Picture this scenario - client purchased a home nearly two years ago with 100% financing and a 2/28 adjustable rate mortgage, expecting to refinance into a fixed rate before the first adjustment period. Fast forward a year and some change, and the market TANKS, so now he's upside down by $70K and the refinance he had planned to do is completely out of the question. Yet, he is living on a bit of a tight rope, and when his rate adjusts, there is no way he's going to be able to afford the additional $300/month that will be required.
This is my client's situation.
Solution -- which, by the way, seems almost too good to be true -- the short refinance or "short refi". The short refi basically contains two components, the first of which is the negotiation of a "short payoff" with the original lender. Basically, in a process similar to that of a short sale, the lender and consumer avoid the burden and expense of foreclosure, because the lender forgives a portion of the existing debt and agrees to accept a "short" payoff of what remains. The second part of the short refi, then, is the borrower's ability to qualify for a new loan (based on a percentage of the home's CURRENT appraised value), to pay off the original bank. The killer part, in this situation (as opposed to in a short sale), is that the consumer gets to remain in the home and move forward with a positive equity position and a more affordable monthly payment.
I'll be submitting this particular client's short refi application this week. I am confident that, if all goes as planned, the client will be utterly thrilled and pinching himself to be sure he's not dreaming. And, for me, being able to make a difference like this in someone's life . . . well, that just makes it all worth the while.
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