Mortgage Options |
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OPTIONS |
PROS |
CONS |
Refinance: |
Low interest rates, lower monthly payment, get out of Alt-A loan or Option Arm. Fixed payment for the remainder of the loan. |
If current loan is a purchase loan (non-resource loan) a refinanced loan becomes a recourse loan. Monthly payment might increase. |
Loan Modification: |
Low interest rates. Get out of an |
The monthly payment might increase. Many borrowers cannot service the principle payment. Loan modification has an 80% failure rate. Borrower agrees to sign off legal recourse to original loan. |
Loan Modification: Change the terms of the existing loan to a 5 year interest only. |
Lower monthly payment. Provides a 5 |
Provides no long term solution. Same as above. Need strategic tax plan. Unknown lending environment in 4-5 years. |
Short Refinance: Principle write down obtain financing with new lender institutional or private. |
Obtain a principle write down, lower monthly payment through an FHA program or debt negotiator. |
Very few qualify. Most FHA brokers will not negotiate principle write down. No leverage for the borrower. |
Short Sale: The lender(s) accept a short payoff from the borrower. |
Borrower is able to get out of a home they cannot afford. Borrower may qualify for a new mortgage in 18-36 months. |
Potential tax consequence. A potential deficiency. Credit 'ding', typically 80-100 points to the credit score. Can remain on Credit Report for 7 years. |
Hybrid Short Sale & Credit Card Settlement Combo: The lender(s) accept a short payoff from the borrower. Unsecured creditors accept a reduced payoff. |
Borrower is able to get out of a home they cannot afford and settle credit card debt all at once. Borrower may qualify for a new mortgage in 18-36 months. |
Potential tax consequence. A Credit 'ding', typically 90-100 points to the credit score. Can remain on Credit Reports for 7 years. |
Bankruptcy: |
Borrower may be able to keep their home. Chapter 13 lien stripping. Borrower may gain relief from other debts. Borrower may qualify for a new mortgage in 18-36 months. |
Borrower may not be able to keep their home. A credit 'ding', typically 120 points to the credit score. Bankruptcy can remain on the credit report for 10 years. |
Loan audit: Loan audit to obtain legal leverage for agreeable workout with lender(s). |
Borrower may obtain principle reduction, loan work-out, short sale, Deed in lieu with no credit hit. |
Fees associated with a loan audit. Fees associated with a negotiator. Fees associated with legal representation. No guarantee for a positive outcome. |
Fannie Mae & Freddie Mac are |
Government Loan Modification Programs: www.hud.gov |
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This table is intended to provide practical information with regard to the subject matter covered. It is offered with the understanding that the Foreclosure Options Network is not engaging in rendering legal, tax or other professional services. If legal, tax or other expert assistance is required the services of a competent professional should be sought. |