What is this called

I was talking to an investor that does allot of short sales. He mentioned he often takes loans that don’t have enough equity or he is not able to discount enough to be worth the holding title and get the lender to tack all the rearages to the back end of the property owners loan. Therefore getting paid by the property owner for providing a service by stopping foreclosure.

Does anyone know what the term is for this process and how is it done.

any help would be great
thanks in advance

you say you talked to this investor that does a lot of short sales; well what you described does not sound like a short sale. Sounds he is simply negotiating with the bank to do some time of forebearance or loan modification and getting paid, say, $2k for his services.

Yes what he does do is short sale but if the property isn’t appealing to him he offers this service. I believe its called forbearance. has anyone done these? and if so, how does the process work?

Are you talking about a forbearance?


From what I know - the loan payment can be suspended but the interst is still due - and any arrearages are tacked onto the back of the loan.

Different banks do forbearances different ways.

Some take the total arrears including legal fees etc and depending on the debtors capability of paying it can be from 6 months to 18 months.
The debtor is then responsible for the normal monthly payment puls the arrears monthly payment.
This is usually the arrears divided by the months = monthly payment.

Some lenders will ask for some sort of a goodfaith down payment and then the amount left divided into monthly payments.

Countrywide do ask for money doen and can suspend payments for up to 5 months if negotiated correctly.

Just remember forbearances are not automatic, they must qualify… they must have the means to make the original payment PLUS the additional arrears monthly payment.
Also the bank will ask when they defaulted what was the cause and what measures have they taken to rectify it.


That person is providing part of what is usually called Loss Mitigation or Home Redemption services. There are tons of articles, books and courses that show how it is done. It is something the homeowner can set up himself/herself by calling their lenders, but for many reasons they are not always able or willing to do so.

There are some people that specialize in this service only. Some investors offer it as a service where they can get paid to help the homeowner if s/he really wants to stay in the home, and in the process they create top-of-mind awareness as the person to call when the homeowner almost inevitably falls back into the same trouble down the line and must sell the home.

Unfortunately it has a bad rap because people use the mask of foreclosure “bailouts” or “saving” a person’s home to take horrible advantage of them. Thus alot of states are cracking down on these services and how they can be done in the future.

This is from HUD – Jan

Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.

Partial Claim. Your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current. You may qualify if:

1.your loan is at least 4 months delinquent but no more than 12 months delinquent;
2.you are able to begin making full mortgage payments. When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development will pay your lender the amount necessary to bring your mortgage current. You must execute a Promissory Note, and a Lien will be placed on your property until the Promissory Note is paid in full.The Promissory Note is interest-free and is due when you pay off the first mortgage or when you sell the property.

Pre-foreclosure sale. This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan. You may qualify if: 1. the loan is at least 2 months delinquent; 2. you are able to sell your house within 3 to 5 months; and 3. a new appraisal (that your lender will obtain) shows that the value of your home meets HUD program guidelines. Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily “give back” your property to the lender. This won’t save your house, but it is not as damaging to your credit rating as a foreclosure. You can qualify if: 1. you are in default and don’t qualify for any of the other options; 2. your attempts at selling the house before foreclosure were unsuccessful; and 3. you don’t have another FHA mortgage in default.

Q: How Do I Know if I Qualify for Any of These Alternatives? Your lender will determine if you qualify for any of the alternatives. A housing counseling agency can also help you determine which, if any, of these options may meet your needs and also assist you in interacting with your lender. Call (800) 569-4287 or TDD (800) 877-8339.