Dumping the “Underwater” Mortgage

July 30, 2013

You need to sell your house, but you’ve discovered you won’t be able to sell it for enough to cover the mortgage, much less walk away with a profit.  Should you chase the dream of a “short sale?”

Know the truth first!

money-house

You can short sell your home (that is, sell it for less than the value of the mortgage) if your bank agrees.  A short sale, it is said, will preserve your credit score and allow you to avoid bankruptcy.  But be warned:  The short sale has many pitfalls:

  • How good is your relationship with your bank?  Short sales would seem to be a good deal for everyone; the bank recovers at least some of their mortgage as opposed to losing all of it as they would if you were forced into bankruptcy… but in keeping with the unhelpful trends in banking, approvals for a short sale are few and far between.  And because so many banks move at a glacial pace when it comes to helping their customers, you might find a potential buyer for your house, submit the bank paperwork for a short sale, and not find out that you were denied for months – by which point your buyer has long since moved on.
  • Will the bank verify that the short sale will entirely clear your debt?  Make sure of this point; former homeowners have been astonished to discover that even though their bank approved a short sale, they were then sued anyway for the balance, via a “deficiency judgment.”  This nightmare is even more likely to occur if you had a home equity line (HELOC) in addition to your mortgage.  You can find a more complete explanation on the CNN Money website; click here: You Lost Your House But You Still Have to Pay.
  • What is the actual effect of a short sale on your credit rating?  We know that declaring bankruptcy is brutal to the credit score – so arranging a short sale (and thereby recovering at least a portion of the money you owe through your mortgage) ought to earn you a little respect from credit institutions.  Alas, your honorable efforts at not abandoning the obligation of your mortgage might just count for nothing.  The Washington Post ran a good article on this; read this link for more:  Short Sellers May Take a Big Hit On Their Credit Scores .

The myth of the short sale is tempting; the truth is much more ugly – as many an unhappy former homeowner has discovered.  Learn from what they went through, avoid the traps… and consider the bankruptcy alternative:

  • A bankruptcy isn’t as hard on your credit score long-term. Startling but true:  Nothing will get you to a good credit score faster than a bankruptcy discharge.  You can have a solid rating within three years… and because your score is determined by your debt-to-income ratio, having no debt at all during those three years sure doesn’t hurt.  Keep in mind that by the time you get to the point of considering a short sale, your credit rating probably isn’t very good anyway – so the bankruptcy can provide you with a surprisingly clean re-boot.
  • A bankruptcy happens once; the pain of a short sale can go on and on.  Remember that glacial pace the banks move at; they might not decide to sue you for the balance on a short sale until long after you assumed your mortgage debt was settled.  Their suit will once again devastate your credit score.
  • Out-of-pocket expenses for a bankruptcy are cheaper.  If your bank sues you for a deficiency judgment on a short sale, there isn’t much any attorney can do for you; you’re going to end up owing the balance of your mortgage on a house you no longer own and pay that same lawyer to take you through a bankruptcy.  It’s far less costly.
  • Filing for bankruptcy now, while you are in financial trouble, often provides benefits you might not qualify for later.  When you’re dealing with a tough situation – a job loss, a divorce, or an equivalent upheaval in your life – you can often qualify for a chapter 7 discharge on a bankruptcy, which provides you with useful benefits.  But because banks can decide to sue you years after you short sell your house, they may go after you when your finances have recovered.  At that time, a chapter 7 discharge may no longer be an option for you and the results will be much more severe.

The very idea of bankruptcy sounds like failure, emotionally – and the concept of a short sale seems honorable.  But don’t be the sucker that falls for it.  (And if you’re determined, make sure you hire a lawyer; your realtor is not equipped to protect you.)  We don’t write the rules; we just make sure you know how the rules are stacked against you.  Arm yourself with the truth:  Short sales are trouble.

For excellent advice on this topic, Graine Mediation refers clients to: http://www.brandtlawfirm.com, a law firm that focuses on bankruptcy work.

Posted by Prudence Bovee, Guest Writer and Robin Graine, JD, Virginia Supreme Court Certified Mediator

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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Cheating Spouse? In Virginia, GPS Evidence Only Available To The Wealthy.

July 23, 2013
There has been enormous controversy over the past several years about the right of spouses to use GPS evidence in an adultery case.  Just like anything having to do with modern day electronics and digital evidence, the courts are way behind the technology. New Virginia law, effective July 1, 2013, allows GPS tracking device evidence from your alleged cheating spouse’s automobile ONLY if that device was placed there by a registered private investigator.  As you could probably imagine, a good private investigator is very expensive. Good luck, Virginia, on this one.  Sounds like a lot of lobbying went awry. The new Virginia Code Section is §18.2-60.5.  gps
Read more here.

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.


Help in Moving On: When Others Misperceive You and It Makes you Want to Scream!

July 2, 2013

Positive-ThinkingMy mother is one of the smartest people that I know.  I have gone to her for every problem I have ever suffered through.  Over the years I have come to see my mom as one the world’s greatest advocates of “turning the other cheek”.  She is not a fan of putting one’s head in the sand, but feels that staying true to oneself – even when others have nasty things to say about you – is, in the end, the best way of pushing through life and coming out the other end as a happy, well-adjusted person.

So, for those of you who are suffering under the oppression of other people’s negativity towards you, here is some advice that my brother and I were raised with and that, in turn, we both rely on when raising our children.  I asked my mom to write up her philosophy on this topic.

The Question:

When your spouse, ex-spouse, friend, or former friend personifies you in a way that is demeaning, hurtful and incorrect, how can you avoid the personal pain that is caused by such misconception?

The Answer:

First off, you must know that the image portrayed and accepted by these persons may be permanently installed in the folklore of their family (friends), and is NOT you.  Think of this image as an invention of someone else’s imagination shared at your expense.

What to do?  You must rise above it all BECAUSE you know who you are and this image built around one single version of you is not you.   You also know that you are being pushed down so that those pushing you down can appear higher (right, superior, the winner, whatever).

You must know yourself and who you are so well that nothing can shake you (otherwise you won’t survive.)  You must feel so right about decisions you make and things you choose to do that it does not matter what those around you say.  You are as entitled to an opinion as they are.

Do not worry that former friends now taunt you.  They are no longer friends.  They were friends not worth having.  It may worry you that they do not like you, but plenty of people do like you.  Shift your attention to those people.  Remember, no one is liked by everyone.

And remember, also, when you are put down by a friend or former friend, spouse or ex spouse, despite what they may think, they do not run the world.  They are just one voice and not necessarily the voice of wisdom and reason that they may think themselves to be. Treat them with the same type of respect as you would accord a next door neighbor that you weren’t really close with, but had to deal with occasionally (or even often).  Don’t expect anything gratuitous from them and then you won’t be disappointed when they say hurtful things to you or about it.  It will just be business as usual.

When you know you have to come into contract with one of these ex-friends who is going to put you down, even ever so subtly, practice a mantra in your head: “I’m not listening to what you are saying, I’m not listening to what you are saying, I’m not listening to what you are saying”  Then, you will hardly what they have to say and it won’t hurt nearly as much as it otherwise would, or even at all.  Eventually you won’t hear what they are saying.  Eventually they might even notice that you hardly hear what they are saying and will stop wasting their breath.

Here is some wisdom that I recently found in an art magazine, regarding artists who are hurt by critics and even other artists (my mom is a collage artist at the Torpedo Factory Art Center in Old Town Alexandria, Virginia):

“When someone says, either in veiled language or in no uncertain terms, that you are an idiot, have no talent…often your reaction will be a hard-to-tolerate emotional response that shifts your world.  Nearly everyone has a strong, visceral reaction to being criticized, humiliated or shamed.  …Some very advanced or very detached human beings may be able to avoid these feelings.  For the rest of us, we feel them.  What to do?  The author continues (and I will summarize):

  1. Acknowledge to yourself that you just got slapped in the face, or worse.
  2. Realize that nothing important really happened.  What hit you is only one person’s opinion.
  3. Engage in a courageous personal assessment of the situation.  Maybe what they said is true and maybe that is the way you want to be.  Maybe they only took one part of your personality that they did not like and used it to define your whose being.  Maybe they are totally unqualified to pass judgment on you at all….like when a realistic painter feels an abstract painter isn’t really a painter…or a person who writes poems that do not rhyme is really not a real poet…etc…etc.

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator with Gwendolyn Graine of graineart.com

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.


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