There are several options that your lender may extend to you if you are behind on your mortgage payments and want to avoid foreclosure.
Revised Repayment Option
If you have had a short-term financial setback due to circumstances beyond your control, your lender may be willing to let you pay off your deficiency in installments over a set period of time.
Loan Modification
Many mortgage servicers will adjust the terms of your loan; usually by extending the amortization schedule of your loan, lowering the interest rate, or rolling the deficiency into your loan and re-amortizing the balance. This will bring your loan current and give you a fresh start. Your lender does not want a mortgage in default and with declining prices they do not want the house.
Short Sale
Your lender may allow you to sell your home for less than the outstanding loan amount. In this event the lender takes the proceeds and will forgive you of any remaining debt. Contrary to its name, there is nothing "short" about a short sale other than the amount of money the lender is willing to accept. To date the process is long and not for the faint of heart. We are connected to a bank who is the BEST in short sales. Give us a call for details.
Short Refinance
Under some circumstances the lender may chose to release you of your existing debt and refinance the outstanding balance into a brand new loan.
Why Would a Lender Agree to a Short Sale?
Here's the Lender's Position
Your lender will weigh a number of factors before they decide to approve your loan for a short sale. They will carefully review of your circumstance and decide whether you deserve a second chance due to financial hardship caused by unavoidable circumstances. They will also look at whether it would be cheaper for them to simply proceed with the foreclosure on the house, make any needed improvements to the property and sell it through a local agent. How many other real estate owned properties they have in their portfolio will play an important role in their final decision.
The Short Sale Journey
When a borrower falls behind on several payments the loan is sent to the lender's loan loss mitigation department. Most lenders will at this time also consider short loan payoff sale requests.
If your communications with them is intelligent and complete your chances of success improve greatly. Your contact with your mortgage lender's loss mitigation department should be unemotional, professional and honest. You will be sending them the appropriate documents and any additional information that they may require.
You must know that lenders will approve a short sale as a last resort before foreclosing on your home. If a home was purchased at the peak of the market and has depreciated considerably, the owner may be upside down, which simply means the home is worth less than is owed. The lender may then consider agreeing to a short sale.
A lender is not into property management. A vacant home is costly. Insurance premiums, taxes, interest and repairs mount while no income is produced. They are making nothing from the investment until the property sells and closes. If a short sale can be accomplished, part of the investment is recouped and they are no longer losing. In a some cases the bank may even be willing to finance a new owner after a short sale.
Ron Gunder
Short Sale Listing Specialist
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purchase of foreclosures
303-717-8402
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ron@gundergroup.com
