Arizona Short Sales and Loan modifications battle for popularity in ongoing reach for viable foreclosure alternatives
Although Arizona short sales and short sales around the country gained widespread popularity in 2012, with total sales figures reaching new heights as the market continued to improve, experts are questioning whether or not that growth will continue. They are perhaps the best alternative to foreclosure, but another alternative is beginning to make waves in the market.
Known as loan modifications, these programs have only recently appeared as possible, sensible alternatives in the eyes of lenders. Simply put, a loan or mortgage modification is a program that allows the lender and borrower to agree on changes to be made to the original contract, ones that will help the borrower through financial trouble he/she may be having, make sense for the lender, and correspond with borrower qualifications.
Now, it seems that word has caught on to homeowners, who are beginning to turn to experts in search of answers and more information regarding loan modifications in Arizona. Numerous federal modification programs are starting to take off, but qualification limitations that have been put into place are a cause for many homeowners to be excluded from taking part. In other cases, depending on a homeowner’s long-term prospects, a modification may not be the best option available.
Currently, four loan modification programs are available, including HAMP, FHA-HAMP, HARP 2.0, and Save Our Home AZ. A fifth, the National Mortgage Settlement, was included in the “Big 5 Settlement” and has also received money to make modifications available to borrowers.
Homeowners who have fallen behind on their mortgage payments may be eligible for a modification through the Home Affordable Modification Program (HAMP). Principle reductions through Fannie Mae and Freddie Mac are unavailable through HAMP, and in most cases, the only major change to the contract terms will be with the interest rate (usually locked or adjusted). The process can take quite a while, and it affects credit by disallowing homeowners from purchasing a new home until three years after the modification has been completed, which is the same as a short sale or foreclosure.
If a homeowner wishes to move within those three years, he/she will either need to have equity to sell the home or qualify for both the original loan and the new loan on the new home, both of which are financially difficult for anyone in this situation.
Meanwhile, FHA loan recipients can take part in a special loan modification program through HAMP.
The Home Affordable Refinance Program (HARP 2.0), on the other hand, is only for individuals who are current on their loan payments but are experiencing or anticipating financial trouble, allowing them to work out a mortgage plan that is stable and affordable. It works very similarly to HAMP in that interest rates will be modified and principle reductions are not available. Unlike HAMP, however, a second or multiple residence, as opposed to the primary, can be refinanced, and no credit ramifications or wait period before obtaining a new loan exist.
The National Mortgage Settlement was created in early 2012 to provide relief to borrowers who desire a principle reduction modification. $25 billion was set aside by the nation’s five largest loan providers to give homeowners relief in participating states (including Arizona) – however, Fannie Mae or Freddie Mac loans are not eligible for this program.
While these options are fantastic new ways for homeowners to receive relief when falling behind on mortgage payments, their qualification requirements still leave many homeowners in the dust. These growing programs will have to adjust in order to keep hundreds of thousands of homeowners from finding relief elsewhere. If you are in need of an Arizona short sale, please contact us today at 602-741-1602.
Tracy (G+) is an Arizona Short Sale Realtor, Investor, Rehabber, and Foreclosure Expert.
She also is an avid blogger, vlogger, contributor to the Bigger Pockets Blog, and consultant on all things Arizona Foreclosures.