Sunday, June 14, 2009

Doesn't that just sound special? This one only works in limited circumstances. Still, it could be for you.

One of the owner-occupants must be an eligible military member on active duty, reservist, National Guard or veteran. The Department of Veterans Affairs is extending a long arm to help you.

Enter from stage right with flourish and fanfare the short refinance.

Imagine the borrowers owe more than their home is worth. Making the payments is difficult. Maybe they had an option adjustable rate mortgage (ARM) and the new payment is breaking all four of theirs. Perhaps it is a subprime loan and the rate took a ghastly turn.

The owners bought their home in the first place because they loved it. They don't want to move. That makes both a short sale or a foreclosure an undesirable option.

It's time to inquire with the current lender about a short refinance. Ask for the loss mitigation department.

Borrowers who have trouble negotiating for themselves should seek the advice of a local, knowledgeable, experienced attorney to represent them. Do not pay money in advance to a company offering to bail you out. Do not give up the deed to your property to any such company.

The goal is to have the lender accept a short payoff. Why would they do that? Their options are a short sale (not going to get more money -- could get less -- and takes longer and lots of staff time), a foreclosure (same as above plus expensive legal fees) or (such a hero you are, I have to wear shades against the sun glinting off your armor) a short refinance.

It gets this miserable loan off the lender's books. All they have to do is accept a payoff equal to the current appraised value of the property.

In Monroe County, loan amounts up to $575,000 are possible. Because we are in a high cost area, VA will guarantee a loan well past the $417,000 conventional loan amount. How many more band-aids will $575,000 buy than $417,000?

Veterans and military members can borrow clear up to 100 percent of the current appraised value of the home. The new loan may also cover some or all of the closing costs.

If there is equity in the property, eligible VA borrowers can even get cash out for legitimate purposes such as paying off other debts.

It does not matter what type of loan is being refinanced. Unlike the Home Affordable Refinance Program (HARP), VA doesn't care what type or loan you have. Fannie Mae? We don't care. Freddie Mac? We don't care. Mac 'n cheese? Subprime? Tax lien? Uncle Guido? It's all the same to the VA.

Veterans Affairs can guarantee the refinance of current or delinquent loans. Eligible borrowers must concentrate on the fact that two things are taking place, however. The VA is offering a guarantee for the loan. Another institution (the new lender), though, is delivering the dough. Just because the VA is willing to guarantee a new loan for the delinquent borrower doesn't mean that every lender will entertain supplying the cash for the new loan.

What do you think?

Regina E. Corcoran, SRA, is a Florida real estate broker, state-certified residential appraiser and residential contractor. She is president of AmeriRealty Corp. and vice president of AmeriMortgage Corp. She can be reached at ReginaECorcoran@cs.com. Corcoran writes her column exclusively for The Citizen. It appears every other Sunday.