Saturday, October 1, 2011

Foreclosure: What It Really Means & How To Avoid It

9 Ways to Avoid Foreclosure:

1. REINSTATEMENT: Bring the loan current
2. FOREBEARANCE: Temporary repayment plan
3. REFINANCE: New loan with reduction in monthly payments
4. LOAN MODIFICATION: Modify original loan terms
5. SELL THE PROPERTY: Use equity to payoff or pay difference
6. RENT THE PROPERTY: Must make loan current
7. SHORT SALE: Negotiate with bank to accept sale under loan amount
8. DEED IN LIEU OF FORECLOSURE: “friendly foreclosure”
9. BANKRUPTCY: Will stall foreclosure but not prevent it

The facts are these, if you are currently experiencing a financial hardship and are considering walking away (foreclosing) or bankruptcy, there is a better, more dignified way to exit gracefully - short selling your home.

The benefts to short selling your home are recovering sooner from any "late payment" marks against your credit (with foreclosure, the judgement remains on your credit report for up to 7 years and there is NO guarantee that you can get a loan to purchase again within two to three years contrary to popular belief), and in some instances, some lenders are allowing short sales without being in default. I personally have closed a handful of those. In that instance, the seller could feasibly purchase again right away.

Additional benefits to a short sale are the Debt Forgiveness Act which protects you from tax implications up to $250,000 (if you're single) and $500,000 (if you're married); and SB 458 (California only) which protects you from the deficiency once the short sale closes, neither the Sr nor the Jr lienholder can pursue for the difference once the sale is complete.

Unlike SB 458, once you "walk away", the deficiency will walk right behind you. Then it will take another derogatory action to make that go away -- bankruptcy. Not only is bankruptcy yet another blow and judgment against your credit, but it's also expensive. Whereas with a short sale, your lender will cover the costs of the transaction (commission, escrow/title fees, buyer closing costs, etc). If you have a definitive hardship, it is assumed you have no funds to contribute to the transaction.

As you can see, an expert in this area is required as this is not an easy process; nor is every real estate professional trained in short sales.

So, reconsider "walking away", count the costs, do your homework, get with a qualified real estate professional, and soon you will be on track to recovering sooner.

Tuesday, September 13, 2011

HAFA Problematic? Oh Yes!

The purpose of the government sponsored HAFA (Home Affordable Foreclosure Alternative) program is to simplify and streamline the short sale and DIL (Deed-in-lieu) process by providing a standard process flow, minimum performance timeframes and standard documentation.

However, in my recent experience with HAFA, simplify and streamline have been benched and their opposing teammates complicate and inefficient are on the field instead.

Here's what's occuring (adapted from an article written by Kevin Kravcak)

1. THE GOOD INTENTION: Servicers, in accordance with investor guidelines, determine if a short sale or DIL (deed in lieu of foreclosure) is in the best interest of the investor, guarantor and/or mortgage insurer.

THE NEGATIVE RESULT: It matters not what is in your sellers best interest but what is in the best interest of the investor/lender/insurance companies.


2. THE GOOD INTENTION: By signing the SSA, you are agreeing not only to a short sale but also to a deed‐in‐lieu of foreclosure if a short sale is not successful.

THE NEGATIVE RESULT: By signing the SSA, you are agreeing not only to a short sale but also to a deed‐in‐lieu of foreclosure if a short sale is not successful... keep reading...


3. THE GOOD INTENTION: You have up to 120 days to sell the property.

THE NEGATIVE RESULT: After the 120 days, the servicer may or may not agree to extend it for up to a year.


4. THE GOOD INTENTION: You can get a preapproved short sale when you list your home, no waiting for an approval.

THE NEGATIVE RESULT: When the seller signs the SSA (HAFA short sale agreement) they are agreeing up front to a DIL (see #2 above). The investor is obligated to accept a DIL in accordance with the terms of the SSA if the term of the SSA expires without resulting in a sale of the property - This means come day 120 the lender can exercise and enforce a DIL because the seller already agreed to it in writing. For those of you who don't know, a DIL is nothing more than a volunteered foreclosure. It will show on your credit as a foreclosure. This is not a benefit to you but it is to the lender because they get the property back in their possession faster thereby saving them money compared to making them go through a judicial foreclosure process.


5. THE GOOD INTENTION: Servicer Disclaimer – Servicer may provide a disclaimer related to any limitations of the information provided in the matrix as it relates to individual investor or mortgage insurance restrictions or additional program requirements.

THE NEGATIVE RESULT: Lay man's terms, this means Servicers may amend the terms of the SSA in accordance with investor requirements, or they can do whatever they please, and in most cases they do just that.


6. THE GOOD INTENTION: Your home is appraised up front!

THE NEGATIVE RESULT: The offer price will be dictated by the lender using the 90 day "as-is" BPO value. The servicer does not have to agree to additional valuation methods. Sellers better pray they get an experienced BPO agent because if they over value your property and it does not sell within 120 days because it is overpriced, you're stuck with a house that won't sell (price not negotiable) and so you just gave your property to the bank (see DIL #2 and #4 above).


Don't fret though as there is ONE good thing about HAFA. You can opt out of this program at any time! If the borrower fails to contact the servicer within the timeframe or at any time indicates that he or she is not interested in these options, the servicer has no further obligation to extend a HAFA offer. This means you can elect to perform what is now being referred to as a "proprietary" or "traditional" short sale (or a non HAFA short sale).


If you have help from a qualified experienced short sale professional, they will know all you have to do is put in your short sale package cover letter the words, "THIS IS TO BE A NON HAFA SHORT SALE." They will also have many ways to help you avoid having a foreclosure on your record, avoid agreeing to a DIL, avoid agreeing to deficiency judgements and avoid signing promissory notes.


Bottom line, HAFA is great for the lender/servicers but not so much for you, the homeowner/seller. This program will be a good fit for very few homeowners, if any at all.

Monday, September 12, 2011

Know What You Owe - Ready, Set, Get Outta Debt!

(This article courtesy of Feed the Pig. Copyright 2011 American Institute of Certified Public Accountants.)

Get Out of Debt

There's no time like the present to start on the path to get out of debt. Set aside some time to create an attack plan for lessening and eliminating your debt. Here are some tips to get you started.

Know what you owe. A major downfall in managing debt is not knowing exactly how much you owe. You may have a vague idea, and know approximately when your bills are due, but without knowing specifics you are more likely to run into trouble. Make a list or chart of all your current debt balances—all credit cards, loans, etc.—and note the date each payment is due every month. Keep it somewhere you will see it on a regular basis. Set up reminders for each bill due date on your phone or email to help ensure you make each payment on time.

Consider consolidating. Like many Americans, you may be carrying more than one form of debt, which can make it hard to manage, especially with multiple payment due dates. Consider debt consolidation, which allows you to combine your smaller loans into one larger loan, usually with a longer term and lower interest rate, resulting in one monthly payment. Consolidation has advantages and disadvantages depending on your individual situation, so talk to a financial professional, like a CPA, to see if consolidating your debt is right for you.

Reduce, reduce, reduce. A key strategy to managing and lessening your debt is to always reduce, never increase. It can be tempting to open another credit card when one is maxed out, but doing so will only make debt management more difficult. Instead, look for ways to adjust your spending habits to pay down the debt you already have. Make a goal to always pay more than the minimum payment due.

Don't hide. If you feel like your debt is spinning out of control and you don't know what to do, talk to a financial professional who can help get you back on track. You may also want to contact your creditors. Creditors will often work with you to come up with an alternate payment plan if you take the time to explain your situation.

Do you have a success story of how you managed your debt? Share it with us on the Feed the Pig Discussion Board. For more information on managing debt, click here.

Visit www.feedthepig.org for more money-saving tips.

Friday, September 9, 2011

What You Can Do If You Have Been Scammed In Real Estate

WHAT YOU CAN DO IF YOU HAVE BEEN SCAMMED (OR BECOME AWARE OF A LOAN MODIFICATION SCAM)? REPORT FRAUD AND FILE COMPLAINTS WITH --

1. The DRE if a real estate licensee is involved, or if the person or company is unlicensed. If the person or company is unlicensed, the DRE will file a Desist and Refrain Order. If the person or company is licensed, the DRE will commence disciplinary action, http://www.dre.ca.gov/cons_complaint.html.

2. The District Attorney, Sheriff, local police and local prosecutor in your community.

3. The California Attorney General, at www.ag.ca.gov/consumers/general.php.

4. The California State Bar if a lawyer is involved, or if an unlicensed person claims to be a lawyer at www.calbar.ca.gov.

5. The California Department of Corporations, at www.corp.ca.gov, if a loan modification claims to be operating under a California Finance Lender License.

6. The Federal Trade Commission, at www.ftc.gov. They have an excellent fact sheet on Foreclosure Rescue Scams.

7. Federal Bureau of Investigation (FBI), at www.fbi.gov.

8. HUD, at www.hud.gov.

9. The Federal Deposit Insurance Corporation (FDIC), at www.fdic.gov.

10. The Better Business Bureau in your community.

11. The Chamber of Commerce in your community.

12. File a Small Claims Court action. These are informal courts where disputes are resolved quickly and inexpensively by a judge. Since 2008, you can recover up to $7,500 in Small Claims Court. You represent yourself, and can request a judgment for money damages.If your judgment is based on fraud, misrepresentation, or deceit, or conversion of trust funds, and the judgment is against a real estate licensee, DRE has a Recovery Fund that may be able to pay your claim. Go to the DRE web site at www.dre.ca.gov, and look under the tab for “Consumers”. Also, the California Secretary of State has a “Victims of Corporate Fraud Compensation Fund” that provides restitution to victims of corporate fraud. Go to the Secretary of State’s web site at www.sos.ca.gov/vcfcf for more information.

(info above issued 3/2009 via www.dre.ca.gov)

Thursday, September 8, 2011

INDUSRTY UPDATE: Four Foreclosure Avoidance Programs Under "Keep Your Home California"

(Information taken from Keep Your Home California blog)

Cash-strapped homeowners who want to avoid foreclosure have four programs under Keep Your Home California, each with thousands of dollars available – and in some cases as much as $100,000.

The federally funded, state-run effort established the four programs after input from community leaders statewide. Quite simply, we wanted to know the best way to put almost $2 billion to work for low and moderate income families in the Golden State, from El Centro to Crescent City.

Each program caters to specific needs, such as jobless homeowners looking for help with the mortgage for a few months while they find work to those needing to reduce loan principal to make their payments work. And, like most efforts, you need to find the program that best fits your needs.

We’ll go over the basics of each of the four programs, but we strongly encourage you to contact our customer-service reps who can check if you are eligible, determine the best program for your needs and start the process.

Below is an overview – all the detailed information is available at www.KeepYourHomeCalifornia.org, including a seven-minute video on the process.

Also, please remember that some homeowners are eligible for multiple programs. When you apply and begin the process, representatives can answer questions about eligibility and determine if multiple programs – and more funds – are possible.

Unemployment Mortgage Assistance Program – Out of work and need some money for the mortgage payment? Well, maybe we can help. Keep Your Home California will provide as much as $3,000 or the combined monthly payment of principal, interest, taxes insurance and homeowners’ association dues, whichever is less, for a maximum of six months. Of course, there are some requirements, including that you must be receiving unemployment benefits from the California Employment Development Department.

Mortgage Reinstatement Assistance Program – Homeowners behind on their mortgage – including interest, taxes, insurance and homeowners’ association dues – can receive as much as $15,000 to help get back in step on the payments, a huge help for consumers with a short-term issue that affected their income. Homeowners must also prove they can afford the mortgage payment once it’s reinstated, otherwise we are creating a situation for failure – and that’s not good for anyone, from the homeowner to the lender. Some homeowners can combine this program with California Housing Finance Agency’s Loan Modification Program. More than $129 million has been earmarked for this program.

Principal Reduction Program – This program is like going on a fiscal diet, trimming your mortgage principal balance. How much of a cut to the mortgage principal depends on additional Keep Your Home California assistance funds (yes, you can get dollars from other programs mentioned above). Note: like all of our programs, your mortgage servicer must be participating in Keep Your Home California for this to work for you. Unfortunately, this program has been the most difficult to get mortgage servicers to participate in. Check our list of servicers to see if your servicer is participating.

Transitional Assistance Program – We realize that sometimes it’s best for people to transition to another type of housing. So, when it comes to getting back on track for homeowners who avoided foreclosure through a short sale or deed-in-lieu of foreclosure, maybe we can help. The Transitional Assistance Program offers as much as $5,000 for families to find a new place to live.

The information above is intended only as an overview. Their website, www.KeepYourHomeCalifornia.org, has all the details.

Or you can simply call one of their counselors at 888-954-5337 to get more information and check eligibility.

Monday, August 29, 2011

REALTORs Push Back on Behalf of The Distressed Property Homeowner in California

While nationwide, distressed property sales showed signs of improvement, California's distressed preoperty sales took a dip in the month of July.

The California Association of REALTORs (C.A.R.) points to lenders’ requirements which make closing these transactions a difficult process.

C.A.R. recently sent letters to the heads of the nation’s largest lenders – JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo – making recommendations on how the short sale process can be improved and calling for the lenders’ urgent attention to address the issue.

Beyond the customary requests for realistic timelines and explanation for short sales that are rejected, the trade group is asking the lenders to disclose up front whether or not they actually own the original loan and be clear on who has the final authority to approve a short sale offer.

Realtors also say the process would move along much more quickly if lenders would pre-approve the short sale and price upon request, prior to the property being listed.

They want the lenders to increase the amount junior lien holders are given for agreeing to a short sale; second mortgages can often derail a transaction.

From "California Distressed Sales Decline, Realtors Push for Streamlined Shorts" an article written by Carrie Bay, DSNews, 8/26/11

Saturday, August 27, 2011

If I Sell My Home in a Short Sale, Will the Bank Pursue Me for the Difference?

I am happy to quickly say, as of July 15, 2011, not any more. Here’s why –

Last year the Legislature passed Senate Bill 931 adding Section 580e to the California Code of Civil Procedure and stating that the senior lien holder could not pursue a deficiency judgment after a short sale which they had previously approved. The law equally applies to purchase money, hard money and refinance - as long as there was no cash out.

However, although the passage of the bill was a great victory for homeowners, it left a few items undetermined and unsettled. Questions such as “What about the junior lien holder?”, “What if a borrower’s short sale closed prior to that date, was it retroactive?”, and “Does the law apply to investors?”

This year the Legislature passed Senate Bill 458, amending Section 580e and extending the protection of SB 931, by making it applicable to junior liens as well. In addition to not being able to get a deficiency judgment it provides that after a short sale, no deficiency shall be owed or collected and no deficiency judgment shall be requested or rendered provided the short sale closed escrow and the lender was paid the amount they agreed to accept.

So what does this mean in lay man’s terms? Although the law does not specifically say so, it is likely the courts will interpret that section to mean that it applies to a short sale closing either before or after July 15, 2011, the effective date of the new section – making it retroactive. That analysis, according to attorney Dave Tanner with Hanson Law Firm, is based on the provision that the short money cannot be collected and no deficiency can be requested. It also applies to investment owned properties up to 4 units, and will bar lenders from turning these loans over to a collection company which some lenders were doing even though the earlier section barred a deficiency judgment.

The amended law further provides that the holder of a note shall not require the seller to pay any additional compensation, aside from the proceeds of the sale, in exchange for their consent to the short sale.

The remaining question is whether this law will protect the seller from liability after a short sale or whether it will lead lenders to denying short sales in favor of pursuing foreclosure where a deficiency of a junior lien can still be pursued.

That question, as well as an industry question, how the law will affect other parties of the transaction, title companies and real estate agents, as it pertains to the junior lien holders attempting to usurp the law and collect on the deficiency, remain to be seen. Because the probabilities exist, we are certain to hear more about them in the very near future.

If you have any questions or are considering a short sale and want to discuss your options, feel free to contact me at (916) 678-1803 or visit my website at www.SheSoldItForMe.com. For real estate law advice, contact the Hanson Law Firm at (916) 447-9181 or log on to their website at www.HansonLawFirm.com

The majority of the information contained in this article came from excerpts shared by Dave Tanner of Hanson Law Firm on August 26, 2011 at the monthly Sacramento Association of REALTORS industry update meeting.