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Originally posted by mdmanley

Thanks Bank. Think a lot of people confuse the two.

So still seeing if anyone has done one of these just yet. Been hearing a lot about them, but haven't met anyone that has completed one.

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Originally posted by vivianr
I just completed one. We refinanced for about $100,000 less then what they owed. He is saving about $600.00 and we also included impounds. It was nice for them.

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Originally posted by mdmanley

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Originally posted by vivianr
I just completed one. We refinanced for about $100,000 less then what they owed. He is saving about $600.00 and we also included impounds. It was nice for them.

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Hey VivianR.

So did you get the original lender to reduce the amount owed and then refinance them with a new company or did you do it all with the original lender? Also how long did it take and what bank did you do the renegotiation with it?

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Originally posted by BankNegotiator

I've done one and have two more in the works.

The first one was with OCWEN and ended up being an "in-house" short refi. Original loan was ~$305k structured as an ARM that had adjusted up twice.

When all was said and done the new loan was at $197k at a fixed rate. (around 7% I believe...can't remember). The other $108k was written off and was forgiven. Similar to a short sale...but the homeowner didn't sell or move.

The BIG benefit to these "in-house" short refis or "aggressive loan modifications" or whatever you want to call them is that because it's technically a loan mod, the tradeline isn't closed out and tagged "Settled for Less Than Amount Owed" which can result in a large hit to score.

Of course, unless you are charging for your mitigation services separately and outside of your loan transaction (and you SHOULD be as loss mitigation work is a separate and independent service which should never be done for free in conjunction with a refi or sale) then you are getting cut out of the loop completely on these and getting paid zero for your helping people in a big way.

The other two that I have right now are with Homecomings, Aurora, National City, and HFC. First and seconds on both houses.

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Originally posted by StevieV22

This is very interesting.
Just curious, how did you start the process? Was there a specific department for this or you simply contacted customer service. Also did you ask for a specific number to lower the payoff or the bank decided the maximum amount they will forgive.
Thanks,

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Originally posted by ritabradley01

How do you determine if a short re-fi or a loan mod would be better and/or which one would be more likely to get approved? I imagine a lot has to do with the bank.

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Originally posted by peter


I do have a ready customer who wants a short refi from
First Federal Bank of California. He has been paying a
minimum payment on an Option Arm since he bought the house
in 2006 for $560,000. His current loan balance is $548,000.
He has lost his job and has not been able to find a new one yet.
So, he has been late for 3 months now but has not received
an NOD.

My recent comp of the same 4 bedroom/2bath house that was
sold this month is $360,000. I do have a qualified buyer for
$300,000 and am in the process of negotiating a preforeclosure
sale for my buyer. However, if First Fed were to take a hair cut,
it would be well over $248,000 plus expenses -- well over
45% of the outstanding loan balance. My buyer has no means to
make any payment as he has no job and no income at the present
time. The property is in northeast San Fernando Valley where
home prices are dropping monthly, but if my buyer can get this
house for $300,000 with 10% down from First Fed she would go
for it.

I doubt if the loss mitigation department of First Federal
Bank will entertain this type of low bids, but if they don't
this house will go into foreclosure and the homowner is retaining
an fee-based real estate attorney to fight to the end to keep
the house as long as possible. I do not know if I should pursue
this deal or not as it seems that the attorney will be the victor
in the lend as he can secure his own buyers to buy this house
probably for less than $300,000 in months ahead. The legal
strategy of wearing down the bank seems to be working in several
cases that I have observed -- like a lion stalking a horse with
a broken leg. I am just waiting in the wings hoping that there
is no other buyer who will come in to scoop up this deal thru
his attorney, as it is a very nice house with good upkeep and
a good sized lot.

Anyone here has any suggestions, please. Thank you.

Peter

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Originally posted by varga197

Vivian: you just call the lender and say "we are doing a short refi" ? Don't borrowers have to submit proof of hardship, their financials, hardship letter, bank statements ..etc to the original lender? Is the lender just saying " ok, you can do the short refi and we want X dollars for the property?" is this how it works? I'm not being sarcastic, I just don't know how it goes. I thought that one has to be behind payments to even ask for anything shorted and I thought one has to be at least 4 months behind to be considered for a loan mod.

Brian, Vivian, do you know anything on this?

My question is this: if you have to be behind payments to do get any short payoff option than it is tough to qualify for a loan because you can't have more than two missed payments if you want to get decent LTV.
But if it goes like Vivien seems to do by just calling the original lender and letting Loss Mitigation know that she is doing a short refi, and they don't ask for anything or oppose to the short refi, or try to give you workout plans like repayment plan, special forbearance and an interes free loan to catch up, than there is not such of a problem bringing new money in. The other guideline I thought that borrower not only has to be in default to qualify for short payoff (whether in house or not) is that borrower's DTI has to be close to %100. Now when that is the case, even with reduced monthly payments it is unlikely that they will qualify for a new loan with 43% back DTI ratio.

Can someone who has done these please be so kind and explain the technical side of this in detail? Thank you so much in advance!

Thanks.

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Originally posted by BankNegotiator

vivian is right - many banks do not require payments to be behind to consider a short. This USED to be a universal truth before 2007, now the smarter banks want to resolve issues before they become issues...once the writing is on the wall as it were.

Don't bet on short refi transactions going as smoothly as she outlined before. Her experience is the EXCEPTION to the rule, not the norm. Very few banks are openly considering short refis. VERY VERY Few. That she was able to pick up the phone and negotiate a short refi without starting negotiations as a short sale and converting to short refi down the road is not a common occurance. Usually the bank reps will be completely confused and transfer you 20 times to others who don't know what you are are talking about until you either get disconnected or dumped into someones voicemail that doesn't call you back. (about 95% of all bank people never return calls)

The exception is GMAC and Homecomings which are both very open to short refis, know what they are and have procedures in place for them. If I was a betting man, I would bet that the short refi Vivian negotiated was held by one of these two companies.

If you are going to pursue short refis, it might even be worth the time to find a way to get a list of people that need help that are ONLY GMAC or Homecomings, as they are the easiest to work with on these. Then market ONLY to those homeowners and exclude the rest.

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Originally posted by bigjake54

Vivian

For clarification...what type of new loan are you refinancing your people into, FHASecure or are you saying that since they have not missed payments you are going with a new conventional loan at the current market LTV?

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Originally posted by bflower

So what happens to the 2nd mortgage if the first has been "refi'd"? What if the 2nd won't play ball? What happens if they want to procede with foreclosing? Sorry for all the questions, but I've been looking at getting into loan mods, but wanted to get a better understanding.

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Originally posted by varga197

From what I understand banks are only willing to do loan mods if borrower is behind payments.
But as Vivian has showed us that's not the case with short refinances. That's good news.

Vivian, can you just get a regular Conventional loan for your new loan in the short refi? I know that the max LTV won't be 97% as with FHA, but it can go to 95% Rate and Term and than there is no upfront MI and the transaction is much faster? Is this a bad idea? Brian?

thanks.

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Originally posted by varga197

Brian the "internal short refi" you've done with OCWEN, were borrowers behind on the payments or they were current? I know that you've listed their property as short sale. Thanks.

Also do you have to be over equity for banks letting you do a short refinance? Otherwise, wouldn't everyone who has a mortgage just try to refinance with less principal balance?

I have a refi where borrower is simply wanting to refinance because she has an adjustable rate and wants to refi into a fixed rate loan. In addition the amount she owes on her mortgage is about 100% of the value as of now, maybe she is even a little over equty with her loan. Should I pursue a refi and ask the lender to lower LTV to 97% or whatever max loan LTV she can get (this is an investment property) OR should I just try to call the lender and arrange a Loan Mod with just asking them to "FIX" the interest rate? (she wants the fixed rate loan, that is the reason for her refi)

This borrower has never been behind and currently able to pay for the loan, but if rate adjust she will have a problem paying. Thanks.
Thanks for suggestions.

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Originally posted by varga197

Ok. I just called Chase to tell them that we I'm trying to do a short refinance on an account. This is how it went:

Me: Hello, please connect me to loss mitigation.
operator: ok
Loss mitigation: hello my name is xy please give me the account # you are calling about..
Me:acct# ..... We've been trying to sell this property for 5 months now and NO Offer has come in at all. I'd like to see if we can short refinance this property.
Loss mit agent: hold on, let me find out if we do those..... Ok, sorry we don't do short refinances, we can only do short sales....
Me: you see I understand the short sales, but there was NOT ONE offer for the property for five months and if we could Refinance the property with a lesser loan amount, borrower would be able to stay in the home and avoid foreclosure.
Loss mit agent: sorry we don't do short refinances, but you might want to call a Chase LO and see if they can refinance it..

Me: See, we are not trying to do a regular refinance.... are there any other options you can offer for the borrower? He has not missed a payment yet, but coming this payment he won't be able to make his payment any longer...

Loss Mit Agent: Well, if he goes delinquent 60 days there are repayment options for her...

Me: Thank you for your help.

Vivien, what do you tell the loss mit agents to you get your point across?

As Brian pointed out, it is not the easiest to get a short refinance done and I know that Brian started with a short sale and turned it into an internal loan mod. I just don't see too much incentive for the lender to help if borrower is not delinquent. Please let me know if you guys have any suggestions how to work this file.

Vivien, you are either really good talking to people, or very lucky, but as I just experienced, it did not go like " Ok, send us a hardship letter and a loan approval for a lesser amount and we'll write off the difference"

Any advise for this scenario?

thank you in advance.

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Originally posted by varga197

Ok. I just called Chase to tell them that we I'm trying to do a short refinance on an account. This is how it went:

Me: Hello, please connect me to loss mitigation.
operator: ok
Loss mitigation: hello my name is xy please give me the account # you are calling about..
Me:acct# ..... We've been trying to sell this property for 5 months now and NO Offer has come in at all. I'd like to see if we can short refinance this property.
Loss mit agent: hold on, let me find out if we do those..... Ok, sorry we don't do short refinances, we can only do short sales....
Me: you see I understand the short sales, but there was NOT ONE offer for the property for five months and if we could Refinance the property with a lesser loan amount, borrower would be able to stay in the home and avoid foreclosure.
Loss mit agent: sorry we don't do short refinances, but you might want to call a Chase LO and see if they can refinance it..

Me: See, we are not trying to do a regular refinance.... are there any other options you can offer for the borrower? He has not missed a payment yet, but coming this payment he won't be able to make his payment any longer...

Loss Mit Agent: Well, if he goes delinquent 60 days there are repayment options for her...

Me: Thank you for your help.

Vivien, what do you tell the loss mit agents to you get your point across?

As Brian pointed out, it is not the easiest to get a short refinance done and I know that Brian started with a short sale and turned it into an internal loan mod. I just don't see too much incentive for the lender to help if borrower is not delinquent. Please let me know if you guys have any suggestions how to work this file.

Vivien, you are either really good talking to people, or very lucky, but as I just experienced, it did not go like " Ok, send us a hardship letter and a loan approval for a lesser amount and we'll write off the difference"

Any advise for this scenario?

thank you in advance.

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Originally posted by peter


I believe Chase is not a good lender to talk about short refi while one
should pick the 2nd private lenders with their existing 2nd lients on the
chose properties to talk to. Let's say, your borrower has his 1st with
GMAC and 2nd with seller's financing on a $500,000 purchase in 2006.
Let's say $400,000 on the existing 1st and $100,000 on the existing private
lender's (seller's) 2nd, And today's value has dropped to $420,000.
Then, refinancing 97% on $400,000 will give a new FHA rate and term refi loan
of $407,400 to pay off the existing 1st plus closing costs. Then, one will just
have to negotiate with an existing 2md private lender or the original seller
to subordinate behind a new FHA 1st. If the 2nd private lender sees the
benefit and tne new 1st FHA lender allows an overequity CLTV (in this case,
it is 120.8% CLTV), then he could consent to the subordination.

Ideally, the new FHA refi rate and term should be a cashout refi of 95%
whereby there is an added benefit to the 2nd lien holder by paying down
some $$$$$ to reduce the amount of the preexisting 2nd. So, if the current
market value has only dropped to $450,000 and 95% refi cashout thru FHA
is $427,500, there will be a cash out of $20,100 (Paying off preexisting 1st
of $400,000 less $7.400 closing costs thus leaving a balance of $20,100
to pay down the preexisting 2nd loan. Thus, the clearer benefit to the
preexisting 2nd lien holder as his exposure is reduced from $100,000 to
only $79,900 ($100,.000 minus $20,100) and the new 1st is a government FHA
guarantted loan. Aftter the $20,100 paydown of the preexisting 2nd,
the total CLTV will only be 113 % approx. (1st new loan of $427,500 plus
a newly reduced preexisting 2nd of $79,900 = $507,400 total new 1st plus 2nd,
divided by $450,000 current value).

So, the BPO or later actual appraisal will have to bear some relationship
to the loan amounts of the new propoed refinance that it provides the benefit
of having the preexisting 2nd paid down to reduce the 2nd lender's balance
as well as the new loan being a govertnment-guaranteed loan.

I have not actually done one, but I am trying to construct some logical
framework here. As for the lenders to negotiate with, there are those
lenders who will turn a blind eye to this opportunity and we will just have
to do business to those lenders, institutional or private, who will work
on short refis with us. There are bound to be some lenders who believe
in "Prevention is better than Cure" and will be glad to overquity-refi
their upsidedown borrowers rather than seeing them leave the houses.

Please help me if I am on the wrong or right path of logic and practicality,
as I have never done one short refi but would like to learn more about this.

Thank you.

Peter

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