Mortgage Reduction Short Sale Service

For desperate homeowners, the short sale is an event that is both desirable and disastrous at the same time. According to the National Association of Realtors, short sales made up 11 percent of the home sales in June 2009. That’s no mean feat for a transaction that was rarely used prior to this recession.

What’s most uncommon about the short sale is the number of successful short sale deals that actually result in a transfer of property from one homeowner to another. Instead, more than three out of four short sale transactions fail. Sellers, buyers and banks all point to different reasons for that. Sellers say that banks are unresponsive to legitimate buyer offers. Banks say that buyers offer too little for the property and sellers don’t keep the bank updated with their financial information. Buyers say they hear nothing from the bank for months on end and their own financing falls apart, or that they just want to get into a home and don’t need the additional short sale hassle. At times, the market values plunge between the time a short sale offer is made and the time the bank responds, causing many short sale investors to withdraw their offers.

The impact of a failed short sale is devastating. Most often, the homeowner abandons the property after the bank forecloses. The foreclosure process may take months, during which unoccupied, neglected homes can be damaged, either intentionally or unintentionally. As a foreclosure sale, the value of the property plunges even more. Often banks recover less than half of the remaining mortgage when a foreclosed home is sold. More often, the bank elects to keep the home on its books, hoping that a better real estate market is just around the corner.

Buyers fare the best. There are so many homes on the market, the buyer who is interested in occupying a home has hundreds to choose from, including those that have never even been occupied. Banks are reluctant to lend to anyone, so only those buyers whose credit is sterling need apply.

A particular type of buyer, the short sale investor, can benefit as well. The short sale investor – especially one who isn’t dependent on a bank for financing, and who can afford to wait the many months (sometimes in excess of a year) a successful short sale can take – can benefit from this market as long as the short sale offer doesn’t exceed the market value when the sale is finally concluded.

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The bigger they are, the harder they fall. Who hasn’t heard that? Well, it now seems that high-value homes have fallen more in value than more modest homes have. According to Trulia, homes whose value exceeds $2 million and are for sale saw price drops of nearly 15% in June, compared to drops of about 9.75% for homes whose values were initially below $2 million. This opens short sale opportunities among the most exclusive properties in the country.

What is the problem for extra-posh digs? There is no secondary market right now for jumbo loans. When lenders can’t sell their mortgage loans, they’re on the hook for the full amount of the transaction. With banks being 100% risk-averse right now, no one wants to write even the occasional $2 million loan. Some analysts are even declining to predict what will become of the high-end housing market, saying only that there is no recovery in site for high-dollar homes.

The state of the multi-million dollar housing market for buyers doesn’t change the situation at all for homeowners who need short sales. With potential buyers being shut out of the market, the lucky few homeowners may get by with a short sale of the property.

For the high-value homes, a short sale is a win-win. The bank doesn’t want to take back a property for which there is no market and no chance of a sale in the near future. Taking back the property means that the bank will be paying high taxes for the foreseeable future, and will be responsible for the maintenance and upkeep on the home, if only to preserve the value of the property.

The short-sale buyer can rescue a property with a high potential resale if he can offset the maintenance, upkeep and tax costs that will accompany the home. In addition, the home can be rented to generate income while the market recovers.

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Mortgage debt in bankruptcy typically isn’t dischargeable. Because an asset –the home itself – secures the debt, the creditor can take control of the asset if the petitioner fails to meet the requirements of the bankruptcy settlement. Although primary residences are protected in bankruptcy proceedings, the lender can petition the bankruptcy court to seek foreclosure on the home if the lender is not convinced that the petitioner can follow through on the reorganization plan or if the petitioner defaults on mortgage debt in bankruptcy.

Bankruptcy is a state we as consumers are counseled to avoid at all costs. Like foreclosure, bankruptcy can have a long-lasting and devastating effect on the petitioner’s ability to get credit. A poor credit rating can also impact the petitioner’s ability to get a job, insurance or consumer credit. It may also make the petitioner vulnerable to creditors who offer high-interest, high-risk credit targeted toward consumers who have petitioned for bankruptcy protection.

Right now, bankruptcy courts do not have the authority to apply mortgage reduction in bankruptcy proceedings. Congress is considering expanding the authority of the US Bankruptcy Court to permit the courts to write off (or “cram down”) the portion of the mortgage debt in bankruptcy that is no longer secured by the home and to impose other debt relief provisions on creditors.

One option Congress is considering is to allow the Bankruptcy court to convert a portion of an over-valued mortgage into “unsecured debt.” This conversion would allow the court to apply mortgage reduction in bankruptcy, discharge a portion of the debtor’s mortgage altogether, or subject it to a “pennies-on-the-dollar” settlement.

For the most part, mortgage lenders oppose these reforms and no decisions have been made on these issues yet. Bankruptcy may still be a strategy worth exploring because it can work together with other foreclosure prevention strategies like short sales and deeds in lieu of foreclosure.

A carefully timed bankruptcy petition can discharge deficiencies that may have arisen as the result of a short sale or deed in lieu of foreclosure, and it may also discharge tax liabilities that arise from situations not covered by the Mortgage Debt Relief Act of 2007. A short sale or deed in lieu of foreclosure used in conjunction with a bankruptcy will not shield the petitioner’s credit record, but can offer protection against adverse collection actions related to short sales, deeds in lieu of foreclosure and tax liabilities.

In Portland, mortgage reduction is receiving a lot of news coverage right now. What is mortgage reduction, why is it needed, how can it help, and when is it most useful? Can it lower mortgage payments? Can it stop foreclosure?

In a mortgage reduction, the lender and borrower agree to new terms on an existing mortgage. Sometimes, the original terms of the mortgage no longer work for either party. A new mortgage can be made if the parties can agree on terms. One wrinkle: the “parties” may include more than just the borrower and the bank. Banks often sell mortgages to investors; so all parties (including the investors) must agree to the new terms.

Banks usually use refinancing, fair-market sales and foreclosures to “correct” a non-performing loan. In Portland, many mortgages are becoming delinquent due to faulty lending decisions, or the reduction or elimination of a borrower’s income. The local real estate market is too soft to sell the home, and fair market value for most properties is now less than the balance owed on the mortgage. Reduced property values also prevent homeowners from refinancing troubled loans. Banks must now weigh the loss they’ll take if they agree to a mortgage reduction compared to their loss through foreclosure.

The goal of mortgage reduction is to stop foreclosure, keep a homeowner in the home and return the mortgage loan to a productive status. Mortgage reduction can take a number of different forms; they can extend the terms of the mortgage, lower the interest rate, lower mortgage payments, convert a loan from a variable to a fixed rate, and in some cases, reduce the mortgage principal.

Mortgage reduction is useful when the homeowner stands a good chance of being able to stay in the home under the new terms. In general, changes that lower the monthly payment or reduce principal are the most helpful. These approaches are also the most difficult to negotiate, because they require the bank and its investors to accept a loss on the loan.

Negotiating a mortgage reduction is time-consuming, and many homeowners who have tried find themselves in the exact same position after months of exhaustive, frustrating and fruitless effort. Sell Home Owner employs professional negotiators in Portland who have relationships with mortgage lenders. Our professional negotiators know how to reach the right people, stop foreclosure, lower mortgage payments and move a new agreement forward. Contact Sell Home Owner today and let us negotiate a mortgage reduction that may stop foreclosure and keep you in your home.

Photo Credit: Colin Peterson

When you’re in need of mortgage reduction in Portland, does it really matter who does the negotiating? In one word, yes. There’s a major difference between working with loss mitigation professionals who can spend weeks or months preparing and executing a complicated financial transaction, and attempting to get your lender to reduce a mortgage loan on your own.

A loss mitigation professional knows everything about negotiating a mortgage reduction. It’s a more complicated transaction that most people give it credit for. When done correctly, mortgage reductions can solve a problem for both the homeowner and the mortgage issuer. When done incorrectly, the mortgage reduction can adversely affect the homeowner, and potentially expose him or her to huge financial liabilities after the deal has been concluded.

When you’re already in financial trouble, do you reallywant to take on this additional stress, or would you prefer to turn your mortgage reduction over to a dispassionate professional negotiator who understands the industry intimately and who can fight for your best interests?

Sell Home Owner has a staff of loss mitigation professionals who do nothing but negotiate mortgage reductions and short sales. They understand the potential liabilities for all parties. They’ve built long-standing relationships with mortgage issuers and know the deals that banks will (and won’t) accept. They also know how to protect the seller from the numerous pitfalls that a carelessly crafted mortgage reduction can generate.

Protecting the homeowner and eliminating any “carryover liability” is critical and can only be done during the negotiation period. Once mortgage reduction negotiation is complete, any errors or oversights can mean that the seller is exposed to huge liabilities.

When it comes to mortgage reduction, work with a loss mitigation professional who is invested in protecting the interests of all parties in the transaction. Contact Sell Home Owner today.

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