Our processing department will structure your file which will allow us to aggressively negotiate with your lender all the possible options or workouts that are available. There’s many different types of options that a lender, or the government or your investor can offer on how they can assist you in lowering your mortgage payment by reducing your interest rates, by lowering your principal balance owed or even by extending the term of the loan that the mortgage is under. We make promises in aggressively negotiating all these options for our clients. There’s not a lender in this industry that wants your property. Lenders would much rather be willing to negotiate or reach some type of workout to totally avoid going into litigation or going down a foreclosure avenue. It’s a dead-end street for most lenders.
Most properties, especially in the state of Florida are upside down where the current homeowner actually owes more on the mortgage than on the actual value of the home. This puts the lender in an uncomfortable position. If the ‘ender ends up going into foreclosure on that home owner, it’s most likely going to take them 12, 24 and in some cases 36 months to execute a foreclosure. Now with a house that goes into a foreclosure, the outcome for the lender is normally a property getting auctioned off for pennies on the dollar which normally means that a lender has much more to lose than our clients do.
No lender wants to be part of this outcome. They would much rather be wide open to negotiating a favorable outcome that meets both parties that satisfies both sides. We have been successful in reaching favorable outcomes for our clients by getting their interest rates reduced and we’ve seen rate reductions as low as 2% on primary residence. Most of these rate reductions at 2% are not fixed for 30 years. Normally they’re fixed for five years. Those rates then adjust up to about 3% 12 months later. They also have a second adjustment up to about 4% for 12 additional months. They will finally adjust and convert into a fixed rate somewhere about 4.5 4.75 or whatever current market interest rates are at the time never to go any higher. So with a rate reduction in itself it will be very beneficial in helping to reduce your monthly mortgage payments.
- A second option we have is an extension of the term of the loan. Most mortgages have 30-year loans. By amortorizing your loan by an additional 10 or 20 years we’re able to reduce your mortgage payments significantly.
- The third option is a principal balance reduction. There are several options we have with a principal balance reduction.
- The first option is the most favorable it’s a principal balance reduction permanent forgiveness. Where the lender can permanently reduce what you owe on your mortgage where you will never pay back a penny of that reduced amount.
Here’s an example, if you owe $300,000 on your loan, the lender can choose to reduce that amount balance by let’s say $50,000. They can permanently forgive that amount so the client will never have to pay it back leaving them with a new balance of $250,000 and these are just random numbers I’m giving you for an example. The second type of principal balance reduction is known as a principal balance deferral. Same example, the borrower decides to take $50,000 off the balance and they can defer it to the back of the loan. What happens is the new mortgage payment is based off the $250,000 the deferred amount gets tacked on to the back of the loan so when you actually payoff your mortgage in 30 years from now, that’s when you’ll have a balloon payment to pay the principal balance deferment to tack on to the back of the loan.
The nice thing about a principal balance deferral is that today it’s $50,000, in 30 years from now it’s still $50,000–there’s no interest that accrues. So it’s basically interest free. The third type of principal balance reduction is known as a principal balance settlement. We’ve been successful with lenders mainly with second and third mortgages getting them to accept settlements for pennies on the dollar. Example, we’ve settled a $362,000 mortgage for $21,000 which is approximately 6% of the principal balance owed. So again here is a very favorable outcome for our clients when the lender had the option to process a foreclosure but chose to accept a 6% settlement compared to going down a foreclosure avenue. See we know what the position of the lenders, we know what they’re up against. This gives us a tremendous advantage when negotiating with them. We know what they stand to lose and we know they would be much more willing to negotiate with us and avoid a foreclosure and reduce the mortgage payment by putting the client in the position to afford their loan.