Smablog.files.wordpress.com



ARE YOU UPSIDE DOWN ON YOUR MORTGAGE? . . . THERE ARE OPTIONS

 

Making Home Affordable Program - Programs to help homeowners avoid foreclosure

 

Standardized modification & Short Sale protocol

i. When a homeowner is authorized by the bank to sell for less than what is owed on the mortgage .

ii. The lender authorizes or accepts the sales price as a payoff

iii. The seller avoids a credit-destroying foreclosure, and sometimes they can also avoid a deficiency judgment

i. Honorable exit to a difficult situation

i. Homeowners can typically live in the home until the new owner closes, giving time to make other living arrangements.

i. Foreclosure is postponed and collection calls will stop once a written, signed offer is received and approved.

ii. Parties in typical transactions

a. Agents

b. Seller

a. Buyer

a. Buyer's lender

i. Parties in typical short sale transactions

a. Agents

b. Seller

c. First Mortgage holder

d. Housing Counselor

a. Junior Lienholders (may be one or more)

a. Loan Servicer (B of A)

a. Buyer's Lender

b. Mortgage investor - FNMA

a. Mortgage Insurer

i. Primary

ii. Pool

a. Negotiator

b. Buyer

c. HOA Dues

a. HOA liens

 

i. Critical to know difference of Note vs. Deed

a. Promissory Note - Creates financial obligation

b. Deed of Trust - Creates collateral to secure payment

a. If the creditor agrees to a "Full Release" - must make sure seller is has a full release from both Note and Deed of Trust

1. Release from mortgage debt after Short Sale or DIL (Deed in Lieu of Foreclosure)

1. The Mortgage Debt Relief Act releases homeowners from the obligation of paying taxes on mortgage debt forgiven from a short sale, foreclosure, or modification. Taxpayers are eligible if the property is the primary residence.

This expires 12-31-2012

1. Beginning June 15, 2012, new guidelines issued under FHFA (Federal Housing Finance Agency) - Loans guarantees by FNMA (Fannie Mae) and Freddie Mac (FHLMC - Federal Home Loan Mortgage Corporation) - will be required to respond to initial short-sale requests within 30 days of receiving an offer from a potential buyer rather than months as has been the case in the past.

 

Making Home Affordable Programs:

1. HAMP - Home Affordable Mod Program

a. If Principal, Interest, Taxes, Insurance and Home Owner Association dues exceed 31% of income, seller qualifies

i. May give you 2% mortgage, extend term to 40 year, defer a portion of principal, interest-free, until loan is paid off. - (a lot of people end up doing a short sale) - saves median $500+ each month - you get $1000 to stay

1. 2nd Lien Mod Program (2MP)

1. Treasury FHA-HAMP & (USDA's) RD-HAMP

1. Unemployment Program (UP) Forbearance plans

a. Bank will reduce payment to 31% of PITI and HOA - or suspended for 12 months or more - does not have to be current - when you get a job - your mortgage company evaluates for HAMP

1. Home Affordable Foreclosure Alternatives (HAFA) - SS & DIL - through 12-31-2013

a. Mortgage unaffordable

b. Homeowner doesn't qualify for mod

a. Homeowner has moved and needs to sell

a. Payment to 2nd now $8500 (was $6,000)

a. Relocation assistance $3000

a. If requested by homeowner, full contractual payment may be made to remain current

a. Eligibility Basics

i. 1st Mortgage origination on or before 1-1-2009

i. $729,750 for one-unit property

i. Mortgage delinquent or default is reasonable foreseeable

i. Hardship (for Service members, this may include a Permanent Change of Station order)

i. Servicer must receive appropriate docs by 12-31-2013

i. Transaction must be completed by 12-30-2014

[pic]

HAFA - Short Sale Agreement

Process

1. Screening Phase

1. 30 calendar days - Services has 30 days to offer consideration under HAFA

1. 14 calendar days - Homeowner must respond w/ request for consideration for HAFA

1. 10 business days - Service must acknowledge homeowner's request

1. Evaluation Phrase:

1. 45 days - Services must deliver an SSA to homeowner

2. 14 days - Homeowner has 14 days to return SSA to servicer

1. Marketing Phase:

1. 120+- days - Homeowner and/or listing agent has minimum of 120 days to market property

1. 3 business days - Homeowner must submit offer with RASS to servicer (see section under RASS)

1. 10 business days - Servicer must approve or deny the sale or provide a counter offer

1. 45 days - Servicer schedules closing for NO LESS than 45 days. Upon closing, homeowner receives $3,000 relocation assistance.

NOTE: RASS - Request for Approval of Short Sale

Alternative RASS - Alternative Request for Approval of Short Sale

1. Listing/Marketing

a. Homeowner/listing agent submits Alternatiave RASS w/ executed contract and RMA

b. 10 days - Servicer must acknowledge homeowner's request

1. Eligibility/Evaluation

a. Servicer notifies homeowner about potential HAMP eligibility

1. Approval/Closing

a. 14 Calendar days - Homeowner must respond to request for HAMP consideration

b. 45 days - Servicer must approve, deny, or provide counter offer

c. 45 days - Servicer schedules closing for no less than 45 calendar days. Upon closing, homeowner receives $3,000 in relo assistance

DIL Agreement - Deed-in-Lieu Agreement - you give your house back to the bank

1. Key components:

i. Borrower conveys clear title to servicer and investor and negotiates subordinate liens

i. SSA or DIL Agreement specifies property vacate date (cannot be less than 30 days after the date of the termination of the SSA or separate DIL Agreement, unless borrower voluntarily agrees)

i. May allow borrower to rent or re-purchase property at a later time.

Also Home Affordable Refinance Program (HARP)

On 3/19/2012 (announced Oct. 2011) - was available on a manual basis and limited to just the homeowner's current servicer,

 

To see if you qualify:

 

1. Loan held by Fannie Mae or Freddie Mac (Big Banks sell their loans so 2/3 of US mortgages are owned by:)

• Fannie Mae: 1-800-7FANNIE (8 am to 8 pm ET)

• Freddie Mac: 1-800-FREDDIE (8 am to 8 pm ET)

1. No underwater limits - no loan to value limits - could be 150% loan to value - no appraisal

1. Expires 12/31/2012

1. Must have closed loan on or before May 31, 2009 and owned by FANNY MAE and FREDDIE MAC

2. Rates will vary - depending on loan to value and credit score

3. Do not have to stick to your current bank

1. OK for 2nd home or investment property

1. No late within 6 and no more than one late within 12 months

2. Loan must fall under current conforming loan limits



 

The Hello Bar is a simple notification bar that engages users and communicates a call to action.

HARP Program specific contact information for major mortgage servicers with whom you already have a mortgage through (not for new loans or shopping for a new servicer):

Bank of America: 1-800-846-2222

Wells Fargo: 1-877-937-9357

Chase: 1-800-848-9136

Citi: 1-800-283-7918

US Bank: 1-866-932-0462

 

 

Industry Resources:

|• Trusted Advisors can escalate cases to the HAMP - Solution Center: escala.ons@ or |(866)939‐4469. |

• , (800)7Fannie,KnowYourOp., resource_center@.

• , (800)Freddie and select op.on 2.

• For assistance with FHA loans, contact the FHA National Servicing Center at (877)622‐8525 or offices/hsg/sk/nsc/nschome.cfm.

• For assistance with VA loans, call (877)827‐3702 or visit HomeLoans..

• For help with USDA RHS loans, contact the Centralized

Servicing Center at (800)414‐1226.

May 2012 | Making Home Affordable

Learn More at and





 

Some Short Sales also are contingent upon seller filing bankruptcy.

 

If you file bankruptcy, it takes care of the first , second and other liens - usually. For Chapter 7 it generally takes 4 months from filing until it is over. Check with your attorney to see if you can wait a few weeks prior to the foreclosure sale to file for bankruptcy. (It could cost more if you wait until just a few days before.) After the bankruptcy is over, then you can sell the house and any money you get will go to the first and second lienholders.

 

1. Chapter 13 Bankruptcy

1. Plan of Reorganization

2. Cures Arrears/Maintain Current Payment

1. Stops all collection activity including foreclosure

1. A "Carve out Fee" may be charged, potentially to buyer (in excess of sales price and cannot be included in mortgage). This is a federally approved fee. When a person files Ch 13 - you are handing all assets to the trustee - WA lowest paid $75 so the "carve out fee" is used to pay costs. Minimum Carve-out Fee is $15,000 (can be more) (only 4 Trustees in Washington) (Fee must be on Final HUD)

1. Chapter 7 Bankruptcy

Buys Time

Trustee May Pursue a Short Sale

Stops all collection activity including foreclosure

 

Who can Negotiate a Short Sale for Seller?

1. Real estate agent

1. Difficult to do without giving legal or financial advice - not licensed to give legal advice

1. Lender

1. Difficult to do without giving legal or financial advice - not licensed to give legal advice

1. Attorney

1. Licensed to give legal advice

 

Other Types of Short Sales (besides HAFA)

1. Standard Short Sale - Non Government Sponsored Enterprise (GSE)

i. Hardship usually

i. 2-6 months for a yes or no response to offers

i. May not release debt

1. In-House programs (programs your lender may have)

2. FHA PFS (Pre Foreclosure Sale)

i. Priced in advance of offer

ii. Set Net Proceeds

i.

|  |Listed for 30 days |Net Sale Proceeds 88% |

|  |Listed for 60 days |Net Sale Proceeds 86% |

|  |Listed for 90 days |Net Sale Proceeds 84% |

i. Cash back

i. Release of debt

General - Waiting periods to purchase

 

|Foreclosure Event |Current Waiting Period Requirements |New Waiting Period Requirements |

|Deed-in-Lieu of Foreclosure |4 years |2 years - 80% max. Loan to Value |

| |  |4 years - 90% max LTV |

| |Additional requirements apply after 4 years to 7 years |7 years - LTV per eligibility matrix |

| | |VA - no waiting |

|Short Sale |  |Same as above |

Exceptions to Waiting Period for Extenuating Circumstances

|Pre Foreclosure Sale |Current Waiting Period Requirements |New Waiting Period Requirements |

|Deed-in-Lieu of Foreclosure |2 years |2 years - 90% max LTV ratios |

| |  |VA - no waiting |

| |Additional requirements apply, after 2 years up to 7 ears | |

|Short Sale |No policy currently exists specific to short sales |Same as above |

 

Mortgage Forgiveness Debt Relief Act of 2007

Enacted 12/20/2007. Generally allows exclusion of income realizzed as a result of modification on the terms of the mortgage, or foreclosure of your principal residence. This act expires end of 2012 unless extended

The reason this act is important in today’s housing market is that, without the act, debt reduced through mortgage modifications or short sales qualifies as income to the borrower and is taxable. If the legislation is not extended, then it would require homeowners to complete a short sale or modification prior to year’s end in order to avoid a tax consequence.

 

Pasted from

 

 

1. Proceeds of refinanced debt used for other purposes - for example, to pay off credit card debt - do not qualify for the exclusion

 

Why do Short Sales Fail?

National statistics show that about 23% of short sales are successful. Reasons for failure include:

1. Unrealistic expectations

2. Timeliness - offer does not followed "expected" guidelines

3. Low ball offers due to market conditions

1. Property listed too low

1. Seller may not have "decided" whether he will cooperate with a short sale - buyer will not know that

1. Seller accepts offer with excessive seller concessions and costs (which bank wouldn't consider)

1. Offer does not meet investor guidelines

1. Mortgage insurer requiring promissory note from seller (seller won't agree to signing one)

1. Lienholders do not agree to short sale (they may prefer to send it to collection)

1. Credit unions may not agree to take less than owed

1. Seller does not agree with terms offered by bank

1. Buyers get discouraged and walk

2. Bank asks buyer for more money or different conditions

1. Seller 's lender will often take months to respond - when conditional letter is received, buyer must respond very quickly

1. Seller's lender may:

1. Reject the offer;

2. Modify the offer;

1. Increase the purchase price,

1. Change the closing date,

1. Refuse to make repairs,

1. Choose not to allow seller's payment of buyer's closing costs, etc

1. Demand a very short closing

1. At this point Seller may:

a. Pull the plug

a. Decides he doesn't want to move and decides to let house be foreclosed

a. Doesn't like terms upon which lender allows the sale to proceed

a. Lender may refuse to discharge the deficiency owned by seller

a. Form 22SS gives sellers the ability to choose not to accept the terms of the lender's approval

a. Buyer is just out of luck - and money - and time wasted

1. With each additional lien, repeat number 14 above.

 

FORECLOSURES

1. When you are delinquent:

a. Notice of Default comes first -

b. About 6 months later comes the Notice of Sale - 3 months later is the foreclosure date (on a Friday)

1. Non-Judicial Foreclosure Process - sold at Court house

A Notice of Default will be published in paper

Seller can catch up in 6 months - no sooner than 90 days for foreclosure on a Friday

Seller can't cure within last 11 days

DOT (Deed of Trust) trustee - will conduct a sale

1. Judicial Foreclosure - will go for bid

 

LEGAL ADVICE ADVISED:

The Robert Russell Law Group gives free consultations to Distressed Homeowners

1. They have complete Short Sale Negotiation services

2. Short Sale Success Rate: 90% + success rate of a successful short sale

3. Bank has all the tools; the seller should have all the tools

1. Will determine if seller's first position lien creditor participates in a special program

1. We recommend using a real estate attorney if at all possible. I am an expert in marketing and selling real estate and that should be my focus. I do not consider myself a short sale expert, although I have taken hours of training. Real estate agents are not required to take any training before handling short sale negotiations. Real estate agents cannot give legal or tax advice

 

INTERESTING FACTS:

1. When a bank forecloses and takes a property into inventory, it becomes an asset so the accountants like foreclosures although Short Sales are much better for the general market.

2. When a short sale closes, it goes on the bank's books as a loss

3. If a bank forecloses , the value of the loan contributes to their insolvency. If they are FDIC insured, they are required to send 2-5 x the asset to FDIC (cannot loan it out)

1. Short Sales are a better outcome than a foreclosure sale for borrowers, investors and communities

1. Short Sales minimize the time the property is vacant subject to vandalism and deterioration

1. Short Sales reduce the need for potentially lengthy and expensive foreclosure proceedings

1. Short Sales preserve the condition and value of the property

1. Servicer incentives are paid by the investor for completed short sales

1. Recent stats: 3.8 offers for every completed short sale

1. Expect for a Short Sale listing to have an average of 4 months on market.

 

 

 

 

 

 

 

 

 

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download