A Short Sale is recommended by real estate experts as the best alternative for foreclosure avoidance. What is meant by Short Sale? Well – imagine you are one among the unfortunate millions of US home owners, who are facing foreclosure process due to default in repayment of mortgage dues. Worse still, you find your property value in the market is below the amount of your mortgage balance due. You are considered as a homeowner “underwater” like several others.In such a dire situation, even if you sell your property to a buyer on your own accord, the proceeds will not be sufficient to clear the mortgage debt. It is here the Short Sale option comes to your rescue. You as a borrower-house owner explain your financial inability, to fulfil your mortgage commitments to the lender and seek their permission for selling off the property at a price, which may not be equivalent to the mortgage dues.The lender has to approve your request and give you permission to sell your home, after evaluating all the particulars and documents submitted by you. Why the lender should accept a price, which is normally less than what is due on your mortgage? A good question indeed.The Short Sale option is anxiously promoted by the federal government through a latest legislation called Home Affordable Foreclosure Alternative (HAFA for short), with a view to help millions of home owners out there like you. Its provisions are stipulated clearly, with a view to eliminate the ambiguities and delays involved in the procedures, so far existing.Mortgage lenders are encouraged to consider Short Sale requests with least possible delay. There are financial incentives also, to forgive the difference in sale proceeds and the actual mortgage dues.So in the present situation, it is most likely that mortgage lenders will accept Short Sale request, including yours speedily.

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Strategic default is the financial decision to “walk away” from your underwater mortgage, even if you have the money to continue paying it. Many homeowners and investors are taking this step right now, and even more are considering it. The goal is to rid yourself of the problem mortgage without paying any more cash out of pocket, while simultaneously having the bank agree not to pursue you for a deficiency judgment to cover the unpaid portion of the loan. If you take the step of strategic default, make no mistake – your credit score will go down, and it will likely stay down for quite some time. In fact, you will start to feel the impact once you miss the first one or two mortgage payments – perhaps long before you actually finalize a default through one of the typical exit methods I recommend, such as short sale or deed in lieu of foreclosure.

How Important is a Good Credit Score to You?

If you’re like me, you may have put off considering strategic default because you want to protect your credit rating at all costs. Eventually for me, the cost of continuing to pay my hopelessly underwater mortgages was greater than losing my pristine credit score, so I opted for strategic default. You must decide for yourself whether or not the credit score truly matters to your personal and financial future. Areas where a lower credit score could impact your life are:

Difficulty or inability to get credit in the future – especially mortgages;
Possible unprovoked cancellation of existing credit cards, even with a spotless payment history (it happened to me);
Difficulty securing a lease on a house or apartment;
Challenges getting certain jobs, as many employers are now doing credit checks.
Are you prepared to deal with this? I was, because most of these areas simply were not important to my future endeavors.

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The US Treasury Department created the Home Affordable Foreclosure Alternatives (HAFA) Program on April 5, 2010 to give homeowners and lenders an alternative to foreclosure on a property. Through HAFA, both homeowners and lenders are given a financial incentive to sell the property in question via a short sale or deed-in-lieu of foreclosure instead of foreclosing on it.A short sale happens when the mortgage company agrees to allow the sale of a home for less than the amount owed. Typically, a short sale is more advantageous for a homeowner because they cannot make the payments on the mortgage and a short sale doesn’t affect their credit like a foreclosure does. A lender usually agrees to a short sale because they believe that selling the home for a slight loss is better than having to pay high foreclosure fees and go through the time and money it takes to sell it on the open market again.A deed-in-lieu of foreclosure is when the homeowner gives the interest in the home back to the lender to satisfy the mortgage loan in question. With a deed-in-lieu of foreclosure, the borrower is released from the debt with less public exposure and impact on their credit.

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While it is understandable when people fail to meet their mortgage commitments owing to financial inability, there is a growing segment of home owners, who refrain from paying the mortgage loan installments, as a strategy, although they can afford financially. This is the case in all the housing markets of the U.S., including Dallas-Fort Worth area in North Texas, where there are impending signs of recovery from the gloom.As per authentic statistics in the Dallas-Fort Worth area alone, over 5,600 homes are lying under various stages of foreclosure in the month of June – reason: default in mortgage repayment, including strategic default.The tendency to stop paying mortgages wantonly is subject to analysis by research firms like Morgan Stanley, Experian and Oliver Wyman, Chicago Booth/Kellogg School Financial Trust Index etc. These researchers conducted organized surveys and studies, among home owners whose property is facing foreclosures. According to the results, strategic defaults are rising – from 22 percent in March 2009 to 31 percent during March this year – out of 1,000 home owners surveyed.

Why people embark on the strategy of defaulting from mortgages on their own accord? Researchers found the answer from their surveys – in the first place home owners, who have negative equity – that is the value of their home drops below what is due on the mortgage – get frustrated. They reportedly feel that there is no use paying the mortgage, inasmuch as there is no hope of retaining the home from being foreclosed.

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Homeowners are left with the task of devising and coming up with various strategies to avoid foreclosure. Actually foreclosure cannot be avoided, unless you’re the sole owner of that property. Your best option is to prolong foreclosure for many years or until you are in a better position to modify your mortgage loan.Delaying it will entirely rest on your hands. You can find ways to delay foreclosure but remember that every foreclosure varies from one another and may differ, as well, from state to state. Sometimes it can be very frustrated and complicated and sometimes it’s very easy to deal with.

Foreclosure, as well, will depend on the property, if it’s a house or another type of property. Then there’s also the lender. If the lender is kind and understanding then the foreclosure process can be easier to fight. It’s another thing if the lender is strict on terms and policy.Although each foreclosure differs from one another, most Financial Institutions deal with it in the same way; if you still cannot make your monthly mortgage payments, your lender will file for foreclosure against your property. You will be given about a month or half to respond to the foreclosure’s Summon.If you ignore the notice of foreclosure it would mean that you are giving up your claim to the property and your rights to defend yourself. The judge will favor the financial company and you will be sent a notice to leave your property. If you don’t leave your property by the date indicated you will be forced out of the property.

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