Short Refinance Definition

A short refinance is the refinancing of an existing mortgage by the same lender for a mortgage account that is in default and facing imminent foreclosure. The short refinance is almost always less than the existing loan amount-that is, it is "short"-with the difference being forgiven by the lender.

Why would a lender offer short refinancing? Foreclosure is very expensive and time consuming. If the lender believes the short refinance will be successful, they will offer it as long as the associated costs are less than the cost of a typical foreclosure. Caught between a rock and a hard place, the lender seeks the best possible outcome.