It finally happened! One of my short sale customers was able to settle a mortgage for about 1/3 of the balance!
Almost every person that is upside down on their home, has thought, "Why not have the bank reduce the principle balance to what the home is worth, and let me keep my home from foreclosure?"
As a short sale agent in Bradenton with plenty of experience most sellers would be able to afford to keep the home if their mortgage payment was reduced to what the new buyer will pay. Really, principle reduction is every underwater homenowner's wish.
The bank did their BPO, and about two weeks later they offered a cash settlement for the mortgage. My seller owed over 80,000 on the home, and she was offered a buyout for 28,000. She was able to borrow from family, and payoff her mortgage on her home, and the bank was able to settle an account that had they agreed with the short sale, they would have netted about the same money. (The values of homes in Manatee county have really dropped by up to half the cost or less of the 2006 peak)
She can now live in a home that she has owned for 25 years, and is comfortable. This was a GMAC loan, which I have to say has one of the best short sale departments I have dealt with.
Is this a sign of things to come? For my seller it was a great day. Principle reduction of her mortgage eliminated her mortgage payment, and with her limited income she could afford to stay paying taxes and insurance.
This is one less home that became a rental property. One less low priced, distress selling price, one happy homeowner.
My hope is that lenders start considering real principle reductions. It's hard to see someone sell their family's home that they paid 400,000 in 2005, and now they have it short sale, or foreclose. The new owner buys the home for 200,000. The former owner could have afforded a payment that was half their original.
I guess this is something that they avoid, since if they will do it for one, why not everyone? At least I have seen it happen once. What is amazing is that the bank offered this to the owner and she had not asked for the principle reduction.
The 28,000 they received as a settlement in the mortgage principle reduction would have been close to what they would have received in a short sale, and perhaps even less had the home foreclosed. Perhaps principle reduction for homeowners underwater will become more common with the major lenders. Bank of America, Wells Fargo, and Chase could benefit from following what GMAC did in this case.
Posted via email from Joe Murphy Knows Real Estate in Bradenton
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