Jerry Raviol

1640 S. Stapley Dr., #124 • Mesa, AZ 85204
TOLL FREE: 1888-JRAVIOL (572-8465)
CELL: (602) 695-5478
Office: (480) 820-3333
Fax: (480) 907-1443

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West USA Realty

Archive for credit history

Sellers often ask me what’s the difference if they do a short sale or just let the bank foreclose?  Most of the time property owner’s long term financial health is better off if they do a short sale. There are, however, some cases where the property owner’s long term financial health is better off by letting the bank foreclose or doing a bankruptcy.   

Your current situation is temporary, your finances will change in the future, and the choices you make now can affect you long term.  The most popular tools available to fix your situtaion include –
  • Short Sale
  • Foreclosure
  • Deed in lieu of foreclosure
  • Loan Modifications
  • Bankruptcy

Each of these tools will have a different impact on both your short and long term financial health.  Don’t let the bank foreclose before you know the difference, and you and I talk about the details. My initial consultation is free.

A short sale occurs when you negotiate with the mortgage company to accept less than the full balance of the loan.  When you consider a short sale or foreclosure you need to consider how they will impact the following items:

 Credit History
A foreclosure will hurt your score by approximately 250 to 300 points for at least three years. In addition the loan will show on your credit report as foreclosed for 7 years.

With a short sale only the late or missed payments prior to the short sale will be reported, the points off your credit report can be far less, and if you make all you other payments on time the impact will only be 12-18 months.  Furthermore, if the lender agrees to accept nothing more than the proceeds from the sale the loan is typically reported as “settled” or paid in “full”.

Getting a Mortgage in the Future
In addition to the difference in your credit score with a foreclosure you will not be able to get a Fannie May backed loan for 5-7 years, and you will have to answer yes to the question have you ever been foreclosed on.  Having to say you have been foreclosed on will increase your future interest rates.  With a short sale you will only be prevented from getting a Fannie May loan for 2 years, and you never have to answer yes to whether you have been foreclosed. 

Security Clearances
With a foreclosure if you are a police officer, in the military, or any other position that requires a security clearance, the clearance will be revoked.  A short sale on its own does not challenge most security clearances.

Remember my golden rule – friends don’t let friends get foreclosed on until after they have figured out if short sale can help them more.  You cannot know what is best for you without knowledge of the following:
  • The AZ Deficiency Statute
  • Bankruptcy
  • Loan Modifications
  • Short Sales
  • Foreclosures

As a public service to AZ homeowners I am glad to offer you a free consultation.  If you take advantage of this free service and then go to speak to an attorney and tax expertyou will be armed with information that will help you get more from their consultation fee.

Jerry Raviol
West USA Realty

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Should you do a short sale or a foreclosure? Is a short sale or foreclosure better for your credit rating? How do you qualify for a short sale? If these are some of the questions you may have then a short sale and foreclosure specialist is what you need. I can help with these kind of questions and issues. I know how to deal with the short sale process and I always recommend my clients speak to an attorney and tax accountant. Read more about the short sale process below and if you know someone that is thinking about a short sale or foreclosure be sure to share this link with them. It could save them from future legal and financial problems they didn’t know could happen.

10 Things They Didn’t Teach You in Short Sale School

Issues that Could Cost You and Your Client Money

By Neil Thomson & Don Doerr
Arizona REALTOR® Magazine – August 2010

Everyone involved with short sale transactions has run into issues trying to get them closed.  Problems with lenders are an everyday occurrence.  But the following examples are beyond the normal and expected issues.   These are the kind of events that could result in a borrower having to file a lawsuit against the lender.  REALTORS® need to be aware of these potential problems to avoid fallout in their direction.  We hope that this information helps REALTORS® avoid these traps.

A note from AAR: You’ve heard it before, but we’ll say it again. REALTORS® working with clients on a short sale should always strongly advise their clients in writing to seek legal, tax and credit advice from those qualified to deliver it. The Short Sale Seller Advisory is a great resource to begin this conversation. Be the source of the source, not the source itself!

  1. Most people know that the fine print in the account agreement signed when opening a new bank account provides the bank the ability to sweep funds in an account to pay other delinquent accounts.  We recommend that our clients close all accounts they may have at any bank that services their mortgage(s).  But in one case, the bank took it far beyond simply sweeping an account.  A borrower had a nearly empty checking account with $1000 of overdraft protection.  The bank, without the consent or permission of the borrower, increased that overdraft amount to $10,000 so that the bank could process a mortgage payment through this account (even before the borrower was late).  This action changed this amount from a potentially non-recourse obligation to a recourse obligation, and since there is now an unpaid balance on this checking account, the borrower could not close the account until this negative balance was corrected.
  2. Homeowner arrives home to find out the locks on the house have been changed and several boxes of their personal belongings were taken.  The trustee’s sale had not been completed, and the lender admitted to having the locks changed.  In one case, after settling with the lender, the lender did the same thing a second time. 
  3. Pursuant to RESPA, when a lender accepts a Qualified Written Request (QWR), it cannot report that borrower to any credit agencies until the issue has been resolved.  RESPA also specifies that the lender has 60 days to resolve the disputed issue.  In the past, lenders generally adhered to these requirements.  However, early in 2009, lenders started to ignore this requirement and started reporting on borrowers in violation of RESPA regulations.  Because the reward to the borrower from the lender who violates this regulation is maxed at $1,500, borrowers are unlikely to take this to court.   Many lenders have apparently made the decision to disregard the requirements and continue to report borrowers to credit agencies.
  4. The second lien holder refuses to allow a short sale to close unless money is paid by the borrower outside of escrow.  This is referred to as “greenmail.”  In many of these cases, the borrower would have no obligation to this lender if they let the home go to foreclosure, so there would be no legal reason to submit to these demands.  This is where the borrower should definitely get legal advice before paying any funds to a lender.
  5. Lender makes promises for a modification or extension of trustee sale only to later deny or retract the offer.  We have seen this in the case of both verbal and written offers from some lenders. 
  6. Temporary modifications can be used against the homeowner if payments are missed.  Because the temporary modification involves a payment less than the original loan terms, the lender can interpret this as missed payments, therefore placing the borrower in a default position.  The lender may file for trustee sale, even if the borrower was current before accepting a temporary modification.  This removes the borrower’s leverage of not making payments to force the lender to re-evaluate the borrower’s loan modification request and minimizes the chances of a successful short sale.
  7. Lender attempts to retain homeowner’s payout on the sale of a property to offset loss on another delinquent property serviced by that lender (no language in loan documents to support the lender’s claim to these funds).
  8. The lender’s mortgage insurance company demands a note from the homeowner before a short sale closing.  This usually occurs at the eleventh hour and comes as a complete surprise to the borrower.  In most cases, the borrower was unaware that the lender had purchased mortgage insurance on their loan.  Again this is an example where the borrower needs legal counsel prior to any payments being made.
  9. A borrower vacates their home in preparation of a foreclosure.  The home is vandalized while empty.  The borrower is responsible for this damage as long as they still own the home.  The borrower’s homeowners insurance covers the damages, but the lender directs the homeowner to sign the check over to the lender for disbursement to the contractor after close of escrow (COE).  After COE, the lender refuses to pay the contractor and sends funds to the note holder for missed payments, leaving the homeowner with an unpaid bill from the contractor.
  10. Second lien holder gives amount in a short sale for release of lien.  This is not a full release from deficiency.  This is just the amount they require to allow the short sale to close.  From a borrower’s point of view, it makes no financial sense to agree to pay this if there is not a full release, as the lender could still pursue a deficiency suit against the borrower.  If the second lien holder persists and the first lien holder will not provide the funds to the second lien holder, it is generally better to let the home go to foreclosure.
  11. Jerry Raviol
    West USA Realty

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Foreclosure vs. Short Sale

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To Foreclose, or not to Foreclose – that is the question. What should you do and why?

Jerry Raviol
West USA Realty

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