Monday, February 22, 2010

Another Minefield For Struggling Homeowners: Discount Payoffs

A “Discount Payoff Agreement and Release of Claim” is growing trend that the Center's Counseling Network is seeing being offered by second and other junior lien holders.

A Discount Payoff Agreement is an offer allowing homeowners facing foreclosure to pay a small portion of the total remaining principal balance on a second (or third...) mortgage in exchange for release of that mortgage. The Agreement also suggests that it will forgive all remaining debt owed on the released mortgage. This seems like a great opportunity, and mortgage holders will encourage homeowners to quickly sign the agreement and send in a check for the payoff amount.

But is it too good to be true?  Maybe.

Homeowners need to proceed with caution, and before agreeing to a "Discount Payoff" they need to consider the following:

   1. Is the Mortgage Debt REALLY Forgiven?

   2. How does the lender handle "Release of Claims"?

   3. How does the lender REALLY define a “Discount Payoff”?

The answers to these questions can really be a minefield for struggling homeowners... who may view a Discount Payoff as a life raft from a sinking ship.  BE CAREFUL... this life raft may be full of holes!

Working with the Housing Preservation Project, a non-profit legal organization, the Center has produced a fact sheet that defines and explains "Discount Payoffs" and offers advice about some of the pitfalls and the possible dangers associated with them.

For a copy of this new fact sheet... click here.

Not all "Discount Payoffs" are dangerous... and they can be a great help for struggling homeowners burdened with second or third liens.  Before signing ANY documentation from a lien holder... whether it be a Discount Payoff or any other paperwork... the Center recommends that homeowners seek the advice of a certified non-profit Foreclosure Counselor.  To find your local FREE housing counselor, click here.

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