A short sale is when your lender agrees to accept less on the mortgage balance to allow you to sell your house before it forecloses. The reason your lender will do this is because they don't want the house back when it forecloses. They also realize most people don't have any equity in their home to sell it. Most people are upside down on their mortgage. So they are willing to take a small loss now on a short sale, then a huge loss when they get it back after foreclosure.

This is called the pre-foreclosure sale program. The Pre-Foreclosure Sale Program allows a Mortgagor in default to sell his or her home and use the sales proceeds to satisfy the mortgage debt, even if the proceeds are less than the amount owed.

• The requirements are:
  
  
  1. You must be living in the home-or moved out because of unstoppable reasons. For example, job transfer, couldn't afford the utilities anymore.
     
     
  2. Must be 31 days behind on payments.
     
     
  3. Must show reduction in income or increase in living expenses.
     
     
  4. Cannot abandon home.
     
     
• You lender will always do a full settlement and they cannot pursue the deficiency.
  
  
• Your lender will pay you $750-$1000 incentive when you sell your house.
  
  
• The foreclosure sale will be postponed for 4-6 months to allow you to sell your house under the program.
  
  

• You can be current or behind to do a short sale.
  
  
• If you have a security clearance it will most likely not challenge any security clearance.
  
  
• You will be able to keep your VA eligibility on a short sale. The amount of the eligibility will be reduced by the deficiency amount.
  
  
• Your lender will always do a full settlement and they cannot pursue the deficiency.
  
  

• Home Affordable Foreclosure Alternative (HAFA)
  
  Requirements to be in the program:
  
  
  1. Must be your primary residence.
     
     
  2. Must be living in your home (unless you moved within the last 90 days over 100 miles away because of a new job).
     
     
  3. Loan must be originated before Jan 1, 2009.
     
     
  4. Your are delinquent on your mortgage, or you will be delinquent very soon.
     
     
  5. Your unpaid principal balance must be less than $729,750.
     
     
  6. Your total mortgage payment exceeds 31% of gross income.
     
     
  
  Details of HAFA for borrower:
  
  
  1. You will get $3,000 incentive for relocation expense.
     
     
  2. Foreclosure sale with be postponed for 6 months to allow you to sell your house.
     
     
  3. Requires that borrowers be fully released from future liability for the debt.
     
     
  4. Lenders pay all servicing fees - homeowners have no out-of-pocket expenses.
     
     
• If homeowner doesn't qualify for HAFA program they can still do a short sale:
  
  * Anybody can participate in the short sale.
  
  * Unfortunately no incentives.
  
  * No Requirements other than experiencing a hardship.
  
  * You can be behind or current on payments.