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Short Sale Surprise

July 6, 2010

Let’s just say that you were one of those people that was a janitor and wanted to buy a house in 2005. Everyone around you was buying houses, even that stupid Ricky kid down the street bought a house and your wife was harping on you, pushing the “stupid loser” button, because you hadn’t bought her a house.

You know that Ricky makes less money than you do so one night, while you’re drinking beers, you get the agents phone number from Ricky.

Ricky’s agent does loans and real estate so he ran your credit. He said your FICO score was 662 because you were behind on your car payment but you could still buy a house.

“Right on!” you exclaim, then worried you ask “what kind of payment will I have?’

“Oh, don’t worry, it’s only $700 more than what you are paying for rent”.

$700 is about 25% of your income but, you can probably rent a room to your cousin so you can work it out. Your wife beams.

When you go to sign the paperwork, you ask the agent why it says “cleaning service” after your name and that you make $12,000/month. He shrugs and says, don’t worry, the lender won’t check. Besides, your kids have already picked out the colors for their rooms.

Your wife signs the papers, without reading one word, and expectantly, passes the pile to you. All eyes on you, you sign.

11 months later, after you are living in this beautiful house, in a neighborhood you never thought you could afford, after you’ve spent every weekend redoing the kitchen and converting the garage into a rental so you can keep up on the car payment, you get a notice in the mail.

Your payment is adjusting in 60 days. Your new payment is $1800 higher than the current payment that you can’t afford.

At first,  you ask for overtime. You pick up side jobs. You hustle.  You don’t pay the car payment and the car disappears one night.

Despite your best efforts, you start to get behind on the mortgage. You miss that first payment and are on edge waiting for the house police to knock on your door and tell you to leave. The phone rings more and letters come in the mail. You make piecemeal payments until the bank refuses partial payments.

Time ticks and you almost forget that you are behind on the mortgage.

Then another letter comes and this one is from the courthouse. The Notice of Default has been filed.

You’ve been sleeping on the couch for 6 months because the wife thinks you’re a “stupid loser” to let this happen. You are working two jobs, are renting two rooms, have a family living in the garage and built a cottage out back to rent, but you only have $1420 in the bank and the cure amount is $32,485.

You call that same stupid dude that got you into this mess to sell the house.

“Oh, sure. We’ll just do a short sale. I’m doing a ton of them.”

This time you gather up original documents: bank statements, pay stubs, tax returns. Everything is submitted to the bank and the short sale is finally closed after 5 months of documents and paperwork.

The agent makes another paycheck. You are now a renter and your wife has left with the kids because it’s too embarrassing to be with such a “stupid loser”.

3 months later you get a letter in the mail, this time it’s from the FBI. The bank audited your loan files and found some discrepancies. They have turned your loan files over to the FBI  and you are now under criminal investigation for loan fraud unless you can explain how your income went from $12,000/month to $3400/mo in a three year period while working the same job.

Surprise.

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