Bank of America has changed its rules on short sales in an attempt to avoid financial losses on foreclosed homes. According to an April 21 article in financial-industry publication Financial Planning, BofA and its recently acquired Countrywide division once would not approve sales in which 10% of the price did not go toward paying off home equity lines of credit. That changed last month, a spokesperson said. The lenders will now accept payment of 5% of the purchase price when there is no equity available to lienholders. The goal is to save money on foreclosures, the article said, which can cost up to 30% more than short sales and have glutted the housing market already.
A spokesperson for the lenders, Terry Francisco, said the previous policy "set an arbitrary amount that did not take into account the savings derived from proceeding with a short sale." As Placentia loan modification lawyers, we believe this statement captures one of the biggest problems facing our clients who are at risk of foreclosure. Foreclosure is expensive for the lender and ruins the homeowner's credit, so it seems logical that both parties would be interested in alternatives. However, until recently, banks have resisted them because they mean a loss and can be difficult to negotiate with all lienholders. We hope this change leads the way for other banks to revise their own policies.
In a short sale, the lender agrees to sell the house for less than the homeowners owe on their mortgage. The lender still takes a loss, but it typically gets back more money than it would if it had to foreclose on the property. The homeowners, for their part, must give up the home but are freed of any further financial liability and avoid the serious credit consequences of a foreclosure. For those reasons, short sales are best when it's clear that the property will end up in foreclosure either way -- unfortunately, a situation that thousands of Americans are facing right now. For procedural reasons, this can take months -- but with lenders in a tight spot right now, we hope that will soon change.
Howard Law LLP's Stanton loan modification attorneys specialize in helping homeowners in these tight situations make the best possible financial move. If you've been trying to get a short sale or loan modification approved by your lender, only to run into endless red tape, we can help. Our Orange loan modification lawyers negotiate aggressively with lenders, using any evidence of predatory lending or other legal violations as leverage to get their complete attention. We have been successful changing the interest rate, repayment terms and sometimes even the structure of our clients' loans.
If you're at risk of default and you know you need help negotiating a meaningful change to your loan, you should call Howard Law as soon as possible for help. To learn more about us and your rights at a free, confidential consultation, please contact us online or call toll-free at 1-800-872-5925.