As home prices continue to decline in certain markets, home owners with adjusting interest rates face the obstacle of not being able to refinance due to their mortgage balance exceeding the value of their property.
The FHA Short Refinance program may be able to help if you are in this scenario.
There are a few options available when considering a FHA Short Refinance:
1. Short Refinance – Also phrases as a Mortgage Write Down, the short refinance is the process of negotiating with your current mortgage lender to allow them to accept a payoff less than you currently owe. Since banks are not excited about acquiring new property, they may be willing to look at this option knowing that they would have to sell the property for less if they were to proceed with a foreclosure.
2. FHA Secure Refinance – In the case that you have a first and second mortgage, the FHA Secure Refinance would allow for the second lien to be subordinated while the first mortgage was refinanced at a lower loan amount.
3. FHA Secure Short Refinance – Through a process of negotiating with your current lender, there is a possibility that a deal could be put together where they would write off a portion of the outstanding mortgage balance and arrange for the remaining unsecured debt to paid with new terms and rates. This would help the bank in the fact that they are not at a complete loss on the total amount owed.
With any of the above options, it is important that you seek the help of an experience professional who knows how to work with lenders for a win win scenario.
Written by Mark Madsen, a Las Vegas Loan Officer.
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Thanks for that well-summed information. I think it’s sad that so many homeowners don’t realize they have this many options. There really needs to be more information out there about this different opportunities home owners can have to prevent foreclosure. Lord knows the last thing our economy needs right now is more foreclosures!
This team has really got it together and it is definitely tough to do so in this market. People need the right people and dealing with the wrong team can really be a big problem.
We have seen clients of ours who have come from 2 or 3 previous loan officers and just about given up with getting their principal reduced and in 30-45 days. Keep informing those out there that need it!
Mark, Great Article. I see you strongly believe that the short refinances will be an excellent outlet for upside down or underwater home owners. We are excited to see more people like yourself helping people everyday to write down the principle of their loan balance. I agree that not too many people know about this program but with people like you and me drawing attention to it, we’ll start to see it become more mainstream in the media.
my hme foreclosure is frozen i have not paid for 8 months and its frozen cause im military and im in irak can i still qualify for short refinance. i stopped paying cause a loan officer advised me to do it and i got seperated from my wife so i lost her income.
Juan,
I’m sorry to hear that another loan officer advised you to stop paying on your mortgage. In order to qualify for a short refi you have to be current on for the past 24 months. However, a loan modification or short sale may be a good option for you as well.