Labels: Loss Mitigation, Negotiation, Short Sale

Each state has it’s own rules. In the State of California, for Residential Property (1-4 Units), Owner Occupied here’s a quick chart.

* If a senior Lienholder forecloses on the property, the wiped out junior loan lienholder who no longer has a secured note may NOT sue on this promissory note for those categories indicated on this chart.

There are other factors and conditions which may change the result (such as borrower fraud).

Always consult a legal professional.

Labels: Mortgage Debt Relief Act, Notice of Default, Short Sale

Cattle, Sheep. Goats, go ahead and pick your favorite. You are a now a piece of livestock in the eyes of Fannie Mae and Freddie Mac.

And you thought you were just another number?

As the pressure mounts for more and more homeowners, it's no surprise that Foreclosure Rates have risen.

Yesterday, Bloomberg News reported that,

"U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders."

From the mouths of Lenders (thanks to Calculated Risk),

Don Truslow, Wachovia Corporation - SEVP, Chief Risk Officer

"Ken, that's exactly right. And Kevin, it's just this pattern almost that somewhere -- I don't know where the tipping point is, but somewhere when a borrower crosses the 100% loan to value, somewhere north of that and they presumably run into some sort of cash flow bump, whether it's reduced income or kind of normal things in life that have created past dues before, their propensity to just default and stop paying their mortgage rises dramatically and I mean really accelerates up and it's almost regardless of how they scored, say, on FICO or other kinds of character, credit characteristics."

Dowd Ritter, Regions Financial Corp. - CEO & President:

"I would tell you that in a few of those that you saw us basically write off, we did not write them down, and because some of those -- they did have firsts, but there are cases where people as early as 18 to 24 months ago had one value on that property, and as they started to sell it or refinance it, they realize that valuation was 40% below what it was 18 to 24 months ago, and they're walking away from those homes in those markets."

What we're talking about is a

Realized Fear of Herd Mentality

Make no mistake, the lenders are worried. This has moved up the food chain to Fannie Mae and Freddie Mac who came out with new guidelines for those wishing to finance in the future with a Foreclosure on their record.

As more and more people "walk away" from their homes, it becomes easier for the next person to make the same decision.

Herd Mentality

Cutting to the chase (a herding term) Fannie is saying to homeowners,

If you Walk Away today we're going to punish you tomorrow. We will now prohibit foreclosed borrowers from getting another mortgage for Five Years!

And even after that five year period is up, we're going to require you come in with at least 10% down.

Oh and we want you to have a really good credit score too. Better have better than a 680 FICO."

Five years isn't so long is it? Doesn't a foreclosure drop off your credit after a few years?

Foreclosure is Forever.

Remember, on the loan application is a cute little box for you to check Yes or No.

Check the YES Box and your loan application jumps out of the Automated Underwriting line (easier approval process) and is pulled into the black hole that sometimes is Manual Underwriting.

This makes it all that much more important for homeowners in trouble to fully examine all their options. For instance, by going through the "hassle" of a Short Sale, you'll avoid the Foreclosure Label.

I see that as a big positive in an otherwise negative situation. "I'm never going to own a home again!"

Who knows what the future holds? What if Grandma passes away and gives you her home? What if she had a reverse mortgage on that bungalow? Now what are you going to do?

By the way: Not checking the Yes box (with a foreclosure in your distant past) is grounds for Fraud.

"Mommy, why are they taking Daddy away?"

"Daddy was a very bad man, he checked the wrong box!"

Labels: debt forgiveness, Notice of Default, Short Sale

Here's what a blank form looks like. In a Short Sale or Foreclosure this is what the Lender might chose to file (a foreclosure might send you a 1099-A too).

Like any other 1099, one copy goes to the taxpayer (you) and another copy goes to the IRS.

(click to enlarge)

The most important box is

Box Number 2: Amount of Debt Canceled

This is not your loan balance. It's your loan balance, plus every single little nit picking fee the Lender can tack on. Add penalty and fees too!

In a Foreclosure, these fees and charges are pretty much left unchecked by anyone from the homeowner's side.

In a Short Sale, either the Listing Agent or a Negotiator can help negotiate a reduction of these charges. In fact everything in a Short Sale is negotiable including the very issuance of this 1099.

Remember, the Lender is reporting this to both you and the IRS as "income". While you may or may not fall under the protection of the Mortgage Forgiveness Debt Relief Act (HR 3648), there is also the State tax consequences to be considered.

When I hear homeowners who say they don't care about a short sale, "just let it go to foreclosure", because they are not going to gain anything from it - this is one of the first gains I think they don't see.

I can see that. If you didn't receive a 1099-C, because you completed a short sale and your Negotiator minimized Box 2 or negated the issuance of the 1099 all together, would you notice?

Maybe not.

But I can say, TurboTax (or your tax professional) would notice more if they didn't.

Labels: Short Sale Negotiation

I just heard that US Bank will not finance a home if it is an REO or Short Sale property.

Like the Countrywide rumor yesterday, this too is only a rumor for right now. I’ll see what I can find out later.

Remember, this has nothing to do with the lender that owns the house. This is about the financing the buyer comes in with.

Maybe you don’t know who your lender will be?

Your best bet is to ask your Mortgage Broker who you are approved with. If it is with US Bank - don’t be surprised if your broker doesn’t know this. Yes, he’ll find out later - but isn’t it too late then?

Using a Mortgage Broker for your financing? Good for you! In these rapidly changing times adaptability and flexibility are critical. A good Mortgage Broker can offer you that. Direct Lenders cannot.

Update: According to two US Bank Retail Loan Officers, they are still doing loans for just about all properties. I’m still waiting to hear back from the wholesale side.

Labels: Lenders to Avoid, Short Sale Negotiation

This is a follow up to yesterday’s story.

According to my source, Countrywide is indeed NOT negotiating short sales on Vacant Homes.

She said…

“No Investment Property, No Rentals, No Vacant Homes“

If your short sale was already approved - you may have a case to continue on. If the homeowners have moved out (it shows better when empty or staged) they may need to move back in just to close the short sale.

Considering the vast amount of homes CFC has on the books, there’s a lot of potential issues coming up.

Have you made an offer on a Countrywide Short Sale home and just waiting for approval? Is it currently vacant?

Ouch!

Labels: Lenders to Avoid, Loss Mitigation, Short Sale Negotiation

There’s a rumor I’ve heard from several different sources that Countrywide (who is quietly going through a restructuring of their Loss Mitigation Department) has a new policy that went into effect last Friday.

According to Susan Goulding, a Tracy, CA Short Sale Expert,

"If the home is vacant Countrywide will NOT approve a Short Sale."

I have a call into my contact at Countrywide now. Remember at this time it’s only a rumor, we shall see.

Labels: Lenders to Avoid, Short Sale Negotiation

I just got off the phone with a Negotiator for a very large bank.

I always like to connect to them in some way.

So how’s the weather?

Where in the country are you?

How about those Rangers?

In the course of our conversation I asked how many files she had on her desk. She said they worked electronically (paperless).

When she went to her computer desktop to see what she had on tap I think it was a little more than just me that was surprised.

* 247 current files that had cleared Underwriting and Setup. These are the active files she needed to work on or was waiting for someone to get back to her on.

* Almost 500 files that were on their way to her (eventually). These were either incomplete, needed updating, or somewhere in the processing department.

With 247 files screaming for her attention right now, is it any surprise these poor people can’t get back to us in a timely fashion?

Which is why I contend that you need to make it as easy as possible for them to deal with your problem.

Complete, Concise, Clean Packages?

That’s just about mandatory isn’t it?

Labels: Loss Mitigation, Short Sale Negotiation, Short Sale Success

I was interviewed by the San Jose Mercury News the other day. I had a couple of great in depth conversations with Sue McAllister, the real estate reporter for the paper.

You can read the entire article HERE, I cut the portion that directly involved S-R below.

Part of the problem is that lenders are overwhelmed by managing so many short sales nationwide, said Mike Mueller, co-founder of Suburban Renewal, a Concord short-sale negotiator. Another problem is that many agents handling such sales lack experience at it.

"Most don’t know how to put together a compelling package and push the lenders’ buttons," to get a swift sale, Mueller said.

Despite recent changes in federal laws, some sellers owe tax on the portion of their debt "forgiven" by the lender. But whether or not the lender reports the forgiven debt is negotiable, Mueller said.

One Bay Area homeowner in the midst of short-selling her home said so far, she’s in favor of working with an intermediary company. The woman, an information technology consultant with three young children, said she needed to sell her Contra Costa County townhome following her recent divorce. She owes more for the home than it’s worth, and her real estate agent suggested working with Mueller.

"He’s given some amazing tricks and tips on what you need to do to make a short sale work," said the homeowner, who did not want her name published.

The townhouse was listed in February and got four offers, which her lender received about a month ago, she said. She hopes the lender will make a decision in the next week or so. "It’s a stressful situation. It’s nice to have someone else dealing with the ugliness of it."

Thanks Sue.

We’re all doing our best, trying to make the best of the situation.

BTW: Sue writes a pretty mean blog: Square Feet Check it out!

Labels: Loss Mitigation, Short Sale Negotiation, Short Sale Success

Time is

speeding up the process to get to an agreement before the buyer backs out.

Time is

sometimes a race against the foreclosure process.

Time is

Hours and days that we wait for a simple call back from loss mitigation.

Time is

something we waste a whole lot of while listing to canned elevator music.

Time is

an excruciating thing while the Homeowner is waiting for an answer.

Time is

something that seems to take forever according to the Listing and Buyers Agent.

Time is

the key to everything in a short sale.

Labels: buying a short sale, Short Sale Negotiation