California Association of REALTORS® Sends Letter To Major Lenders

The letter written by CAR President Beth L. Peerce was address to major top 4 lenders and services urging improvements in the short sale process.  They include Bank of America, JP Morgan Chase, Citigroup, and Wells Fargo.

In the letter, C.A.R. President Beth L. Peerce stated, “As public attention continues to be focused on the real estate industry in hopes of signs of a housing recovery, we trust you’ll agree that change in your short-sale process is critical.”

“We believe banks, investors, homeowners, and real estate professionals all have a common interest in conducting these transactions expeditiously and efficiently. The housing market recovery is in everyone’s best interests, and your urgent focus on these issues will help achieve that end,” Peerce continued in her letter.

Listed below are the suggestions to improve the short sale process.

• Provide realistic time frames and then meet those time frames.
• Provide a comprehensive list of information needed upfront.
• Provide approval requirements upfront that, if satisfied, would assure the borrower of a short sale approval.
• Disclose whether a loan you service is owned by you or if others own it. If others own it, provide time frames for approval. Be clear on who has final authority.
• Pre-approve the short sale and price upon request, prior to the property being listed.
• Review and respond with an approved offer to a borrower’s short-sale request within 30 days of receipt of the request. If rejected, be explicit on why, and how it can be corrected.
• Do not “restart” files from square one if something is missing. Allow the correction and continue, without bumping it to the back of the line.
• Have a person available who can inform the borrower about the file’s status and shortcomings, and who can assist in problem-solving.
• Increase the speed of processing files. Often, a single home goes through the process numerous times, resulting in months elapsing and buyers losing interest. The pre-approvals and cumulative files discussed above will dramatically assist this effort.
• Increase the amount junior lienholders receive. This is a common reason why short sales fail.
• When the property is cleared for sale, be explicit that there will be no recourse on the notes as required by SB 458, which now is in effect.

I believe these suggestions would go a long way in improving the short sale process. Most believe having a short sale is better on a neighborhood than a foreclosure.  The foreclosure process is taking way to long and the home sits empty and uncared for in the process.

SB-458 has taken away the risk for most homeowners of having a junior lender come back after them for recourse.  Improving the approval time frame and giving a green light early on in the process will keep buyers from having to write multiple offers in the hopes of finding one short sale that is approved.

Visit our short sale category for more details.

Photo courtesy of Flickr.

California Tops In Short Sale Fraud

First the FBI announced a crackdown on short sale fraud, and then Freddie Mac  they are teaming up to go after bad real estate agents.  Freddie Mac short sales have increased from 4% of completed workouts in 2000 to nearly 14% in 2010.  The California Department of Real Estate has also issued a consumer alert.

As you can see from the image above, California is in the top states for short sale fraud.

Why are they going after real estate agents?

Since short sale fraud requires the cooperation of one or more real estate professionals involved in the transactions, we have begun reaching out to Realtor associations in target markets to educate them about the latest trends in short sale fraud, the red flags to watch for, and what actions they can take to stop it. We strongly believe responsible Realtors are America’s natural first line of defense against such scams.

There should be a special circle of H*ll for agents that participate in such deception.  The article goes on to give examples of possible short sale fraud.

Falsely indicating on a new short sale listing that there is an offer on a property in order to discourage legitimate offers and protect an accomplice’s planned low bid.

Manipulating the short sale listing price by making the house look more distressed than it really is (“reverse staging”), inflating repair estimates, or using similar tactics designed to obtain an artificially low home value on the Broker Price Opinion. (Our requirements prohibit the buyer, buyer’s agent, buyer’s attorney, or a third-party short sale negotiator to be the contact point for the agents preparing the BPO.)

“Flipping” schemes where the fraudster “buys” a house at a short sale without putting down any of his own money and then sells it a few hours (or days) later to a legitimate buyer at a much higher price. These are complex multi-step schemes that use falsified title and/or loan documents to fool a lender into approving the ultimate buyer’s mortgage, which the fraudster uses to settle the earlier closing on the house he “acquired” at the short sale for a much lower price.

Manipulating the HUD-1 settlement statement so the fraudster can skim away net proceeds from the sale for himself or other parties in the transaction without the seller’s or investor’s knowledge. (The HUD-1 is the document that itemizes all fees, charges, and other funds involved in a home sale.)

Download full FBI report by clicking image below:

One of the hurdles to Short Sales has been the uncertainty of the junior note not coming back later for a deficiency judgement.  SB 458 takes that question off the table for most circumstances.

This does not change the fact that homeowners thinking about what option is best for them should contact both a Real Estate Attorney and Tax Expert for individual council.

I highly recommend Pete Solecki who offers a “distressed property review” for $375.00.

Here is a followup from the California Association of REALTORS® on SB 458.

On Friday of last week the Governor signed C.A.R.-sponsored SB 458 (Corbett) into law! This measure, for any short sale transaction closing escrow after July 15, 2011, will prohibit deficiency judgments from being imposed after a short sale on sellers of one-to-four unit homes. Because the bill was “urgency” legislation, it took effect immediately upon signature.

SB 458 extends the protections of SB 931 (Ducheny), which went into effect on January 1 of this year. SB 931 requires a first mortgage holder that has approved an agreed upon short sale payment to accept that amount as full payment for the outstanding balance of a loan secured by real property, prohibiting the lender from pursuing an additional deficiency judgment at a later time. Unfortunately, this rule did not apply to junior liens!

SB 458 extends the protections of SB 931 to junior liens, effectively providing that any lender that agrees to a short sale must accept the agreed upon short sale payment as full payment of the outstanding balance of the loans.

Some sources have questioned whether prohibiting the junior lenders rights to a deficiency judgment might cause junior lien holders to reject more short sales outright, forcing more homes into foreclosure. Others have suggested that some borrowers have abandoned short sales when faced with the threat of a deficiency or “reservation of rights.” C.A.R. concluded that on balance, the system would be improved and be made fairer for homeowners. Especially since this measure still allows a borrower, real estate agent or other parties to negotiate to bring extra money to the table in the hopes of reaching an agreement.

I also wrote a post regarding SB 458 with some of the preliminary details of the bill.  As CAR speculates there may be some Jr. Lien holders that will not participate and force the homeowner into foreclosure, the up side is more homeowners will be likely to take this option now they know when approved there will be no recourse.

Photo courtesy of SeattleClouds via Flickr

One of the biggest mistakes a distressed homeowner can make is to rely on advice from family, friends, or real estate agents regarding alternatives to foreclosure.  Real Estate agents are licensed and experts in real estate matters, and they are breaking the law by dispensing any legal or tax advice.  Since a real estate agent has a opportunity to make a sales commission on a short sale, and does not on a foreclosure, guess which one unscrupulous agents recommend?

One resource that I often refer is a service offered by Pete Solecki he calls “distressed property” review.

We all know that Attorney’s are expensive and work on a per hourly basis from $300 to upwards of $500.00 per hour.  What you don’t want to be in a distressed position is “penny wise” and “pound foolish”.  The “distressed property” review may save you thousands of dollars from making the wrong decision on a loan modification, short sale, or foreclosure.

For this program Pete Solecki charges $375.00 which is his normal hourly rate.  With that you get much more than an hours worth of value as the program covers the following after you have mailed or e-mailed the requested documentation.  He will take personal checks or credit cards, talk with his office regarding your payment options.

• Set up either an in-person office or telephone conference at your preference.
• Focus on the three primary questions that homeowners have which are how will this effect my credit, how will this affect my taxes, and can or will a lender come after me for a deficiency?

At our meeting I do not tell you what to do, rather I try to give you a road map of what to expect so you can anticipate issues and determine how best to proceed.  For tax issues, only your tax advisor, who knows your personal tax situation, can give you definitive answers but I tell you the tax framework so that you know what to ask your tax advisor.  That meeting or phone call usually lasts about an hour and a half.  Thereafter I take follow-up calls at no additional charge.  I have done this hundreds of times and my clients have found the information to be quite useful when facing this type of situation.

To get started on this program give Pete’s assistant Brandy a call to set up and appointment.  She will supply you in an e-mail all the documentation that you’ll need to scan and e-mail or mail into the office.  The office phone number is 877-309-4747.  They are in the process of moving from Rancho Bernardo to the Bankers Hill area.

If you would like to know more about Pete Solecki please visit his website or read a post about him that I wrote several years ago.

The important thing to remember is that you’re not along in this.

The first step towards a better life is for you to take action and reach out for help – waiting only makes your options disappear one by one.  I know from personal experience how difficult, confusing, and stressful this can be.  Please read “Financial Hardship, Don’t Let Fear Keep You From Action”.

For more information on Short Sales, Short Sale Help, or Foreclosure please visit our categories.

Photo Courtesy of Flickr

The California Department of Real Estate has just published a consumer “Loan Modification Self-Help Guide” with tips for doing your own loan modification to save your home.  This process can be done by the homeowner who should avoid at all costs paying someone up front to do a loan modification.

A loan modification is basically a re-structuring of your current loan term, interest rate, and/or payments.  Sometimes some of the principle balance (loan amount) could be forgiven  or the loan terms could be extended.  Loan modifations are a tool to avoid a “short sale” or foreclosure for those homeowners that qualify.

How do you qualify?

• You must have consistent and sufficient income to cover your new payments or your request will likely be denied.
• If a foreclosure on your home is imminent and the sale date is soon, your request will be denied.
• You cannot be in a bankruptcy proceeding.
• The home needs to be your principle place of residence.

Source Wikipedia

California SB 458 (Corbett) signed by Gov. Brown on July 15, 2011.

According to a press release from the California Association of Realtors (CAR), Gov. Jerry Brown signed Sb 458 into law on Friday.  SB 458 extends the protections of SB 931 (2010), to ensure that any lender that agrees to s short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans.

In 2010 a previous law, SB 931 insured that a first mortgage holder that accepted a short sale payment was payment in full for the outstanding balance of the loan.  SB 931 did not apply to junior lein holders, while SB 458 does.

Here is what CAR president Beth L. Peerce had to say:

“The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference,” said C.A.R. President Beth L. Peerce. “SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders – those in first position and in junior positions – will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property.”

It is always my advice for anyone in financial stress to consult an attorney & tax expert regarding tax & legal consequences and if a short sale is the most appropriate action.  SB 458 will take away the uncertainly  of a purchase money loan have recourse after a short sale has been approved.

Those agents that have been doing short sales would often have to negotiate with Jr. Lien holders to remove language from short sale approval letters that opened the door to possible future recourse.

SB 458 contains an urgency clause making it effective on signing.

Here is a summary of SB 458 from Around The Capital:

Existing law prohibits a deficiency judgment under a note secured by a first deed of trust or first mortgage for a dwelling of not more than 4 units in any case in which the trustor or mortgagor sells the dwelling for less than the remaining amount of the indebtedness due at the time of sale with the written consent of the holder of the first deed of trust or first mortgage. Existing law provides that written consent of the holder of the first deed of trust or first mortgage to that sale shall obligate that holder to accept the sale proceeds as full payment and to fully discharge the remaining amount of the indebtedness on the first deed of trust or first mortgage. Existing law specifies that those provisions would not limit the ability of the holder of the first deed of trust or first mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any 3rd party for fraud or waste if the trustor or mortgagor commits either fraud with respect to the sale of, or waste with respect to, the real property that secures that deed of trust or mortgage. Existing law makes these provisions inapplicable if the trustor or mortgagor is a corporation or political subdivision of the state.

This bill would expand those provisions to prohibit a deficiency judgment upon a note secured solely by a deed of trust or mortgage for a dwelling of not more than 4 units in any case in which the trustor or mortgagor sells the dwelling for a sale price less than the remaining amount of the indebtedness outstanding at the time of sale, in accordance with the written consent of the holder of the deed of trust or mortgage if the title has been voluntarily transferred to a buyer by grant deed or by other document that has been recorded and the proceeds of the sale are tendered as agreed. The bill would also provide that, in other circumstances, when the note is not secured solely by a deed of trust or mortgage for a dwelling of not more than 4 units, no judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage for a dwelling of not more than 4 units, if the trustor or mortgagor sells the dwelling for a sale price less than the remaining amount of the indebtedness, in accordance with the written consent of the holder of the deed of trust or mortgage. The bill would provide, following the sale, in accordance with the written consent, the voluntary transfer of title to a buyer, as specified, and the tender of the sale proceeds, the rights, remedies, and obligations of any holder, beneficiary, mortgagee, trustor, mortgagor, obligor, obligee, or guarantor of the note, deed of trust, or mortgage, and with respect to any other property that secures the note, shall be treated and determined as if the dwelling had been sold through foreclosure under a power of sale, as specified. The bill would prohibit the holder of a note from requiring the trustor, mortgagor, or maker of the note to pay any additional compensation, aside from the proceeds of the sale, in exchange for the written consent to the sale. The bill would provide that these provisions are inapplicable if the trustor or mortgagor is a corporation, limited liability company, limited partnership, or political subdivision of the state. The provisions would also be inapplicable to any deed of trust, mortgage, or other lien given to secure the payment of bonds or other evidence of indebtedness authorized, or permitted to be issued, by the Commissioner of Corporations, or that is made by a public utility subject to the Public Utilities Act. The bill would provide that any purported waiver of these provisions shall be void and against public policy.

I am sure more discussion on SB 458 will pick up next week and more information will be published.  Of course the question of “purchase money” loans and HELOC’s need to be clarified, but overall this is very good for California homeowners who had no straight answers regarding the status of Jr. Liens.

Photo of Gov Jerry Brown via Wikipedia

Deed For Lease  - Another Know Your Options

Many people don’t realize that Fannie Mae has a Deed-for-Lease Option available for those homeowners that want to stay in their home.  This program may be available for those that:

• Are ineligible to refinance or modify their mortgage.
• Facing long-term hardship.
• Several months behind on your mortgage payments.
• Owe more on your home than it’s worth.
• Have not been able to sell your home.
• You want to remain in your home and neighborhood.

The first step is to find out who owns your loan.  Other lenders may or may not have similar programs so be sure to check with your lender.  You can find out if Fannie Mae owns your loan and the Deed for Lease Option on the loan lookup page.

So what are some of the benefits of the Deed For Lease Option?

• Eliminate or reduce your remaining mortgage debt
• Resolve your delinquency and avoid foreclosure
• Stay in your home and neighborhood—no need to move or relocate
• Lease at current market rate rent for up to 12 months with a possible option to extend the term
• Pay no security deposit
• Assistance for relocation may be available at the end of your lease
• Start repairing your credit sooner than if you went through a foreclosure
• May be able to get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) by executing a DIL than if you went through foreclosure (at least 7 years)

How does the Deed for Lease Program work?

• Your mortgage must be owned by Fannie Mae
• Your mortgage company will refer you to a property management company that will inspect your property and review your financial information
• You will sign a lease agreement (if you qualify for the program)
• You will sign a Deed-in-Lieu of Foreclosure (DIL) to transfer title to the property to them
• Your lease becomes effective once the DIL is complete/accepted by them
• You will remain in the property according to the lease terms paying monthly rent
• The property management company will manage the property and collect the monthly rent

If you want to know your options visit the Fannie Mae website or our HAFA short sale page.  More information can also be found in our Short Sale and Foreclosure categories.

Short Sale HAFA Changes

As guessed the Treasury Department has changed the rules regarding a short sale and the HAFA program.  You can read complete details on the HAFA program on our HAFA resource page.

Will the short sale actually be true to its name?

Currently short sales are taking many months with many of them not being approved or loosing buyers that finally wander off.  No one would call them short.

In a nutshell here are some of the changes:

• Those seeking a short sale must get an answer within 30 days.
• Servicers will no longer be required to verify a borrower’s financial information.
• Servicers are no longer required to determine if the debt-to-ratio incomes exceeds 31%.
• Second lein holders no longer must accept 6% of the unpaid balance.

The Government is clearly focused on making short sales a viable option.  This does not appear to be the case with the Banks that sometimes pass up a short sale offer and end up with less proceeds on a Trustee sale.  Only time will tell if the program will actually start to work but I am currently working on HAFA certification to understand the whole process.

Below are some of the basics of the HAFA program for short sales.

HAFA Basic Eligibility Eligibility Requirements For Short Sales

The home must be owner-occupied principle residence.

• It must have a first trust deed mortgage(loan) in place prior to January 1, 2009.
• The mortgage must be delinquent or delinquency is likely.
• The unpaid loan balance is no more than $729,750 for a single family home.
• Your monthly payment is more than 31 percent of your gross income.

HAFA short sale advantages.

• Buyer’s will know where they stand in the purchase.
• Seller’s will walk away from the property more dignity.
• Fewer deals with fall through at the last minute.
• Uniformity of forms used in the process.
• 10 day business response from lender upon presentation of executed offer.
• If Seller not approved for HAFA may be considered for deed-in-lieu of foreclosure.
• Mandatory deficiency release.
• $3,000 in moving expenses.

Stayed tuned for more HAFA short sale updates.

Photo courtesy of  Hans Kylberg on Flickr

Fannie Mae has just announced www.knowyouroptions.com.

Another resource for people in real estate financial hardship was launched the other day by Fannie Mae called Know Your Options.  The Fannie Mae site has lots of information links and an interactive video.

Here are a few of the major links to resources:

• Contact a housing counselor at 888-995-HOPE.
• Check to see if your loan is owned by Fannie Mae here.
• Financial Checklist from Fannie Mae.
• Refinancing options or loan modification options.
• Deed for lease program.
• Options for leaving your home like a short sale or Deed-in-Lieu.

Unfortunately many of the people offering hope and assistance are frauds.  Check out loan scam alert and prevent loan scams.

Most important find out how you can take action.  Nothing will get better by delaying the process, but taking the first step towards getting help will.

A HUD-approved housing counselor is an experienced, trained professional who can advise you on preventing foreclosure, buying a home, protecting your credit, and other issues. The U.S. Department of Housing and Urban Development (HUD) sponsors housing counseling agencies throughout the country and counseling is available in many languages.

A housing counselor can talk to you about your situation and help you decide what mortgage options are best for you, whether you are concerned about falling behind on your mortgage or are preparing to buy a home. There is no charge to work with a HUD-approved housing counselor—help is free!

If you have missed any mortgage payments, are about to miss a payment, or if your loan already has been referred to an attorney for foreclosure, a HUD-approved housing counselor can help you assess your circumstances, identify your options and prepare you to talk with your mortgage company.

The U.S. Department of Housing and Urban Development (HUD) sponsors housing counseling agencies throughout the country and counseling is available in many languages.

Foreclosure Avoidance Counseling

There is no charge for working with a HUD – approved counseling agency.  Before calling you should have the following information together.

• Mortgage statements including any 2nd or Junior mortgages.
• Other monthly debt like car, student, or other loans.
• Your income details including pay stubs and income tax returns.

Fannie Mae has put together a handy form to gather this information.  Financial checklist or Contact Information Sheet.

The Worst Thing You Can Do Is Nothing!  Please Don’t Let That Happen To You.

The past years have been a really tough time for most everyone.

However, it has effected folks that purchased real estate at the top of the market the most.  Faced with bad mortgages, no equity, lost jobs, and other financial challenges it is easy to want to jump in bed and pull the covers over your head.  I know that I did.

A article in “Fear of losing one’s home a powerful force” the other day on Sign On San Diego had this tragic story:

As San Diego discovered on New Year’s Day, Michael Cour of Santee was one of those desperate people. Staggering under a worst-case scenario pileup that included unemployment, bankruptcy and foreclosure, Cour set his house on fire and shot his wife before turning the gun on himself. The situation was extreme and his response was horrifying, and if you are a veteran of San Diego’s boom-and-bust real-estate wars, the story of Cour’s homefront nightmare probably still haunts you.

“Your home is your shelter, and that fulfills one of your basic needs in life,” said Gabe del Rio, a senior vice president at Community Housing Works, a local nonprofit whose services include foreclosure intervention. “But people have also been taught that their home is their wealth. And when you think about your shelter and your wealth being taken away, you are really getting to a very emotional place.”

I know how hard this can be from personal experience.  After working for 10 years through some of the best times for real estate sales, the management position in the Company that I worked for came to an abrupt end.  Big changes in ownership, leadership, and culture caused many managers to unexpectedly “go back into sales.”

Having recently purchased a condo in The Grande South which was near the Coaster so I could commute back and forth to Rancho Santa Fe I found myself unemployed with a large mortgage and high HOA fee.  In addition I was in the process of a divorce that went on for 3 years, with mounting attorney fees, and heath issues.

Suddenly I was back to being a self-employed real estate agent thrown into a crashing real estate market after being out of sales for 8 years.

Let’s just say these were some very dark days and I cannot tell you how hopeless I felt as things spiraled out of control for me in almost every aspect of my life.  Without some close friends and family I would not have survived after loosing most everything that I had worked for over my 20 year real estate career.

If I can give you one piece of advice please take action.

Many people are in desperate financial hardship and you are not alone.  Even better there are many resources out there to help you make some touch decisions.  Start today by calling a HUD certified housing counselor, real estate attorney, and a trusted real estate agent. Family and friends can be some good resources for referrals.

Options include loan modifications, short sales, bankruptcy, foreclosure, and deed in leu of foreclosure,  Depending on who owns your mortgage you might even be able to lease you home making it possible to stay in your home at an affordable rental rate.

The unfortunate result in this market shift is it has brought out many scams and charlatans pretending to be experts.  Preying on the most desperate the take a bad situation and make it worse.  It is really frustrating and sad the horror stories I hear every day from folks that have reached out to the wrong people or have been given bad advice.

If you want resources for short sale information please visit our HAFA page.  Information on foreclosures can be found in our foreclosure category. These article have links to Fannie Mae, Freddie Mac, and HUD for help and information.

Take a moment to read the California Department of Real Estate warning regarding the so called experts out there.

The DRE has noticed an increase in the use of questionable and possibly misleading terms such as “expert”, “certified”, and “specialist” in the marketing and advertising of assistance to anxious homeowners in connection with their home loans and foreclosure rescue services and short sales A growing number of individuals and companies, many of whom are unlicensed, purport to be “experts” in the area of short sales, “certified” forensic loan auditors, short sale “specialists”, loan modification “specialists”, loss mitigation “experts”, “fraud investigators”, and the like, and many of these designations and claims seem to be nothing more than marketing ploys by unscrupulous fraudsters to capitalize on the desperation and vulnerability of unsophisticated and/or financially strapped homeowners.

One good friend told me during this time, “Jeff, if you are marching through hell…you better just keep marching!”

I am so glad that I did and reached out to the many resources out there.  Today is a much brighter day and a much better option than Michael Cour.

Please pass this article on to friends and family.  Let them know there is hope out there and the best thing they can do is take the first step on the journey back.

Photo courtesy of Flickr