I wish that for every client that asked me this question, my reply could be, "yes". But unfortunately, when a homeowner is financially distressed and either has already stopped paying their mortgage, or is thinking about stopping, the most likely scenario to avoid foreclosure is a short sale....a transaction in which the property is sold for less than the amount owed with the mortgage lender's approval.
Now, the owner could try a loan modification, but in most cases, the lender won't forgive any of the principle balance. Since the property isn't worth what is owed, a modification can put the homeowner in a position of a better payment in the short-run, but leave them with an un-sellable house in the long-run, creating a situation in which a short sale is simply needed later in order to get out from under the debt on the property.
However, there are some specific circumstances in which, if an owner asks me, "Is there a way you can help me keep my home?", I CAN say, "yes".....reducing their mortgage debt significantly, while preserving their credit, AND keeping them in the property. And this process has nothing to do with a loan modification.
These circumstances include:
- The owner must have a Jumbo 1st mortgage loan - meaning a loan amount ABOVE $417,000 in most areas.
- The owner must be CURRENT on your payments. **A financial hardship need not exist, but it helps.
- The property value must be LESS than what is owed.
That's it.
My name is Aaron Ayotte, The Short Sale Monkey, and I've been helping homeowners and Realtors for about 4 years with short sales. Although helping homeowners avoid foreclosure via a short sale is great, being able to help clients keep their house, while preserving credit and greatly reducing debt is, in a word, awesome!
On the surface, the process is simple.
- The owner, gets pre-approved for NEW financing at about 75% of the VALUE of the property. (Chances for approval are high because 1) being current on the existing mortgage means the owner probably has good credit, and 2) the loan-to-value for the NEW lender is very attractive.
- Once approved for the new loan, our workout attorney begins negotiating a discount on the existing mortgage with the lender(s). **During the process, he discloses to the lender that the owner's intention is to pay off the discounted debt, keep the house, and refinance at a later time.
- Once the discount from the existing lender is approved, the owner uses our investment group's funding to pay off the discounted amount, and refinance a few days later to pay us off.....again, all with the complete knowledge and written disclosure to all lenders involved.
The result is a greatly reduced debt obligation on the property, preserved credit rating,and the owner doesn't have to move or sell, or work with the bank directly.
Beautiful!
Now there are a number of specific reasons why this works and I've gone into these details on our site, The Short Sale Monkey. I've also created a free video that goes into even greater detail with numerical examples about how this works. It's very important to understand that this ONLY works in a jumbo loan scenario. Trying to keep your house in this manner with any other type of loan simply isn't possible.
Think about the people you know, the people you've met in your business, at your church, or in civic groups. I'll bet that if they have a jumbo loan, there's a very good chance their property value is less than what they owe, and that if they knew about this program they would want to start asking questions and get more details.
There are A LOT of people in the U.S. right now living in property that is worth less than what they owe, many continuing to make their payments diligently, waiting for the market to "rebound" so they can be in a position of equity again. I'm excited to be able to help these homeowners realize this equity position quickly, without the wait.
As with anything new, there will be questions - likely lots of them. Feel free to leave a comment or question below and I'd be glad to respond.
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