Loss Mitigation: Short Sales are the New Exit Strategy

Is your variable-rate mortgage resetting higher, leaving you in the dust? Have you lost a job recently, or suddenly had an expensive emergency with a loved one? Have you recently been through a pricey divorce, or had to send your child to college?

In the old days, before the invention of loss mitigation, circumstances like these that led to falling behind on mortgage payment simply meant that you would have to give up your home.

Foreclosures stay on your credit report for a decade, and result in great upheaval in your life.
Now days, you can try to get a loan modification. Or reamortization. Or a restructure on your loan. Or if all of these fail, you can at least do a real estate short sale. If your lender or bank agrees to let you do a short sale (which are becoming more and more common in this depressed real estate market), you then hire a professional agent to help you find a buyer for your home, at a lower price than the amount you owe on it. With the banks' approval, they will forgive your mortgage and absorb the extra loss, and in exchange you are done with each other and no one has defaulted or foreclosed. It's a win-win solution for a losing situation.

Now, if you're hard up for cash and missing payments, you'll likely be reluctant to hire someone to help you find a buyer. But it is possible to find a real estate agent who will work partially pro bono or at a reduced rate, and this has the added benefit of making your lender more willing to help you.

And you'll definitely have to scale back in all aspects of your spending budget at home- you need to prove to the bank you're making a rigorous effort to make payments but you simply cannot do it any longer, for permanent, or at least long-term reasons.

Of course, a short sale is a last resort. You should start talking to your lender the minute you think you might have to miss a payment, or you're falling behind. You may be able to do a workout on your loan and restructure it, or get a full-out loan mod. In this market, it is becoming more and more common for more and more banks and lenders to make accommodations for struggling homeowners. It's in their best interest, and in the best interest of the entire industry and the economy.
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About the Author
For more information on loss mitigation and help with short sales or loan mods, ask the pros at http://www.accesslossmitigation.com