What is a short refi? A short refi is a program approved by FHA where we negotiate with your lender for a short pay off (the lender allows you to pay less than what is owed on the property). So in this situation, a lender will forgive a portion of the principal balance owing on the mortgage, which has been paid as agreed, if the borrower refinances the loan with a different lender. It is not the same as a short sale where usually the borrower is behind and/or is having financial difficulties.
Why wouldn't everyone do this? A short payoff is not automatic. In a short sale situation, the lender is not getting any monthly payments so it may be better for the lender to negotiate a shortsale than forclose. In a short refi situation, the lender is still getting the monthly payment, borrower can not have any 30 day lates in the last 12 months in order to qualify for the refinance.
Why would the lender take a short payoff if they are still getting monthly payments? In most cases, their has to be an apparent hard ship. Loan adjusted, payment went up. Two income family, one was laid off. High medical bills. Something that shows the lender that if they do not approve a short payoff then it could turn into a short sale or a forclosure in the near future. Another reason is that a lender is limited to what they can lend based on what they currently have on their books. If one of their borrowers refinances with someone else, it allows them to lend out more.
Are there any tax consequenses with a sort refi? Please contact your CPA.
If you are upside down on your home and want to stay, then a loan modification or a short refi is the answer you are looking for. Call Joseph Crespillo at 916-784-7653 if you have any questions or would like to get started.
(UPDATED 08/27/2009) According to an article in StreetInsider.com "The Obama Administration announced new details of its Making Home Affordable Program, including an effort to lower payments on second mortgages and to refinance underwater mortgages.
It is the last statement that interests me the most. Read it out loud - refinance underwater mortgages. What this means is that the Obama Administration wants the lenders to help out the homeowners when they can. Refinance you and give you back a home with some equity. I have heard from reliable sources that US Bank and Wells Fargo are already on board.
Don't hesitate to find out if you too can do a short refi.
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