Can You Refinance With A Bank On A Homeowner Financing How to Avoid Home Foreclosures: Short Selling & Short Refinancing

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How to Avoid Home Foreclosures: Short Selling & Short Refinancing

As home values ​​have plummeted in recent years, Michigan’s unemployment rate has risen to an all-time high, leaving many Michigan homeowners in dire financial straits. Some homeowners have faced layoffs and sudden unemployment, leaving them unable to make monthly payments, while other homeowners find themselves “underwater,” burdened with large mortgage payments for homes that are now worth far less than their original mortgage amounts.

While foreclosure may seem like the only option available to these Michigan homeowners, there are ways to avoid foreclosure. Foreclosures are financially damaging to mortgage lenders as well as homeowners, and it is often in the bank’s best interest to avoid foreclosure. Recent federal stimulus packages and tax incentives have made accepting alternatives to foreclosure more attractive than ever to mortgage lenders.

Avoid Home Foreclosure by Short Selling

In short sale contracts, banks and mortgage lenders allow homeowners to sell their homes for less than the original loan amount. Banks can still hold homeowners responsible for the remaining balance between the original mortgage amount and the short sale amount, known as a “deficiency,” but this arrangement allows homeowners to avoid the crippling credit damage of being tied up with a foreclosure. Short sale agreements are beneficial to mortgage lenders, who are spared the large legal fees associated with foreclosure, as well as potential property damage and the responsibility of managing an empty foreclosed home.

Although short sales have a negative impact on the credit history of the owners, these sales are seen as liquidation by the credit bureaus and consequently are much less damaging than foreclosures. In many cases, Michigan mortgage lenders will forgive homeowners the remaining deficiency, allowing homeowners to walk away from short sale debt.

Avoiding foreclosures through short refinancing

A short refinance, also known as a loan modification, is similar to a short sale in that the mortgage company allows the homeowner to refinance the property in question for less than the original purchase price. As with short sales, owners may still be liable for the deficiency, although in some cases this remaining balance may be forgiven. Short refinances are ideal for homeowners whose mortgages have gone underwater due to property devaluation. In loan modification agreements, homeowners can keep their homes while reducing their mortgage payments to payments that reflect the current market value of the property. Again, there is some credit damage associated with loan modifications, but this damage is less than it would be in a foreclosure. Short refinances benefit lenders, who avoid the high costs associated with foreclosure.

Find help to avoid Michigan home foreclosure

Navigating these alternatives poses a huge challenge for individual homeowners and real estate agencies who are not well versed in the latest mortgage laws and real estate practices. Getting mortgage lenders to agree to short sales and short refinances is often a difficult process, and completing these transactions without the help of a mortgage transaction specialist can be tedious and unsuccessful. In many cases, individual homeowners and real estate companies that do not specialize in foreclosures will not be able to complete the loan modification or short sale in time to avoid foreclosure.

Enlisting the help of a Michigan foreclosure real estate specialist significantly increases a homeowner’s chances of success in avoiding foreclosure.

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