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.

Lender Purchase Money Loan	Seller Financed Purchase Money Loan	Refinanced (Non Purchase Money Loan)
NO Deficiency Judgment if Senior or junior Lien Holder * see Civil Code 580b.	NO Deficiency Judgment if Senior or junior Lien Holder * see Civil Code 580b.	YES - Deficiency Judgment if judicial foreclosure NO Deficiency Judgment if Trustee Sale Foreclosure see Civil Code 580b

* 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

I have a client who is dire need of a Short Sale to get out from under her mortgages.

She's upside down primarily due to the reasons I explained in my post, "You Can't Fix LTV".

In simplest terms, her homes value has dropped dramatically because the homes around her have drastically dropped in value.

Yes, she has no income. Yes, she has no chance to loan modify. Yes, she bought at the market high with the wrong loans and little to nothing down. But as I started looking at the "other" reasons why the neighborhood is in such decline and found a horrid tale that can only be described as Ugly, Ugly, Ugly!

How Ugly is UGLY?

There are currently 82 REOs in the neighborhood.

There are 139 NODs (soon to be REOs)

How about the record high HOMICIDES last year?

What about the other crimes?

How does 631 separate incidents in the last 90 days sound?

My package includes over 300 recent news stories about this neighborhood.

I don't know about you, but if I was a Loss Mitigation Specialist and had an offer presented that would keep my company from owning this potential soon to be REO, I'd take pretty much anything that came my way.

We shall see. The Listing Agent has a couple of real offers and I'm putting the Short Sale Package together today.

Labels: Negotiation, Notice of Default, Short Sale, Short Sale Negotiation

Notice of Defaults

Last week (week ending Feb 20th) we saw the following NOD filings.

For the State of California: 8,178

By County

Alameda: 323
Contra Costa: 487
Sacramento: 678
Solano: 180

By City

Antioch: 89
Modesto: 163
Oakland: 107
Sacramento: 400
Stockton: 216
Vallejo: 70

Labels: Notice of Default

I was just asked this question and had to look it up.
I figured it was worthy of a post.

In California, if the property is in Notice of Default, and the purchaser does not occupy the property (Investor), the transaction becomes what is called an Equity Purchase.

That's important because there are specific rules that need to be applied and adhered to.

Here's the actual question:

"I plan on buying a home that is in foreclosure and flip it, But I just heard the seller (homeowner) has a 2 year right of rescission. What does that mean? Do I have to hold the property for two years before I can sell?"

As I mentioned, I had to look this up to make sure I had the correct information.
Here's what I found.

Once the sale has closed, the investors title is subject to the seller in foreclosure's Two Year Right of Rescission due to any unconscionable advantage the Investor might have imposed on the transaction.

So does that mean the homeowner can get their property back?

Not quite. Assuming the investor has already sold the property to an unknowing buyer, the remedy would be a recovery of the money the original homeowner was out.

That figure would be determined by the value of the property at the time of resale, less the old loan amounts, less any funds received (good faith money) in the original transaction from the investor.

Interestingly, if it was a sale rent back, where the homeowner never left but instead started to pay the new owner rent, they will not be able to recover any of the rent paid - NONE.

They will however get paid 10% interest on the equity they lost from the start of the violation.

Where did I find this information?
California Civil Code 1695.10 and 1695.14

Buying a foreclosure and planning on living in it?
These rules don't apply to you.

Remember, always work with a professional. Always!

Labels: buying a short sale, Notice of Default

Last week (week ending Feb 5th) we saw the following NOD filings.

For the State of California: 6,736

By County

Alameda: 460
Contra Costa: 339
Orange: 334
Sacramento: 512
San Joaquin: 212
Santa Clara: 174
Sonoma: 273
Stanislaus: 276

By City

Antioch: 85
Bakersfield: 143
Elk Grove: 63
Fontana: 107
Hayward: 99
Modesto: 149
Oakland: 171
Sacramento: 326
Stockton: 110
Tracy: 50
Vallejo: 63

The highest: 6.3 Million for a 3 bedroom / 2 bath in Winchester, CA

The lowest: a 3 bedroom / 2 bath in Anaheim that is behind on their $2,333 loan!

Labels: Notice of Default