As a defaulted borrower, how your proceed is not an easy decision to make. The biggest area of new foreclosures are the forgotten defaults from 2007 - 2012 that are now "waking up". Most of these mortgages are now held by investors and not the banks that made the loans. Because of this, new economic reality rules must be recognized so that a defaulted borrower has knowlege of what lies ahead.
The Market for Non-Performing Loans -
I just got back from a two day national conference of lenders and investors that deal in non-performing loans. Hearing what lenders do to make money off of a non-performing loan was fascinating. The key to the disposition of a non-performing mortgage is to have the investment make money for the mortgage holder. Typically this concept is complicated with non-performing loans because they are held by an investor that is not The lender, or not even A lender at all, but instead a hedge fund or investment company.
Primary Goals of an Investment in a Defaulted Mortgage -
Without exception the top of the list of what to do was first determine what equity was in the property.
Second was to see if the borrower could be rehabilitated. That means can they start making payments.
Third, depending on the investor, some like to forget about resolutions and just foreclose. Others said were adverse to putting someone out of their home and those moral characters will just re-sell the loan to another investor who likely WILL foreclose.
All of the investors looked at the financial profile of the borrower.
The big take a way from all this is that none of the investors ever felt compelled to give a short payoff unless it was in their own economic interest.
New Defaults Way Down -
Another issue in today's marketplace of non-performing loans is that the default rate of new loans is so low that everyone is bidding on the leftover scraps of non-performing loans from the meltdown, and that is driving up pricing on this product. Because pricing is up, that means (for illustration only) instead of paying 65% of face value, investors are now paying 75 to 85% of face value. Under most borrower scenarios they are essentially asking the investor to take a loss. In this marketplace that is unlikely to happen because the investor can sell the loan to another investor and be economically better off.
You can consult with an experienced attorney in this matter to see if maybe there are some defects in the paperwork that could devalue the loan and make the current investor more inclined to cut and run. So not only must you be advised on the legal aspects of the loan, but on the economic aspects as well.