Understanding Car Short Sale and Loan Gap Reduction
Many times when we talk about car short sale, we reference having the loan gap reduced by removing some of the fees and charges from the leanholder. And one of those charges is what’s called add-ons or FNI additions. And here’s an example of where these have been shown to be illegal or improper.

CFPB Case Study: Titlemax and Unlawful Fees
This is a news article publication, a press release from the CFPB, Consumer Finance Protection Bureau. This is a government agency that protects consumers from any kind of financial fraud from institutions. This was a loan company called Titlemax, and they were forced to pay $10 million for unlawful title loans. And if you look at the very end of it, it says fees for useless products. What they did was they tacked on extra fees on top of the loan that made the loan balance higher for consumers.

Federal Trade Commission Requirements on Loan Fees
Now, if you audit some of these loans, you’ll find that it could be thousands of dollars in extra fees for products that had no tangible value. And in the requirements from the Federal Trade Commission, it says very specifically, you cannot add on fees for things that have no tangible value or practical value.

Practical Strategy for Reducing Negative Equity
So, one of the things to look at in a car short sale or lean mediation is to remove those items or cancel those items from the loan. And many times that can add up to thousands of dollars. So, if you have a negative equity on a vehicle that you owe, let’s say 30,000 and it’s only worth 20. If you can chop off three or 4,000 in fees from the loan, get another two or 3,000 from getting a resale value rather than a wholesale value. You can maybe get that negative equity within a couple thousand or maybe break even so you can get out from underneath your car.

Additional Options for Upside Down Vehicle Loans
Many times the lender will also participate in that negative equity to help either refinance it to help adjust some of the difference and sometimes the dealership that sold you the car may have some liability to look at as well. So if you have a vehicle with negative equity, you’re upside down in the vehicle. This is one of many methods you can use to reduce that negative equity, get the loan balance closer to the value or maybe even at the value so you can sell your car, trade it in, and get out from underneath that big car payment.