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Short Sale vs Loan Mod vs Refinance

The three big options for homeowners are short sales, loan modifications and refinance. What have you seen that actually worked?

Options: Refinance, Loan Modification, Short sale.

Refinance

Basics: Refinancing is when you are paying off your old loan with a new loan with lower interest rates.

  • The goods: This option is suitable for those who plan on staying in their home for awhile and/or those who are in an adjustable mortgage rate situation and want to solidify a fixed interest rate.
  • The bads: You will be paying closing costs when you refinance and in order to refinance, you must have equity in your home.

Loan Modification

Basics: A Loan modification is typically when you modify the current loan to make payments more affordable via lower interest rates and/or extending the duration of the loan (30yr to 35yr).

  • The goods: Loan mods can be a means to prevent foreclosure when you are delinquent on payments. Lowering payments could result in a more affordable living situation.
  • The bads: Back in 2010, the Today Show reported loan mods helped only 5% of applicants. Yes, it does lower payments and prevent foreclosure but it does not lower the 5 hidden costs of homeownership. The home may still be above your affordability level. In the long run, a loan mod would prolong the problem and not fix it as you are simply extending the term of the loan thus paying more payments/interest and not building equity.

Short Sale

Basics: A Short sale is when you sell your property for less than what is owed and negotiate the difference with your lender.

  • The goods: A short sale allows the homeowner to walk away from their home and in most cases, be forgiven of the remaining balance owed to the lender(s). Normally there are taxes involved with the forgiven balance. However, until the end of 2013, the Mortgage Forgiveness Debt Relief act grants immunity on primary residences.
  • The bads: A short sale will put a ding on your credit score and it will take about 90-120 months to complete one.

These are just the basics but would love to know what your experience is on each of these options.

Thanks

www.seattleshortsaleblog.com

 

 

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Do Loan Modifications Actually Work?

Loan modifications are a popular option most homeowners turn to when they are struggling with mortgage payments. It isn’t a secret however that it hasn’t worked as well as we hoped. The idea of “modifying” your current loan to create a more affordable payment plan seems enticing but do these popular loan modification programs actually work? Let’s looks at the data.

Don’t get me wrong, loan modifications do work for certain homeowners. Statistically, it is not for the majority. Mortgage Metrics Report reveals only 47.7 percent of the estimated 2.9 million loan mods are current or paid in full since 2008.

*excerpt from dsnews.com

“About 7.1 percent are currently less than 60 days delinquent; 14.2 percent are 60 or more days delinquent; 7.7 percent are in the foreclosure process. Lastly, 7.3 percent have already been foreclosed.

The OCC reports higher success rates among particular types of modifications. For example, the agency finds greater success among HAMP modifications. However, the OCC notes, “more restrictive qualification criteria restrict the number of borrowers who may qualify for a HAMP modification.”

Do you know of any friends or family who is successfully using a loan modification? What have you heard?


Peter

www.seattleshortsaleblog.com

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5 Reasons Foreclosure Prevention Is Like Halloween

1. Tricks

I don’t know if kids do this anymore, but I remember part of the fun, the anticipation, of Halloween was coming up with a “Trick” to offer in exchange for candy – a joke, rhyme, hand stand, armpit noise or, if you were desperate, a song. Foreclosure prevention is like that, except sometimes the trick is on the homeowner. You go to the lender’s door, ring the bell, ask for short sale approval and the bank requests a trick. You do the trick, even though it’s ridiculous (e.g., provide the birth certificate of your childhood pet), stick out your palm for your treat…and…and…what the?!...the lender requires another trick. Six months worth of tricks and you might get a treat.

2. Treats

Possibly the best part of Halloween – the treats! For a kid, heaven is having to use two hands to lug home a pillowcase weighed down with candy. Sorry, there is no candy in short sales. But there are treats. For a homeowner, the treat is to “hit the reset button”, to be released from an oppressive situation & constant lender harassment, without the stigma of foreclosure. For lenders, the treat is being spared the cost to preserve vacant property and the legal cost involved in foreclosure.

3. Costumed Characters

Every year, the National Retail Federation publishes a list of the most popular costumes (Michael Jackson in 2009; Spiderman in 2004), but some costumes are classic: Zombie, Super Hero, Vampire, Witch. I have yet to encounter Spiderman in any short sale transaction, but I’m convinced that a prerequisite for hire as a bank’s short sale negotiator is Zombiehood. Bank Negotiators and Zombies. Not. Human. Not human! Both have that risen-from-the-dead, jerky, robotic shuffle. And they l-l-l-o-o-o-v-v-v-e feasting on human flesh. As a Realtor specializing in short sales, I have witnessed scenes of chaos and panic as whole neighborhoods are consumed by Hells Fargo’s (Goo-For-Brains) Zombies.

4. Terror

Halloween and Short Sales elicit more than just fright; they both give birth to Terror. Fright is like a sudden shock – painful, but not enough to leave a noticeable scar and it’s over quickly. Terror implies something more intense. Dictionary.com’s definition of terror is “extreme fear in the presence of danger or evil”, and describes it as “prolonged…and may refer to imagined or future dangers”. For months, homeowners behind on their mortgage payments (1 of 5 Florida homeowners) dread opening the mail or answering the phone. They lose sleep at night, imagining the worst, nightmare images of the Bank of Evil tossing their belongings in the street as the neighbors look on. Halloween terror is also prolonged, but only until the movie is over.

5. Spooky Houses

For homeowners, the place that once represented the future, their piece of the America Dream, is now laced with cobwebs. Windows that formerly framed Norman Rockwell holiday scenes are now hidden behind tightly drawn curtains. Crabgrass replaces flower beds. Picket fences, once proudly painted white, fade to gray in the moonlight.



Disclaimer: My husband, the historian, read this and explained that “trick or treat” actually referred to a bribe, as in, “Hand over the sweets and I won’t egg your house.” Whatevs, Honey.
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