The Mother and Daughter Realty Team

Types of Short Sales
There are several different types of Short Sales.  Each homeowner should know the type of loan and mortgage servicers they have.  This will help you decide the type of short sale you qualify for.  (The same goes for Loan Modifications)

Why is it important to know what type of short sale you qualify for,  you should first know as much about each type as possible.

Short Sale - HAFA - (Home Affordable Foreclosure Alternatives)
In order to qualify for a HAFA short sale it MUST be the seller's primary residence and you must have a severe financial hardship and limited cash assets. It's designed to streamline the short sale process, release sellers from liability and provide relocation assistance. There are 2 basic types of a HAFA short sale: a preapproved HAFA or a HAFA short sale request along with a purchase offer.
Fannie Mae Loan Lookup

http://loanlookup.fanniemae.com/loanlookup/
Freddie Mac Loan Lookup

https://ww3.freddiemac.com/corporate

Short Sale - Fannie Mae HAFA
In order to qualify for a Fannie Mae HAFA Short Sale, you must live in the home or have moved more than 100 miles away. You can't move across town and apply for a Fannie Mae HAFA. Your mortgage payment must exceed 31% of your gross monthly income. There is a dollar limit on cash reserves as well that does not apply to a regular HAFA. And the government might decide it's more profitable to foreclose on you.

Short Sale - Freddie Mac

In order to qualify for a Freddie Mac Short Sale, Freddie Mac wants you to be 60 days delinquent on your mortgage payment. Many Government Sponsored Entities insist that you stop making your mortgage payment. Freddie would like your mortgage payment to exceed 31% of your gross monthly income, but that is not a solid requirement, unlike a Fannie Mae HAFA short sale.

Every bank handles a Freddie Mac a bit differently. Generally, banks servicing a Freddie Mac loan want a T4506 and an 1126 form. The 4506t lets the bank order copies of your tax returns, and the 1126 is a financial statement. Freddie Mac might want to see that your loan is in arrears, as well. Hey, it's the government. The government wants you to stop making your payments. Isn't that great? Not.

Short Sale - Fannie Mae

Like most other types of Short Sales, Fannie Mae won't consider the short sale until the seller agrees to or has stopped making mortgage payments. Getting Fannie Mae approval adds an extra layer to the short sale process and can extend that time for approval by several days.

Short Sale - Traditional Hardship
In a traditional short sale, your Short Sale request will be closely examined. You will also have a better chance of walking away if your loans were originally purchase money loans. Those two combinations make for a successful and pretty much stress-free short sale, if there is such an animal.

Short Sale - Strategic / Cooperative Short Sale
One institution that stands out because of its cooperative short sale program is Bank of America. In a Cooperative , the bank pre-approves the purchase price and the seller, and negotiates a seller contribution in advance, before your home goes on the market.

It is a myth that a seller must face a financial hardship to do a short sale. However, if you have no hardship, plus you have a hard money loan, you will probably pay a lot more than for simply no hardship at all. It's like having two strikes against you.

Short Sale - with Private Mortage Insurance (PMI)

If your loan has mortgage insurance, MI will add another layer to the process. The mortgage insurance company will be required to approve or reject the short sale. Bear in mind that the mortgage insurance company will pay either way -- short sale vs foreclosure -- and it might get paid more to do a foreclosure. I'd say the odds are about 50 / 50. With any luck, your MI will have gone out of business. The basic risk with MI is it might want a contribution, either a prom note or cash to approve.

Short Sale - with more than 1 loan
The best thing to say about two loans on a short sale is at least there is probably no mortgage insurance. Depending on the type of second loan, though, the lender may or may not be willing to cooperate. . Generally, the second agrees to the $3,000.