They want a principal reduction, but their lender won’t agree to it. Lenders will drop your interest rate to 2% for five years. But, they are very reluctant to grant principal reductions. Let me explain why.
They are forced to take huge write off on their books when they give you a principal reduction. No, this is not a “tax” write off.
If they give you a $ 300,000 principal reduction, then they have to take that directly off that year’s earnings. That hurts earnings, which hurts the stock price, which in turn hurts the likelihood of the people at the top getting bonuses.
This makes principal reductions so rare. Instead, they like to reduce your payment down to the equivalent of a 400k principal amount. How?
By dropping the interest rate to 2% for 5 years. The lower interest rate reduces your payment as much as a principal reduction would have done.
The banks hope that you can limp along for five years until the economy recovers. Hopefully by then housing prices will recover, or you will be able to afford the higher payment after the interest rate reset.
But, many experts do not think the housing market will recover in 5 years, much less 10 years. This is why I recommend a short sale and renting to anyone who is upside down by 30%.
Now, you may be saying, “Of course you do recommend that. You get more sales that way.” But, if that was true, then why would I give away free loan modifications kits to homeowners in foreclosure?
(Click here to request a copy of my Loan Modification Guide that has the instructions you will need to get a loan modification approved with your bank.)
I believe that most loan modification are a temporary band-aid that doesn’t solve the underlying problem. Most people that short sale are already suffering and their credit has been hurt by a pending foreclosure.
What if they accept the loan mod offer and can’t afford the payment reset in 5 years? They may have to stop paying, hurt their credit again, and apply for another loan modification.
Why not wipe out the upside down debt while your credit is already damaged? Agree? Disagree? Please put your comments in the comments section below. Thinking about a short sale?
I can help you short sale your property and get back on your feet. Send me an e-mail at email@example.com. I will contact you for a free consultation.
When we talk, I will explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can call me at (919) 606-8751
Discover how other sellers successfully completed a short sale and request a free consultation by clicking VA Compromise Sale.
Thinking about a loan modification? Our Raleigh loan modification kit has the instructions you will need to get a loan modification approved with your bank. Click here to request a copy.
Thanks for reading this, Ken Smith.
Ken is a Real Estate Broker at Goldens Realty. Raleigh Short Sales Realtor:
Phone: (919) 606-8751. firstname.lastname@example.org.
Friendly, loyal, intelligent service!
View My homes for sale at www.GoldensRealty.com.
Ken Smith specializes in loan modification assistance and short sales in Raleigh North Carolina. Raleigh Loan Modification Help, Raleigh Short Sales. Raleigh Short Sale Realtor. Raleigh NC Short Sales. Raleigh Realtor.