The Short Payoff Refinance is done using a standard FHA Loan Program. This process is similar to a short sale. The difference is instead of the owner-occupied property being sold, it is refinanced with a new lender. A Short-Pay Refi is unique in that it allows the borrowers to keep their home, lower their payments and eliminate the upside down equity in their homes while reducing their principal.
What's the Process? It's critical to build a relationship with the borrower's lender. If there are two, you will want to engage both primary and secondary lien holders/servicers at the same time because all parties will need to approve the demands. What's so great is we handle all the negotiations for you. Our negotiation department builds credibility with previous lenders and the entire process becomes easier. We let them know your intent to re-negotiate the negative equity on the borrower's behalf. More and more lenders are open to this process. The transaction itself is mostly a three part process. Negotiations are done by our Negotiating Affinity Realty in conjunction with the borrower and the lien holder. First, our appraiser need to establish the actual current value of the home. Next, we underwrite your borrower through Total Scorecard to the maximum LTV for that new value and issue our preliminary approval. Now, armed with your appraisal and our loan approval, our Negotiating company and your borrower can enter into equity re-negotiations with the bank/loan servicer for a discount on the current mortgage. Once the bank/loan servicer accepts the offer presented and issues the shortened pay-off demand, we can complete the new loan transaction with the final underwrite, lock and go to docs and fund. Who should get a Short-Pay Refi? For those borrowers that still have decent credit scores, income and up to two mortgage lates but do to a decline in the value of their home (owing more than it's worth), a Short-Pay Refi is the perfect solution. Aside from the decrease in the home's value, there are certain scenarios where the current lender will be more open to the proposal, for instance where there are financial challenges on behalf of the borrower and where default may be imminent due to these challenges or where the mortgage interest rate is scheduled to adjust upward. Remember, we intend to refinance the borrower into a low fixed rate FHA loan at the highest LTV (up to 96.5% ltv) possible. Please note that HUD/FHA loan limits per county do apply. This allows the borrowers to put the brakes everything gets away from them and spins out of control. After the transaction is complete and the lien holder is paid off, it's completely up to that lien holder as to how they are going to rate the paid-off mortgage to the credit bureaus and as the loan officer you must explain this to your client. Depending on the lender, it may be filed as: Paid In Full, Settled, Charged-off, Paid for Less than Balance.
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