Q. Our home is currently underwater by over $100,000.  We would really like to save it and we’ve been trying to get a loan modification for over a year but we have had absolutely no luck.  A mortgage company said that they can do what is called a short refinance on our property so we could save our home.

Can you please tell us how we do this and if this is a scam or not?

A. A short refinance is when a borrower is underwater like yourself and your current lender agrees to a principle reduction in order to refinance into a new mortgage with a new lender. In order to qualify, you would have to be approved as a sound borrower by the new lender and you would also have to get your current lender  to agree to take over $100,000 off of  your loan.  This is much easier said than done.

The reason that this home saving solution is not being actively engaged is because mortgage servicers are simply not allowing them.

They make perfect sense because a short sale is essentially the same thing.  But with this type of refinance the homeowner gets to save their home.  You would think that this foreclosure remedy would be the hottest thing since loan modifications, but lenders will just not have it and one can only speculate on the reasons why.  It could be because of principle reductions and the threat of investor lawsuits or it could be the fear of borrower fraud.

I have never seen a short refi successfully completed with my own two eyes.

I come from the mortgage school of where I have to see it to believe it. Especially in this day and age of white collar crimes and phony mortgage fixes.

Many homeowners have come to our forum and have spoken about these offers but they always turned out to be snake oil.  The borrowers were tricked into paying up front fees and never got anything in return for their money.  The mortgage brokers blamed it on the lender, appraiser or even the borrower. However, the homeowner is left in a worse foreclosure position and with no cash.

So, I would say that most of these short refinance offers that you see are scams.

It would be better that you keep pursuing your loan modification.  If you’re doing it on your own and getting nowhere, then you should seek assistance from a nonprofit housing counselor who can help you for free.  You can call 888-995-HOPE or visit the links below to find a non-profit in your area.

  • HELP 24 hours a day / 7 days a week – (888) 995-HOPE
  • Help For Homeowners Facing The Loss Of Their Home
    (En Español)
  • HUD Approved Housing Counseling Agencies: California Cities
  • List of Approved Credit Counseling Agencies
  • Get Mortgage Help Now – By County
  • Loan Servicer “Hotline” Contact Numbers
  • What if You Cannot Pay Your Mortgage?
  • (VA) – Trouble Making Payments
  • Moe Bedard
    My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.