Short Sale May Better for Homeowners Who Can’t Afford Their Home

The New York Times reports that 53% of loan modifications end up with the homeowner back in hot water. I realized long ago, that many folks who purchased a house saddled themselves with more house than they could possibly afford. So now, they face a tough choice… Try to get a mortgage note modification from the lender you are delinquent with, or do a short sale and move out. The loan modification lets them stay in their home so they don’t have to face a gut-wrenching move to a new house or even an apartment. But the loan work-out does not eliminate other unsecured debt.

Many homeowners should consider a short sale and avoid a mortgage modification altogether. They must slash their debt and move to a smaller or cheaper place to live. I sold my house in 2005 even though it wasn’t much fun to all leave the house we had lived in for years. But in my heart I knew that tough times were ahead and that we should rent rather than own. So we up and packed, and moved to a nearby rental. And now, fast forward four years later. I have to move this coming summer because our lease is expiring. I am not looking forward to it but I will have to move again.

If people “own” a house (own is the wrong word if there is no equity) and they can’t afford to stay, then they need to do a short sale, not a loan mod. I don’t believe in restructuring mortgages for people who clearly are going to end up back in trouble again. There are some guidelines to follow, to do loan modifications and if a homeowner fits within the home preservation plan, then likely their mortgage restructuring will succeed. Sign up and get foreclosure news emailed to you as it happens.

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