A short sale seller recently contacted our office to ask whether he should continue to make his mortgage payments during the short sale process. He also asked what he should do about his HOA monthly dues.
Consciously or knowingly ceasing to make mortgage payments is called strategic default. There are many people that knowingly stop paying the mortgage because they cannot afford to continue to do so, and there are others that opt to stop because they believe that this might accelerate their short sale or their loan modification.
However, the conscious decision to stop making mortgage payments cannot be made by a real estate agent. Borrowers need to understand the consequences of their actions. Late mortgage payments impact your credit score and thus, they also impact your future ability to borrow.
The Home Affordable Foreclosure Alternatives (HAFA) program has specific guidelines, which often allow for a short sale when the borrower is current on the mortgage. Additionally, Short Sale Expeditor® often successfully completes short sales for short sale sellers that have not missed a single mortgage payment.
As for the HOA dues, the HOA can often be a short sale deal killer. Short sale lenders do not like to pay the seller’s unpaid HOA balance and often will only allocate a small amount of money for HOA document and transfer fees. So, at Short Sale Expeditor® we always advise short sale sellers to continue to pay the HOA dues whenever possible.
Whether to continue to make the mortgage payments or HOA dues is a personal decision that can only be made by the borrower. Understanding the consequences of the late payments can often help to make a more informed decision.