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In order thing that the bank will want to know is: What is the hardship that the borrower is facing? The hardship will need to be demonstrable. A hardship can be defined as: A material change in the financial situation of a homeowner that is or willaffect their ability to pay their mortgage.
Examples of acceptable hardships are: Loss of a job, business failure, damage to property, death of a spouse, death of a family member, severe illness, inheritance, divorce, mandatory job relocation, medical issues, military service, payment increase or mortgage adjustment, insurance increase, tax increase, reduced income, too much debt, incarceration, an event that is causing the homeowner to fall behind in your loan payments.
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Is the mortgage currently in default (is the homeowner behind behind on payments)? Or has something in the homeowner's situation changed that will cause the home to soon be in default?
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Is the homeowner Insolvent? Insolvency for a homeowner (for the purpose of a Short Sale) occurs when the homeowner owes more than there income can cover, and there are no other assets or liquid cash that may be used to buy-down their mortgage. In other words, the homeowner does not have any assets that could be used to pay the mortgage.
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Do you owe more on the property than you can sell it for?
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Has you lender contacted you and let you know that your loan is in default and they are starting foreclosure proceedings?
All of this will need to be documented with tax returns and financial statements. If the homeowner does have assets there is still a possibility that the lender will grant a Short Sale, but the lender may require certain contingencies from the seller.
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