A short sale is when your lender allows you to sell your property for the current market value (or a price agreeable to all parties) that is less than your current mortgage balance. The difference is usually split between the lender and borrower (percentages vary) via a 1099, promissory note, or with cash contribution from the borrower. A short sale is only a viable option if you are looking to move out of the property. But what if you want to stay but you cannot afford the current mortgage? That's when the dreaded loan modification is your only hope.
Loan modifications--a new way to elevate your blood pressure. More than half of the clients who hire me to assist them with facilitating a short sale have tried to modify their loan with their current lender--often to no avail. They borrower is forced to provide tons of paperwork, wait for months on end only to get declined or they receive an unreasonable proposal. The proposals given to consumers from their lenders range from a small reduction in payment to an increase in the payment!!! The truth is banks do not make it easy to do a loan modification and seem to only be interested in meeting federal guidelines of providing clients with a proposal or a decline to meet the requirement that they have to do one or the other, whether it makes sense or not, within a certain time frame. The phone conversations with condescending customer service representatives are enough to make anyone irate. The best option is to use third party companies like NACA to successfully get an affordable payment option. The process is simple, but not a fast one. On average it takes 6-12 months, but in some cases the lender will suspend foreclosure attempts while a borrower is in the loan modification process. I have personally used NACA for a loan modification, represented one of their borrowers in purchase and another in a short sale. There are other outfits that assist with short sales, however, any that require money to begin the process are a SCAM! Use only a HUD approved counseling agency. This way you can be sure the company is legitimate.
Some lenders will require that you contact one prior to allowing you to do a loan modification.
