But what if the homeowner is in the right home; just in the wrong mortgage? The hassle and hearache of moving out and moving on can now be avoided. Enter, the Short Refinance FHA Loan.  The short refinance works exactly the same as a short sale with the exception that the homeowner remains a homeowner.

With a short sale, once an offer comes in it is presented to the bank along with an application package from the seller asking the bank to take a discount on the current mortgage.  Once the bank accepts the offer for less than what the seller owes the bank they have agreed to a short sale.  A short refinance works in much the same way as a short sale only in the case of a short refinance the “offer” presented to the bank is actually a copy of the homeowner’s brand new short refinance FHA Secure approval.  The short refinance approval, along with all the supporting documentation, is then submitted to the bank requesting a discount.  Once the bank accepts the discount, they have accepted a short payoff and agreed to a discount on the loan allowing for the short refinance.

A major benefit of the short refinance is that it allows borrowers to keep their homes.  The short refinance delights homeowners because they get a new start with a lower mortgage payment and a lower mortgage balance.

Why would the bank agree to a short refinance and not just foreclose on the property?  Simply put foreclosing on a property requires large amounts of legal fees and then the home is typically sold at a substantial discount off of the fair market value.  The short refinance allows the bank to avoid the majority of the legal fees and allows the new lender make its largest loan based on the fair market value.

Related posts:

1. FHA Mortgages and Short Sales
2. Atlanta Refinance Opportunities are Short-lived
3. Your Home is Underwater; How Do You Keep Treading?

Truth be told, I have been right here, with you, weathering the same drop in home values and number of homes on the market that you have.  And, now that we are being honest, it has not been a lot of fun.  My own home is probably worth $100K less than it was two years ago.  And, I know, so is yours.

I was thinking of the latest in the investment banks to fall – Lehman Brothers – and then the thought occured to me:  what will all the job losses from Lehman, Merrill Lynch, Bear Stearns and others do to to housing market in and around New York City?

Not sure, but I would much rather be in Alpharetta, GA then in White Plains, being in the mortgage biz.

Here is an interesting stat, from the National Association of Realtors, that the Atlanta metro area has dropped an average of 9.8% since 2005.  New York has dropped a percent more, by 10.8%.

I’ll bet home values in NY will drop more precipitously in the coming months.

My thoughts go out to the 10′s of 1000′s who will lose their jobs up there in the New York area.  I hope some of those Yankees make there way down to Atlanta and find greener pastures.

Related posts:

1. Investing in Atlanta Real Estate
2. How Much Have Atlanta Homes Dropped in Value?
3. The Credit Crisis: A Real Life Example