What the Heck is a Short Pay Refinance?

monoploy moneyJust because you haven’t heard of something doesn’t mean that it doesn’t exist or isn’t good for you. Case in point – the mysterious Short Pay Refinance. Most people have not heard of this option for those in a distressed housing situation but everyone will soon here this term more soon. In reality the short pay re-fi has been around for years but until recently nobody gave a second thought to using them. So what the heck is a short pay re-fi?

It starts with someone who owes more on a home than the current market value. Thus, the “Short” aspect. People who handle short pay re-fis first go to FHA/HUD and qualify the homeowner for an FHA/HUD loan at fair market value. This represents the “pay” part of the Short Pay Refinance program. Then comes the fun part. Either the homeowner or more likely a negotiator will approach the lender, with cash in hand from the FHA/HUD program, again the “pay” from the Short Pay Refinance, and convince the current mortgage company to take less than the current loan amount. This process culminates into what we refer to as Short Pay Refinance.

These days, banks move like molasses dripping onto a plate of hotcakes so they have been slow to accept the short pays even though they cost the bank less than doing a loan mod. But who ever said that banks use logic? Anyone interested in more short pay re-fi info can feel free to contact us.


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Filed under Loan Modifications, Mortgages

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