FREE Mortgage Rights Workshop
May 11th, 2009 categories: Elk Grove, Loan Modifications, Real Estate, REO, Short Sales, Special Events
Legal Forum for Homeowners in Crisis
This Tuesday, May 12th at the Elk Grove Community Library there will be a seminar hosted by two local attorney’s who specialize in real estate mortgage matters. The most impressive part is that it’s FREE and one of the speakers, Davie Pereira is a “court qualified expert in mortgage finance.”
The reason I am promoting this seminar is because as a real estate broker I am not afraid to ask the tough questions and to defer to the experts when I don’t know what I don’t know. I’ve met with Mr. Pereira and I believe his knowledge of real estate mortgage law is impressive and his willingness to share his expertise with the public is refreshing.
According to the flyer there are no commercials for his or his companies products and there will be a question and answer session after the presentation. Additionally he has told me that he does offer a free consult so if you have further questions or don’t want to discuss your situation in a public setting that is an alternative solution.
You must pre-register at 916-275-0907as seating is limited and if you have any questions concerning mortgages, credit, foreclosures, bankruptcy or other financial questions I would advise you write them out and bring them with. Opportunities for the public to ask relevant questions of mortgage professionals are rare and given his knowledge of contracts any insight he might offer is well worth the time spent.
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Related articles:
http://folsomlakehomes.com/2009/05/06/foreclosures-fixer-scams/
http://folsomlakehomes.com/2009/04/28/short-sales-impact-on-credit-scores/
http://folsomlakehomes.com/2009/04/14/california-prevention-act/
http://folsomlakehomes.com/2009/02/16/loan-modifications-vs-short-sales/
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Foreclosures Fixer Scams
May 6th, 2009 categories: Foreclosures, Real Estate, Short Sales
FTC Cracks Down On Rescue Scams
A bit late but better than never. Peggy Twohig, the Associate Director (Division of Financial Practices) for the FTC, spoke today before the House and introduced their plan to curb the schemes of fraudulent companies taking advantage of homeowners.
Apparently over the past year there have been eleven cases brought forth against companies who have defrauded uninformed consumers. What this means to you and me is that you now have somewhere to go to find out what questions to askto verify if someone is legitimate or not. Hope Now Alliance is a good place to start to educate yourself about the process and even offers Free counseling.
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Related articles:
http://folsomlakehomes.com/2009/04/28/short-sales-impact-on-credit-scores/
http://folsomlakehomes.com/2009/04/14/california-prevention-act/
http://folsomlakehomes.com/2009/02/16/loan-modifications-vs-short-sales/
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Short Sales Impact on Credit Scores
April 28th, 2009 categories: Foreclosures, Loan Modifications, Real Estate, Short Sales, Taxes
How the credit agencies are reporting short sales
At today’s realtor tour meeting our speaker, a former owner of the Money Store, offered some information about the impact short sales are having on seller’s credit scores. According to his statistics a short sale affects credit by reducing a seller’s FICO score on average 80-100 points. In contrast a foreclosure or bankruptcy impacts the score between 250-280 negatively. It’s obvious from this information why a homeowner should pursue a short sale but I would caution that getting your home on the market at the first sign of distress is a must for a successful short sale.
Another bit of important information is the impact a short sale will have in terms of taxes. The Mortgage Debt Forgiveness Act of 2007 states that non-recourse money (original purchase money) is a non-taxable event for sellers of homes sold from Jan 2007 until Dec 2012. California has not to my knowledge extended this beyond 2009. This is not so with recourse money IE: equity lines or refinances. However, if you took out a loan to put in a pool or landscape and you find yourself in a situation where you have to short sell you might be able to avoid paying taxes on the borrowed money IF you can produce receipts. Of course talking with a CPA is always one of the first things I recommend to my clients.
Talking with a knowledgeable Realtor is your first line of defence and can offer you a dignified exit during a stressful time in your life. If you would like more information or need to speak with me please call and let me explain your options before things snowball and get out of control.
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California Prevention Act
April 14th, 2009 categories: Foreclosures, Loan Modifications, Real Estate, Short Sales
AKA: Extend the moratorium on Notice of Default filings
There’s been a lot of talk about the extension of the Notice of Default (NOD) filings by the senate bill 1137 passed this February and it’s impact on the housing crisis in California. According to the report it extends the filing of the NOD’s (Notice of defaults)by 90 days so it seems that homeowners will gain an additional 3 months before they hear from their banks.
I’ve heard both sides of this argument and frankly don’t know which side I’m inclined to favor. Some folks claim that it will keep a flood of homes from hitting the market all at once. Others say it will prolong this down market and we should just let the market adjust itself without meddling in it. Given the amount of short sale business that I’ve been doing lately I’m in favor the freeze because it allows us Realtors to get in front of the banks with our listings a bit faster. Short sales and REO’s (bank owned) are driving this marketand with the next wave of adjustments on the horizon it makes sense for the banks not to overload their already overworked loss mitigation depts.
Currently short sales are taking an average of 21-30 days for the bank to respond. Some lenders are so impacted that you cannot get them to answer a phone call. Email is not the typical mode of communication so the result is slow processing and little understanding for the plight of the homeowner, let alone buyer. So what is the solution? I counsel all parties involved to be patient…remember what Mom used to say about it being a virtue? The payoff can be very good for those who are willing to go the distance and with the delay in NOD filings you have plenty of time to get through the process without fear of the house being foreclosed on in the middle of the transaction.
If you are looking for good counsel it pays to talk with a Realtor who has been working in the short sale arena. There are attorney’s advertising for loan modifications who also provide short sale assistance but there is a big difference and that is how they get paid. Typically when you hire a Realtor to represent you in your sale or purchase the commission paid to the agent does not occur until the transaction closes. When you hire an attorney to represent you then you pay them a fee…regardless of the outcome. So be wise and understand that you will still be liable to pay the attorney even if you don’t succeed in getting a loan modification and your home needs to be sold short. It doesn’t make sense to go further into debt when your Realtor can guide you through the process. I’ve been successfully closing shorts sales and would gladly help you get through the process.
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Avoiding Foreclosures
March 11th, 2009 categories: Real Estate, REO, Short Sales
Short Sales, loan modifications and other information.
Since the government passed the new stimulus pkg there has been a lot of questions as to how much money will be devoted to helping homeowners save their homes and the reality is that very few will benefit as it stands now. The reason for that is only those loans that are government backed i.e. FHA, Fannie Mae, Freddie Mac qualify for re-structuring because they must meet the criteria outlined as a government sponsored entity(GSE). Those that do not qualify(which is the majority) are anxious to get out from under the payments so what is the best way to approach this situation? Following is an outline of some of the current methods used in California by the real estate community but please keep in mind that every situation is unique so please email me with your questions.
Short sales offer a solution to selling your home if you owe more than what it is currently worth. The way the bank sees the situation is that they stand to lose more if they don’t agree to take less than the loan balance due. The reason for that is because they will have to pay the foreclosure costs in addition to marketing your property. The banks know that the best case scenario is for them to net 85% of the sale price so a short sale profits them.
Loan modifications are few and far between. Sellers who hire an attorney to negotiate their loans are paying for a service they can handle themselves. In fact according to senate bill 1137 the banks are required to call or visit the homeowner with the express purpose of finding a way to help the homeowner keep his home. The real problem is that most homeowners don’t qualify because they don’t earn the income necessary to qualify. Additionally the GSE are for only those loans that the government insured so your first question will be what type of loan do you have? Calling your lender and finding out if you qualify for a loan modification is the best way to determine how to solve your mortgage problem.
Some people are so frustrated that they just want to walk away because they realize they will never catch up. A deed in lieu of foreclosure basically means that you mail the keys back to the lender. This isn’t really a solution and is basically the same as foreclosure but without the black mark on your credit history. Some lenders make this a difficult process and it will negatively impact your credit score so this would be a last resort. If you find yourself not able to make your house payments and don’t know what to do give me a call and let’s go over your situation. It’s never too late to figure out a solution.
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Loan Modifications vs Short Sales
February 16th, 2009 categories: Foreclosures, Real Estate, REO, Short Sales
Does hiring an attorney really help?
The past couple of years have re-introduced to the real estate community the short sale that has helped many people sell their homes and keep some semblance of credit worthiness, and now attorneys have found a niche with loan modifications.
We last saw the short sale in the mid 1990′s when the market had a similar fall due to the overbuilding and investor inflation created by a rising real estate market. In essence, the seller was able to sell his house without having to satisfy the debt he owed to the lender and the new buyer was able to purchase a home with a clear title even though the previous owner owed more than the new buyer paid.
Now attorneys are introducing their services to help homeowners obtain a loan modification. Real estate loans can be obtained from a variety of sources i.e. banks, mortgage brokers, mortgage bankers, credit unions, investment firms, private funding, etc… so is it necessary to hire an attorney to get a toxic loan re-negotiated? That depends on a couple of factors but most importantly it depends on the reason you are seeking relief from your loan obligation.
How much you owe vs. what you can afford to pay for a mortgage is the primary reason most people find themselves in this situation in the first place. There are exceptions for loan fraud and in those cases an attorney would be a good choice however, the majority of people now seeking relief accepted a loan at a teaser rate knowing it would adjust. They were hoping the market would continue to increase and that they could re-finance at a fixed rate after their minimum period expired. Your ability to qualify for a loan modification is the same criteria lenders use to qualify any buyer for a loan.
In a loan modification the goal is to re-negotiate the loan to something that the homeowner can afford. The best case scenario is to get in touch with your lender and begin the discussion of loan modification prior to missing any payments. The labyrinth of departments make this an intimating situation and can seem overwhelming. Attorneys capitalize on these fears and extract more money from the homeowner which exacerbates their financial situation.
I recently had a conversation with one loss mitigator from a bank I was working out a short sale for one of my sellers. He said his bank requires that the attorney, the loss mitigator and the homeowner have a three-way phone conversation explaining to the homeowner that the hiring of an attorney was not necessary to negotiate a loan modification. He then asks the homeowner why he hired an attorney when he could save himself the money and the usual answer was fear. This was the reason most people were willing to go further into debt with no guarantee that they would get their loan modified. Again, the primary factor in obtaining a loan modification is your ability to qualify for the loan in the first place.
Some law firms specializing in loan modifications have “working relationships” with investors who will purchase your home should you not qualify for a loan modification. Essentially, they are structuring a short sale with the law firm doing the paperwork on behalf of the seller. This is where I have a problem because the seller is being charged for services a Realtor would provide FREE. Since the seller did not qualify for the loan modification they are now forced to sell their home or face foreclosure but they now have attorney fees to pay. Talk about fear!
My suggestion to people who are upside down on their mortgages is to first talk with a Realtor who is familiar with loans and short sales. Find out if you qualify for a new loan and what your home value is in this market. If you suspect loan fraud then get a referral from your Realtor for an attorney who specializes in real estate. Paying for the learning curve of those attorneys who are exploiting people’s fears is not going to help your situation.
For more information see these articles: Now Is The Time To Renegotiate With Banks
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Now Is The Time To Renegotiate With Banks
January 12th, 2009 categories: Folsom Lake, Real Estate, Short Sales
Threat of judges interference encourage mortgage workouts
According to a news report from CNN Jan. 9,2009, Citibank has signed on with legislation to negotiate mortgage modifications with folks who have filed bankruptcy. It also says that the National Assoc. of Realtors is leaning towards supporting this piece of legislation which appears to be a complete 180 from previous statements. Allowing judges to renegotiate loans and reduce interest rates is some scary stuff.
My concern is the long term impact this type of “tinkering” with mortgages will have on the real estate industry as a whole. Referred to as a “cram-down” by the banking industry, this is something seldom used but according to this article (and my own experience) “the banks have been dragging their feet” in terms of negotiating with homeowners. It appears this offers the push back needed to get them to move the paper and get on the phone to the homeowners (and hopefully answer the phone calls from the Realtors!)
The real estate profession has long been used as a metaphor for unethical behavior but the lenders got caught in this past market and their true colors were displayed for all to see. I understand that mortgage brokers have to make a living and most are honest people who work for their clients best interests but we all know a story or two about the fast Eddie’s who got in and made a quick buck. Unfortunately it’s not those same people who have to take it in the shorts but at least this offers a solution to Joe the plumber to salvage his situation and get his loan reduced to keep his home. If the courts do indeed get the power to start reducing mortgages and alter the interest rates I think the industry as a whole will start to police it’s actions more closely and hopefully everyone will benefit.
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Short Sales: Are They Worth The Wait?
December 3rd, 2008 categories: Foreclosures, Real Estate, Short Sales
When Is It Time To Give Up?
This past year the majority of homes that have sold have been either foreclosures, REO’s or short sales. This post will focus on short sales because although they tend to take longer, are probably the riskiest, they also have the potential to be great deals. I have closed a number of them this year and have helped sellers get out from under a mortgage that had a rate adjustment or got caught in a relocation they didn’t expect. The buyers gained because these homes are usually well maintained and have good locations. In the previous market these are the homes that would sell quickly. 
First of all let me define what a short sale is: When the bank agrees to take an amount short of what is actually due on the loan or loans against the house. If there is more than one loan then position will dictate who gets paid first and who stands to lose the most. For example: A home was purchased for $400,000 and the loans originally taken were for $300,000 (1st position) and $100,00 (2nd position) with different banks. (This was how a lot of people avoided paying PMI (Private Mortgage Insurance) which can increase your monthly payment by hundreds of dollars.) The seller lists the home for $320,000. An offer comes in at $310,000 and the 1st bank approves the amount at $310,000 because the cost to do business:realtor fees, title fees, taxes, etc. comes in around $20k so they will take a short amount of about $10,000. The problem lies with the 2nd lien holder. They are stuck with nothing so the agent needs to negotiate with them to accept a small amount to come off title so the house can reconvey to the new buyer. This is where you need to make sure you have an agent who is dedicated to seeing this transaction through.
Patience is the key to a successful short sale. I have a client who will be closing escrow on a short sale that we first made an offer on in March 2008. We will close this Friday so, doing the math, it took 9 months to deliver this baby. There were some interesting twists along the way, one of which was a reduction in price of $15k because by the time the bank decided it would agree to the short sale the market had dropped. My appraiser said he couldn’t come up with any closed sales to substantiate the price so the bank had to reduce the sales price or lose the buyer and start the process all over again. This is very costly and even though the NOD (notice of default) was filed and the bank was ready to foreclose they were willing to reduce their price because it saves them money in the long run.
Another short sale I will be closing on next week has a very happy buyer because the rates dropped last week and his interest rate went down. We asked the bank to extend the closed date and they agreed and the buyer now has a lower monthly payment. The seller is happy because he managed to keep his credit intact by keeping all his other bills paid on time so the hit from missing only one payment didn’t damage his credit rating too badly.
The dirty little secret about short sales and the real estate community is that agents don’t like to show short sale properties. Why? Because it takes so long and the potential for the sale to NOT close is greater. Conversely when the sale does take place there exists a possibility that that buyer could realize some equity in the property even in this down market. The reason that is possible is because finding an equal comparable property that has closed escrow within the past 3 months is hard to come by so the appraisers only recourse is to use what actually closed. In some areas there isn’t a true equal comparison. It’s the different between finding a home with the same square ft. and lot size but the interior has been completely remodeled vs. one with original equipment.
There are so many variables when purchasing a short sale but the old adage of location, location, location still rings true. The fear of not closing the sale is very real when trying to purchase a short sale and the agent representing the seller needs to be flexible and willing to do the extra work to get it across the finish line. So when is it time to give up? I would say that if you have a timeline that doesn’t allow you to wait. If you absolutely need to get settled quickly, can’t stay in your current home or need to focus on something else (like a new job) then don’t get involved with a short sale. But if you have the time to see it through then find an agent who is patient and will work with your situation. Grandma was right, good things come to those who wait.
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