I Short Sale, Inc. (ishortsale.com), a leading nationwide short sale and loss mitigation advisory firm, has expanded its loan modification department with the addition of several experienced loan modification specialists and support staff.
Key reasons for property owners to avoid foreclosure:
·Minimizing damage to the credit
Foreclosure and bankruptcy are public records that cause fatal damage to credit score (foreclosure up to 7 years and bankruptcy up to 10 years)
·Maintaining control and integrity
Eviction is an unpleasant experience where the borrower is forced to lose the house against his will
Modification
In a loan modification, a lender agrees to modify any or some of the terms of the mortgage. This is a process where an existing note is modified, but not cancelled. Changes may include: extend the term of the loan, change the monthly payments, change the interest rate, etc.
This solution does not solve the reason the borrower is in default, and usually only delays the problem. It can work only if the borrower has the proper income (very rare). The lender might lose seniority. The lender takes a loss in advance.
Forbearance
Under a forbearance agreement, the lender agrees to stop the foreclosure process and determines the payment terms that in a certain time will bring the borrower current.
This solution does not solve the reason the borrower is in default, and usually only delays the problem. For the borrower, unpaid interest will be capitalized into principal at the end of the forbearance period. In this case, the borrower must have funds excesses the monthly payment and should have stable income- this is not realistic in many cases.
Deed in Lieu
A deed-in-lieu of foreclosure is a voluntary conveyance of title in exchange for a discharge of debt. The house must be free of other liens and the borrower must have clear title.
Borrowers like this alternative because they can get free from their mortgage although the damage to their credit is high. However, generally, lenders will not proceed with this option when the current market value of the property exceeds the outstanding indebtedness of the borrower. This option holds a legal liability to the lender. The lender ends up with REO. This is a rare solution because of the additional loan liability.
Refinance
To receive new financing or to discharge an existing mortgage with the proceeds from a new mortgage obtained at a lower interest rate.
This solution does not necessarily solve the reason the borrower is in default, and usually only delays the problem. Lenders often incorporate costly penalty clauses to try to make it not worthwhile to repay the mortgage earlier. New regulations (full doc) will make it almost impossible for many borrowers to refinance especially in a declining market. Rising interest rates may be an obstacle.
Short Sale
A process in which a lender agrees to receive a lower amount of an owed debt in exchange for the sale of the property to a third party, usually at no cost to the borrower.
This solution solves the core of the reasons the borrower is in default. It gives the borrower a real opportunity to exit the situation and have a fresh start while minimize damages to the borrower (considering the default situation). It is a Win-Win solution for lenders and borrowers. The lender receives funds upfront and losses are minimized in comparison to REO and the lengthily foreclosure or bankruptcy.
Short Sale
REO
Process
·I SHORT SALE coordinates the entire process
·Pre-Lien
·Lien
·Notice of Default
·Notice of Sale
·Trustee Sale
·REO
Time
·2-4 months
·Pre-Foreclosure - 9-24 months
·Eviction time – Minimum 30 days
·Average closing time – 30 days
·Average minimum of 120 days on the market
Property Condition
·Usually tenants will maintain the house in good condition
·Fair-Bad condition
·Pre-Foreclosure - Often tenants will care less about property maintenance (sometimes cause damage)
·REO properties are harder to protect and to maintain
·Liability to lender
·Environmental I Short Saleues
Property Value
·Current fair market value
·Traditionally 20-30% lower net than short sale
·Low image – targets investors
·High deprecation
·Considering the market trend, properties stay longer on the market and loose value rapidly
Cost
·The difference between the loan balance and the sale price
·5-7% Closing Costs
·Traditionally 20-30% more than short sale
·The difference between the loan balance and the sale price
·Foreclosure Costs
·Repairs
·Insurance
·Property and other Taxes
·Property Management
·Current market trends – decrease in property value
·Legal liability
Short Sale
REO
Property Owner
Most likely to minimize damage to the credit score and to avoid foreclosure
Lender
Most likely to minimize loses and to avoid the lengthily and costly foreclosure process
Woodland Hills, California. Los Angeles, California. Beverly Hills,
California. San Diego, California.
Miami, Florida.
Phoenix, Arizona. Las Vegas, Nevada.
The information contained in this website is intended to be used for informational purposes only and to provide a general overview of the topics described herein. There may be tax and other legal consequences associated with a short sale. I SHORT SALE makes no representations or warranties concerning potential tax or legal consequences relating to any final disposition of any property. Clients are advised to consult with a tax professional regarding the potential tax consequences for their particular situation. I SHORT SALE is providing a service in response to a complex situation and offers a recommended solution where possible. Nothing is represented as tax advise to our clients as every situation may result in different tax consequences. I SHORT SALE is not a law firm or an accounting firm and regarding any specific questions relative to any transaction, I SHORT SALE strongly encourages all parties, agents, and brokers involved in a transaction to seek such advice from a professional advisor. Legal Statement
The information contained in this website
is the sole and exclusive property of I Short Sale, Inc. ("I SHORT SALE")
and may not be reproduced for any purpose whatsoever without the express
written permission I SHORT SALE. Any unauthorized reproduction of these
materials is strictly prohibited.
