A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
Short sales (also known as pre-foreclosures) may be the answer to helping homeowners in distress with their mortgage. Right now, an estimated 1.15 million homeowners are at some stage of the foreclosure process, and 5.6 million are 30+ days late on their payments. This translates into almost 6.76 million homeowners being in some sort of financial distress.
There are countless hardships that can turn home ownership into a burden. The loss of a job, medical bills, or an unexpected hike in monthly payments can suddenly make an affordable mortgage payment unaffordable.
Jim Tobin is very concerned about the mortgage crisis not only for its effect on the real estate industry but more importantly for its effect on homeowners. The most important thing to understand is that not only are the homeowners with sub-prime loans effected, today we are seeing more and more defaults by homeowners with “regular” conventional loans.