A New Revitalization of an Old Lending Practice
In the simplest meaning, asset-based lending is any kind of lending secured by an asset. This means if the loan is not repaid, the asset is taken. A home mortgage is an example of an asset-backed loan. More commonly however, the phrase is used to describe lending to business and large corporations using assets not normally used in other loans. Typically, these loans are tied to inventory, accounts receivable, machinery and equipment, but they can also include exotic things like the value of pharmacy script files, a trademark, or whole assets of intellectual property. For example, Midway Games took out a line of credit secured by its Mortal Kombat game. If it fails to repay, the bank then owns the franchise and can sell the rights to it.
Surviving A Short Sale
There are several differences between a “short mortgage” sale and a mortgage foreclosure and the effects between the two are substantial for all involved including the borrower or mortgage holder, the bank and a potential real estate agent.
For the borrower, the benefits of a short sale include not having the “foreclosure” designate on a credit report, eliminating the opportunity for the lender to take legal action against the borrower for the difference between the negotiated “accepted” price and the actual cost of the property (with a no recapture allotment) and zero tax implications as long as the short sale is completed and closed before the year-end 2012. Even if the short sale text is reported to the credit bureaus (which, again, any wording or verbiage can be negotiated), a borrower will not have to wait the industry standard 24 months for another mortgage. The obvious benefit for the lender is they no longer have to absorb the operating cost nor the liability of the property until the property is either auctioned off or becomes an REO (Real Estate Owned) property. The lender knows the realized settlement net because of the accepted offer.