subject: How To Decide Loan Modification Or Short Sale [print this page] The housing sector in the US took a hard hit after the mortgage crisis a while back. Due to this mortgage mayhem, many home owners found themselves in the red as far as their mortgage repayments were concerned. Banks wanted their money yet were unwilling to lend money and what followed was what can only be described as a tragedy. Many home owners lost their homes, others filed for bankruptcy but worst of all, and some lost everything. Of the home owners who found themselves in trouble, one of the two options available to them were loan modification and short sale.
Loan Modification
Loan modification refers to the offer of a lender to restructure a mortgage repayment schedule in the light of new developments in the mortgager's ability to pay. Now, by definition, this could either be revised upwards or downwards. However, in this case, the mortgagee is unable to keep up the payments so the payments are factored downwards. Retaining a loan modification attorney with years of experience is the best way to get the best deal.
Short sale
When a borrower defaults on mortgage payments, the lender may opt for a short sale. By designation, a short sale is sale of a property for less than the remaining value owed on the mortgaged property. Most lenders opt for this as an easier and less painful option than having to keep track of the loan payer who may not be able to service the payments.
Now, in comparison, both the lender and borrower have both pros and cons in each instance. When it comes to loan modification, both the lender and borrower stand to benefit although the bigger winner is the home owner. This is because they have a new longer period to repay their mortgage and they still own the home. This works well especially because the economy and home market is expected to rebound. On the other hand, the lender also retains the original interest charged and in addition, in the long run, stands to make much more off the renegotiated loan.
On the other hand, short sales benefit neither the lender nor the borrower. Due to the under par value of the sale, the lender loses out on the interest they would have earned from installment payments. In addition, this leaves no room to recover lost revenues when the housing market improves. On the side of the borrower, it's simply a matter of cutting one's losses and moving on. Moreover, the borrower is not absolved from paying the difference between the short sale cost and the money owed to the lender. Essentially, the borrower is the major loser in such an arrangement. On either count, getting great representation to negotiate loan modification or a short sale is the best way to get the most out of a murky situation.
by: Besk Ajj
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