PHOENIX LAW GROUP real estate and finance attorneys have the substantive expertise and have worked extensively with borrowers to avoid foreclosure, negotiate modifications of existing loans and complete short sales to avoid the unnecessary and sometimes harsh consequences associated with loan defaults and threatened foreclosure. Although homeowners should consult with their tax advisors, short sales and loan modifications can often be accomplished without tax consequences, and provides homeowners with alternatives that allow them to keep their residences and other properties. Dealing with lenders can often be intimidating, embarrassing and complicated. Loan modifications and short sales, even when beneficial to all parties, are notoriously difficult to negotiate. Unfortunately, given their complex nature, many homeowners and their realtors give up when the lender becomes difficult to deal with. We bring 27 years of combined expertise in negotiating with lenders to find workable solutions for our clients.

SOME OF THE MOST FREQUENTLY ASKED QUESTIONS IN THIS AREA BY OUR CLIENTS ARE INCLUDED BELOW:

1. WHAT IS A SHORT SALE?

Short sales have become a large and growing part of the real estate market today. Short sales are defined as a transaction where the seller and the lender accept a purchase contract for less than the amount owed on a property. For example, if your loan balance is $100,000.00 and you have a buyer only willing to pay $80,000.00, but your lender will accept the sale to pay off your loan, the lender has agreed to “short-Sale” the property by accepting the proceeds of the sale to pay off the loan even though the proceeds are less than what is owed.

2. WHY WOULD A LENDER ACCEPT A PAYOFF FOR LESS THAN THE LOAN BALANCE OR AGREE TO MODIFY ITS EXISTING LOANS?

Lenders must manage and mitigate their losses. The short sale and loan modification options are an alternative to foreclosure. Short sales and loan modifications can prevent a costly foreclosure from a lender’s and owner’s perspective. Lenders are required to maintain reserves on all properties in foreclosure; therefore, it can be financially advantageous to accept a payoff for less than the loan balance or modify an existing loan to avoid maintaining such reserves. Lenders and banks are in the business of lending and banking, not owning real estate. Foreclosure forces the lender to become the owner of the real estate. In addition, foreclosures have a negative impact on values and drive market values lower. This can result in more borrower defaults and more foreclosures. Lenders are aware of this potential downward spiral.

3. WHAT IS A LOAN MODIFICATION?

A loan modification is a negotiation between a lender and a borrower so that the loan terms are restructured without third party refinancing. The rate and terms of a loan are restructured to fit the borrower’s current financial situation. A loan modification is a good solution if the borrower cannot refinance, is behind on (or struggling to make) monthly payments, and/or has experienced a genuine hardship and would prefer to stay in their home.

4. WHY WOULD A BANK AGREE TO A LOAN MODIFICATION?

Banks and lenders would rather keep a borrower in his or her home and make less money without going through a foreclosure. Creating a solution that will help both parties out is a win-win.

5. WHY USE AN ATTORNEY?

One of the benefits of using attorneys is that lenders are more responsive to attorneys and give greater credibility to the information and requests provided by attorneys. In addition to understanding the legal documents involved in modifying an existing loan, we have worked with a number of lenders and their legal departments, and are familiar with the short sale and loan modification nuances of these lenders. Having already established the negotiating protocol, it is easier for the lender to read, understand and process a professional request from our lawyers in an expeditious manner. Time is of the essence and having an attorney on your side lets the bank and lender know that you are taking your modification proposals with serious credence.