Jun
24
Posted under
Short Sales Fannie Mae is cracking down on Walk-Aways….or…are they?
So, lets flush this out and get to the bottom line…
A default is considered strategic when homeowners have the capacity to pay, yet choose to walk away from their mortgage. The trigger, researchers say, is negative equity: When the value of a home is less than what the lender is owed on it, borrowers are more likely to strategically default.
Note: Check this out, article and video: Double Dip In Housing Values, Banks Aggressively Foreclosing and Approving Short Sales.
About 11.3 million homeowners with a mortgage, or 24 percent, owe more on their mortgage than the home is worth, according to real estate research firm CoreLogic. Another 2.3 million have less than 5 percent equity in their homes. All told, about 29 percent of all homeowners with a mortgage are either underwater or very close to it. The firm estimates that the typical underwater homeowner won’t return to positive equity until late 2015 or early 2016.
Lets look at that estimated date of return of positive equity…
Joe homeowner bought his house in 05 for $500,000. Over the last 2-3 years the home has depreciated by 50%…now its worth $250,000. Joe bought the home in 05 with virtually no money down, interest only…and still owes almost the same amount he borrowed back in 05. Joe is underwater by $250,000. Joe’s situation is now considered normal for literally millions of Americans.
Now, for Joe’s home to be worth what he owes ($500,000) it will have to RE-appreciate by the lost 50%….and according to Corelogic that will take 5-6 years.
No way. That will never happen.
What would that rate of appreciation per year have to be? Well over 10% per year! Realistically, Joe homeowner won’t be even in his home until 2020 or possibly, never. Never is a realistic possibility in many parts of the US.
Oh..and one last thing…did you know that 19,000,000 homes in the US are VACANT?
And Fannie Mae, an arm of the federal government and a big part of the Obama administration’s housing policy, wants to make sure that if struggling families walk away, they suffer for it.
A ‘Walk-Away’ is just that….c-ya…wouldn’t wanna be ya.
No attempt at a loan mod, no attempt at a short sale. Agents, put your marketing hats on. What this policy change means for agents is that the decision to do a short sale (or DIL) is without question their best option. “Mr. Homeowner, if you simply walk-away do you realize that Fannie (and soon Freddie) can and may go after you for their loss…..”?
Under HAFA and the new Fannie/ Freddie version of HAFA…no deficiency judgments! HAFA clueless? No worries, watch the exclusive FREE National Association of Realtors and Harris Real Estate University HAFA training videos.
Homeowners who strategically default or did not work “in good faith” to avert foreclosure through other means will be ineligible for new Fannie Mae-backed mortgages for seven years. The firm said it will also pursue homeowners in court, seeking so-called “deficiency judgments” to recoup outstanding debt by seizing borrowers’ other assets. Thirty-nine states do not limit the ability of lenders to recover what they’re owed.
“In good faith”…translated: Short Sale, Deed In Lieu of a Foreclosure, Loan Modification. Agents, tell ALL of your clients to fully document their attempts to work “in good faith” with their lender/ servicer. Save phone logs, letters, emails..everything. That way, when the time comes for them to buy another home there will be no question that they complied with this new Fannie policy.
Fannie Mae said that next month the firm “will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.”
“Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting,” Terence Edwards, Fannie’s executive vice president for credit portfolio management, said in a statement.
Strategic defaults among homeowners have been on the rise. More than a million homeowners went that route last year, nearly double the amount in 2008 and more than four times the level in 2007, according to a recent analysis by the credit reporting company Experian and Oliver Wyman, a management consulting firm.
And..homeowners acting in THEIR own best interest…acting strategically will only continue to increase. Its estimated that up to 75% of ALL loan modifications will FAIL. What effect will all of these failed loan mods have on homeowners behavior?
A study by a team of academics from the University of Chicago and Northwestern University estimated that nearly a third of home mortgage defaults in March were strategic. The deeper underwater homeowners are, the more likely they are to walk away from their mortgage, the researchers noted.
Agents, did you catch that….nearly 1/3 of all March 2010 defaults…were strategic! Read this: Double Dip In Housing, Real Estate Crash 2.0.
Earlier this month, the House of Representatives passed a bill barring strategic defaulters from obtaining home mortgages backed by the Federal Housing Administration. The agency guarantees nearly one in four new mortgages.
“I can’t help but notice that every group now frantically calling for tough penalties for homeowners who walk away was virulently opposed to judicial modification of mortgages in bankruptcy,” Rep. Brad Miller, a North Carolina Democrat, told the Huffington Post.
Bank of America and Citigroup, the nation’s largest and third-largest banks by assets, respectively, support changing existing law to give federal judges the power to modify mortgages in bankruptcy, otherwise known as “cramdown.” Proponents argue that if homeowners were able to modify their mortgages in bankruptcy, the number of strategic defaults would substantially decrease, if not nosedive.
About 3 million homes will receive foreclosure notices this year, real estate research firm RealtyTrac estimates. More than 1 million will be repossessed by lenders, adding to the nearly 2.2 million homes that lenders took over from 2007 to 2009.
Fannie Mae and its sister firm Freddie Mac guarantee nearly three out of every four new mortgages, according to leading industry publication Inside Mortgage Finance. The two firms control about $5.5 trillion in home mortgages, according to their federal regulator. That’s nearly half of all outstanding mortgage debt in the U.S. Their share of the mortgage market is nearly double what it was 20 years ago.
Note: Many agents don’t understand the relationship between the servicer and the investor. The servicer is the bank…Chase, BoA, Wells etc. The investor..who actually OWNS the mortgage loan is…75% of the time…Fannie Mae or Freddie Mac. Every reason to believe that by years end that number will rise to closer to 90%.
Because Fannie controls such a large portion of new mortgage issuance, the freezing out of homeowners for seven years could prove devastating.
Yeah, won’t happen. For housing to (ever) fully rebound we need MORE buyers…not fewer. At the end of the day, how exactly will this new policy be enforced. Remember, a borrower has to work “in good faith” to avoid the wrath of this new policy. Who determines what “in good faith” means. We are assuming it means to attempt a mod, a short sale or do a deed in lieu. Does this mean that the servicers will need to store all short sale, loan mod files..for 7 years?
Brent T. White, a law professor at the University of Arizona, recently wrote in an academic paper that most homeowners can recover from a foreclosure within two years. In fact, defaulting on a mortgage is not as bad as most people think, White notes.
“Lenders are unlikely to pursue a deficiency judgment even in recourse states because it is economically inefficient to do so; there is no tax liability on ‘forgiven portions’ of home mortgages under current federal tax law in effect until 2012; defaulting on one’s mortgage does not mean that one’s other credit lines will be revoked; and most people can expect to recover from the negative impact of foreclosure on their credit score within two years (and, meanwhile, two years of poor credit need not seriously impact one’s life),” he writes.
There is a “huge financial upside” for seriously underwater homeowners to strategically default on their mortgages, White said.
While it’s still taboo among most homeowners, it’s common behavior among corporations.
In December, Morgan Stanley, the nation’s sixth-biggest bank by assets, walked away from five San Francisco office buildings the $820-billion firm purchased as part of a landmark $2.43-billion deal near the height of the real estate boom. A group led by Tishman Speyer Properties gave up a 56-building apartment complex in Manhattan in January after defaulting on some $4.4 billion in debt. A spokesman for the California Public Employees’ Retirement System, the nation’s biggest municipal pension fund and one of several investors in the venture, told the Huffington Post that they “basically walked away from it.”
Fannie was effectively nationalized in September 2008. Taxpayers own 79.9 percent of Fannie and Freddie. The Obama administration announced on Christmas Eve that it would provide unlimited financial assistance to the firms, disregarding what was a $400 billion cap on taxpayer bailouts. Their debt is backed by the U.S. government.
The two firms, facing growing losses on sour mortgages in perhaps a worsening housing market, have already taken $145 billion from taxpayers. Fannie Mae is responsible for $83.6 billion of that bailout.
Freddie Mac did not say it would take a similar position on strategic defaulters.
Fact is, everything has changed. Homeowners are taking measures and acting in a way never seen before. Read this post, Housing: Its different this time.
“Such so-called strategic defaults, once rare, are now common enough to jeopardize the already-weak housing and mortgage markets,” wrote economists Celia Chen and Cristian deRitis of Moody’s Economy.com in an April 13 note. “If the trend continues, strategic defaults could both accelerate the pace of home foreclosures and also make it harder for new borrowers to obtain mortgages. Both factors would in turn worsen the decline in house prices.”
Well, that may be true. But, as we reported yesterday…the 33% hose dive in new home sales has nothing to do with strategic defaults…clearly, there are more factors pushing housing into a double dip than homeowners doing strategic defaults. New Home Sales Nose Dive 33%, Worst Home Sales Since 1981.
JPMorgan Chase, the nation’s second-largest bank by assets with more than $2.1 trillion, warned investors last month that underwater homeowners may not continue to make their payments even when they’re able to, according to a May 10 filing with the Securities and Exchange Commission.
A top executive at Freddie Mac posted a note on the firm’s website pleading with homeowners to not intentionally walk away from their homes.
“Knowing the costs and factoring in the time horizon, some borrowers have made the calculation that it is better to purposely default on the mortgage. While I understand how that might well be a good decision for certain borrowers, that doesn’t make it good social policy,” Freddie Executive Vice President Don Bisenius argued in a May 3 note.
Agents, strategic defaulting movement has gone viral. Meaning, its now excepted and perceived as being financially prudent. Its your job to show the homeowner why they want to NOT do a strategic default that results in a walk-away but, a strategic short sale.
The firm warned investors and analysts about the risk of increased strategic defaults in March 2008. Referring to it as “ruthlessness,” Dick Syron, Freddie’s former chairman and CEO, said the firm was “seeing an increase in ruthlessness” that had “the potential for changing consumer behavior.”
Imagine that…lenders, banks and servicers are calling folks who do strategic defaults (remember, strategic short sale) “ruthless”. Is it just me or does that sound a tad…ironic.
Fannie Mae said Wednesday that borrowers who have “extenuating circumstances may be eligible for new loan in a shorter timeframe” than the seven-year period it’s warning about.
WHAT? So, they are already planning on changing their new policy? So it appears that this policy is only valid for those who don’t make a “good faith” effort…and have “extenuating circumstances”. Imagine being the poor Fannie Mae employee who has to make that call?
Republicans in the House recently tried to rein in the twin mortgage giants. Rep. Darrell Issa, the top Republican on the House Committee on Oversight and Government Reform, attempted Wednesday to amend the financial reform bill under consideration by the House and Senate to mandate that the federal government appoint an inspector general to oversee Fannie and Freddie. The mortgage behemoths’ federal regulator has been operating without an independent watchdog looking over it and Fannie and Freddie since 2008.
Republicans have also tried to amend the bill to subject Fannie and Freddie to the Freedom of Information Act so members of the public can keep tabs on the firms by compelling the disclosure of documents and records.
Both efforts were thwarted by House Financial Services Committee Chairman Barney Frank (D-Mass.), who ruled that they were not “germane” to the legislation under consideration.
Emails sent after normal business hours to spokesmen for the White House and Treasury Department requesting comment were not returned.
Jun
03
Posted under
News,
Short Sales Click the link below and you will be able to SEE WITH YOUR OWN EYES what is transpiring with the new HAFA guidelines and how you can avoid a foreclosure AND a future DEFICIENCY JUDGMENT.
Call our toll free 24 hour recorded short sale hotline to learn how to also apply for your $3,000 for relocating after closing your short sale.
866.876.3905, Ext. 200
HAFA__Short_Sale_Letter_from_Bank_of_America
Jun
02
Posted under
News,
Short Sales “What wording should my satisfaction of mortgage contain so I will not be liable for a deficiency judgment?”
Understand this: A mortgage is merely evidence of a loan being in place and is not the actual loan itself.
A “mortgage” used as a single term is actually made up of two parts:
1. A promissory note, aka, “a promise to pay back the borrowed money.”
2. A mortgage (document) that secures that note (debt) against that asset or real property.
Legally these cannot be grouped together simply because one wants to. A payment is based on a promissory note.
Once the proper release has been signed by an officer of the lender or servicer and recorded, regardless of what your short sale approval documents disclose, you cannot be pursued for a deficiency judgment. You cannot collect on something that has been ”paid in full”. Get it?
What is the number ONE “secret to not having a deficiency judgment filed against you now, or in the future? “GET THE SALE DONE!”
Why? Because, a deficiency judgment can ONLY be placed by a judge!
To learn more about how to protect yourself when selling your home in today’s “short sale” environment, you MUST grab a free copy of my new eBook, “Should I Short Sale My Home?” by calling
866.876.3905, Ext. 200
In conclusion, please understand – I am not an attorney nor am I giving legal advice. You are always advised to consult a competent real estate attorney to inquire of your legal rights.
Jun
01
Posted under
News,
Short Sales There is no such thing as a deficiency on a short sale.
Frogiveness of Debt and a deficiency are two separate and distinct situations and the terms do not mean the same thing whatsoever and the distinction is VERY..VERY..important.
A short sale is a negotiated settlement, short payoff on a mortgage. PAYOFF. When a short sale is completed, the bank issues a SATISFACTION of the mortgage AND RELEASES the borrower from all obligation. Once a Satisfaction of Mortgage is filed and the Release of Mortgage is obtained, there is NOTHING from which a deficiency JUDGMENT can be obtained. The mortgage has been SATISFIED and the Borrower RELEASED.
To learn more, get my FREE eBook, “Should I Shor Sale My Home?” by calling:
866.876.3905, Ext. 200
May
31
Posted under
News,
Short Sales Why would a lender (AKA investor/service/insurer) approve a short sale payoff?
The short answer (pardon the pun) is because they are not in the business of owning property. Nor are they in the business of holding onto non-performing assets. Let’s look at the ramifications and benefits for a lender to approve short sales:
How the assets are performing: Delinquent and non-performing loans place a huge burden on mortgage
lenders. For all delinquent and non-performing loans lenders must set aside funds in reserve to deal with
potential losses. These funds can’t be put to work generating new loan fees until the bad loans are resolved.
A successful short sale enables the lender put more money to work. When an asset is performing, the lender is
allowed to lend 7-9 times its value and collect interest on that amount. When it’s not performing, they can’t loan
money against the asset (because it’s no longer considered an asset). The real numbers? Mutiply $1 billion of
loans outstanding by the 7-9 times factor and you see the damage a non-performing asset can have on a lender!
Obviously, getting a toxic asset off the books through a short sale frees up the lender’s ability to generate
income through their primary business- lending money.
Asset Repair & Management Expenses: If a lender acquires a property through foreclosure, the property will be
repaired and managed until it is resold. It’s expensive to repair properties that are often vandalized by the
former owners, and more expensive still to manage a portfolio of real property assets (aka homes) spread
throughout the US. Property maintenance, utilities, repairs and administration are all costs the lender would
prefer to avoid. A short sale eliminates most of these costs.
Keeping Uncle Sam Happy: Mortgage lenders have come under pressure from the Obama Administration to
work with borrowers to resolve their mortgage hardships. The Home Affordable Refinance Program and the
Home Affordable Modification Program are but two examples of the comprehensive Making Home Affordable
strategy initiated by the Federal government in the past year. The sands continue to shift constantly and swiftly
in the pre-foreclosure desert. No matter, the government provided billions of dollars to failing banks and they
expect to see non-performing assets begin to disappear from the books.
A final note: Mortgage lenders rely heavily on their ability to package and sell bundles of loans on the secondary
mortgage market, and Wall Street is watching their performance. Lenders need to sell these loan portfolios in
order to put the funds back to work. This is done by lending the money which results in income generated
through interest and loan fees. If mortgages perform poorly after they are sold it could impact the lender’s
ability to sell their loans on the secondary market. A successful short sale gets the loan payoff resolved quickly
which enables the lender to more effectively sell on the secondary market…aka “Wall Street”.
Lear more by getting a FREE copy of my eBook,
“Should I Short Sale My Home?”
by calling our 24 hour toll free recorded hotline at:
866.876.3905, Ext. 200
May
28
Posted under
Short Sales Negotiating a deficiency is at once the most critical and frequently overlooked aspect of completing a short sale. Why? It helps to understand the relationship of the parties involved. To state the obvious, lenders pay Realtors when a home sells. Therefore, Realtors have a financial incentive to close as quickly as possible. That being the case, who ensures that the sellers are relieved from any loan deficiencies?
Negotiating a deficiency is at once the most critical and frequently overlooked aspect of completing a short sale. Why? It helps to understand the relationship of the parties involved. To state the obvious, lenders pay Realtors when a home sells. Therefore, Realtors have a financial incentive to close as quickly as possible. That being the case, who ensures that the sellers are relieved from any loan deficiencies?
Considering the settlement of a deficiency requires legal analysis and specific language, it’s no wonder this all-important part of the negotiation is bypassed regularly when anyone but an attorney is handling the negotiation. As a Realtor, I DO NOT render a legal opinion or give advice on terms and settlement language. My clients need qualified legal interpretation and a written analysis of their closing documents. Anything less spells A-M-A-T-E-U-R…
With a short sale, the lender has three possible waysto handle the deficiency balance, which is the portion of the mortgage debt not covered by the sale of the home:
1. The lender can attempt to collect the deficiency balance from the seller after the sale of the property has closed.
2. The lender may require the seller to sign an unsecured promissory note for the deficiency balance as a condition of agreeing to the short sale. If the new note is for less than the balance of the original debt, the difference would be considered canceled, or forgiven, debt.
3. The lender may agree to cancel the entire deficiency balance
There’s almost nothing more important to the seller than the release of both the property lien and the underlying personal debt secured by the note. Otherwise, the lender may not forgive the personal debt and begin collection activity. It should also be noted that Federal loan forgiveness law does not grant all sellers loan forgiveness and does not relieve sellers from taxes levied in certain states.
For more information onhow we help you avoid all such issues,
call today and get your free copy of my eBook,
“Should I Short Sale My Home?”
866.876.3905, Ext. 200
May
26
Posted under
Short Sales At this time, Fannie Mae and Freddie Mac are not participating in this program. To see if your mortgage is owned or guaranteed by them, simply call the toll-free numbers below or use their online lookup tools.
Fannie Mae
1.800.7FANNIE (8am to 8pm EST)
www.fanniemae.com/loanlookup
Freddie Mac
1.800.FREDDIE (8am to 8pm EST)
www.freddiemac.com/mymortgage
If your loan is with Fannie Mae or Freddie Mac, you may still qualify for other foreclosure alternatives. Call one of our home retention specialists at 1.800.846.2222 to explore your options.
You are living in the home as your primary residence*
The amount you owe on your first mortgage for your property is equal to or less than:
* $729,750 for 1 unit
* $934,200 for 2 units
* $1,129,250 for 3 units
* $1,403,400 for 4 units
You owe more on your home than it’s worth,
Your current mortgage was taken out on or before January 1, 2009.
Your payment on your first mortgage (including principal, interest, taxes, floor and hazard insurance, and homeowners association dues, if applicable) is more than 31% of your current gross income before taxes and deductions
You are experiencing a hardship (such as a job loss, divorce or medical emergency) and are unable to afford your current home loan.
Program at a glance:
Step 1: Call us to request a HAFA short sale and update us on your current financial situation. We’ll review your information and check your eligibility for a Home Affordable Modification or any other home retention program that would enable you to stay in your home.
Step 2: If you don’t qualify for a modification and want to sell your home, we’ll work to gain approval of your first mortgage HAFA short sale request. If you have a second mortgage with another lender, you will have to ask them for approval. Within approximately 30 to 60 calendar days, you’ll receive a Short Sale Agreement with the acceptable offer price.
Step 3: You will be given time to market and sell your home — typically 120 calendar days. You are required to work with a licensed real estate professional.
Step 4: Once you receive an offer, you have 3 calendar days to submit a Request for Approval of a Short Sale document as well as the offer letter. We’ll get back to you with a decision on the offer within 10 business days.
Step 5: If the offer is accepted, your house is sold and your mortgage and any other loans against the home are settled from the proceeds of the sale.
For more information, call our 24 hour toll free recorded hotline to get a copy of my FREE eBook,
“Should I Short Sale My Home?”
866.876.3905, Ext. 200
May
24
Posted under
Short Sales What is this?
It’s our premier program which enables you to take advantage of our network of experienced real estate attorneys to negotiate and close your short sale—at no cost to you! What do you get for that?
1. A bona fide, experienced real estate attorney who specializes in negotiating short sales with lenders
2. If necessary, a forensic loan document inspection designed to uncover RESPA, TILA and other violations
3. Substantially more leverage that comes from the threat or initiation of litigation
4. A detailed financial cost/benefit analysis, submitted to the lender, that illustrates a short sale is a substantially less expensive alternative to the lender than foreclosure
5. High likelihood of negotiating reduction or elimination of the deficiency
6. A much faster response from the lender due to escalation resulting from legal representation
7. Identification of important or damaging legal issues at the earliest possible opportunity (deficiency judgments, tax implications, fraud, etc.)
8. Minimized damage to credit and the ability to borrow in a fraction of the time vs. foreclosure
When you take advantage of the Short Sale Accelerator Program, you’re tapping into a wellspring of legal resources designed to protect distressed homeowners seeking loan modifications, and/or stopping or preventing foreclosure. The program also allows you to take advantage of expert short sale and short pay refinance representation, and to generally combat the predatory lending practices of lenders and loan servicing companies.
Call our 24 hour toll free recorded hotline and get your FREE copy of my eBook,
“Should I Short Sale My Home?”
866.876.3905, Ext. 200
As a client, you will also receive a FREE attorney consultation to asses your situation.
May
21
Posted under
Short Sales For homeowners, the probability of foreclosure can be financially and emotionally devastating. More than 50% of homeowners in distress never talk to anyone. They also don’t open mail from lenders. They do what’s in our human nature—they hide and hope the problem goes away. Homeowners who proceed without guidance of any kind are headed for disaster. These homeowners NEED QUALIFIED, EXPERIENCED help to move forward with their lives.
The best course of action for a homeowner in distress is to speak with a well-informed, real estate professional who has the resources and capabilities to come up with a solution. For many homeowners, this person may be the last chance they have at avoiding foreclosure. Things to look for in a qualified professional:
1. Someone who is a true market specialist
2. Someone with visibility as a “problem solver”
3. Someone who has the knowledge, resources and time to complete short sales
4. Someone who will happily help your family and friends withtheir own short sale
One thing I can say for sure about short sales is that they help to maintain a community. If there’s truly a case for Loss Mitigation, it’s for the benefit of the neighborhood and the goodwill of its residents. As the foreclosure crisis reached epidemic proportions in the fall of 2008, entire communities were abandoned by homeowners. As a consequence, crime and vandalism spiked, swimming pools turned green and grass turned brown. Upset homeowners — showing a human a mix of depression, bitterness and anger — stripped homes of their belongings and filled toilets with cement.
That anger is understandable.
The solution for you to close this chapter of your life and open the door to a new one begins by getting your
FREE copy of my eBook,
“Should I Short Sale My Home?”
Call our 24 hour toll free recorded hotline to get yours today!
866.876.3905, Ext. 200
May
19
Posted under
Short Sales The Federal Government is incentivizing lenders (paying them with taxpayer dollars) to speed up the short sale
process in an attempt to get the property sold before the bank must repossess it. Dubbed the Foreclosure
Alternative Program (FAP), the property must be listed and entered into a bona fide contract (Arm’s Length
Transaction). If the property doesn’t sell within the average market time for that community, then a Deed-in-
Lieu of foreclosure will be issued.
So how’s it working? The FAP was officially unveiled in May; and as of publication date, the promised
standardized Short Sale Agreement and Offer Acceptance Letter haven’t been issued by the Feds. Brokers and
agents alike are anxiously awaiting these updates.
Another pilot program is actually working. Wachovia, under the former company name of World Savings,
promises to process short sales in 30 days. The pilot program is being conducted in parts of California.
Here’s how it works:
1. Listing Agent emails purchase contract and HUD-1 to local field office
2. Internal BPO and AV (automated value) generated within 72 hours
3. Approval/denial of the short made within 5 business days
4.Conditional approvals sent out within 7-10 business days
5. Wachovia promises to pay junior lien holders 10% of their balance to settle
6. You can’t even get a refinance loan completed in that amount of time these days!
Learn more by getting a copy of my FREE eBook
“Should I Short Sale My Home?”
by calling our 24 hour toll free recorded hotline:
866.876.3905, Ext. 200