LOSS MITIGATION

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LOAN MODIFICATION

A loan modification is a change made to the terms of an existing loan by a lender. It may involve a reduction in the interest rate, an extension of the length of time for repayment, a different type of loan, or any combination of the three.
Such changes usually are made because the borrower is unable to repay the original loan. Most successful loan modification processes are negotiated with the help of an attorney or a settlement company. Some borrowers are eligible for government assistance in loan modification.


Getting a mortgage loan modification could mean extending the length of your term, lowering your interest rate or changing from an adjustable-rate mortgage to a fixed-rate loan. Though the terms of your modification are up to the lender, the outcome is lower, more affordable monthly mortgage payments. Foreclosure is a costly process for lenders, so many are willing to consider loan modification as a way to avoid it.

Can Anyone Do A Short Sale?


It is important to understand that not all lenders will accept short sales or discounted payoffs, and not all Sellers will qualify for a short sale. Yes, there is a qualification process. In most short sale cases, the Seller must have a proven hardship and must owe more to the bank that what the home is currently worth. It is not enough to simply say that you cannot sell your home for what you owe. It is not enough to say that you want to move to a bigger home and that the market isn't good enough for you to get a Buyer. It is not enough to say "Hey, I made a bad purchase, so let's just dump this home". Rather, there must be some sort of extenuating circumstance that is preventing you from selling the home and completely paying off the entire debt. Additionally, you must also show that the current circumstances have affected your ability to continue making timely mortgage payments.

Common hardships that may be acceptable to banks include divorce, curtailment of income, job loss, job transfer, medical issues etc. Banks want to ensure there is a valid reason to take a loss. Sellers must be able to prove that they are enduring a financial storm by providing mountains of paperwork to the bank such as bank statements, paystubs, tax returns etc.




Will I get any money selling my house as a short sale?


While it’s called “relocation assistance,” you can use the money for anything.

Our record for relocation assistance is $40,000.00. We find that our clients get relocation assistance in about 95% of the sales we help with.

If you meet HAFA (Home Affordable Foreclosure Alternatives) requirements you may get up to $10,000 when your short sale closes. Even if you don’t qualify for HAFA relocation assistance, you have other options. If you have a Fannie Mae loan, you may qualify for up to $3,000 in assistance at closing.




How long does a short sale take?


This answer can vary significantly as there are many moving parts and variables. It can often take homeowners wanting to short sell their homes weeks or even months to obtain lender approval. Mortgage lenders can also take several more weeks to accept or reject purchase offers made on home short sales they're allowing. Homeowners are responsible for their homes, including maintenance, during the entire short sale process. Once a short-sale buyer's purchase offer is accepted by the lender, the lender will generally close the sale within a couple of weeks.




What are the Tax and Credit Consequences of a Short Sale?


Sellers often ask which is better... a Short Sale or a Foreclosure? Well, that depends, and it will always depend. More often than not, a short sale is going to be 'better' because the consequences will be less severe than a foreclosure. However, each situation is different, each Seller's needs are different, and each bank is different. Regardless, there may still be credit, legal and tax consequences with both short sales AND foreclosures.

Both foreclosures and short sales will have credit consequences, and both may stay on your credit report for 7 to 10 years. However, whereas a foreclosure may prevent a lender from approving you for another home loan for 5 to 7 years afterwards, typically, short sellers may be able to purchase again within 2 to 7 years. A lot depends upon how a short sale is reported to the credit bureaus. If it is reported like the vast majority of cases as "settled for less than full value", then your credit will indeed take a hit, albeit still smaller than with a foreclosure.




Do I Have To Be Behind On Payments to Do Short Sale?


The short answer to this question is... maybe. It depends. Most people who have successful short sales are indeed late on their mortgage. Some are late by only 30 days, and other have not made a mortgage payment in a couple of years. Our best advice is to continue making your mortgage payments to the best of your ability. If you cannot make complete payments (many lenders will not accept partial payments), then you must do what is in your best interest. Nobody should tell you to STOP making mortgage payments. If your attorney or real estate advisor counsels you to stop making payments, you may want to think about alternative advice.





FREQUENTLY ASKED QUESTIONS

Short SALE

A short sale in real estate is when a financially distressed homeowner sells his or her property for less than the amount due on the mortgage. The buyer of the property is a third party not the bank, and all proceeds from the sale go to the lender. The lender either forgives the difference or gets a deficiency judgment against the borrower requiring them to pay the lender all or part of the difference between the sale price and the original value of the mortgage. For example: If a Seller still owes a bank $200,000 on their mortgage, but they may only be able to sell the home for $175,000 on the open market, then the home and seller may qualify for a short sale, and the bank may agree to accept $175,000 as full payment.
Why would anyone agree to do this?  The foreclosure process can be very lengthy and costly for the bank.  It can also be very frustrating and emotionally draining for the Seller.  Many homeowners who can no longer afford to keep mortgage payments current find that a short sale is the best alternative to bankruptcy or foreclosure proceedings.  It may also possibly save their credit from total disaster.  When lenders agree to a short sale in real estate, they are betting that they can avoid a lengthy and costly foreclosure process. It is supposed to create a win-win scenario for all parties involved. 

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Can Anyone Do A Short Sale?


It is important to understand that not all lenders will accept short sales or discounted payoffs, and not all Sellers will qualify for a short sale. Yes, there is a qualification process. In most short sale cases, the Seller must have a proven hardship and must owe more to the bank that what the home is currently worth. It is not enough to simply say that you cannot sell your home for what you owe. It is not enough to say that you want to move to a bigger home and that the market isn't good enough for you to get a Buyer. It is not enough to say "Hey, I made a bad purchase, so let's just dump this home". Rather, there must be some sort of extenuating circumstance that is preventing you from selling the home and completely paying off the entire debt. Additionally, you must also show that the current circumstances have affected your ability to continue making timely mortgage payments.

Common hardships that may be acceptable to banks include divorce, curtailment of income, job loss, job transfer, medical issues etc. Banks want to ensure there is a valid reason to take a loss. Sellers must be able to prove that they are enduring a financial storm by providing mountains of paperwork to the bank such as bank statements, paystubs, tax returns etc.




Will I get any money selling my house as a short sale?


While it’s called “relocation assistance,” you can use the money for anything.

Our record for relocation assistance is $40,000.00. We find that our clients get relocation assistance in about 95% of the sales we help with.

If you meet HAFA (Home Affordable Foreclosure Alternatives) requirements you may get up to $10,000 when your short sale closes. Even if you don’t qualify for HAFA relocation assistance, you have other options. If you have a Fannie Mae loan, you may qualify for up to $3,000 in assistance at closing.




How long does a short sale take?


This answer can vary significantly as there are many moving parts and variables. It can often take homeowners wanting to short sell their homes weeks or even months to obtain lender approval. Mortgage lenders can also take several more weeks to accept or reject purchase offers made on home short sales they're allowing. Homeowners are responsible for their homes, including maintenance, during the entire short sale process. Once a short-sale buyer's purchase offer is accepted by the lender, the lender will generally close the sale within a couple of weeks.




What are the Tax and Credit Consequences of a Short Sale?


Sellers often ask which is better... a Short Sale or a Foreclosure? Well, that depends, and it will always depend. More often than not, a short sale is going to be 'better' because the consequences will be less severe than a foreclosure. However, each situation is different, each Seller's needs are different, and each bank is different. Regardless, there may still be credit, legal and tax consequences with both short sales AND foreclosures.

Both foreclosures and short sales will have credit consequences, and both may stay on your credit report for 7 to 10 years. However, whereas a foreclosure may prevent a lender from approving you for another home loan for 5 to 7 years afterwards, typically, short sellers may be able to purchase again within 2 to 7 years. A lot depends upon how a short sale is reported to the credit bureaus. If it is reported like the vast majority of cases as "settled for less than full value", then your credit will indeed take a hit, albeit still smaller than with a foreclosure.




Do I Have To Be Behind On Payments to Do Short Sale?


The short answer to this question is... maybe. It depends. Most people who have successful short sales are indeed late on their mortgage. Some are late by only 30 days, and other have not made a mortgage payment in a couple of years. Our best advice is to continue making your mortgage payments to the best of your ability. If you cannot make complete payments (many lenders will not accept partial payments), then you must do what is in your best interest. Nobody should tell you to STOP making mortgage payments. If your attorney or real estate advisor counsels you to stop making payments, you may want to think about alternative advice.





FREQUENTLY ASKED QUESTIONS

FOREBEARANCE

A mortgage forbearance agreement is an agreement made between a mortgage lender and a delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will—over a certain time period—bring the borrower current on their payments.


The coronavirus outbreak has triggered forbearance help from Fannie Mae and Freddie Mac, which, between them, guarantee more than two-thirds of all mortgages and 95% of mortgage-backed securities.


Forbearance provides the borrower time to repay delinquent mortgage sums. This is advantageous to the struggling borrower, but offering forbearance also benefits the loan owner, such as a bank, which frequently loses money on foreclosure after paying the fees associated with the process. However, loan servicers, which collect payments but do not own the loans, may be less willing to work with borrowers on forbearance relief because they do not bear as much financial risk.

What are the terms of a forbearance?


The terms of a forbearance agreement are negotiated between the borrower and the lender. The opportunity for such an agreement depends on the likelihood that the borrower will be able to resume monthly mortgage repayments once the temporary forbearance is over. The lender may approve a full reduction of the borrower's payment or only a partial one, depending upon the extent of the borrower's need and the lender's confidence in the borrower's ability to catch up at a later date.

In some cases, the lender grants the borrower a full moratorium on making mortgage payments for the forbearance period. Other times, the borrower is required to make interest payments but not pay down the principal. In still other cases, the borrower pays only part of the interest with the unpaid portion resulting in negative amortization. Another forbearance option is for the lender to reduce the borrower's interest rate on a temporary basis.




Will you receive forbearance?


Being awarded forbearance on a mortgage requires contacting the lender, explaining the situation, and receiving approval. Borrowers with a history of making payments on time are more likely to be granted this option. The borrower must also demonstrate the cause for repayment postponement, such as financial difficulties associated with a major illness or the loss of a job.

A borrower who worked the same job for 10 years and never missed a mortgage payment during that time, for example, is a good candidate to receive forbearance following a layoff, particularly if the borrower has in-demand skills and is likely to land a comparable job within weeks or months. Conversely, a lender is less likely to grant forbearance to a laid-off borrower with a spotty employment history or a track record of missing mortgage payments.





FREQUENTLY ASKED QUESTIONS

Repayment Plan

A repayment plan on a mortgage helps you get back on track after a period of missed payments. While your mortgage lender already charges you a fixed amount per month, a repayment plan adds a portion of the past-due amount to your bill for a period of several months until you're caught up. It's a strong option if you're now in a better financial situation and you're motivated to avoid falling further behind. You'll need to demonstrate to your lender that you can afford the repayment plan, which may incorporate late fees.

Bill

Conventional sale

A conventional sale is when the property is owned outright (has no mortgage remaining) or the owner owes less on their mortgage than what the market indicates the owner could sell their property for. Such conventional sales are often smoother transactions than non-conventional sales, such as foreclosures, probate related sales and short sales.

To learn more about your options, call (305) 969-3602 or send an email to schedule a confidential case consultation with our experienced foreclosure attorneys.

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PHONE: (305) 969-3602

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PHONE: (305) 969-3602

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