The term short sales is now very familiar to many homeowners. The recent property market crash, due partly to over extension by mortgage loan seekers and faulty bank lending has had negative impacts for all participants. Investors who provide mortgage finance and homeowners are two main participants. Many homes have negative equity and banks have seen increasingly higher mortgage delinquency rates.
The short sale process requires the assistance of highly specialized professionals. This holds true both for the banks and the homeowners. In this type of real estate transaction third party approval is always required for the sale to proceed. The third party is the investor who provided the finance for the loan. Statistics show a steady increase in this type of real estate transaction.
Banks can be the originators of a mortgage loan. Some banks may play the role of servicing the mortgage loan for a client. As a servicing entity for a mortgage loan, monthly premiums are received from the homeowner and paid to the investor. In return the banks receive a monthly fee. It is a little known fact that servicing companies have to reimburse their client every month with the amount due, even if the mortgage payment is not made. Losses can quickly pile up. The banks are more amenable to short sale options as a result.
Banks have loss mitigation departments who oversee retention and liquidation options. Short sale options fall in the liquidation category. The mitigation dept evaluates any buy offers made on behalf of the homeowner. They are restricted to evaluating and negotiation any offers within the investors' guidelines.
Increased foreclosure rates have been very costly for the banks. High legal fees, maintaining foreclosed properties on their books and the necessity to continue paying property taxes have all added to the expenses. Many banks are cutting their loses by participating on more short sale transactions.
Homeowners experiencing financial hardship, for instance a reduction in income or loss of a job may have problems keeping up with the monthly mortgage premiums. Modification options can be explored and are offered to struggling homeowners. These options may include, reducing the monthly payments or forbearance, where the investor suspends payments for a few months to allow the home owner to improve their financial situation.
However, the homeowner may not be willing to keep the home or the investor may refuse to allow any changes to the original terms of the loan.The homeowner may ask the bank for permission to liquidate the mortgage by short selling the property. This has certain advantages over the foreclosure option. The homeowner may not be required to pay the delinquent amounts due. Credit worthiness necessary to purchase another home in the future may not be as badly damaged.
The relationship between banks and homeowners for non-retention options is complex and intertwined. The banks working to reduce mortgage loan losses are restricted by investor guidelines. The homeowner facing the loss of the home also experiences negative social and financial ramifications. Both homeowners and banks can use short sales as an alternative to foreclosure. As a non retention solution, it is a faster and less expensive option for both parties.
The short sale process requires the assistance of highly specialized professionals. This holds true both for the banks and the homeowners. In this type of real estate transaction third party approval is always required for the sale to proceed. The third party is the investor who provided the finance for the loan. Statistics show a steady increase in this type of real estate transaction.
Banks can be the originators of a mortgage loan. Some banks may play the role of servicing the mortgage loan for a client. As a servicing entity for a mortgage loan, monthly premiums are received from the homeowner and paid to the investor. In return the banks receive a monthly fee. It is a little known fact that servicing companies have to reimburse their client every month with the amount due, even if the mortgage payment is not made. Losses can quickly pile up. The banks are more amenable to short sale options as a result.
Banks have loss mitigation departments who oversee retention and liquidation options. Short sale options fall in the liquidation category. The mitigation dept evaluates any buy offers made on behalf of the homeowner. They are restricted to evaluating and negotiation any offers within the investors' guidelines.
Increased foreclosure rates have been very costly for the banks. High legal fees, maintaining foreclosed properties on their books and the necessity to continue paying property taxes have all added to the expenses. Many banks are cutting their loses by participating on more short sale transactions.
Homeowners experiencing financial hardship, for instance a reduction in income or loss of a job may have problems keeping up with the monthly mortgage premiums. Modification options can be explored and are offered to struggling homeowners. These options may include, reducing the monthly payments or forbearance, where the investor suspends payments for a few months to allow the home owner to improve their financial situation.
However, the homeowner may not be willing to keep the home or the investor may refuse to allow any changes to the original terms of the loan.The homeowner may ask the bank for permission to liquidate the mortgage by short selling the property. This has certain advantages over the foreclosure option. The homeowner may not be required to pay the delinquent amounts due. Credit worthiness necessary to purchase another home in the future may not be as badly damaged.
The relationship between banks and homeowners for non-retention options is complex and intertwined. The banks working to reduce mortgage loan losses are restricted by investor guidelines. The homeowner facing the loss of the home also experiences negative social and financial ramifications. Both homeowners and banks can use short sales as an alternative to foreclosure. As a non retention solution, it is a faster and less expensive option for both parties.
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