Any lenders facing unpaying borrowers know that foreclosure is often a last resort. Foreclosure brings many complications for both lenders and borrowers, and can often result in losses on both ends. Lenders seeking alternative resolution might consider resolving the deficiency with a short sale. A short sale is meant to mitigate the damage to both the borrower and the lender. Lenders might consider many aspects of the short sale before deciding whether to let their borrower enact one.
What a Short Sale Means for for Lenders
A short sale might mean a loss for a lender, but often not as big of a loss as a foreclosure. In a short sale, a lender agrees to accept a mortgage payoff, less than the amount owed, and then to forgive the remaining balance.
This potentially has benefits for all the parties if they are able to negotiate the terms they desire. While not as devastating as foreclosure, a short sale can still be damaging to a borrower’s credit score. A borrower might negotiate that a lender report the mortgage as “paid in full.” Lenders, however, are not obligated to not tell credit bureaus, and borrowers may wish to tread carefully.
Lenders may benefit from short sales because the foreclosure process comes with extra compliance and separate transactions to recover losses. Lenders are also not required to forgive the deficiency. Because the lender must approve the short sale in the preforeclosure stage, the lender holds the power in this transaction. However, a lender should be sure that they are following compliance laws and ethical lending practices precisely, or a borrower might have the power to issue a lawsuit.
Total Lender Solutions Can Help with Alternative Resolution
Short sales, while not as damaging as foreclosures, can still be tedious processes. If borrowers and lenders wish to avoid a short sale, there are still multiple options for alternative resolution. A lender might consider loan modification, a forbearance agreement, or refinancing, just to name a few. Regardless of the process that a lender is facing, Total Lenders Solutions can provide education, advice, and step-by-step guidance.
Keep Your Team Educated About Foreclosure Law
At Total Lender Solutions, we advocate for lenders looking to maximize recoveries on defaulted loans. For over 15 years, our team of highly experienced real estate professionals and legal experts has transformed complicated processes into clear resolutions for institutional and private lenders. We work as a vigorous extension of your team to provide comprehensive solutions and seamless communication, from pre-foreclosure and notice of default to the final sale phase. Our dedication and persistence when it comes to the foreclosure process ensures that our clients feel confident in reaching a successful outcome. Contact us today.
