The bank has been notified by the owner that he is insolvent and each further mortgage payment is from the little available credit he has left.
The payments are all current. The guy has perfect credit across the board but he is using his credit cards to maintain that credit rating.
The house is now up for sale. He owes 177,000 on 1st and 22,000 on second. Both are held by same bank.
The short sale price is around 120,000.
Question: Will the bank do this deal if he is still current on the mortgage but is technically insolvent and can prove it?
Question 2: What kind of report can the owner negotiate with the bank for the credit reporting agencies?
I have negotiated short sales on similar situations where the homeowner faced an “Imminent Default”. Obviously if you can prove the financial distress and that this situation is not going to change, then the bank should be open to negotiating.
My only caveat is this; the last time I negotiated one of these was prior to the huge foreclosure explosion. They may not even consider future default with all the current defaults that are keeping them busy.
We do short sales on current accounts ALL THE TIME.
Also the impact on the credit is the same as long as the lien is not paid in full. On the credit it will carry the same weight as a charge off. You can attempt to negotiate a full release of lien even when it is short and this will not affect the credit. We do these types of transactions but the are not to be considered as the rule of thumb as it is not frequently done.