In the final hours of voting to avoid the “fiscal cliff” in Washington, lawmakers chose to approve the extension of the Mortgage Forgiveness Debt Relief Act and Debt Cancellation that was originally approved in 2007. 

This is great news for sellers that are still struggling to negotiate with mortgage lenders on modifications or get their short sale approved on their home.  This act protects many sellers from being taxed on the difference of what they owe on the home and the current market value sales price that the home sells for.  Prior to the extension some short sale  homeowners could have faced a scenario where the bank forgives a $50,000 deficiency on their home, but the IRS taxes them on that deficiency.  This could have resulted in homeowners moving into a different tax bracket. 

The IRS web page has not been updated to show the date through 2013, but I imagine it will be soon.  For the details on the act please visit the IRS Mortgage Forgiveness Debt Relief Act and Debt Cancellation page at:



This article will appear in the Eagle Informer in February.  It was written by three Woodhouse Group agents that are familiar with the short sale process. 

“Short sale”, unfortunately, is a term that you hear quite often these days.  And while you may think you have a basic understanding of what that means, there are several “moving parts” to a short sale and without an understanding of all of them; you may not have the complete picture.

Fundamentally, short sale means to sell a property for less than what is owed to the lien holder(s) (lenders) to pay off the loan(s.)  What makes short sales complex are the number of variables often associated with a short sale transaction.  For example:

  1.  How many liens (loans) are recorded against the property?  This can include 1st and 2nd mortgages, lines of credit, tax liens, or mechanics liens.  The fewer number of liens on the property, the more straight forward the short sale process because there are fewer lien holders (lenders) to negotiate with.
  2. What types of liens are on the property? Different liens pose different challenges.   Home Equity Lines of Credit (HELOC), for instance, can create more difficult negotiations than a 2nd mortgage lien.  Personal tax liens  and mortgage insurance can also create obstacles.
  3. Who owns the lien?  Does a bank own it or a private investor like Fannie Mae or Freddie Mac?  Sometimes there are different guidelines and rules to follow based on who owns the lien.
  4. Has the property received a Notice of Default (NOD)?  A Notice of Default is the official document that lets the seller know that the bank is foreclosing on the property and states the official date the property is scheduled for auction.  Whether the property has a NOD recorded is important because that can have an effect on the amount of time that is available to complete a short sale.
  5. How does your financial situation look on paper? Not everyone is able to try to short sale their home.  Lenders require sellers to “qualify” for a short sale by a careful review of the seller’s financial situation and their “hardship” to determine the likelihood of the seller becoming more able to resume their payments in the near future.  The lenders will require copies of tax returns, bank statements, investment statements, pay stubs, profit and loss statements if self-employed and a detailed letter explaining the personal situation that has caused the hardship and inability to pay.

There are other variables that could affect the ability to short sale a property.  These topics, and others, will be covered in future articles.  Of the various options a homeowner has when they owe more than the market value of their home and they are struggling to pay their mortgage, a short sale is a viable way to go to try to avoid foreclosure.  The most important thing to consider if you decide to try to short sell your property is to use a real estate agent that has short sale experience.  It could mean the difference between a successful short sale and a foreclosure.

Written by:  Rebecca Standerfer, Marilyn Talbot, and Judy Trimble

Bank of America services an amazing number of loans.  If you are an agent that works short sales, you undoubtedly have worked with Bank of America over and over again.  The processes they have in place continue to improve and I am hopeful this new improvement will help too. The change went in to effect Dec. 1, 2011, and impacts all short sales submitted with an offer in which the homeowner is eligible for the Home Affordable Foreclosure Alternative (HAFA) program.

The good news is they have shortened the timeline for their response back to the homeowner and agent on the short sale offer.  They have also taken away  homeowner requirements to call Bank of America to accept the HAFA short sale program.  “Real estate agents can now indicate a homeowner’s HAFA interest by submitting the necessary documents to in the online system (Equator) within 14 days. During that 14-day window, the short sale will continue moving forward.  Bank of America is transitioning the processing of all HAFA short sales with an offer from outsourced vendor partners to Bank of America associates”.

I am happy to see this transition and am looking forward to having a HAFA short sale go through the system directly with Bank of America vs. an outsourced vendor.  I think this will help homeowners and agents complete short sales in a more timely manner so that we avoid additional foreclosures AND keep the buyers that get frustrated with the time a short sale takes.

With banks/servicers  improving their processes, more homeowners can avoid foreclosure by completing short sales. 

If you have a hardship and are struggling making payments on your mortgage and owe more that what the fair market value of your home is, you should consider talking to a real estate professional about options instead of foreclosure.  Short Sale is just one option. 

If you currently live in your home, but do not want to stay in your home, you may qualify for a HAFA (Home Affordable foreclosure Alternatives) short sale. 

Do you qualify for HAFA?  Here is a link with additional information:


The media has done a good job about talking about the number of short sale and bank owned properties are on the market.  In some areas of the Treasure Valley we do have quite a few of these properties active on the market.  As a buyer what does that mean to you when you are looking for a home how long will you wait for a response?

Bank owned properties can be offered on and closed usually within 30 to 45 days.  This is good for the buyer who wants to get in a home quick.  What to remember with a bank owned:

  1. If the property is priced competitively, we are seeing multiple offers on the same property OR an offer comes in quickly on a property (within the first two days of the listing becoming active).  You will need to act fast to be considered for the home.  Don’t wait to view a home.
  2.  Most banks give people who are going to be occupying the home the first look.
  3. Homes are sold “as is”.  Spend some time when viewing the home to get an idea of the obvious repairs that are needed.  When making an offer, make sure it is contingent on a home inspection.
  4. Remember that you will have to follow the bank rules on the offer.  They may have their own addendum, contract or other forms to fill out and they usually do not deviate from them.

Short sale properties still take some patience when purchasing.  The bank does not own the property yet, but the seller is asking the bank to accept an offer that is less than the amount that the seller owes on the property.  Many banks have streamlined their short sale process and we are seeing some approvals come through 30 to 45 days after submitting an offer.  BUT – most short sale still take a minimum of 90 days from offer submission to close so patience on the buyers part is required.  What to remember when purchasing a short sale:

  1. Some areas are getting offers quickly on short sales.  If you want to be the first offer in, don’t wait to view a home.
  2. If there is a first offer already on the property, make a back up offer.  Many buyers realize that they do not want to wait through the short sale process and they terminate their offer.  You will be next in line to be considered by the bank.
  3. Make sure the agent representing you asks a lot of questions of the listing agent so that you know who the bank (s) are, where they are in the process and what the expected time frame is on this particular home.  If you know you will be waiting 3 weeks for an update from the bank, it helps reduce your anxiety.
  4. Homes are sold “as is”.  Spend some time when viewing the home to get an idea of the obvious repairs that are needed.  When making an offer, make sure it is contingent on a home inspection.  Most sellers are not in a position to fix anything.
  5. Many banks are pretty firm on items that they will and will not pay for.  If your agent finds this out ahead of time, you will have fewer surprises and fewer expenses later in the game.
  6. Expect that you will not have an answer on a short sale for 90 days minimum.  If you get an answer before that, it is a bonus.  It is truly an exercise in patience.

Real estate negotiation is different when purchasing a short sale or bank owned property.  If you are educated on the process and know what to expect you can find some great properties at very good prices.

I would be happy to answer any questions about purchasing distressed properties.

Have a great week-end.


Many people who are struggling to stay in their home, decide to walk away and let the home foreclose.  That is an option.  However, if you want to save you credit from being hit so hard, there are other options that might work for you: 

 Cure/Reinstate  Reinstatement might be possible when you are behind in your payments but can promise a lump sum to bring payments current by a specific date.   Once you are in default, you still have an opportunity to cure the default of the loan.  You typically have 120 days from the formal Notice of Default, until the foreclosure auction date.  At anytime prior to foreclosure, you are allowed to pay the delinquent amount plus any costs incurred in the foreclosure process. 

 Redemption  This is defined as paying off the loan in full.  At all times, until the foreclosure auction actually takes place, the borrower has an absolute right to “pay off” the loan that is in default.  This payoff usually occurs through a refinance of the property with a new lender providing a new loan to the borrower.

Forbearance  Your lender allows you to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.  Lenders sometimes combine Forbearance with Reinstatement if they know the homeowner will have the funds (for example a tax return or inheritance) to bring the account current by a specific date.  If the account is past due, but the homeowners NOW can make payments, the lender might agree to let you catch up by adding a portion of the past due amount to a certain number of monthly payments until the account is current.

Military Forbearance  Similar to regular forbearance but since you are military, you could qualify for additional benefits like a longer forbearance period with no negative impact to your credit score.  A special hotline has been set up to offer additional guidance about this option:  877-MIL-4566.

 Repayment Plan  This option is similar to forbearance in that you must demonstrate to the lender that you have had a temporary situation which have resulted in your inability to make loan payments.  The difference is that you do not believe you will receive enough funds to reinstate the loan all at one time.  The lender will sometimes combine a forbearance and create a repayment plan for you to make extra payments each month over a set period of time until you catch up prior to your foreclosure date.

Refinance  You may be able to refinance and receive  a completely new mortgage with new terms, interest rates and monthly payments. This would replace your current mortgage and may lower your payment so you could improve your financial situation.  You may qualify for the Home Affordable Refinance Program:    Remember that this program is currently in the process of being changed so if you do not qualify now, you may qualify in the next several months. 

Loan Modification  If you can make the regular monthly payment now, but cannot catch-up the past due amount, the lender might agree to modify the mortgage. They may do that by adding the past due amount into the existing loan, financing it over a long term or change your interest rate.   Lenders may also modify loans if you no longer have the ability to make payments at the same price or level. The lender can modify your mortgage to extend the length of your loan (or take other steps to reduce the payments).  You may qualify for the Home Affordable Modification Program:

FHA Loans  If you have an FHA-insured loan, the lender might be able to help you receive a one-time payment for the FHA Insurance Fund.  FHA has a loss mitigation option that allows a borrower to get an interest free loan from HUD to bring their mortgage payments up to date.  You will need to contact your lender to file a partial claim.  Your lender can work with the Department of Housing and Urban Development (HUD) to help you. FHA information line: (877) 622-8525

VA Loans Financial counseling to help homeowners avoid foreclosure is available through VA Regional Loan Centers. Contact 1-800-827-1000 and ask for the phone number of the Loan Service Representative in your area.

Short Sale   This is when you owe more than fair market value on your home.  You and your real estate agent work with your lender to approve the sale of the home and forgive the remainder of the debt owed.  You may qualify for a pre-approved short sale through Making Home Affordable:    Or contact a real estate agent that is experienced in short sales and they can help you navigate through this process.

Deed-in-Lieu of Foreclosure  Your lender may offer be willing to accept a deed-in-lieu of foreclosure.  You would voluntarily transfer ownership of the property to your servicer.  Many lender require that homeowners try to modify their mortgage or short sale their home before they will accept a deed-in-lieu. 

HUD(U.S Department of Housing and Urban Development) You can contact a HUD approved counselor at (800) 569-4287 or search on the web at A counselor may be able to help determine which options might be available to help you negotiate with the lender to work out a repayment program.

Be your own advocate 

You need to put a plan in motion.   Lenders do not want to foreclose if they can help it, but many of them are overwhelmed by the number of defaulted mortgages.  Make sure you get them all of the information that they require and follow-up on a weekly basis on what the status of your loan is.


I am still hearing a lot of sad stories about people wanting to stay in their homes, but unable to get the help that they want from their service provider.  It appears that there are more success stories lately about loan modifications, but there is still an incredible number of frustrated homeowners that are not getting good information from their loan service company and they either give up or they follow the information from a customer service representative that may not fully understand the program.  What I have found is persistence is key. 

  1. Continue to call your service company until you get clear and concise instructions on what you can do to be considered for one of their programs.  You can start by visiting  If you don’t qualify for one of the government programs, many servicers have their OWN programs).
  2. If you get someone on the phone that does not sound like they know what they are talking about.  Politely hang up and call back.
  3. Once you get an answer or instructions, call AT LEAST one more time to make sure you were given the right instructions
  4. Fill out paperwork requested thoroughly and on time.
  5. Gather and submit all documents requested.
  6. If you receive a letter that is declining you from a modification or other program, call and ask more questions.  Ask for the supervisor.  Make sure you understand why they are saying that you do not qualify.  What would it take to qualify?  Can you change a couple of things in your finances to make this happen?  GET DETAILS! 
  7. Don’t give up.  It’s hard to consistently call these servicers but if you want to stay in your home, don’t bury your head in the sand.

You can research several of the options for foreclosure alternatives on  If you decide a loan modification isn’t the direction you want to go, there are other options instead of foreclosure.

Why is it so important as a buyer to be pre-approved by a lender prior to looking for homes? 

One of the biggest reasons is that you want to make sure that you are looking in the proper price range for your home.  You may have a price set in your head that is too high or too low based on your debt to income ratio and the interest rates.   Get the facts ahead of time so you are not disappointed when you are ready to make an offer. 

 Another reason to get pre-approved is that you may not get the home you want if you cannot put your offer in quickly!  In this market, short sale properties and bank owned properties require a pre-approval letter with offer submission.  If you are ready to look for a home, you need to be pre-approved.  The banks require it.  You don’t want to have another offer come in at the same time with a pre-approval letter and beat your offer out. 

Is it hard to get pre-approved for a loan?  NO!  That is what is so great.  You can talk to most lenders on the phone and complete a telephone application or an online application.  They will analyze your information and pre-approve subject to submission of documents ( in most cases you will get a pre-approval letter while you are gathering your documents).  The lender will also typically pull your credit so they can get a clear picture of your debt to income ratio as well as your credit score.  This will tell them what kind of interest rate they can offer so you can make a decision on the price range of homes to look at.  The counseling session with your loan officer will help you work together so that you are looking at homes that fit in your budget and loans that are the best fit for you and your situation.

If you are thinking about purchasing a home and do not have a lender, let me know and I will send you some names.  A good loan officer will walk you through this process quickly and efficiently.

Be a confident pre-approved buyer and be ready to make an offer on the home you want!

How do derogatory credit events affect your future home purchases? That answer has been difficult to pinpoint. With the number of short sales, bankruptcies, and foreclosures that have occurred in the past couple of years, the answer seemed to change too. I asked Jason Ames with Waterstone Mortgage Corporation what they are seeing right NOW on the effects of derogatory events. Of course the answer always is, “it depends”. It depends on if in the future you are seeking a conventional loan, FHA loan, VA loan, or USDA loan. Conventional loans can have as little as a 2 year waiting period after a short sale. That’s good news because a year ago, we were being told a little different story. I have attached a document from Jason, that gives you a lot more detail on what the current guidelines are: 

Waiting Periods for Derogatory Credit Events

The most important thing after a derogatory event is to re-build your credit.  Call your lender for ideas that will help you establish good credit again after you experience a significant credit event.  With a little patience, you can be back in your OWN home soon!

Thank you for visiting my Boise Idaho Real Estate blog! I specialize in the best Boise homes online including great deals in Boise Short Sales and Bank Owned Property in Boise.

Through this blog and my connected website you will find all kinds of educational information about short sales, foreclosure alternatives, the government stabilization programs as well as information for homebuyers and sellers.

With home prices still low and mortgage rates an exceptional levels there has never been a better time to buy a home in Idaho than right now! Contact me, Judy Trimble to start finding the properties in the Boise area that you’ve been searching for!