Q. What is a short refinance or a short payoff?
A. A Short Refinance happens when your current lender allows you to write down the balance you owe on your mortgage. The current lender issues a payoff for an amount less than what the current loan balance is. The decreased payoff is reached through our negotiations with your current lender. With that payoff, we obtain a refinance for you with a new lender at the decreased loan amount.
Q. Who can a short refinance help?
A. A Short Refinance or Short Payoff can assist a home owner who owes more on their home than what it is currently worth and can show a hardship or significant strain in financial circumstances. If you are not sure if you fall in this category, contact the phone number at the bottom of this page and we can walk you through the process.
Q. Must I be able to qualify for the new loan?
A. Yes. This process includes two dynamics that must take place. 1. The current lender must be willing to negotiate for the shorted payoff and 2. You must be able to afford the new loan and qualify showing tax returns, w-2’s/1099’s, check stubs and bank statements. This is a full documentation loan.
Q. Will my new loan be a secure loan?
A. Yes. Your new loan is an FHA 30 year fixed loan. Principal and Interest Payments are required. Adjustables and Interest Only ARMS are not allowed. This will require an upfront mortgage insurance premium as well as a monthly mortgage insurance payment. The maximum loan to value for the new loan is 97% of the current value.
Q. What is the motivation for the current lender to enter into a short Refinance or short my payoff?
A. The current real estate market is dictating their motivation. If you can prove a hardship or significant financial strain and you no longer foresee being able to make your payments, then the lender will face having to foreclose on your property. This means that they are now faced with selling the property for no more than what it is currently worth. They now have to compete with all the other foreclosed properties that also have dropped drastically in value. The market is flooded with an oversupply of homes for sell. This means that the property they want to sell will be sitting on their books for an extended period of time. While the property sits on their books, they are no longer collecting any mortgage payments at all. They also become responsible for maintaining the property taxes, insurance, HOA dues, power, water, sewer/trash and landscaping until that property sells. Additionally, each month it sits unsold, the value continues to decrease anywhere from 2-3%.
Q. Is obtaining a short payoff from my lender a straightforward process and is there any certainty that my lender or servicing company will do it?
A. No and not always. It will partly depend on the current financial strength of your lender or servicing company. For example, a lender or servicing company in dire straights may be more open to approving a short refinance as opposed to a stronger bank that isn’t facing closure.
Q. Do I need to be late on my mortgage to qualify for a short refinance or short payoff?
A. We would never recommend you being late on any of your credit obligations. Anyone that tells you to be late is risking your chances of qualifying for the new loan and risking your credit. If your lender or servicing company tells you that they won’t help unless you are late, take their name and extension and ask to speak to a supervisor. It shouldn’t matter that you are late if you can show a hardship or significant change in financial circumstance. Most people that call us don’t want to ruin their credit and being late completely negates that goal.
Q. I think I am ready to see if I can obtain a short refinance. What should be my next step?
A. You will want to start by gathering the following documentation so we can negotiate a lower loan balance and better rate for you:
- 2006 & 2007 W-2’s (for everyone going on the loan)
- 2006 & 2007 tax returns (for everyone going on the loan)
- Check stubs for the past 30 days (for everyone going on the loan)
- Bank statements covering the past 60 days (make sure to include all pages from the statement even if it is an advertisement page!!!)
- Most recent statement for any investment accounts including CDs, IRAs, Money Market accounts, pension/retirement
- Your mortgage statement(s)
- A copy of your homeowners insurance policy
- Copies of your ID and Social Security Card (for everyone going on the loan)
- Fax these documents to our secure fax at 1-800-630-0896 OR
Contact Casey Moseman