Loss mitigation is a term that's bandied about a lot these days. And, until I delved further into real estate investor education, www.reinvestorsolutions.com, I was unfamiliar with the term.
Loss mitigation includes the gamut from loan modification, cash for keys, deed in lieu of foreclosure to short sales, where the lender accepts less from the bank than what is owed.
Loan modifications include modifying the terms, interest rate and length of the loan. The owner must qualify for the loan,that is have income that supports the repayment of the loan. Sometimes, it's necessary to do some type of debt settlement to lower the ratios so the owner can qualify for the loan modification. I work with a firm for debt settlement that guarantees 50% reduction in debt. Reduce the debt, reduce the mortgage, the homeowner can now afford to stay in the home.
Sometimes, though, the homeowner is so far upside down in their loan, and can't afford the payments, it makes more sense to do a short sale. The bank must approve the sale, and the homeowner, by law, can receive nothing from the proceeds.
Loss mitigation is a very time consuming process; modifying the loan can take up to a year before final settlement. Short sales, from the time the banks receive the package, is generally at least 120 days. I work with Realtors; I do the negotiations, they get the listings.
Doing a Short sales is a win-win for everyone. The bank wins, they don't get a nonperforming asset back. The homeowner wins, they don't have a foreclosure on their record. The Realtor wins, they get a fully negotiated short sale, and they don't have to spend their time sitting in the office, talking to the bank. And I, as an investor win. Because of my education through Nouveau Riche, I'm able to help homeowners to divest themselves of the house that has become a liability.
No comments:
Post a Comment