As we’re all aware, more often than not lenders deny borrowers’ loan modification requests, but would entertain short sale proposals and other times they’d rather take the property back in a foreclosure. It all comes down to what is most profitable for them and not to the homeowner!When an investor/lender does modify a loan, and perhaps even a reduction in principal-balance, it still retains the note and because of the modification, prolongs the number of years yet needed to even make up for the loss provided the borrower keeps making the payment as scheduled. And there still exist a good chance of re-default. Assisting homeowners with this approach is not a money maker for the investor, for sure, unless they get off the note!Just recently, I heard about lenders willing to do short refinances. Seemingly, it allows the owner/borrower to short refinance with a NEW lender at 90% max. LTV of its current market value, qualifying them on high debt-to-income ratios. It is accessible to those homeowners with good credit and an ability to pay for a new loan with verifiable income who could not otherwise qualify for a loan modification.It is not a cure for all, but for the most part, it presents a window of opportunity to large number of homeowners. And the incentive for a lender to do a short refinance is the shorter time frame to recuperate some of their capital as well as cutting losses to minimal with no chance of re-default. As it appears, Wells Fargo and GMAC are the two advocates among handful of other lenders (and growing) in position to cooperate with homeowners to allow short refinances. And we all know too well, when one does it, others follow.Is this the ultimate resolution to avert foreclosure - the last stop?
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