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Short sale and cancellation of credit cards by banks

Licensed Real Estate Agent

Charleston, SC

September 07, 2009

I have heard that when a homeowner becomes late in their mortgage payments in anticipation of a short sale that the holders of their credit cards from other banks find out about this and immediately cancell all of their credit cards; has any one heard of this or experienced this?

Licensed Real Estate Agent

Pembroke Pines, FL

September 07, 2009

I have not heard that but I would assume it would be illegal for the homeowners Lender to share the fact there is a Short Sale in process. However, if the credit card companies are being paid either, then they have that fact to cancel or hold the credit from being used.

It would be interesting to find out if this is widespread.

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Licensed Real Estate Broker

Pleasant Hill, CA

September 07, 2009

I've heard of credit cards cancelling and decreasing limits, or HELOCS cancelling, etc.. but I'm not sure that they could find out specifically that there was a short sale unless the homeowner told them, but certainly I do think they check credit or have a way of monitoring credit on their cardholders, and once they've missed a mortgage payment or two it probably triggers something in their system. I think that once you miss mortgage payments , what your other creditors do is probably fair game. They want to protect themselves too.

Licensed Real Estate Agent

Laguna Beach, CA

September 07, 2009

Once this is reported to the bank as a short-sale to their banks, all the other banks become aware of this. Due to the government taking over the banks and all the banks have the same data base as each other, the other bank owned creidit cards will do one of two things. 1) They will send out a notice that the credit limit has been dropped from $5000.00 to $250........2) They will also raise the interest rates up to as much as 31.99% APR..........The card holder agrees not to use the card anymore and to pay off the balance at the rate they had before the increase. Does anyone remember that people went to jail for loan sharks for charging this amount of money? This is wrong on so many levels. The expect us to pay on time, but we can't even get a bill passed to have the banks respond to our offers within 30 days. Why are the American people not better taken care of than this? And why isn't the govenrment making their banks as resposible as they are making us and our clients?.......This has been going on, especially in CA for some time now........So, people that know they are in trouble go out and rent a place before their credit drops, and even buy cars for they know they will not be making their mortgage payments and will not be able to get a car at a decent rate. Again, there are so many levels of wrong here I can't believe it.......

Licensed Real Estate Agent

Charleston, SC

September 08, 2009

More specifically my question is, do you know of any instances where a client, who is going for a short sale but has not yet had the bank agree to an offer, and this clients starts to miss several mortgage payment; will other banks/credit card companies shut down their credit cards or reduce available credit to a minimal amount. My client has a small business and relys on credit cards for work plane tickets, hotels and misc supplies???

This client barley has enough income to pay for basic living and work expenses and is paying mortgage payments but using all of his retirement funds to do so because he is afraid that if he misses a mortgage payment while trying to do a short sale his creit will be cut off.

Thanks for your reply's above and for any more yet to come!

Licensed Real Estate Broker

Pleasant Hill, CA

September 08, 2009

Yes, absolutely. Once you start missing mortgage payments you are fair game to other creditors as far as them wanting to protect themselves. My question is does he use the cards to conduct business and then repay at end of each month or is he just building up more and more debt. If the latter, then he has a real chance of having his cards shut down. Now, keep in mind, if he can afford to keep his mortgage current, one does not always need to be late. Talk to the bank and see if you can do this with his payments current. I've done several with current mortgage payments. Depends on bank, or investor, and sometimes on the nature of the hardship.

But beware, a successful short sale is not the end of his problems. Once that notation hits of settled for less than full balance, or other short sale notation, his other creditors may still see him as a risk.

Licensed Real Estate Agent

Ocoee, FL

September 09, 2009

Catherine is right, one thing I'll add is to get an atty involved and make the short sale contingent on not putting it on his credit report that it was a short sale. I've done this many times. It's still cheaper to do a short sale than to foreclose, and many loss mitigators will say the will not do this, but then they do.

It's also useful to see who owns the loan, fannie, freddie?? And get them involved. I just did that on a GMAC deal where I only needed a few extra days to close on a transaction (due to the loss mitigators fault) and they would not give it to me. So I called fannie mae and not only did they postpone the sale, but they CANCELLED it.

As Catherine says, there are many variables, but don't give up, just because everyone says they won't do non recourse is not true because I HAVE done it and know many others who also have. You just have to be a better negotiator than the loss mitigator, and that is not all that hard. I think they get paid minimum wage and they are given quota's, you don't get enought NPA's off the books, and you are fired. All that and 500 files on their desks with no help. It varies from lender to lender, so just out negotiate them - that is the easy part ;-)

Licensed Real Estate Agent

Ocoee, FL

September 09, 2009

I forgot to add that due to credit card laws (read the fine print) they have the right to pull your credit at certain intervals. EVEN if you have never been late to one credit card, if you have been late on another, OR spent alot of money on one card, OR have a high limit even though you don't use it, they can raise your interest, lower your limits or take your card away entirely.

his is soooo wrong. What everyone needs to do is to cancel their credit cards and start living within their means. If you don't have the money, don't buy it. It's nice to have one to track expenses for taxes, but there are other ways to do that.

I've not had one in over 10 years. My brother asked me "what do you do in an emergency?" lol... you will learn fast what is really an emergency or not if you don't have a credit card and you have to pay cash, work out a barter deal, find a friend who does what you need done and network together to help each other out.

Credit card laws should be changed, but that isn't going to happen, so if the supply doesn't meet the demand, they'll have to change on their own. I've banned them from my life and never missed them. I get calls all the time, letters, post cards offering me a card at 0 percent interest for a year, but they won't guarantee what happens after that, because they WANT you to be late, run up a large balance so they can charge you a fortune that you'd never be able to pay off til the day you die.

I just say no thank you.

Licensed Real Estate Agent

Laguna Beach, CA

September 09, 2009

You wrote, "But beware, a successful short sale is not the end of his problems. Once that notation hits of settled for less than full balance, or other short sale notation, his other creditors may still see him as a risk.

You are correct...........This is just the beginning of the red tape he will encounter for some time

J. "Ronnie" Williams

Licensed Real Estate Agent

Mission Viejo, CA

September 09, 2009

Paula, Can you share on line/off line, the numbers you have for calls direct to Fannie & Freddie for loans they are the underlying investor of? Many thanks for your contribution to the various forums.

Rick Stuart

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