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Fannie Mae gives incentive to short sale homes over foreclosure

By Tara Steele on April 26, 2010

In an effort to help distressed homeowners avoid foreclosure, effective July 2010, troubled homeowners that opt to voluntarily release their homes through a “deed in lieu of foreclosure” or by completing a short sale will now be eligible to apply for another Fannie Mae backed loan in two years.

In 2008, the waiting period was reduced from five years to four and now is at two. After that two year period, to qualify, a minimum 20% down payment will be required unless there are “extenuating circumstances” such as job loss, according to The Wall Street Journal.

Doesn’t this encourage people to walk away?

Critics of the move call this an encouragement for homeowners to walk away from their homes, putting the real estate sector back in jeopardy similarly to the continuing subprime crisis.

“We don’t want to say that there’s a ‘get out of jail’ card during recessions to walk away from your house,” FHA Commissioner David Stevens told the Wall Street Journal. “We are beginning to think about post-recession, how you address borrowers who became unemployed through no fault of their own … and now deserve the right to re-enter the housing-finance system.”

Fannie Mae counterpart, Freddie Mac still requires a four year wait, but if the Fannie Mae program is successful in curbing foreclosures, perhaps Freddie Mac will follow suit.

How to Find Short Sale Homes

By - eWriter, eHow Member

In real estate, a short sale is when a seller is facing potential foreclosure and instead of having their home foreclosed and losing their home, the seller gets a deal with their mortgage lender to accept less than what they owe on their property, in exchange for avoiding foreclosure and becoming a bank owned property. Because the seller is selling their home at a lower price than other comparable homes on the housing market, it is great for homebuyers, investors or anyone looking to buy a house, to get discounts on the purchase price of homes, costing less than what they are worth. You can save lots of money buying short sale homes because of their lower prices. To learn how to find shore sale homes for sale, read the steps below.

Instructions

Step 1

Do an online search to find short sale homes for sale that are listed on the internet. Open up your web browser and type in these keyword phrases: "Short Sale Homes", "Short Sale Homes for Sale". "Short Sale Houses" and "Short Sale Houses for Sale". A list of websites will be displayed. Browse through a few of the websites to find short sale homes.

Step 2

Contact a licensed Real Estate Agent or Realtor and ask them if they can send you a list of short sale homes available on the market. You will need to provide the agent with the all the details of the type of short sale house you are looking for including: single family home, townhouse, etc..., along with the location and price range.

Step 3

Look through free real estate books, located at the front sections of grocery stores, convenience stores, etc.., look through the real estate sections of your local newspaper and look through online classified ads to find short sale homes for sale.

Short Sales, Real Estate, and the Sports Metaphor

By Melissa Zavala on April 13, 2010

Are You a Team Player?

Short sales (and much of real estate, in general) are frequently referred to using sports-type language. I’ve written blog posts about the importance of having quality members on your team. I’ve also written about how every team must have good offensive and defensive members in order to get transactions closed. I’ve even philosophized about how outstanding real estate agents need to be just a strong as hockey player, Wayne Gretsky. You see, Gretzky has been quoted as saying something to the effect of “It isn’t about where the puck is; it’s about where the puck is going to be.”

I’ve used all of these wonderful sports metaphors and analogies and I’m not even a big sports fan! However, in the real estate business and particularly when working short sales, you need to be proactive (not reactive) and you need to be an active participant in the big game.

Frequently we submit our short sale packages via fax and call to follow up every three days for what seems like an eternity. Everyone involved in the process begins to express frustration and is about to throw in the towel. Just about that time, the lien holders finally contact us about the short sale file. There may be a request for updated documentation or there may be a verbal counter offer. The short sale processor at the bank may phone us on Thursday and want a response by Friday at 5:00 p.m. (It’s probable that this request will only occur when the client is out of town or unreachable.)

While all of these types of game-changing moves can be extremely frustrating, I usually just go with the flow and attempt to get the bank everything they need within their requested time frames. I know that I do not want to do anything that will jeopardize my relationship with the short sale negotiator, and I do want to demonstrate good sportsmanship, too.

If you do not demonstrate good sportsmanship, then there is no telling where your short sale file will end up. The property could go to foreclosure; the file could be transferred to another negotiator at the bank, or it could even disappear.

So, when reasonable requests are made (even with unreasonable time frames), I like to think of these game-changing moves as a way to keep me on my toes. After all, those who exercise and practice their sport regularly will be in great shape and ready to address the next offensive or defensive move that comes their way. Maybe some real estate players will even demonstrate the level of success of hockey legend Wayne Gretzky!

MGIC Releases New Guidelines for Short Sale Approvals
by JON PRIOR

Friday, April 9th, 2010, 10:50 am

As the new HAFA program attempts to streamline the short sale process, Mortgage Guaranty Insurance Corp. (MGIC) released new guidelines for servicers wanting a quicker route to approvals.

Under the Home Affordable Foreclosure Alternatives (HAFA) program, the Treasury Department provides incentives to servicers to provide short sales and deeds-in-lieu of foreclosures to borrowers who fail a modification through the Home Affordable Modification Program (HAMP).

One of the benefits of the program, officials said, is that it cuts down the approval time for short sales. In the past, the process usually took upwards of six months. A short sale agreement between the borrower and the servicer under HAFA expires after 120 days. Servicers must get approvals from the lender, investors and, if applicable, insurance companies to execute the agreement. The new MGIC guidelines give an automatic go-ahead if the loan meets certain criteria.

The borrower must be at least 60 days delinquent on the owner-occupied property. The loss on the sale must be less than $75,000, based on a broker price opinion (BPO) or appraisal performed within 90 days of the sale.

The property must not only be sold in “as-is” condition, but the sales price must be within 90% of the home’s value after repairs. Net proceeds at closing must be at least 82% of the “as-is” value.

The borrower cannot receive any of the funds for the short sale and must prove hardship before the MGIC prior approval. Acceptable hardships include job loss, involuntary relocation, divorce, reduction in income used to sustain mortgage debt, serious illness or a call to military duty.

After determining credible hardship, servicers must look into the borrower’s financial situation. The short sale goes through if the borrower’s monthly cash flow is less than or equal to $200, short-term savings are less than the total of three full mortgage payments and long-term savings are less than or equal to $50,000.

If these guidelines aren’t meant, the servicer must submit the short sale request to MGIC for approval.

Calif. lawmakers pass housing-crisis tax relief

By CATHY BUSSEWITZ Associated Press Writer
Posted: 04/08/2010 12:57:08 PM MDT

SACRAMENTO, Calif.—The Legislature passed a bill Thursday that could help many homeowners who were hurt by the housing crisis save thousands of dollars in taxes.

The bill would provide relief for homeowners who received mortgage modifications, lost their homes to foreclosure or sold their houses for less than they owed on their mortgages. It would prevent the canceled debt from being treated as taxable income.

Currently, some types of debts that are forgiven can be considered as income and taxed by the government, meaning that homeowners spared from an overwhelming mortgage can face huge tax bills.

Congress addressed the problem with the Mortgage Forgiveness Debt Relief Act of 2007. The recent legislative action conforms California law to that federal tax change, which runs through 2012.

"The mortgage debt tax relief provision in this bill will provide financial shelter for tens of thousands of Californians," said Sen. Ron Calderon, D-Whittier. "It's about time we gave these folks a helping hand. They've lost their homes and they've sat by fretting over a whopping state tax bill they can't afford."

The Assembly and Senate passed the bill after removing a provision about tax fraud penalties that drew objections from Republican Gov. Arnold Schwarzenegger.

The bill also specified that renewable energy companies that received grants through the American Recovery and Reinvestment Act would not have to report those grants as taxable income.

Schwarzenegger told reporters Thursday he intended to sign the bill.

"We want to give people the relief that they need, and we want to do everything we can for businesses, also for homeowners," Schwarzenegger said.

Taxpayers who already filed their 2009 returns can file an amended return, said Brenda Voet of the Franchise Tax Board. On the amended form, they would reduce their stated taxable income by the amount of debt that was forgiven.

Voet said the change would go into effect immediately after the governor signed the bill into law. Homeowners whose debt was forgiven and who have not yet filed their tax forms can omit the amount of forgiven debt when calculating their taxable income.

Some Republicans continued to oppose the legislation because it introduced a variety of tax increases. Assemblyman Ted Gaines said those tax increases could amount to $82 million.

One change would expand the number of children whose unearned income is taxed at their parents' tax rate, rather than the lower tax rate those children previously enjoyed.

Another change would increase penalties to corporations that fail to file a return.

"It's awfully troubling when we're going to provide a benefit to one class of taxpayer and have another class pay for it," said Assemblyman Roger Niello, R-Sacramento.

Democrats said the tax increases were minor and explained that those changes also conformed California law to federal law.

Short Sales, REOs Near Crisis High Set in Early 2009

April 8, 2010 by Staff

Foreclosure salesDistressed sales – short sales and real estate owned, REOs – accounted for 29 percent of all sales in January, the highest level since April 2009, according to First American CoreLogic today.

The real estate data firm said the peak in distressed sales occurred just three months before that previous high – in January 2009 – when their share reached 32 percent of the market.

Distressed sales then fell to 23 percent by July, before resuming an upward trend.

CoreLogic’s report indicates the foreclosure crisis continues to run its course, with occasional dips in total foreclosure filings. But certain communities within a small number of states are feeling the brunt of prolonged processes associated with short sales and REOs.

Economists and critics of the government’s slow-moving mortgage modification program say the effort is only postponing foreclosure-related sales, keeping overall home prices depressed and deepening the crisis.

The government has responded with new programs targeting “underwater” homeowners that forgive a portion of the mortgage principal. The Obama Administration also launched this week a new effort involving expedited short sales.

REO transactions are bank owned properties that are sold to a third party and recorded as deed transfers. Short sales involve the distressed sale of a property for a price that is less than the amounted owed in mortgages.

During the last 12 months, there were 974,000 distressed sales: 740,000 were REOs and 234,000 were short sales, CoreLogic’s report said.

Both increased in January: REOs 22 percent, up from 19 percent in December, but down from a year ago when it was at 27 percent. Short sales represented 8 percent of all sales in January, up from 7 percent in December and 5 percent a year ago.

Among the largest 25 markets, Riverside, CA, had the largest share of distressed sales in January (62 percent), followed by Las Vegas (59 percent) and Sacramento (58 percent).

The top REO markets were: Detroit (48 percent); Riverside (47 percent); and Las Vegas (45 percent).

The top short sale markets: San Diego (19 percent); Sacramento (18 percent); and Oakland (16 percent).

CoreLogic used public record property transactions covering 2,200 counties in the U.S. These sales cover about 85 percent of all sales transactions.

Housing short sales get useful shot in arm

U.S. program prods banks into swallowing losses

Housing busts are messy, drawn-out affairs. Short sales -- when a homeowner sells at a loss that the bank agrees to eat--are among the quickest of fixes. Unsurprisingly, banks have been reluctant to embrace them. Hopefully the U.S. government's latest intervention to encourage short sales will change that.

Nothing quite calls a bottom like a short sale. Lenders are forced to take their lumps. Borrowers, who can't afford their homes, are released from crushing debt obligations. And a new homeowner can breathe new life into the house, which is now priced at market rates.

There's some evidence that banks and borrowers are warming to the idea, or at least staffing up to handle the volume of borrowers looking for a way out.

The Comptroller of the Currency and the Office of Thrift Supervision report short sales nearly doubled to 33,072 in the fourth quarter, compared with the prior year. Given there are more than five million homeowners in the United States struggling to meet their mortgage payments, this is a drop in the bucket.

The U.S. Treasury's short-sales initiative should help speed things along. Kicked off on April 5, it aims to streamline a process that can take months. Under the program, the bank servicing the loan must give a thumbs up or down on a purchase price within 10 days.

That borrowers participating in the short-sale program have already been vetted through the government's program aimed at loan modification should at least cut down on the paperwork. And there are the financial incentives.

That's not to say there aren't big obstacles. Holders of second mortgages have to sign off on a short sale, since the first mortgage must be unencumbered to qualify for the reasury program. Another is price, the perennial sticking point for banks -- many of which would be forced to take charges against loans that are not fully marked to market.

These obstacles aside, after three years of slow burn in the U.S. housing market, anything that encourages a clearing price is worth a try.

Short Sale Foreclosure Fix with Debt Forgiveness is Underway
April 5, 2010 by Staff

Short sale or deed-in-lieuThe Obama Administration today launches its first program to offer a short sale, or a deed-in-lieu, to rescue homeowners from foreclosure, while forgiving the difference between the sale price and the amount owed on mortgages.

Home Affordable Foreclosure Alternatives, or HAFA, is intended to reduce the need for potentially lengthy and expensive foreclosure proceedings.

Administrators see it as a substantially better outcome than a foreclosure sale for borrowers, investors and communities. The program’s goals include minimizing the time a property may sit vacant and subject to deterioration, a problem that has plagued the worst hit neighborhoods in some states.

But its greatest benefit is to the desperate homeowner who could not be helped by the more common foreclosure prevention method: a reduction in mortgage payments. Those eligible for HAFA have either failed to qualify or were not able to finish a trial with the government’s primary $75 billion Home Affordable Modification Program, or HAMP.

The main mortgage relief program continues to be revised as criticism mounts that too few homeowners have received permanent relief, and even fewer have been granted mortgage write-downs.

In a short sale, the servicer allows the borrower to list and sell the mortgaged property with the understanding that the net proceeds may be less than the total amount due on the primary mortgage and any subordinate lien. But with HAFA, the difference is forgiven, and the seller can even qualify for up to $3,000 in relocation assistance.

In a deed-in-lieu of foreclosure (DIL), the borrower voluntarily transfers ownership of the mortgaged property to the servicer in full satisfaction of the total amount due.

The servicer will be paid $1,500 to cover administrative and processing costs for a short sale or DIL. The investor will be paid a maximum of $2,000 for allowing a portion of the short-sale proceeds to pay subordinate lien holders.

Under HAFA, a list price will be determined for the home and the seller is provided an “acceptable sale proceeds” figure – the minimum amount that the lender must receive after sales costs – from the sale of the home.

When an offer is made on the home, the seller will submit the required documentation for approval.

Once the sale closes, the seller will be released from all responsibilities for repaying the mortgage. In addition, the seller will receive up to $3,000 to help pay some expenses. The check will be paid by the settlement agent as part of the closing.

If there is money left over from the sale after paying the amount owed on the mortgage, plus the approved sale costs, the seller will not be eligible to receive the $3,000.

The short sale must be “at arm’s length.” The property cannot be listed with or sold to a relative, friend or business colleague.

The seller must also agree to share information about outstanding mortgages, liens, credit history and relocation plans with brokers and other third parties that could be involved in the transaction, including U.S. Treasury employees and its financial agents, Fannie Mae and Freddie Mac.

The HAFA servicer will follow “standard industry practice” and report to the major credit reporting agencies that the mortgage was settled for less than the full payment. “We have no control over, or responsibility for the impact of this report on your credit score,” HAFA program literature states.

New guidelines expected to expedite ''short sale' process

By Wayne Faulkner
Wayne.Faulkner@StarNewsOnline.com

Published: Friday, April 2, 2010 at 5:30 p.m.

The Obama administration program launching Monday – called Home Affordable Foreclosure Alternatives program, or HAFA – is aimed at cutting that time it takes to arrange a short sale and thereby making them a more attractive alternative for homeowners facing foreclosure.

The new timeline

The first two tasks can be handled by you or your agent before the home goes on the market.

From the time the homeowner requests permission to do a short sale, the lender or loan servicer has 30 days to create the short sale agreement and send it to the homeowner.

The homeowner then has 14 days to agree and send it back.

When the lender receives the short sale agreement, the homeowner has up to 120 days to sell the home. Then the agreement is terminated or can be extended up to 12 months.

When a purchase contract is signed on the home, the lender has 10 days to say yes or no to the transaction.

To qualify

According to the government:

The property must be the borrower’s principal residence;

The mortgage loan is a first lien mortgage originated on or before Jan. 1, 2009;

The mortgage is delinquent or default is reasonably foreseeable;

The current unpaid principal balance is no more than $729,750; and

The borrower’s total monthly mortgage payment exceeds 31 percent of the borrower’s gross (before tax) income.

The plan requires the homeowner use a real estate agent to market the home.

Short sale hardship letter sample

Posted by Johnny Simms on April 1, 2010

If you are having trouble making the monthly payments on your home it is time to contact your lender to discuss any options available to avoid the devastating affects of foreclosure. As of right now the number one most effective way to prevent this from happening is through a loan modification. But for many individuals who are unemployed or have serious financial hardships this may be impossible to achieve. If you are unable to do this you may have to consider trying to sell your property.

In this down economy it is going to be almost impossible for a lot of homeowners to sell their home at a high enough value to cover the outstanding balance of their mortgage. Home values began to decline in 2007 and now about one fourth of borrowers owe more on their mortgage than the current value of their home. This means the only option these people may have is a short sale.

A short sale is a good way to sell your house when you are having problems making the payments so that you do not have to deal with the extreme consequences of foreclosure. One of the aspects you will need when looking to sell your home this way is a hardship letter.

When seeking assistance with your mortgage lenders will request that you provide them with a hardship letter which explains the details of your financial situation and the reasons why you can no longer afford to pay. Knowing how to prepare this hardship letter is a key step to getting your short sale approved.
Before you write the letter you will want to compose a list of all of the factors that have caused you to fall behind on your mortgage payments. Include such reasons as job loss, illness, relocation, divorce and death of a spouse. You will also want to make a note of when each event occurred. If you can include documentation of each event then this would be even better. But be aware that even though it may be very difficult to achieve this while current it is definitely possible. a good realtor that is familiar with this process can take you a long way.

When you finally get around to writing the letter you will want to format the letter properly. Make sure to use good grammar and have someone else proofread your letter for mistakes. Having a well written, well formatted letter will go a long way in getting your house approved for a short sale. But make sure to keep this letter only about one to two pages at the most. Remember you are not the only one trying to accomplish this, these lenders get hundreds of applications a day so you want to keep your letter short but detailed.

When you are writing your hardship letter you will want to list all of the elements you came up with that caused you to fall behind on your payments in chronological order. By listing the events in chronological order you will easily be able to relay your hardship story to the lender that is reading your letter so that he may fully understand your current situation. Also, when listing the reasons why you have fallen behind on your payments you will want to detail the steps you are taking to correct your situation. For example if you recently lost your job you will want to show how you are currently seeking employment and trying to fix this. Or if you have been having issues selling your home explain why you have been unsuccessful and what you have done to sell your home. If you can provide any documentation to support these reasons will only help your cause of being approved for a short sale.

Lastly you will want to make your plea. In your hardship letter you will want to explain how approving you for a short sale is really a win win proposition for both parties involved. Explain that you are aware of the consequences associated with this event and desperately would like to avoid foreclosure or bankruptcy. Having a well written hardship letter is one of the important steps in getting approved for a short sale. Without this letter your chances of being approved are reduced dramatically. You can find examples here on Loansafe.org and also one example below:

Name: (Your Name)
Address: (Your Address)
Lender Name: (Your Lender)
Loan #: (your Loan #)

To Whom It May Concern:

I am writing this letter to explain my unfortunate set of circumstances that have caused my mortgage to become unaffordable. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to short sale our home. Our home is no longer worth what is was when we purchased back in 2005 and we are trying to do all we can to avoid foreclosure.

The main reason that caused us to in this unfortunate situation is (insert reason here and don’t be too lengthy and long winded). Now, it’s to the point where we cannot afford to pay what is owed to (lender). It is our full intention to pay what we owe. But at this time we have exhausted all of our income and resources so we are turning to you for help.

We do not feel we have the means to repay the loan as agreed and we feel a short sale will be beneficial to us both. It would be greatly appreciated if you can work with us on this so we can get this settled and move on with our lives.

Sincerely and Respectfully,

Borrower’s Signature
Date
Co-Borrower’s Signature
Date

Published: March 31, 2010

What? Quick loan despite a short sale?
MARILYN KALFUS

Mortgage broker Dennis C. Smith says he recently got an email from an agent with the question "Is this legitimate?"

It had a link to a Web site promoting mortgages for buyers who were short-selling their current homes and buying a new one.

"At first my thought was, 'You have to be kidding me,'' says Smith, of Stratis Financial in Huntington Beach. " It seemed sort of off base to expect a lender to finance a borrower who was basically walking away from another lender and costing them money.''

But as he thought about it, he considered the FHA refinance program that will allow "short-refinances" if lenders will take reduced pay-offs to let an FHA mortgage refinance the current mortgage.
He investigated some more.

He reports:

"It turns out FHA does allow mortgages to borrowers who sell their current residence under short-sale provisions and then purchase a new home without the standard 3 year wait. There are certain conditions that must be met--some of the conditions are a little subjective and on these I would not suggest trying to push limits.
"FHA will insure a mortgage for borrowers who short-sell their current residence and purchase another one provided all of the following requirements are met:

* All mortgage payments must have been made within the month due for the 12-month period prior to the short sale
* All installment payments must have been made within the month due for the 12-month period prior to the short sale
* The short payoff must serve as payment in full on the existing liens and the existing mortgage servicer may not require repayment of the difference between the mortgage balance and the short payoff
* Borrowers may not obtain a short sale to “take advantage of declining market conditions and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance” (Borrowers who obtain a short sale due to employment relocation that is not within reasonable commuting distance from the property being sold short are eligible for FHA financing, provided all other short sale and purchase requirements are met)
* Borrowers in default on their mortgages at the time of short sale are ineligible for FHA financing for 3 years from the date of the short sale unless the default was due to significant extenuating circumstances and the borrower had satisfactory credit prior to the extenuating circumstance. To waive the 3-year waiting period for borrowers who were delinquent at the time of short sale, requires a Total Scorecard “approve” or “accept” response for the new purchase transaction
* FHA will not approve loans for borrowers having both a short sale and previous bankruptcy and/or foreclosure

He concludes:
"The keys: All credit payments current through the short-sale, and new home must be "inferior" to home being sold (i.e. smaller, significantly lower value than price on short sale, and/or geographically distant from current property). "The question: Will a lender approve a short-sale on a borrower who is current on their existing mortgage and has the assets available to provide down payment and closing costs for a new FHA mortgage? With the new loan modification program being pushed by the Obama Administration and Bank of America saying it will reduce principle balances by approximately $3 billion to avoid foreclosures, many lenders may see a short-sale as a cheaper alternative, in which case this may be a productive tool for all involved.''

Credit bureau reporting for short sales

Posted by Johnny Simms on March 30, 2010 ·

Many homeowners at this time are experiencing difficulties managing their mortgage payments due to many different events. These may include a reduction in income, job loss, divorce, high credit card bills, etc. During the time when the housing market was at its best, mortgage brokers were offering loans to borrowers who did not necessarily qualify for the amount they were looking to borrow. They did this by mainly by mistating the income the borrower receives and also by offering low credit applicants subprime loans which have now left them in a world of distress.

If you are currently facing financial distress, you might be considering selling your house as a short sale or going into foreclosure. The differences between a short sale and a foreclosure are pretty great as each have their own affects on your credit score. Short sales and foreclosures both report differently to the credit bureaus. While short sales are generally deemed to be much less damaging to your credit, they will still have a negative impact on your FICO score.

When you sell your property as a short sale, the amount your credit score will be affected will vary depending on different factors. One of the main factors will be how many months the borrower was behind on their mortgage prior to closing. If the borrower was many months behind prior to closing the sale, then their credit rating has probably taken major hits. But for those who are fortunate enough to sale their home without missing a single payment, their scores may drop as little as 30-80 points.

While this is not what you really want to happen, it is far less damaging than the 200-300 points associated with a foreclosure. The damage done to your credit report is mainly due to the late payments on your mortgage .

The reporting of a short sale to the credit bureaus will not have a derogatory term associated with it like a foreclosure would. By not being associated with the negative stigma caused by a foreclosure your credit score will not suffer nearly as bad and you will have a much easier time down the road securing new lines of credit and other loans.

One of the major factors that comes with selling your home as a short sale is that you will have to wait two years before you can purchase another home. This rule is set forth by the nation’s two largest mortgage investors Fannie Mae and Freddie Mac. However, with a foreclosure you will more than likely not be able to make another purchase for five to seven years.

Also, because a short sale is not listed as a derogatory mark on your credit report its effects are far less damaging when looking to obtain another home loan. These are generally reported as “settled” or “paid in less than full.” When filling out a loan application you will need to answer a few questions about whether or not you have recently had a foreclosure. Typically if you answer yes to these questions it will be much more difficult for you to receive the loan. While if you sold your home as a short sale there are no specific questions on the loan application regarding short sales so you can not automatically be declined for another loan.

If you are currently thinking of selling your home as a short sale you are probably wondering how short sales are reported to the credit bureaus. Short sales are not specific items on your credit report such as foreclosures and carry far less damage than the aforementioned foreclosures. While they will certainly have negative effects on your credit score it will be far less than the damage caused by foreclosures.

Banks Are More Likely To Respond To Short Sale Offers Than Last Year

PORT ST LUCIE, Fla., March 29 /PRNewswire/ -- Lex Levinrad and David Dweck have noticed an upswing in short sale approvals. Levinrad and Dweck, co-founders of the Port St Lucie Real Estate Investor's Association (PSLREIA) report that banks are finally realizing that it does not pay to incur the considerable legal expense to foreclose when cash buyers are ready to submit short sale offers.

A short sale is when a bank agrees to receive less than the balance owed to them with the mortgage. Typically in a short sale transaction, a cash investor offers to buy the house for less than the fair market value. Most short sale offers require the bank to give the home owner a "non deficiency judgment" meaning that the bank agrees not to seek legal action against the defaulting homeowner.

"This is a win-win situation for all parties," said Levinrad and Dweck. "The bank gets rid of a problem loan and the homeowner can move on with their life without having a foreclosure on their record."

"It is very important to use a short sale negotiator that knows what they are doing. Leaving your short sale to an inexperienced realtor is a big mistake," said Levinrad and Dweck. "The first question you should ask them is 'How many short sales have you completed?'"

Levinrad and Dweck use a local Port St Lucie resident as their short sale negotiator. Scott Markowitz, owner of the Rent 2 Own Guys LLC specializes in negotiating short sales with the bank. Markowitz has successfully completed 64 short sale transactions.

Sunday, Mar. 28, 2010
New government program could ease pain of short sales
MarketWatch

Short sales are a valuable tool for struggling homeowners, but they've been notoriously difficult to complete, with buyers and sellers often playing a long waiting game before hearing back from lenders.

Now, a government program that goes into effect April 5 may make for shorter wait times and a smoother process.

Short sales are useful for borrowers who are underwater on their mortgage, owing more on the home than it's currently worth. In a short sale, the homeowner's lender accepts less than what the borrower owes on the mortgage in order to complete the sale. Both parties thus avoid the foreclosure process.

If the borrower doesn't qualify for a mortgage modification, loan servicers will then assess the possibility of a short sale through the government's Home Affordable Foreclosure Alternatives program that starts next month.

The program is expected to improve the traditional short-sale process in a few ways:

- Borrowers will receive pre-approved short-sale terms before listing the property, including either a list price approved by the servicer or the acceptable sale proceeds, according to the U.S. Treasury Department. That way, sellers know what lenders will accept before listing the property.

- There's a set timeline, with deadlines for lenders and sellers to keep the short-sale process moving.

- At the completion of a sale, borrowers may get up to $1,500 for relocation expenses and servicers may receive compensation of up to $1,000. Up to $3,000 of proceeds are available to distribute to subordinate lien holders, making it possible to compensate the lenders of second mortgages.

Short sales typically sell for 91 percent of their listing price, according to the Campbell/Inside Mortgage Finance survey of real-estate market conditions. Move-in-ready bank-owned properties typically sell for 99 percent of their listing price.

Portland Real Estate Examiner

New Washington modification rules to help troubled home owners - will it happen this time?

March 26, 5:47 PMPortland Real Estate Examiner

Shelby Bateson

Washington announced today new federal relief for home owners in trouble. These new rules will apply to borrowers who are out of work, under water on their mortgages, and/or behind on their payments. Currently more than 15 million home owners are underwater.

The new announcement comes on the heals of a "blistering report" to Congress on the failure of the HAMP program. Obama's popularity rating has been dropping nationwide as promises made on the campaign trail have not been honored, and it seems that Congress and government officials have been unable to get the banks to cooperate with programs as they were rolled out.

Officials in the federal government have been paying attention to the reports that the banks have not been making permanent loan modifications, in spite of all the rhetoric we have been hearing from the banks to the contrary. In fact, to date, only 168,000 loans have been permanently modified, while more than 1.3 million home owners have been enduring up to a year or more of frustration as they go through the modification and trial modification processes. In almost all cases for loans not approved for permanent modification, those loan have either ultimately ended up in foreclosure, or home owners are facing sheer exhaustion and stress trying to deal with banks that are not listening, and who seem to employ less than competent loan workout employees.

Wells Fargo is famous for telling borrowers they are approved just to later tell them the approval was an error, and the modification is declined. In the meantime, they continue to collect "trial modification" payments long after the 3 month trial modification period has ended. Many home owners have actually had their homes auctioned off at foreclosures even as they have been sending in trial modification payments.

Bank of America does not even allow home owners to talk to anyone but those in their collection departments. While Collection Department employees "pre-qualify home owners for trial modifications, it is rare, if at all, that those pre-approvals are ever passed on to the loan retention department, so home owners find themselves going through the process again and again. Paperwork seems to evaporate into thin air, in spite of acknowledgments that it was received. Mis-information is being recorded in loan files that is often responsible for modification denials.

Stories from those with other lenders are living similar scenarios.

The government announced today that help is on the way for some of the more than 4-5 million home owners who are in trouble. For those who are unemployed, loan payments will be reduced to a maximum of 31% of unemployment insurance for up to 6 months, allowing those people time to find work. Borrowers who believe they qualify for this program must meet the following guidelines:

* borrowers must be living in their homes
* loan amounts must be less than $729,750
* borrowers must prove that they are receiving unemployment benefits
* borrowers must ask for assistance during the first 90 days after they fall behind on their payments.

For those who do not find work during the six months, they are supposed to be automatically approved for short sales or deeds in lieu of foreclosure. If work is found, but income is still less than 31% of scheduled payments, they are supposed to be qualified for modifications.

For those underwater on their mortgages but current on payments, home owners will be allowed to qualify for a new FHA refinance program to refinance both first and second mortgages, as long as the total amount owed does not exceed 115% of the loan value. The difference between the old mortgages and the new mortgage is supposed to be gradually forgiven IF you stay in the home and keep your loan current for three years.

Those who are underwater on the mortgage but behind on mortgage payments will be eligible for principal reduction, will bring the mortgage down to current values, and reduce payments at the same time. This option has supposedly always been available, but lenders have not even been discussing this option to date. This option is supposed to move to the top of the list once this program goes into effect.

Residents in Oregon and Washington should see tens of thousands of residents eligible under the new guidelines, so this program will helpfully help these very hard hit states. Oregon especially has among the highest unemployment in the country.

Patience will be required because these new HAMP programs will be rolled out piecemeal. Those unemployed should start seeing assistance within a few months, but those underwater will have to wait until Fall at the earliest.

In the meantime, the government will be handing out even bigger checks to the banks who cooperate beginning within weeks, for helping those seeking short sale and deed in lieu of foreclosure assistance.

Handing out money to the banks has not worked so far. It seems to this reporter that the public would be better served by having those checks paid to the banks, on behalf of the delinquent and unemployed borrowers, to be credited directly to delinquent loan payments and underwater loan balances.

Funding for this program will come from the private sector and $50 billion still in the TARP coffers that had already been allocated for the HAMP program.

It should be noted that this program will not be available for those who purchased home they really never could afford. Specific details on how this program will work, and new guidelines for banks to qualify home owners still need to be worked out.

As always, your comments are always welcome. Perhaps if enough of you comment that you want to see funds go to banks in the form of credits on behalf of the borrowers, we can forward those comments to lawmakers to have that considered, rather than incentive payments to banks for doing what they should be doing anyway.

I'm looking forward to hearing from all of you. Do any of you believe that this program will work any better than any of the prior help troubled home owners have been promised? Interviews with home owners around the country show most people are skeptical. The Obama administration is under fire to make these programs work this time.

Thursday, March 25, 2010

C.A.R. applauds Gov. Schwarzenegger’s signing Homebuyer Tax Credit legislation into law

LOS ANGELES (March 25) – The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today praised California Governor Arnold Schwarzenegger for his leadership in signing the Homebuyer Tax Credit legislation into law.

“We are pleased that Governor Schwarzenegger recognized the positive impact the tax credit will have for families hoping to buy their first home,” said C.A.R. President Steve Goddard. “Successful passage of this legislation was the result of our efforts in Sacramento over the last several weeks as REALTORS® and our team in the capital worked for the bill’s passage before it landed on the governor’s desk earlier this week.”

California’s previous home buyer tax credit program was so successful that it ran out of tax credits by the end of June 2009, eight months before it was set to expire and just as housing markets appeared to be turning a corner. Unlike last year’s legislation, the Homebuyer Tax Credit signed into law today adds a tax credit for the purchase of an existing home by a first-time home buyer.

“The positive impact of the home buyer tax credit at the federal level is clear,” Goddard said. “Nearly 40 percent of first-time home buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered, according to C.A.R. research conducted last year. We expect the state tax credit for home buyers to have the same impact.”

AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

“AB 183 also will significantly contribute to efforts to stimulate jobs creation within California's housing market by helping to incentivize first-time home buyers to purchase homes that have been abandoned, foreclosed upon, and returned to the lender; or have been sitting on the market for extended periods of time,” Goddard said. “It is these homes that will require substantial rehabilitation by the new owners, which will in turn generate a tremendous increase in jobs and accessory purchases connected to home improvement activities.”

Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with nearly 150,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.