Living through The Great Recession
Sometimes even the best efforts to be a good steward of the resources we are given can seem to come up short. In 2008 an economic downturn began that has become known as “the great recession”.
Through no fault of their own, but only due to buying their home at the high point of home prices before the recession hit, many homeowners have found themselves “underwater”.This means the current market value of their homes is less than their original purchase price and less than the outstanding balance of their mortgage loan. If they do a conventional sale, they will be without their home and still owe the portion of their mortgage loan balance that is not covered by proceeds from the sale.
Understanding Short Sales
In these circumstances, with the approval of the lender, it may be possible to sell a home for less than the balance of the home loan and have the entire debt excused. This is known as a short sale. As stated by a Bank of America official quoted on the federal website, makinghomeaffordable.gov, “In many cases, [a short sale] is a dignified exit strategy where the borrower can sell the home and avoid the negative impact of foreclosure on their credit report and return to a better financial position.” While it is true that a short sale may be a viable solution for many, it is wise when considering a short sale to also seek debt counseling.
Debt Consolidation Programs
A debt counselor can help you explore a variety of programs available through the federal government, including the Home Affordable Foreclosure Alternatives (HAFA) program and the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF). But most importantly, a debt counselor will assist you in determining if a short sale is really the right solution for you.
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