A DIL May Not Be Accepted From Borrowers Who Can Financially Make Their Payments

Category: Finance, Real Estate.

Understanding the different options a seller may be considering is important when negotiating with sellers.

Reinstatement of Loan( Cure) : This option is paying the lender everything that is owed in one lump sum to include missed payments, any late fees associated with these payments, legal fees and, foreclosure fees the principal owed during the delinquency. Below are the most common options that sellers may address with you if the sellers are either in default or anticipating being in default. A cure may involve the seller curing or deeding it to the investor" subject to" the exisiting loans, who will cure. Repayment Plan: This is a written agreement between the lender and the seller. There is a risk to the homeowner that the lender may accelerate the loan because of the due- on- sale, and the homeowner no longer owns the property and has no recourse of the investor doesn t pay the loans. These plans require higher payments than the regular monthly mortgage amount for a period of time until the loan is brought up- to- date. Modifications can be considered to reduce the interest rate of the mortgage, change the mortgage product( from an adjustable rate to a fixed rate, for example) , extend the term of the mortgage or capitalize delinquent payments( add delinquent payments to the mortgage balance- only available in extreme hardship situations) .

Loan Modification: A loan modification involves changing one or more terms of a mortgage. Modifications are not easily granted and there must be strong, justifiable reasons for the request. Unless the loan term is extended( which happens rarely) , the later payments generally will have to be higher than the original monthly mortgage payments until the loan is up- to- date. Forbearance Agreement: The lender will allow you a period of time( 3- 6 months typically) of either low payments or no payments at all. Special Forbearance( FHA Loans only) : Allows eligible borrowers to postpone monthly mortgage payments for a minimum of four months. Deed- in- Lieu: A Deed in Lieu is an option in which a borrower voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage.

While there is no limit on the maximum number of months, at no time may the agreement allow the delinquency to exceed the equivalent of 12 monthly PITI installments. A DIL may not be accepted from borrowers who can financially make their payments. Cash Sale: The borrower sells the property, pays off his loan, depending on the, and equity, may net some cash out of the deal. If a borrower qualifies for a DIL program they may be eligible for cash back from the lender as in the Cash for Keys program. The challenge, is being able, of course to sell it quickly enough, which most often requires a substantial drop in the price. This generally results in no cash to the homeowner, but will be better for the better for his credit than a completed foreclosure.

Short Sale: The borrower makes an agreement with the investor to sell it for less than is actually owed, subject to approval of the lien holders. Refinance: The borrower may be able to refinance and get a new loan, but generally this is difficult because the borrower has little equity and poor credit. Explain each of these choices, and be honest with the homeowner. The new loan likely will have higher payments than the old loan. 1Do Nothing: The worst choice for the seller, whose credit will be ruined, but he can stay in the house for several months for nothing, save up some cash, and move when the lender or the high bidder from the auction eventually evicts the homeowner. In many cases, he will trust you for your candid explanations. You may lose a deal or two by offering the homeowner choices that are actually better than your offer, but that s ok, always take the high road and you will have a long and properous business in real estate investing.

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