Often creditors require the borrower to prove they have an economic or financial hardship preventing them from being able to pay the deficiency. The Short Sale Hardship Letter is one way to start that process.

Creditors holding liens against real estate can include Primary Mortgages, Junior lien-holders – such as second mortgages, Home Equity Lines of Credit HELOC lenders, Home Owners Association HOA (special assessment liens) – all who will need to approve indidivual applications for a short sale, should they be asked to take less than what is owed.

Most large creditors have special loss mitigation departments that evaluate borrowers’ applications for short sale approval. Often creditors use pre-determined criteria for approving the borrowers and the terms of the sale of the properties. Part of this process typically includes the creditor(s) determining the current market value of the real estate by obtaining an independent evalauation of the property from an appraisal, a Broker Price Opinion (abbreviated BPO), or a Broker Opinion of Value (abbreviated BOV).

Depending on each Creditor’s policy and the type of loan, creditors may accept applications from borrowers even if the borrower is not in default with their payments. Due to the overwhelming number of defaulting borrowers due to mortgage failures and other causes as part of the financial crisis of 2007–2011, many creditors have become adept to process such short sales applications, however it can still take several months for the process from start to finish, often requiring multiple levels of approval.

Check out this book if you’re looking for information on how to use a short sale to stop foreclosure, and protect your credit.