Short-Refinance My Home?
Without refinancing for less, I may lose my house!As mentioned, lenders are not thrilled with the idea of reducing the principal balance on any mortgage loan. For the consumer, a short refinance produces much the same results as a loan modification. The only apparent difference is that you end up making your lower payments to a different bank.
To the lender there is a difference. The HAMP (Home Affordable Mortgage Program) has built in cash incentives especially for the lender, whereas the losses due to short refinance are not recoverable other than through tax deductions. Furthermore, for those homeowners that qualify for HAMP, the lenders are required by law to negotiate.
To make a long story short, we have noticed recently that nine out of ten short refinance attempts have gone in circles, crashed, and burned. Those are horrid odds, so we have changed our recommendations on this front.
If you cannot qualify for the HAMP loan modification, you may want to consider a traditional modification with help. (We may be able to help you get a modification on your own.) If you happen to have any equity left, then you should consider traditional refinancing. And if you have no equity at all, look at some form of debt consolidation before considering your less friendly options.
If none of these solutions will work for you, please go here.