Reducing Debts With A Short Sale To Stop Foreclosure in California

Stopping foreclosures California and throughout the nation is proving to be a difficult task for our leaders.  President Obama and Governor Schwarznegger are also working hard to stop foreclosure California so homeowners can stay in their properties.  In response, last year we saw the largest stimulus spending ever in the United States.  While this has helped prop-up the stock market and real estate prices somewhat, the bad news is that this stimulus is also rapidly increasing our national debt.  This is of major importance because this ever increasing level of debt is very destabilizing for our economy, and could actually delay any meaningful recovery to our economy while not doing nearly enough to stop foreclosure in California. 

To make matters worse, the stimulus may be starting to wear off.  The stock market is going down again, and it’s hard to predict how much more stimulus the government can afford.  Our national debt already exceeds $13 billion, which is roughly equal to the US’s annual gross domestic product.  At the current rate of growth, our debt will soon surpass the country’s debt-levels in 1945, after WW II ended. 

Stimulus Plan Is Not Stopping Foreclosure California

This has important implications for homeowners who want to stop foreclosure California, but are having difficulties making their monthly mortgage payments.  As the stimulus wears off and banks are forced to wrestle with the growing backlog of unpaid mortgages, it appears that we will be unable to stop foreclosure California.  When this happens, prices will likely fall below current levels in California and around the Country. 

Strategic Mortgage Default

This is an event that banks hope to avoid.  As the economy worsens and real estate prices decline, more and more families may be forced to walk away from their properties.  In addition, strategic mortgage default is becoming more popular.  It is estimated that more than 25% of all real estate is worth less than the mortgage balance.  Until this economy hits rock bottom, you can expect this percentage of “underwater” properties to increase.

Stop Foreclosure California With a Short Sale

While the government appears powerless, there is something homeowners can do when they cannot afford their home.  They can dump their debt using a short sales.  Using a short sale, the homeowner will lose the property, but they will be minimizing the damage to their credit rating.  Under federal guidelines, a homeowner who does a short sale, can purchase another home using federally insured mortgage after two years. 

This is often a better solution because, today, many distressed properties are worth much less that the mortgage.  By selling and purchasing a new property two years later, the homeowners will be getting a fresh start without having all that debt, which was the real problem for them! 

The important thing is for the homeowners to find someone they can trust who will perform the short sale correctly, so they are able to eliminate taxes and avoid a deficiency judgment from the lender. This requires a careful evaluation of the homeowner's debt and taxes.