 GMAC Short Payoff Analysis
Hello and thank you all for your contributions and mounds of advice. First time posting on this thread, but have read it for the past several month. Thank You.
Our mortgage was originated with GMAC in 2007 at 8.75% due to my credit score being so low. I am currenlty in the process of refinancing the interest rate to a affordable rate. I submitted all the necessary documentation to the GMAC loan specialist. They sent over an appraiser who valued my home at 75,000. My current loan amount financed is 90,000 and not backed by Freddie/Fannie. This upside down situation was a complete shock. I can't believe it went down by 40,000 in 2 years. When we originally closed it was valued at 115,000. I have read similiar stories and understand the economic factors involved.
In their attempts at working with me at refinancing my home, they have contacted me and indicated that I would qualify for a 5% interest rate with same 30 year term. The methodology at arriving at this rate involves a "Short Payoff". I consider myself to be financially responsible and have never missed a payment. My current credit score is 770. Shortly after receving notice of the 5% interest rate, I received a "Short Payoff Disclosure". In this letter, GMAC is indicating that by agreeing to the short payoff arrangement, a "settled for less than the amount owed" notation would be on my credit report. They are willing to reduce the principle owed on my mortgage by 15,000. Thus refinancing my home for the current appraised value. The whole purpose of refinancing my home was to get ahead. I feel that this arrangement will in essence take me backwards. The GMAC loan specialist has assured me the eventhough my credit score will be taking a hit, it will probably be back to its current level in one year considering I continue to pay all my debts on time. They are also encouraging me to persue this route because eventually I will owe much less money and can get my house paid off much quicker.
Does this sound right? What kind of credit score reductions have other persons experienced?
When I asked them about a loan modification, they responded and said I could get the rate modified, but for only a short period of time pending further approval. What does this mean? I am currently making huge sacrifices, as are the vast majority of other mortgage holders on this site. Your kind advice and wisdom will be greatly appreciated. Thank You.
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