Archive for the 'Shortsales' Category
SHORT SALE DEFINITION
December 23rd, 2009 Categories: Pre Foreclosures, Real Estate News, Shortsales
Foreclosure Solutions Report
Stop Foreclosure With A Short Sale
Straight out of Wikipedia:
A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.
Click Here For Sacramento Short Sale News
Process
In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Neither side is “doing the other a favor;” a short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than foreclosure or continued non-payment would entail. Borrowers are able to mitigate damage to their credit history, and partially control the debt. A short sale is typically faster and less expensive than a foreclosure. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.
Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority have pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies. A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from an appraisal or Broker Price Opinion (abbreviated BPO or BOV).
Lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from the 2009 foreclosure crisis, they are now more willing to accept short sales than ever before. This presents an opportunity for “under-water” borrowers who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure as a result.
Additional parties
Multiple levels of approvals and conditions are very common with short sales. Junior lien-holders – such as second mortgages, HELOC lenders, and HOA (special assessment liens) – may need to approve the short sale. Frequent objectors to short sales include tax lien holders (income, estate or corporate franchise tax – as opposed to real property taxes, which have priority even when unrecorded) and mechanic’s lien holders. It is possible for junior lien holders to prevent the short sale. If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender’s loss in the short sale. The wide array of parties, parameters and processes involved in a short sale makes it a relatively complex and highly specialized type of real estate transaction. Unsurprisingly, short sale deals have a high failure rate and often do not close in time to prevent foreclosure when they are not handled by a knowledgeable and experienced professional.
The best sources of knowledge and expertise in short sales are short sale negotiators, loss mitigation specialists, and real estate lawyers who specialize in short sale.
Consent
Short sales are different from foreclosures in that a foreclosure is forced by a lender, whereas both lender and borrower consent to a short sale. However, this consent may change at any time, and negotiations may be ongoing between the lender and borrower even while the short sale is on the market. The borrower may decide to remain and refinance their house, or become obstinate and force foreclosure. The bank may renege as well if they decide to stick with the current borrower, or if they disapprove of the sale price. Any short sale contract includes a contingency where the bank must approve the sale.
Changing consent can present a perilous situation for potential buyers. It can waste considerable time and money for a prospective buyer who anticipated a sale. Typically, deposits with the bank will be refunded but money for paid inspections or other services cannot be.
There are several defenses against this. If the seller has moved out of a property, that is a clue that they have no intention of staying or negotiating further with the bank. “Bank Approved Short Sales” are advertised by real estate advertisements, indicating that a real estate broker has verified the selling bank’s position. This still does not guarantee acceptance, and it often does not take junior lien-holders into account, but it is better than situations where the bank holding the mortgage has only been lightly involved in the borrower’s decision.
Credit implications
Short sales are a type of settlement, and they adversely affect a person’s credit report, though the negative impact is typically less than a foreclosure. Like all entries except for bankruptcy, short sales remain on a credit report for seven years. Depending upon other credit information, it is typically possible to obtain another mortgage 1-3 years after a short sale.
While lenders sometimes forgive the remaining loan balance, other lien-holders likely will not. Further, it is common for a lender to omit updating mortgage balances zero balance after a short sale. However, willfully misrepresenting information on a credit report can constitute libel in some jurisdictions, and lenders may be sued in civil court for engaging in this behavior.
Business
Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.
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The Rise of The Sacramento Short Sale
December 22nd, 2009 Categories: Default News, Loan Modification, Real Estate News, Sacramento Real Estate Trends, Shortsales
Sacramento Foreclosure Solutions Expert Report
Sacramento Short Sales now 21.5% of Market
Well First of all, Let’s just quickly define short sales:
A real estate short sale is a sale of property in which the sale proceeds fall short of the balance owed on the property’s loan or loans.
Sacramento’s Real Estate Market has recently been a perfect storm for short sales.
There have always been short-sales. Since the beginning of real estate. Market prices go up and market prices go down, and when a homeowner has to sell when they are upside-down… well, you get the picture.
Homeowners can have many reasons to sell their home in a Short Sale; any time there is a reduction in market value along with the need for relocation, sickness, job loss, death or divorce, there is no other way besides just letting the bank take it back. So Short Sales are the best solution to keep a homeowner out of foreclosure when it is clear they cannot keep the home…
But in this economy, Sacramento shortsales most often occur when a homeowner just cannot pay the loan payment on their property. With Sacramento unemployment at 12.3% and a 41 month long drop in median home prices that has taken over 55% off the 2005 highs in Sacramento County. Sacramento Short Sales are now over 20% of the market!
Short sales in Sacramento have become a popular pre-foreclosure option to keep homeowners out of foreclousure, when loan modifications just don’t provide a solution to foreclosure.
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Stop Foreclosure With Government Shortsale Guidelines
December 22nd, 2009 Categories: Mortgage and Loans, Pre Foreclosures, Shortsales
NEW GOVERNMENT SHORT SALE GUIDELINES:
Loan Mod Fails? Stop Foreclosure with Short Sale/Deed-in-Lieu!
Foreclosure Alternatives for Borrowers Eligible for MHA but Unable to Sustain a Modification
Government
Making Home Affordable
On Feb.18th 2009 the Obama Administration announced the Making Home Affordable (MHA) Program, a comprehensive plan to stabilize the US housing market and offer assistance to up to 7 to 9 million homeowners by reducing mortgage payments to affordable levels and preventing avoidable foreclosures. They are betting on the fact that most homeowners will stick around in a home that is upsidedeown, as long as they can afford it.(low enough monthly payment). Then, two weeks later on March 4th
, they (the Administration) published details of a program that authorized servicers to begin modifications and refinancings under the plan immediately. On April 28th, the Administration announced additional details related to the Second Lien Program and strengthening Hope for Homeowners. Fourteen servicers, including the five largest, have now signed contracts and begun modifications and refinancings under MHA. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the MHA program.
The rest of this post is directly from a press release way back on May 14th, 2009. It shows that they have been pushing for short sales as a foreclosure most of this past year!
Today we are providing a program update, including additional details on Foreclosure Alternatives and Home Price Decline Protection Incentives. Foreclosure Alternatives will help to prevent costly foreclosures by providing incentives for servicers and borrowers to pursue short sales and deeds-in-lieu of foreclosure in cases where a borrower is eligible for a MHA modification but unable to complete the modification process. This program will assist homeowners who cannot afford to stay in their homes by helping them to avoid foreclosure and relocate to a home they can afford. Building on insights developed by the FDIC, Home Price Decline Protection Incentives will provide additional payments based on recent home price declines, and therefore will incentivize additional modifications in areas where home prices have been falling. By increasing MHA modifications and the use of alternatives to foreclosure, we will reduce the negative impact of foreclosure, minimizing damaging costs for financial institutions, borrowers and communities.
Home Price Decline Protection Incentives and Foreclosure Alternatives, together with the other comprehensive elements of the Making Home Affordable program, will help to stabilize property values for homeowners in neighborhoods hardest hit by foreclosures. Based on estimates of the relationship between foreclosures and home prices, the Home Affordable Modification program could help to bolster home values for the average homeowner by as much as $6,000.
Foreclosure Alternatives and Home Price Decline Protection Incentives
1. Foreclosure Alternatives for Borrowers Eligible for MHA
• Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives o
Incentives for servicers to pursue alternatives to foreclosures o
Borrower incentives to cover relocation expenses to homes that are affordable o
Streamlined process combining short sales and deed-in-lieu transactions
2. Home Price Decline Protection Incentives to Protect Against Falling Home Prices
• Incentives to support modifications in markets hardest hit by falling home prices
o Provides incentives for modifications by providing payments based on recent declines in home prices to reduce the risk of loss to lenders from modifications compared to alternatives that could result in the loss of homeownership
- Foreclosure Alternatives for Borrowers Eligible for MHA but Unable to Sustain a Modification: For eligible borrowers unable to retain their homes through a Home Affordable Modification, MHA will provide incentives to borrowers, servicers and investors to encourage short sales and deeds-in-lieu. Both allow families and servicers to avoid the costly foreclosure process, and to minimize the negative impact of foreclosures on borrowers, financial institutions and communities.
Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives
When a borrower meets the eligibility requirements for a Home Affordable Modification (HAMP) but does not qualify for a modification or cannot maintain payments during the trial period or modification, the servicer may consider a short sale, and if that is unsuccessful, a deed-in-lieu (DIL).
Both a short sale and a DIL provide an opportunity for borrowers and servicers to avoid the foreclosure process. In a short sale, a servicer allows the borrower to sell the property at its current value, even if the sale nets less than the total amount owed on the mortgage. Approval of a short sale requires the borrower to list and actively market the home at its fair value. The sale must be an arms length market transaction with all proceeds (after selling costs) applied to the discounted mortgage payoff. If the borrower actively markets the property but is unable to sell it within the agreed upon time period, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer – provided the title is free and clear.
Short sales and DILs are complex transactions involving careful coordination and close cooperation among a number of parties — servicers, appraisers, borrowers, purchasers, real estate brokers, title agencies and often mortgage insurance companies and junior lien holders. A short sale or DIL usually provides a better outcome for borrowers, investors and communities. However, due to the complexity of and time required for completion of these transactions, servicers historically have often opted to pursue foreclosure instead, even where a short sale or DIL would have provided a substantially better outcome for borrowers, investors and communities.
The MHA Foreclosure Alternatives Program simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation. To compliment a standardized approach, Treasury provides incentives to borrowers, servicers and investors to pursue short sales and DILs.
How The Home Affordable Short Sale/DIL Program Works:
- Borrower Eligibility. Borrowers will be eligible for the Foreclosure Alternative Program if they meet the minimum eligibility criteria for a Home Affordable Modification but did not qualify for a modification or were unable to sustain payments under a trial period plan or a modification. Prior to proceeding to foreclosure, participating servicers must evaluate each eligible borrower to determine if a short sale is appropriate. Considerations in the determination include property condition and value, average marketing time in the community where the property is located, the condition of the title including the presence of junior liens and a determination that the net sales proceeds are expected to exceed the investor’s recovery through foreclosure Incentive Payments.
Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL.
- ��� Borrowers may receive incentive compensation of up to $1,500 to assist with relocation expenses.
- ������Treasury will also share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investors, up to a total contribution of $1,000 by Treasury.
- Standardized Documentation: The program will publish streamlined and standardized documentation, including a Short Sale Agreement and an Offer Acceptance Letter. These documents will outline specific marketing terms, describe the rights and responsibilities of all parties and establish clear timeframes for performance. Creating one standard set of documents that the industry can use is expected to minimize the complexity of these transactions and significantly increase use of the short sale option.
- Property Valuation: The servicer will independently establish both property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the borrower regarding the list price and any permissible price reductions. The price may be determined based on either: (1) an appraisal performed in accordance with USPAP and/or (2) one or more Broker Price Opinions either of which must be dated within 120 days of the Short Sale Agreement.
- Minimum and Maximum Duration: Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions. The property must be listed with a licensed realtor experienced in selling properties in the neighborhood. Marketing of the property may run concurrently with the foreclosure process, however no foreclosure sale can take place during the marketing period specified in the Short Sale Agreement as long as the borrower is acting in good faith to sell the property. There will be a maximum marketing period of 1 year for the property, provided any longer period not otherwise delay foreclosure sale, to ensure diligence by servicers and borrowers in moving as quickly as possible to complete the short sale and deed-in-lieu process.
- Selling Commissions and Fees: Reasonable and customary real estate commissions and selling costs that may be deducted from the sales price will be specified in the Short Sale Agreement. The Servicer will agree not to negotiate a lower sales commission after an offer has been received.
- Fees and Charges: Servicers may not charge borrowers fees for participation in the Foreclosure Alternative Program.
- Property Eligibility: Any junior liens, mortgages or other debts against the property must be cleared for the property to be sold as a short sale or deeded to the servicer. The servicer can proceed with a short sale or deed-in-lieu if there is a reasonable belief that all liens on the property can be cleared.
- Program Expiration: Eligible borrowers will be accepted until December 31, 2012. Program payments will be made upon successful completion of a short sale or DIL.
- Deed-in-Lieu: At the servicer’s option, the Short Sale Agreement may include a condition that the borrower agrees to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time specified in the Agreement or any extension thereof. In this case the borrower would have 30 days to vacate the property and would be entitled to $1,500 to assist with relocation expenses, in addition to any other funds the servicer may provide to the borrower.
- Home Price Decline Protection Incentives to Protect Against Falling Home Prices: This initiative provides lenders additional incentives for modifications where home price declines have been most severe and lenders fear these declines may persist. These incentives will encourage servicers to undertake more modifications by assuring that incremental investor losses will be partially offset.
To encourage the modification of more mortgages and enable more families to keep their homes, the Administration, building on insights pioneered by Chairman Bair and the FDIC, has developed an innovative payment that provides compensation based on recent home price declines, structured as a simple cash payment on every eligible loan. Home Price Decline Protection (HPDP) incentives are designed to address investor concerns that recent home price declines may persist. Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed. HPDP payments will be linked to the rate of recent home price decline in a local housing market, as well as the average cost of a home in that market.
- Increases Number of Loans that Are Modified: Making Home Affordable will make payments totaling up to $10 billion to to encourage lenders, servicers and investors to modify rather than foreclose by addressing concerns that home price declines will persist in the future. This should increase the number of modifications completed under the MHA program in markets hardest hit by falling home prices.
How The Program Works:
- Payments will be based on the total number of modified loans that successfully complete the modification trial period and remain in the modification program.
- Each successful modification will be eligible for a HPDP incentive, up to a cap for HPDP incentives of $10 billion.
- If the trial modification remains successful, 1/24th of the HPDP incentive will accrue to the lender/investor each month for up to 24 months. HPDP incentive payments will be made at the end of the first and second year of the modification.
- Calculation of HPDP Incentives: HPDP incentive amounts will be calculated based on a formula incorporating:
- Declines in average local market home prices over recent quarters prior to the quarter in which the loan was modified based on housing price indices; and
- The average price of a home in each particular market, since the potential loss due to a given rate of home price decline will be larger in higher cost areas
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9 Must Know Tips on buying Sacramento Short Sales or Sacramento Foreclosure
December 20th, 2009 Categories: Default News, Pre Foreclosures, Sacramento Foreclosures, Shortsales
Weekly Sacramento Short Sale Foreclosure Report
Many Sacramento home buyers want to hit the jackpot and buy that Sacramento REO foreclosed home, or a Sacramento Short Sale, many of which are often under-priced by the bank or seller. When asset managers (working for banks to unload their foreclosed homes) or a distressed homeowner price REOs or short sales under the market, multiple offers are usually the response . This means as a buyer vying for a Sacramento Home, you could be up against stiff competition for that bank-owned home, short sale or foreclosure.
Especially now that the Sacramento Real Estate Market is short of inventory and it’s hard to find a home that interests you, it’s not unusual for some REO (bank owned homes) or Sacramento short sale homes in to receive 15 or 20 offers or more. Sometimes the bank or homeowner will only respond to two or three offers by asking the selected buyers’ agents to resubmit for their buyer what is called their “Highest and Best” offer. Sometimes the bank or homeowner simply accepts the best offer at inception. Sacramento foreclosures that enter the market as bank owned or REO, or short sales and are priced under the market or below comparable sales are usually gone in days.
If you’re wondering how you can make your offer shine above all the rest and be the winning offer, For either Short Sales or Bank Owned Foreclosures here are a few tips to help you select the right price and terms:
1) Learn the Property History
If it is an REO: ask your buyer’s agent to find out the bank’s purchase price on the Trustee’s Deed or Sheriff’s Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.
Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.
If it is a Short-sale, have your Buyer’s agent ask the listing agent what the mortgages are- how many banks, which banks and what the balances of those loans are. It is important to see how much is currently mortgaged on the home. This information can also be deemed from tax records, is usually pretty easy to figure: If the home was purchased in 2004 for $400,000 and mortgaged for $320,000, there is probably still well over $300,000 owed.
2) Study the Situation
If it is a Bank Owned Sacramento Foreclosure: How long has the bank owned the property? How long was it been in the “pre-list” stage? Were the past owners evicted? Was it vacant when the bank took over? Are their outstanding utility bills and HOA liens or Code Enforcement fines that may need to be dealt with at the eleventh hour of escrow? Ask your buyers agent to contact the listing agent if possible, many Sacramento REO listing agents are notorious about being “untouchable” or hard to contact- be persistent. Most Sacramento bank-owned agents have staff that will answer your questions. Know about the property before you write an offer.
If it is a Sacramento Short Sale, find out about Recourse on the Second Mortgage, if there is one. Were all loans “purchase money loans?” Make sure your buyer’s agent knows what this is and what the ramifications could be. Be sure you are working with an agent who is a hort Sale Specialist and a Short Sale Listing Agent. When most Sacramento Short sales will be multiple offer competitive situations, you only want to write offers on short-sales that have a decent chance of being successful.
3) Study Comparable Sales
Here in our market, Sacramento shortsales and Sacramento bank owned foreclosures make up to 85% of the market in the last six months or more… so that means that every home in a radius search of the Bank Owned Property you are interested in may also be bank owned or short sales. In many cases, the list price has little bearing on the value of the home. The market value will always prevail- If you are up against competing offers, many times other buyers will offer more than list price, they will do their homework to see what they belie market price to be and coffer that price.
- Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO or short sale is worth. Try to use only those homes that most closely match regarding square footage, number of bedrooms, baths, amenities and condition.
- Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Sometimes a Sacramento Short Sale Listing Agent will share that information and some will not.
- Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.
4) Review Listing Agent’s REO and Short Sales Solds History
Most Sacramento REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Some agents will do Elusively Short Sales, some will do a combination. Since most Sacramento REO and Sacramento Short Sale agent will deal in volume, they typically apply the same pricing principles to all their foreclosure listings.
- Ask your buyer’s agent to look up the listing agent in MLS.
- Run a search using that listing agent’s name to find the last three to six months of that agent’s listings.
- Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.
5) Ask Listing Agent About Number of Offers
If there are no offers on the Sacramento Foreclosure REO or Sacramento short sale home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.
If there are multiple offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. Short sale sellers don’t really care and the bank that is being shorted sees no benefit in a cash offer- it’s going to get cash at the close of escrow whether the buyer gets a loan or not, and a homeowner is probably going to counter for a longer escrow time, so a cash offer is really no benefit.
If you are obtaining financing for a bank owned, then you may need to increase the price on your offer to be considered.
5) Submit Preapproval Letter
You do not want a prequal letter. You want a preapproval letter. Get preapproved from a lender in advance. both Bank owned transactions and short sale transactions require the buyer to be fully approved.
Moreover, if it is a bank owned, get pre approved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the prepproval letter from this lender, along with the letter from your own lender. Banks don’t trust other lender pre approvals but trust their own departments.
6) Don’t Ask for Repairs / Inspections up from
Make a squeaky clean offer…
On an REO or Bank Owned, sometimes banks will pay for repairs, but usually will not agree to do so at the offer stage. Besides, remember, you are probably in multiple offer competition here in the Sacramento bank owned foreclosure market. If there are problems found during a home inspection, renegotiate after your offer has been accepted.
On a Short Sale it is very hard to negotiate repairs any time after the initial offer has been approved by the bank- if you absolutely love the house you may want to have your inspections done outside of the contract offer, getting your offer accepted and then approved by the bank is the most critical and hardest part of the process. You may want to do your own inspections just for your information, but don’t ask the bank to pay for anything other than a pest report, if that (remember you may be in competition for the best offer). It will cost some up front money but will keep the deal clean.
7) Shorten the Inspection Period
If other buyers ask for 17 days, for example, to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.
Offer to Split Fees
On REO’s some banks will not pay transfer taxes, for example. If the you as a buyer offer to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow and title fees– remember, this is just business .
On short sales, the most important thing to remember is that it is all about net to the bank- how much money are they going to net from your offer- do whatever has to be done to get your offer accepted by the seller and then approved by the bank.
Many banks negotiate discount fees for title insurance. If the bank will pay for the owner’s policy, the ALTA policy might cost a bit more. But it’s still a good idea to let the bank choose title if you want your offer accepted.
9) Consider the Appraisal Consequences
If you offer over list price on a Sacramento Foreclosure Bank Owned or Sacramento Short Sale, bear in mind that the appraisal will need to substantiate that price, if you are going to obtain financing for your foreclosure purchase. If you find yourself dealing with a low appraisal, you have options; so don’t despair. Remember, the new appraised value will be disclosed to the next buyer and. Most times the bank (either as the seller or the montage lender/investor of a short sale) will agree to sell at the appraised value.
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Folsom Foreclosure, Granite Bay Foreclosure and Eldorado Hills Foreclosure advice.
December 19th, 2009 Categories: Default News, Pre Foreclosures, Shortsales
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Struggling Homeowners: 4% Get Mortgage Help
December 11th, 2009 Categories: Default News, Loan Modification, Real Estate News, Real Estate Trends, Shortsales
This just in from Chris McLaughin:
Treasury officials, in the first comprehensive tally of permanent modifications made, say that loan servicers have converted 31,382 people from trial adjustments to long-term assistance as of Nov. 30, but 30,650 people in trial modifications have been denied. That means that only about 4% of troubled borrowers have received long-term help under the Obama administration’s foreclosure prevention program. A nearly equal number of trial modifications have been denied permanent assistance, the report showed. The reasons include not making monthly payments on time, not submitting all the necessary paperwork and not qualifying for reasons such as insufficient income.
Homeowners claim that banks keep losing paperwork, but banks claim they often don’t get it in the first place. Around 375,000 people should be eligible to receive long-term relief by year’s end, but only one-third of homeowners who have made at least three trial payments have submitted all the needed forms, Treasury officials say, and some 20% have not submitted any paperwork at all. Banks and government agencies have hired outside companies to knock on borrowers’ doors to assist them with completing the paperwork. None of this addresses the real problems, of course: a lot of people are underwater and don’t see the point of making payments, and quite a few know they won’t qualify once their real income comes to light.
Along the same lines is This Article From DSNews:
Treasury released the highly-anticipated progress report on the government’s foreclosure prevention program Thursday afternoon – which for the first time includes details on the number of trial modifications each servicer has converted to permanent status – and as lenders warned earlier this week, the results were disappointing.
Of the more than 728,000 Home Affordable Modification Program (HAMP) trials under way across the country, 375,000 are scheduled to convert to a permanent modification by the end of the year, and only 31,382 have made the transition.
The Treasury Department said in a statement to the press, “According to servicer reports, most borrowers in modifications are meeting their responsibilities to make their payments. Servicers need to do their part to help borrowers complete the process and get to the finish line.”
A number of servicers have told DS News that the problem lies in the paperwork. They say an unsettling number of borrowers just don’t submit the required documentation for conversion once they complete the trial phase, or file incomplete or inaccurate information. Participating servicers say they’re ramping up outreach efforts to ensure homeowners who’ve successfully completed their trial phase get the necessary documents in for permanent assistance.
Molly Sheehan, SVP of housing policy for JPMorgan Chase’s home lending division told a congressional panel earlier this week that the focus of her group’s “immediate attention is finding ways to assist the 51 borrowers out of 100 that are missing some or all of the documentation.”
But on the other end of the process, homeowners and their advocates say it’s the servicers and their staff that cause the delays, and in some cases, even lose the paperwork.
Julia Gordon, senior policy counsel for the Center for Responsible Lending, testified to lawmakers Tuesday that servicers still lack the capacity to effectively administer a program of HAMP’s size and scope. It’s been nine months since HAMP began, and Gordon said, “Homeowners still have terrible trouble reaching their servicers, and when they do, they often encounter staff who are ignorant of the HAMP program, they sit through attempts to steer them into other products, and they are unable to get any firm decisions made in a timely manner.”
Timra Valentyne, a loan officer with United Homestead tells DSNews.com that she’s encountered similar problems helping homeowners work with their servicers on HAMP modifications. On numerous occasions, Valentyne said, the borrowers’ documentation gets lost in the shuffle or never gets tagged for the appropriate account.
She cited a particular case with Chase, in which the homeowner had successfully made his restructured payments through five months of a HAMP trial, but was denied a permanent modification because he cashed in a certificate of deposit (CD) to help cover the new payments and the bank ruled his hardship was only temporary. When Valentyne followed up with Chase, the bank representative told her the homeowner was never on the HAMP plan, although the homeowner had a rejection letter stating that he’d been denied for the “Making Home Affordable” modification program – a clear discrepancy in records and paperwork.
Gordon advocates requiring HAMP-participating lenders who are producing insufficient results to use specialty servicers working for the government to handle certain accounts. These companies specialize in intensive, “high-touch” approaches to working with homeowners in trouble, she says, and are much more effective at reaching borrowers than a mainstream servicer.
One specialty servicer says it’s exactly this type of high-touch method that has led to its HAMP success. Ocwen Financial has converted an industry-leading 74 percent of its trial mortgage modifications to permanent status. The Treasury’s latest HAMP report shows that Ocwen accounts for a disproportionately high 13.5 percent of all permanent modifications completed to date even though it services only 2 percent of the estimated HAMP-eligible loans.
Ocwen says its partnerships with homeowner advocacy groups have been indispensible in helping the company keep borrowers active in the process. Ocwen collaborates with a range of independent housing advocacy and grassroots organizations to reach out to homeowners and to help them gather the required documents for a modification.
Based on the December HAMP report GMAC Mortgage is having the most success with permanent modifications in terms of sheer numbers. GMAC has successfully made the conversion for 7,111 homeowners. The company has extended trials to 39 percent of its eligible borrowers.
Bank of America had the worst showing of all the largest lenders. It has finalized a mere 98 permanent modifications, and has extended trial offers to only 15 percent of its more than a million eligible homeowners.
The administration recently announced a new push to compel servicers to complete more permanent modifications, threatening to impose fines, withhold cash incentives, and publicly name those companies that fail to perform up to par
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Luxury Short Sale Homes Are on the Horizon!
December 4th, 2009 Categories: Default News, Loan Modification, Mortgage and Loans, National Real Estate Trends, Real Estate News, Shortsales
…The Coming ARM Storm
First it was the sub-prime market and now experts agree, adjustable rate mortgages combined with rising unemployment and falling property values could create another economic storm capable of ravaging the weak economic recovery. Here’s a quick breakdown of the ARM Storm-Tracker for those savvy short sale investors to beginning their planning:
Resetting Rates: Current interest rates are at or near historic lows with 30 year fixed mortgages below 5 percent while ARM’s are likely to readjust and drive the cost of monthly mortgage payments to double their former payments. Unfortunately, many current ARM holders do not qualify for refinancing due to changes in employment status, high loan to value ratios and increased debt to income percentages.
Evaporating Equity: Not only did millions of Americans take out Adjustable rate mortgages but they built additions and over-improved their homes based upon loans. As home values fell, so did the equity reserves required to refinance their ARM mortgages. Whether it was a first mortgage with minimal down payment or a second (and even third) mortgage, lower property values have all but erased excess equity from a large number of buyers.
Cheaper to Walk: Many homeowners are finding it less expensive to simply walk away from rapidly rising mortgage, rent for awhile then repurchase. According to industry experts, a significant number of homeowners are capable of making the mortgage payment but simply don’t desire to do so given the cost of purchasing the same home after foreclosure. Current homeowners are eligible for FHA loans in as few as three years after default – creating an inverse incentive to continuing paying on a property worth tens (or even hundreds) of thousands dollars less than the existing mortgage.
Renting an Increased Option: Throughout the nation lenders are getting creative in order to reduce the inflow of defaulting properties on their portfolio; one of the more popular options among existing homeowners is the ability to rent your current property for a specified period of time.
ReFi with an ARM? It’s true, the FHA has a 3.87 five year adjustable rate mortgage option designed to help keep payments affordable. Unfortunately, it may simply delay the pain until interest rates continue to rise later. However, with a 2 percent cap on each adjustment/rate increase, it could conceivably buy time for those in unusual short term situations such as temporary illness, job loss of other large expenses. It also has the benefit of “buying time” for the banks and lenders who are in no hurry to acquire even more properties given the current backlog of non-performing properties in their portfolio.
What is a savvy short sale investor to do? Get ready for the coming wave of ARM properties to hit the market. Be sure your credit is in place and position yourself to solve problems for both homeowners and lenders in need of a new start.
See you at the top!
Another article courtesy Chris McLaughlin
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Bank Of America As Second Lienholder… Is $3,000.00 Enough?
December 3rd, 2009 Categories: Default News, Loan Modification, Mortgage and Loans, Real Estate News, Shortsales
There are so many home retention/foreclosure avoidance programs with acronyms now, it’s hared to keep them all strait…
There’s the MHA program , the HAMP program, the HFHA program, the NPV test, the HARP program, the HAFA program and now, the newest acronym and finally one that might make some difference for homeowners who need to sell; the HAFFAP program or Home Affordable Foreclosure Alternatives Program.
An article from DSNews included thisbreakdown of the program:
To entice servicers to accept a sale on defaulted properties for less than the outstanding mortgage balance, Treasury is offering incentive payments of $1,000 per completed short sale. Servicers will also receive $1,000 for each deed-in-lieu of foreclosure.
Subordinate lien holders will be paid to release their claims on defaulted properties, up to $3,000 of the short sale proceeds as long as the primary investor agrees to share the earnings, and for this concession, the investor will also receive up to $1,000 from the Treasury. For those second lien holders who want more than the $3,000 cap to relinquish their stakes, the Treasury said they can pursue a short sale outside of the federal program.
Homeowners who agree to a short sale or deed-in-lieu of foreclosure will get up to $1,500 to help with relocation, and must be “fully released” from any future liability, according to the guidelines.
The Home Affordable Foreclosure Alternatives Program (HAFA), as it is being called by the Treasury, was initially announced back in May, but was delayed because of concerns over legalities involved in the process and the rights of second lien holders to hold claim over the property. DSNews.com reported in October that the administration was readying guidelines for the program, and yesterday, they arrived.
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New Government Bounty On Short Sales Pay Default Sellers $1500.00
December 3rd, 2009 Categories: Default News, Real Estate News, Shortsales
Government attempts to make short sales easier
The Obama administration laid out final guidelines on Monday that should make it easier for some financially troubled borrowers to sell their homes. The guidelines are designed to encourage the use of short sales, and it also makes it easier for borrowers to voluntarily transfer ownership of properties through a “deed in lieu of foreclosure.” Under the plan, borrowers will receive $1,500 from the government if they sell their homes for less than the amount of their mortgages. Mortgage-servicing companies will also receive $1,000 for each completed short sale. The program is open to borrowers who may be eligible for the government’s loan-modification program but don’t end up qualifying, or are delinquent on their modification, or request a short sale or deed-in-lieu transaction. The short-sale program is the latest addition to the Obama administration’s $75 billion foreclosure-prevention plan, which includes incentives for mortgage companies and investors to rework troubled
loans. The government first said in May that it would include short sales in the program, but it has taken months to finalize the details. Under the new guidelines, second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgages, meanwhile, can collect up to $1,000 from the government for allowing such payments. Borrowers who complete a short sale under the program must be “fully released” from future liability for the debt, according to the guidelines.
courtesy Chris McLaughlin
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Sacramento Hearing Addresses Foreclosure Crisis in California
November 19th, 2009 Categories: Default News, Foreclosure Rescue Scams, Loan Modification, Pre Foreclosures, Shortsales
SACRAMENTO /California Newswire/ — Assemblymember Pedro Nava (D-Santa Barbra), Chair of the Assembly Banking & Finance Committee, led the second in a series of informational hearings today to examine California’s foreclosure crisis, the state’s current loan modification programs, and methods by which the state could improve procedures to help struggling California homeowners. Nava was joined by Nevada Assembly Speaker Barbara Buckley, housing experts, representatives from the banking and mortgage industry, and state and local non-profit housing and consumer organizations.
“This crisis has devastated thousands of California families and communities. It’s time to take a new approach to help families remain in their homes. Today’s hearing provided more evidence that our existing loan modification programs have been ineffective and the number of families benefiting from them is minimal,” said Assemblymember Nava. “I will continue to work with all the stakeholders who testified today to come up with viable and effective solutions, including the establishment of a loan mediation program.”
California continues to have the third highest foreclosure rate in the nation, with one in every 144 homes in some stage of the foreclosure process. While these numbers have decreased from last year, 400,000 were nonetheless foreclosed on in California in 2009. Thus far, federal and state efforts to encourage banks and servicers to modify borrowers’ loans have largely been on a voluntary basis, and those who need help are subsequently falling through the cracks. California needs a new direction and the implementation of a loan mediation program may be one of the solutions.
Assembly Bill 1588, sponsored by Los Angeles Mayor Antonio Villaraigosa, was recently introduced by Assemblymember Nava and California Assembly Speaker Karen Bass. The measure will establish a monitored mediation program to help homeowners and lenders reach sustainable loan modifications. Under AB 1588, if attempts at loan modification fail, a reasonable transition plan would be established by the borrower and lender. This type of mediation program has proven successful in numerous other states and cities.
“Families working to turn around the economy need the financial system to work for them to avoid foreclosure,” Assembly Speaker Karen Bass (D-Los Angeles) said. “AB 1588 builds upon successful mortgage workout programs other states have used to bring lenders and homeowners together to find alternatives to foreclosure. By providing the monitoring necessary for this process to succeed in California’s tough housing market, I’m confident this legislation will help more families stay in their homes and keep communities intact.”
Nevada Assembly Speaker Barbara Buckley testified today before the committee, stating that she believes Californians can benefit from a program similar to the one she sponsored in Nevada. “No matter where we live, it is critical that we do all we can to help reduce the number of foreclosures and help people stay in their homes. Our program in Nevada has shown initial success in stemming foreclosures. While I understand the obstacles California faces as a non-judicial foreclosure state, I look forward to working with the California Legislature to find ways that a similar program could be implemented, said Speaker Buckley.”
Over the next several weeks, Assemblymember Nava will analyze the testimony given at the hearings regarding loan mediation programs and work with stakeholders to determine how to best move forward to address the current crisis and lessen the detrimental impact on California families.
“I am honored to have Nevada Assembly Speaker Barbara Buckley at the State Capitol today to testify on her successful foreclosure mediation program. I look forward to working with her as we make progress with California’s own monitored mortgage workout program,” said Nava.
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