Short Sale Programs For Underwater Homeowners May Offer Debt Relief But Problems May Arise Beyond A Drop In Credit

Short sale programs may be helpful for some underwater homeowners as it can allow them to escape the debt that has come with a home whose value has dropped, which could have created a great deal of financial distress in the lives of certain homeowners. Obviously, a short sale is not the optimal choice that a homeowner has, but they can offer some debt relief in terms of a mortgage payment where the home value has dropped substantially and other factors may have led to strain in the life of the homeowner who is attempting to stay afloat on these mortgage payment obligations.

Yet, problems can arise in the short sale process as there are homeowners who have reported that these short sale opportunities that may currently be available are not always an easy route to getting out from under their mortgage obligation. While underwater home loans are a difficult obstacle to overcome, some homeowners have been able to participate in the Home Affordable Foreclosure Alternatives initiative as a way to help them avoid a formal foreclosure, but it was reported a few months ago that homeowners were still suffering setbacks in their credit score after participating in a short sale, despite the fact that many were hoping to avoid financial troubles that are often seen when foreclosure takes place.

Also, in some cases homeowners have found that their bank had tried to pursue them for the difference in what they still owed on their home and what they sold their home for during a short sale agreement, which is obviously seen as a contradiction in the eyes of a homeowner as it defeats the purpose of short selling a home when a homeowner cannot continue to afford payments on their mortgage. If a homeowner could in fact pay the difference in what they sold their home for versus what they owed on their mortgage, many feel that it would stand to reason that a homeowner may have been able to continue making payments through options like modifications, so when a mortgage servicer pursued homeowners in this fashion, it obviously created a great deal of distress and questions as to the usefulness of a short sale agreement.

There were also problems seen by some realtors who say that dealing with mortgage servicers during the short sale process is troubling due to lack of communication, repeated requests for documentation, and there are also some indications that banks went forward on a foreclosure before a short sale was completed. Yet, there were also some indications that servicers were working with homeowners and realtors in the hopes of filling these homes so that they would not simply be sitting empty, which has been a problem for some banks as there are not enough homebuyers to absorb inventory that is currently in the housing market.

Essentially, homeowners who are considering a short sale may want to be aware of past issues that some homeowners have faced so that they can better decide what options they may pursue, as there are numerous foreclosure prevention plans still in place from a variety of sources that may allow a homeowner to avoid the loss of their home entirely. While problems like lenders pursuing a homeowner after they have sold their home or taxes that may have to be paid on a short sale has been a problem for some, homeowners need to understand that this is not always the case in this particular foreclosure alternative option, but foreclosure prevention plans can also be explored further by homeowners in the hopes of allowing a homeowner to stay in their property even if financial problems have arisen.