Homeowners With Negative Equity And Suffering From Unemployment–Short Sale And Deed In Lieu Of Foreclosure Plans

Ongoing difficulties for homeowners who are in a negative equity situation or who may still be suffering from unemployment to have necessitated the continuation of certain programs from the Making Home Affordable initiative, but there are some issues that homeowners have faced in relation to their ability to find more affordable payments when an underwater mortgage is in place or unemployment has caused financial distress. Yet, some homeowners have seen such severity arise in relation to their financial life that they have sought out a short sale or deed in lieu of foreclosure plan from major servicers like Bank of America, Wells Fargo, or even J.P. Morgan Chase.

However, there are some homeowners who feel that these options are not being made as available by some financial institutions as they should, which has led to a higher number of foreclosures and homes simply sitting empty. According to the Making Home Affordable website homeowners who will qualify for a short sale or deed in lieu of foreclosure program will have to meet certain eligibility requirements, which may be specific in relation to a particular homeowner’s mortgage servicer. Yet, many homeowners are required to have lived in their home for at least one year, are able to document financial hardship, have not purchased a new home within 12 months, and will owe less than $729,750 on their first mortgage. While these are only a few of the guidelines and, again, depending on a homeowner’s particular servicer, other requirements may be in place, but there are some officials who feel that these foreclosure alternatives are needed in order to help further destabilization efforts of the housing market.

As an example, short sales can be beneficial for homeowners who are either suffering from negative equity or a combination of an underwater mortgage and unemployment, as banks may be able to help find a potential buyer for this property, will allow the homeowner to avoid the formal foreclosure process, and sell the home rather than let the property sit empty. Obviously, many homeowners have come upon a situation where, due to the type of mortgage they have or with a combination of employment troubles and financial problems are unable to continue making their mortgage payment, there are still traditional modifications that may be of help to the struggling individuals.

Yet, issues that homeowners still face concerning modifications, and even short sale or deed in lieu of foreclosure programs have many concerned that servicers are not doing enough to prevent foreclosures and offer homeowners the option to either surrender their deed or sell their home for a loss. However, according to the most recent Making Home Affordable servicer report, the number of short sale and deed in lieu of foreclosure plans did increase in the latter part of 2010. Data through the month of November 2010 stated that, for homeowners whose trial modification was canceled, there was a total of 33,604 short sale or deed in lieu of foreclosure agreements made among the top eight servicers in the program, and that number increased in December 2010 to 38,590.

Also, for homeowners who were not accepted for a trial modification during the same timeframe, the November data tracked a total of 54,574 short sale and deed in lieu of foreclosure plans that had been made available to date while December reported 62,594 total short sale or deed in lieu of foreclosure plans. Yet, these options are not guaranteed for homeowners who are struggling with negative equity or unemployment, and again, not all major financial institutions have made a smooth transition or application process for homeowners attempting to avoid foreclosure, but officials are still prompting homeowners to explore these options if a formal modification is unavailable or unhelpful for their situation.