Facts:
Customer has a 745 FICO score. Customer is getting a divorce.
Customer has 4 months before wife stops paying her half. Worth what he owes (only been there 2 years) Customer is thinking of a deed-in-lieu.
I’m thinking it will affect his credit just as much as a normal foreclosure if he gives it back. He doesn’t thinks so, but maybe if he inserts an eplanation on his credit report the next underwriter won’t take it so badly since he is getting a divorce? Maybe he can stop making payments pursposly so i can neg. a SS?
Or… i could list it (i’m an agent) and try and sell it on an REC (than he could really get his asking price since we’re offering it on terms, i could make a commission via a down payment…
what to do, what to do… I can’t refi (i’m a mtg broker also…) because he wouldn’t be able to qualify with just his income alone.
So, either I list it and try and sell it as his agent and collect whatever down money i can to make my living (since there’s no equity to pay a normal commission) Or… i advise him to stop making payments purposely so i can try and negotiate a SS and pay him some money?
I need help figuring out the best possible way out for all.
Does anyone have any suggestions??? Help.
First, never advise a homeowner to stop making their mortgage payment.
A Deed in Lieu will affect his credit but not as much as a foreclosure or short sale.
Being it a divorce situation, personally I would not take this deal. There is much time before the mess with the divorce is handled and they become late on the mortgage. You’ll need the cooperation of both parties the entire time you are working the transaction and that is hard to come by with divorces also you will need to wait to see how the court decides on how the estate is to be handled.
Deeds in lieu are not as simple as mailing in the keys. The bank must accept the deed in lieu before you mail them the keys or they will simply go through a normal foreclosure proceeding. Deed in lieu may save homeowner’s credit if the bank agrees to send them a loan forgiveness (some banks may consider this depending on comps).
To qualify for Deed in lieu:
Property must be listed for sale for at least 30 days,
Lender for first will require “release of lien” from other note holders on property (2nds and HELOCs)
D.I.L. must be approved within 60 days of foreclosure/auction date
Interior appraisal must be done
Property must be vacant
You can still do a short sale even if the homeowners are not yet late on payments. You need to document the hardship, impending hardship and divorce and send to the bank. The first thing to ask for might be a “special forbearance.” Homeowner simply asks the bank to give him a payment holiday for a couple of months because his wife will stop paying in 4 months. The bank may simply deny the forbearance and tell him to list the property for sale.
Get comps in the area and if you can’t sell for the mortgage balance, it automatically becomes a potential short sale. Submit hardship letter and list property immediately. If he can continue paying, he must or suffer lates on his credit. Short sales CAN and DO get approved even if HO is not late - as long as hardship is documented properly.