Hi, I wanted to share with you a recent conversation I had with a new short sale client. This gentlemen called me because he has two loans with PNC and his home is in Virginia, and he faced financial hardship about five years ago.He contacted PNC to do a work out or a loan modification. PNC did approve the loan modification. He had a lower interest rate and was able to have a lower mortgage payment the first couple of years.

Well every year after the first two years, his mortgage payment has increased because each year, the interest rate increases by %1. So now, five years later, he is facing a much higher mortgage payment then five years ago when he started the process and had a hardship. While he makes good money, he can’t handle this very high mortgage payment because now his interest rate is way over market value and he can’t afford the property anymore.

And its really sad because he got a loan modification to help him reduce the payment and it did but it was a very short term fix. Its a great solution for people who want to stay in their home and just need help bridging the gap for short term. But it proves that loan modifications still aren’t a good long term solution and ultimately usually delay a short sale.

So I just wanted to share that with you, its a great solution for a short term fix. But loan modifications usually just delay short sales and aren’t permanent fixes unfortunately. The only way to permanently restructure a loan is through a refinance and the property has to appraise for the amount that you owe.

If you want to talk more about loan modifications or short sales, please give me a call. Have a good day!