Homeowners Can Avoid Bankruptcy, Soured Credit - Shortsale Foreclosure

Homeowners facing foreclosure may think that there is no alternative to their predicament and that they are destined to suffer a soured credit and dealing with the hassles of declaring bankruptcy.

It is true that if your home is foreclosed, then the lender reports the fact to credit organizations and your FICO score is effected adversely as a result. It is also true that you are open to law suits if there are two mortgages on your house. This is a possibility because the lender who holds the second mortgage would get nothing if the holder of the first mortgage forecloses. So, in order to get something, the holder of the second mortgage can sue you for breach of contract, pass the law suit possibility to someone else, or sell the loan for pennies on the dollar resulting in the institution that buys the loan hounding you for compensation. No doubt, a terrible future awaits.

However, you can avoid all this with a short sale. In a short sale you sell your house for the best price offered. The amount you get will not be the true value of the home and may not even be equal to the total amount that you owe the lender, but the sale provides some compensation for the lender. The lender then can rate you as “Paid Settled,” or “Paid Satisfactory” and your credit will take a small hit. But you will remain with decent credit. It is also possible for you to negotiate with the lender to get him or her to rate you “Unrated” or not to notify the credit organizations at all. In this case, your credit remains good.

It is very important to know what options you have open to you if you are ever confronted with the possibility of a foreclosure.

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