Without delving too deeply into the reasons for this current predicament, it is a sad fact of life that many Arizona homeowners are running into serious difficulties in meeting their mortgage obligations. As with most areas of life, in order to combat a problem, it is necessary to first admit that the problem exists. If that sounds crazy, you will be surprised how many Realtors get the call "My home is being foreclosed on next week" especially since that procedure comes at the end of a 90 day period. Too many homeowners ignore all phone calls and correspondence from the bank until it is too late. They cover their ears and go "La, la ,la!" However, there are avenues to explore before we get to that point.
If you know you are unable to make this month’s payment and may have more difficulty in the future, contact your lender immediately. Be aware, the bank does not want to talk to a Realtor at this stage; this is a call you must make yourself. Also, make sure you talk to the right department. Just calling the 1-800 will not suffice. It may take some digging, but you must speak to the "loss mitigation" or "work-out" department. The, probably, outsourced employee at the end of the 1-800 does not have any authority to help you, that employee just wants you to make your payment. Some lenders may be willing to modify the existing note, extend the loan period, or give you a six-month break and add those costs to the loan. This is if your financial difficulty is temporary in nature.
If your monetary problems are an ongoing situation with no end in sight you may try to negotiate a "short pay" with the bank. This is when the bank may agree to accept less than what is owed in order to release the lien from the home and enable you to sell. Most likely, they will try to work with you because the last thing any bank wants is to take the property back. Bear in mind, also, that your setback must be real; if you own other homes or assets you cannot, and should not, expect them to forgive you debt while you still have worth. You will most certainly have to "reverse qualify" to obtain a short pay. In the same way you had to qualify to get the loan in the first place, you will be required to furnish proof you can no longer afford said loan. This is where some people run in to trouble. If you "fudged" your initial loan application, if you "stated" income you did not earn, if you said you were going to "owner-occupy" and you did not; this is when the chickens will come home to roost. Some of these conditions I just mentioned are felonies, so think very carefully a) whenever you apply for a loan b) whenever you try to seek relief. Indeed, with the recent spate of "no-doc", "stated income" loans, which many would argue have fueled this current crisis, you may find the reverse qualification more stringent than the original application.
Remember, a foreclosure or a short pay is going to affect your credit history for a long time to come. Also, remember that in a short pay you will receive an IRS 1099 form from the lender for the short fall, just as if you earned that money. Income tax, therefore, will be due on said amount.
To summarize, if your financial difficulty is short term, most lenders will be very willing to work with you to resolve it. If your difficulties are permanent, it is probably time to consult with a Realtor. You will need them to find a qualified buyer at a fair price, and then you will need their expertise to persuade the bank that this is the fair and equitable solution for all parties involved. In either case, the earlier you acknowledge the problem, the better the resolution.
Finally, make sure the Realtor you choose has the knowledge and experience to see it through, your financial future is Dependant upon it.
