California Foreclosure Short Sale

Based on a May 20, 2008, report from the California Research Bureau, the California real estate market is in the midst of a tailspin. This man-made calamity has left plunging property values and record foreclosures in its wake. As California homeowners scramble to try to save their financial bearings, they are faced with making difficult decisions while still in the “eye of the storm.”

Homeowner Resolutions

There are many paths that an imperiled homeowner can choose while searching for a resolution to their mortgage problems. The most common options include: loan modification, loan refinance, loan forbearance, loan reinstatement, loan repayment, short sale, and others.

According to Mike Carley, a California mortgage consultant, if a homeowner is motivated to keep their home and is confident that their set of problematic circumstances is temporary, then mortgage mitigation is often the best option.

Mortgage Mitigation

Mortgage mitigation, also known as mortgage mediation or foreclosure mitigation, is the act of negotiating with a lender to restructure a homeowner’s payments (both future and overdue) into a plan that is in the best interest of both parties. This can often result in lower interest rates and deferring back-owed payments to the end of the loan.

Because embattled lenders are already struggling to handle the escalating number of foreclosed properties in their portfolios, they are often open to the idea of mortgage mitigation. However, if the homeowner isn’t experienced in negotiating with lenders, they can frequently run into a number of difficulties, such as the lender’s insistence on having the homeowner accept a payment plan that is favorable to the lender but not the borrower.

Hiring Qualified Mortgage Mitigation Professionals

Carley suggests that inexperienced homeowners (in lender negotiation) should consider hiring a third-party specialist. Because a qualified mortgage mitigation professional fully understands all of the options available to the homeowner during the mediation process, their expertise often results in resolving the situation with favorable terms for the homeowner.

If you do hire a mortgage mediation professional, Carley feels that it is important to:

• Make sure that they have a real estate license.
• Avoid the scammers and con artists who are lining up to try to take advantage of homeowners’ vulnerabilities
• Look for indications of credibility, such as legitimate references and reasonable fees.

Short Sale

Carley says that if a homeowner indicates that they either don’t want to keep their home or can’t realistically afford to make payments (regardless of their desire), then a short sale is very likely the best resolution for both the homeowner and the lender.

A short sale is a real estate process that can occur when the homeowner owes more money to their lender than their property is currently worth. Ordinarily, if the homeowner sold their home for an amount less than they owed on it, then the lender would require the homeowner to pay the difference. However, if the lender agrees to a short sale, then they are accepting the sales price of the house as payment in full, which means that the homeowner would not have to make up the difference.

In order to qualify for a short sale, lenders generally require that the homeowner:

• Is at least one month delinquent on their mortgage payments.
• Has a willing buyer ready to purchase the home.
• Is not able to meet all of their existing financial obligations.

If you qualify for a short sale and your lender is a willing participant, this process may be the best way for you to move on with your life, while your lender moves on to their next problem property.

Ranch House in Sonoma County, California

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