The moratorium on eviction and foreclosure proceedings in New York has been extended until August 31, 2021. And thanks to the Biden-Harris Administration, homeowners nationwide can also apply for mortgage forbearance through September 30, 2021.
This period of forbearance and eviction protection is an excellent opportunity for some property owners to get their heads above water, financially.
Instead of relying on extensions and forbearance that will eventually expire or simply waiting for potential homeowner relief, property owners may want to consider a short payoff to resolve their mortgages.
What Is a Short Payoff?
A short payoff occurs when a lender agrees to accept less than the mortgage’s full balance as payment in full for the debt. For example, you may be able to pay $800,000 to settle a $100,000 mortgage. Short payoffs are alternatives to short sales, and they both involve situations where a home’s value has dropped significantly- and usually – less then the mortgage debt.
Through the short payoff process, homeowners not only resolve the default and foreclosure action, but can obtain instant equity. The main downside, naturally, is that lenders and banks may be reluctant to agree to them.
Because lenders and banks cannot take immediate action to protect their investments, they are more willing to accept less than they are owed in exchange for much needed cash flow for their businesses. Reserves have been eliminated and lenders are struggling to service the number of borrowers in default. And similarly, foreclosure stays have prevented them from obtaining judgment of foreclosure and sale, as well as prevented the selling of property at auction for cases where judgment has been granted.
To return to our previous example, if the bank knows it can make $800,000 on a $100,000 home now, it would be more likely to accept a short payoff because the future of foreclosure is uncertain due to the COVID-19 pandemic and federal and statewide protections.
Refinancing Your Mortgage with a Short Payoff
If you have access to the money to do so, you can use a short payoff to your advantage. Perhaps you can use a short payoff to refinance your existing mortgage with the assistance of a non-titled spouse, friend, or relative.
Even if you were facing foreclosure before the COVID-19 pandemic, the delay in foreclosure cases may give you the opportunity to refinance.
Ultimately, if arranging a short payoff is possible for you financially, it is the best way to avoid foreclosure in the future and build immediate equity. You can use a short payoff to get out of your existing mortgage and start a new one.
Again, our firm can help. You will have direct access to an experienced lawyer with a full understanding of relevant real estate laws, and Attorney James J. Quail provides results-oriented and client-focused legal counsel to every client.
We understand what you’re going through, and we offer free consultations to help you find solutions.
Call us at (516) 246-2449 or contact us online to schedule yours today.