Bank failures, mergers and takeovers and the new government backed workout plan creates opportunity for defaulting loans.

While the current list of bank failures, forced mergers, and take overs is bad news for our financial markets and borrowers in trouble, it may have a silver lining for those with defaulted loans.

First of all the Government has passed a government backed mortgage workout plan which will allow a borrower in default , with lousy credit scores and a poor history to recast or modify his mortgage based on a current appraisal, thus reducing the mortgage to current values and effectively reducing the monthly payments as well.

This is a huge opportunity for people in trouble with bad credit history and unable to afford their mortgage or refinance. One issue however with this government plan. Within the first five years, if the house is sold the government shares the profit in a declining percentage from 100% if sold in the first year and then reducing the government share by 10% per year until five years out when it freezes the governments participation at 50% of then profit from then on.

Thus while the government plan saves your house and backs off your loan amount and monthly payments, it will cost you half your profit at least.

If one does not choose to participate in this -program, you can always engage in a more traditional short sale and achieve similar results without having to share profits in the future. It is my belief that under the current `circumstances and conditions the banks will be very willing to make short sale deals.

There remains the issue of being able to acquire another mortgage as the mortgage market is tight but that’s another problem which can also be resolved.

Unfortunately this program will provide no relief for people with SBA loan defaults or IRS liens on their home.

These are tricky times and much analysis and thinking must be considered before you leap into a program, the good news is help is on the way.

Call if you want to discuss this matter and explore the various options.

413-549-2966