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 loss 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.
Homeowners, buyers and real estate industry professionals who want to learn more about the short sale process are invited to be a guest of Craig Long, LLC for a special event featuring Raffi Tal, Chief Operating Officer of I Short Sale, Inc.
Eli Tene, CEO of I Short Sale, Inc. (ishortsale.com), a leading nationwide short sale and loss mitigation advisory firm, shared industry insights at the fifth annual Five Star Default Conference in Dallas, Texas.
I Short Sale, Inc. 1-877-907-4678 info@ishortsale.com Nationwide Short Sale and Loan Modification Services 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
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