thursday, May 16, 2013

This article is Part 1 of a two-part series on debt settlement. In this article, we look at the differences between debt consolidation and debt settlement. In the second article, we will look at two recent real examples - of clients of ours, whose debts we have settled by convincing their lenders to accept thousands of dollars less than the balances owing.

Many people are confused about the differences between the two strategies known as “debt consolidation” and “debt settlement.”

Debts can add up. Unfortunately, today’s difficult economic climate has many people facing reduced income due to hours cuts or layoffs, and home prices remain low. In these tough times, many Americans find themselves forced to pay basic bills with their credit cards. Their debts are adding up to levels that they may not be able to continue paying.

One way of managing a high debt load is “debt consolidation.” Most people have several different debts, each with a different interest rate. Debt consolidation means managing those debts in order to minimize the interest paid.

For example, if you have $5,000 of credit card debt that you are paying 22% interest on, you are paying over $1000 per year in interest on that debt. If you can move that debt (and any other high-interest debts) into a lower-interest loan, e.g. by paying the credit card off through a line of credit secured against your home, you can bring that interest rate down to perhaps 6%. Those savings, of 16% interest on a $5,000 would save you $800 per year - money that can go directly towards paying off the debt itself, not just servicing the interest.

However, debt consolidation does not relieve you of your obligation to actually pay off that credit card debt. You still owe that $5,000 - and you are still accruing interest on it, even though now it is at a lower rate.

And this is where “debt settlement” comes in. Debt settlement is a completely different strategy. It means making an offer to your creditor, to permanently get rid of your debt. For example, in the case above, you could offer your credit card holder $2,500 to call the debt quits! You would be relieved of having to pay the remaining $2,500, and you would be relieved of that $1,000+ you were paying each year in interest!

Why would your credit card company, or any other creditor, agree to this?

Because it's better than getting nothing.

Debt settlement works with unsecured debts - in other words, debts that do not have collateral associated with them, such as a mortgage on a house or a car loan (where the lender has the right to foreclose on the home, or repossess the car, if you stop repaying them).

Debt settlement also works with undersecured debts, for example a second or third lien against a home. If sale of the home generates only enough funds to pay out the first lien (which, in most cases, is the mortgage loan), then the second or third liens are considered to be undersecured. Since so many homes have dropped in value over the past five years, many second and third liens are now undersecured.

In either case, whether the money owed is unsecured (e.g. credit card debt) or undersecured (e.g. a judgment lien), your creditor has nothing to repossess from you if you do not pay it back. They may be worried that you will declare bankrutpcy - in which case they will receive little or nothing on the money you owe. And that is exactly why they may accept significantly less than the actual amount you owe, in order to “settle your debt.” Because if they don’t, they may get nothing at all.

We have helped numerous clients settle their debts, permanently, often for only 10 to 20% of the total funds owed. In Part 2 of this series, we will look at two real examples - where our clients have been relieved of having to repay thousands of dollars of debt.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to theArk Law Group Blog. 

How Does a Short Sale or a Foreclosure Affect My Credit Score?

Seattle Short Sales - Thursday, March 28, 2013

Just because you are having trouble paying your mortgage right now, doesn’t mean that you may not want to enter the housing market again a few years down the road. Smart homeowners who are looking to get rid of their current mortgage debt know that the decisions that they make now will affect their future. One of the things that they consider when assessing solutions (negotiating a short sale, filing bankruptcy, or simply awaiting foreclosure) is how their choices will affect their credit score, and their ability to get new financing.

The credit-reporting agencies (Experian, Transunion, and Equifax) are notoriously tight-lipped about how they calculate credit scores. How a short sale or a foreclosure will affect your credit score depends upon a number of things, including what your credit score was before the short sale or foreclosure (higher scores tend to fall further), and, especially, whether you were delinquent on mortgage payments before the short sale.

Since the credit-reporting agencies do not release their formulas, most of the information available is more “anecdotal” - from blogs and discussion forums. Much of the older information (as in two or more years old) indicated that the hit to a credit score from a short sale was about the same as the hit from a foreclosure on record. However, things have changed lately!

Much of the actual credit score hit was due to the mortgage payment delinquency. Mortgage delinquency is what leads to a lender initiating a foreclosure, so the two go together. It used to be that a borrower had to be delinquent on mortgage payments before most lenders would even look at a short sale request. However, these days, most lenders will consider a short sale request by a borrower who has not yet missed any mortgage payments. In particular, if that borrower can demonstrate to the lender that they are “at imminent risk of default” - i.e. that changed circumstances (e.g. unemployment, increased medical expenses) mean that the borrower will default soon if nothing is done.

This means that, these days, it is possible to do a short sale without ever becoming delinquent, or, in the case of some short sale programs, being only one month delinquent.

For a borrower who has remained current on mortgage payments, the “hit” of a short sale on their record can be as little as 60 points, or even less, and it may remain on record for as little as 12 to 18 months. For borrowers who were behind on mortgage payments when they did the short sale, the hit may be more like 100 points or more. In contrast, a foreclosure may cost the borrower between 250 and 300 points. A foreclosure remains on the borrower’s record for seven years.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to the Ark Law Group Blog. 


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