Jenny Talasazan
619-894-9339

The Short Payoff Refinance
Yes, we allow for Short Payoff Refinance loans with our standard FHA Loan Programs.

Although the “Short Sale” has become a well known solution for borrowers to avoid foreclosure by selling their home for less than what is owe, the “Short Payoff Refinance” (Short-Pay Refi) is becoming a popular tool for borrowers to retain their home, lower their principle balance and most importantly; lower your monthly payment with a fixed rate FHA insured loan.

 What’s a Short-Payoff Refinance ?

This process is similar to a short sale but, instead of the property being sold, it is refinanced with a new lender…. A Short-Pay Refi is unique in that it allows the borrowers to keep their home, lower their payments and eliminate the upside down equity in their homes by reducing their principal balance.

The transaction itself is a basically a three part process. Negotiations are done by you the broker in conjunction with the borrower and the lien holder. First you and your appraiser need to establish the actual current value of the home. Next, we underwrite your borrower at the maximum LTV for that new value and issue an approval. Now, armed with your appraisal and our approval, you and your borrower can enter into equity re-negotiations with the bank/loan servicer for a discount on the current mortgage. Once the bank/loan servicer accepts the offer presented, we can complete the new loan transaction.

 Who should get a Short-Payoff Refinance ?

For those borrowers that still have decent credit, ficos, income and no mortgage lates but do to a decline in the value of their home (owing more than it’s worth), a Short-Pay Refi is the perfect solution. Aside from the decrease in the home’s value, there are certain scenarios where the current lender will be more open to the proposal, specifically, where there are financial challenges on behalf of the borrower and where default may be imminent due to these challenges or where the mortgage interest rate is scheduled to adjust upward. You may also want to take into account loan costs when negotiating the short payoff amount. Remember, we intend to refinance the borrower into a low fixed rate FHA insured loan at the maximum LTV possible. This allows the borrowers to put the brakes on before everything gets away from them and spins out of control. Broker should explain to the borrowers that after the transaction is complete and the lien holder is paid off, it’s completely up to that lien holder as to how they are going to rate the paid-off mortgage to the credit bureaus. Depending on the lender, it may be filed as: Paid In Full, Settled, Charged-off, Paid for Less than Balance, etc. This should be something they would want to discuss during the negotiations.

 Why would the bank/loan servicer agree to a Short-Payoff Refinance and not just foreclose on the property?

Banks/Loan Servicers’ books are becoming swamped with REO’s, so now they’re more open to negotiations than ever. Remember, foreclosing on a property requires large amounts of legal fees and then the home is typically sold at a substantial discount off of the fair market value by the bank. The Short-Payoff Refinance allows the loan servicer to avoid a majority of the legal fees and lets the new lender make its largest loan based on the fair market value. In most cases, a Loan Modification can’t solve the problem as many loan servicers are not lenders; a Short-Pay Refi becomes a very powerful alternative. Short-Payoff Refinances put borrowers in better positions than standard loan modifications because aside from lowering the payment, they also lower the principle balance with an FHA insured loan.
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619-894-9339
Jenny Talasazan
“Your Consultant For Life”
619-894-9339
mortgagefolife@gmail.com