Alpharetta Buford Dacula Roswell Suwanee GA – Here is a question we received recently about short sale deficiencies. We have a first mortgage with EMC. Just got an approval letter on a short sale. NO language in letter that says ”satisfied in full” or words to that effect. It only says “conditions for EMC’s acceptance of this discounted payoff are X.” blah blah.
One other sentence under page 2 says: “This transaction may have implications on your federal tax liability. You should consult the IRS or your tax acct for additional information” No other language regarding reporting to the IRS.
This first mortgage was an investor, non owner occupied loan. Are we sunk? Will they sell the note to a collection company and then hound us for years to come? We have assets. If we let it go to foreclosure, due to it being an investor loan, what are the ramifications for us on the deficiency?
My Answer: In my opinion, the ramifications are exactly the same for a foreclosure as a short sale. Either way, depending upon the laws in your state, you might be chased down. However, between 65% and 80% of all loans will not have a deficiency.
Here is how to find out if your loan is a type of loan that will not have a deficiency. Research who the owner of the loan is. Most loans are not owned by the lender handling them. EMC is probably the “servicer” for the actual owner.
The actual owner might be Fannie Mae, Freddie Mac, a Wall Street Trust, or a pension fund. EMC acts as a trustee for the actual investor. They collect the payments and handle the “Lender” Functions. They then forward the money to the owner of the loan each month.
If the owner of the loan is Fannie Mae or Freddie Mac, in my opinion you won’t have to worry about a deficiency. All of the Fannie Mae & Freddie Mac Short Sale Approvals we have gotten released the home seller from future liability.
FHA Short Sale Guidelines also spell out that you will not have any future liability. VA Short Sale Guidelines release the liability as well. However, you will not be eligible for a future VA loan until you reimburse VA for any loss.
Fannie Mae, Freddie Mac, FHA, and VA account for around 60% of all the loans in the US. If you are considering a short sale and are worried about the deficiency, then give me a call at (770) 866-2561.
When you contact me, I will research the type of loan you have. Based on that research I can give you my opinion on the deficiency.
The above is my opinion. It is not legal or accounting advice. Please contact a competent attorney or other professional because the circumstances vary, depending upon your situation.
Thanks for reading this, Roland Lorans.
Roland is a real estate agent at Better Home and Gardens Real Estate Metro Brokers.
Phone: (770) 866-2561.
- Short Sale Foreclosure Homes are taking as long as eight months to work their way through its Foreclosure pipeline (gashortsalepro.wordpress.com)
- New WA State Short Sale Seller Advisory and Licensee Guidance Bulletins (raincityguide.com)
- Second Mortgages Trip Up Short Sales (online.wsj.com)