Not Eligible For a Loan alteration? – A Short Refinance May Be Your Answer
You are facing foreclosure. You want to save your home. You have just learned that you don’t qualify for a loan alteration under the Making Home Affordable alteration Program. That is really depressing. You are almost ready to throw in the towel and walk away.
Don’t give up. There are nevertheless other ways you can stop the foreclosure course of action and save your home.
One of these is called a Short Refinance. Here you get another lender to refinance your loan. The amount you refinance is more in line with the current value of your home. The interest rate is lower than on your current loan. The monthly payment is one that you can provide to make every month.
The reason this is called a Short Refinance is that the amount of the new loan is less than the amount you owe your mortgage company on your current loan. Your current company would have to agree to accept the amount of money they get from you refinancing your loan as payment in complete.
Would a mortgage company accept less than is currently owed on a loan as payment in complete? You may be surprised by this. Many will. The reason is simple. They will do their own examination. If the money they get from the refinance is more than what they can expect to get from the sale of your home following foreclosure, it makes sense for them to do this.
How do you find out whether you can get a Short Refinance? Unless you are very skilled, this is not something you try to do on your own. You need a lawyer or an expert in doing this to represent you.
The lawyer or the expert has to do their homework. They have to show your mortgage company how much they will get from the Short Refinance. They then have to show them how much they can expect to get from going ahead with the foreclosure and the sale of your home. They then have to let the people at your mortgage company come to the conclusion that it makes more sense to accept the money from the refinance than to go forward with the foreclosure.
The lawyer or the expert cannot deal with the person at your mortgage company to whom you had been speaking. This is probably a lower level person who is not capable of making a decision like this. Most probably your representative will have to deal directly with a manger or higher.
You may say that you already checked. There are no mortgage companies who will refinance your loan. You are right – a normal mortgage company usually will not. However, there are new mortgage companies who are specializing in doing this. One is a company named PennyMac. These companies are looking to refinance loans like yours because they realize that they can make money on these loans.
If you are over 62 years old and have a lot of equity in your home, you may qualify for a reverse mortgage. The money from the reverse mortgage can be used to pay off your existing loan.