Foreclosures and Short Sales

A short sale package is the set of documents that a seller uses to demonstrate their financial hardship to their lender in order to get approval for the short sale. The documents usually include the listing agreement, signed purchase contract, seller’s hardship letter, an authorization letter, bank statements, and tax returns.

A mortgage forbearance agreement is a contract between a mortgage lender and a delinquent borrower wherein the lender agrees to reduce or suspend the borrower’s monthly payments, and the borrower agrees to a plan that eventually gets them caught up on their monthly payments.

An arm's-length transaction is one in which there is a written promise to a lender that the parties involved in a sales transaction don't know each other. Lenders often require an arm's length affidavit during a short sale because they are taking a loss on the sale and want to make sure the seller and buyer aren’t colluding. 

A short sale negotiator, or processor, is someone who negotiates with a lender on a seller's behalf to secure approval for a real estate sale where the sale proceeds would fall short of the mortgage balance. Some may also be able to negotiate debt reduction or forgiveness by the lender for the seller.

A loan modification is a change to your home loan by your current lender, whether that’s changing the length of repayment, interest rate, or other terms. A loan modification can make your payments more affordable, but you must show financial hardship to qualify.

A notice of default is the first step in a bank’s or mortgage lender's foreclosure process. In some states, the notice of default is also attached to the home’s front window or door. It states that the borrower is behind on mortgage payments and the bank is in the process of rectifying the situation. If the mortgage is not paid up to date, the lender will seize the home. 

Refinancing a mortgage involves replacing an existing loan with a new one, either from the same lender or a different one. Homeowners typically refinance a mortgage to secure more favorable interest rates or other loan features that can save them money. However, you do have to play closing costs on a refinance.

An "upside-down" or "underwater" mortgage is one in which the remaining principal balance exceeds the property's fair market value. That might happen for several reasons, but it's often tied to plunges in the economy.

A short sale approval letter is a letter that a lender issues to the seller to let them know that it approves a short sale—a sale for less than the amount the borrower owes on a mortgage. It is sent by the lender at the end of a short sale to demand the "short" loan payoff in return for releasing the lien on the property.