Shelli Dore’s Real Estate Blog

Archive for the ‘Short Sale’ Category

Considering Short Sales
by Carla L. Davis

In today’s economic climate, many families are finding themselves in dire straights. The home that was once a blessing has now become a financial burden.

In an attempt to avoid foreclosure, which can reap havoc on one’s credit for years to come, homeowners are searching out details on short sales.

In simple terms, a foreclosure is when, after defaulting on payments (typically after 3 months), an estate becomes the absolute property of the lender. And what’s more, in some cases you, the homeowner, may also be responsible for “deficiency judgments.” These mean if the sale of the foreclosed property doesn’t satisfy the amount of the loan, you may be obligated to pay the difference.

On the other hand, a short sale, according to MSN Money, is “the sale of a house for less than what the owner still owes on the mortgage. If the lender agrees to a short sale, the rest of the homeowner’s debt typically is forgiven. Lenders sometimes agree to the procedure in order to take a small loss and avoid the lengthy and costly foreclosure process.”

There are more reasons to avoid foreclosure than just your credit rating. A recent report from NeighborWorks America ® notes that other factors come into play in neighborhoods affected by foreclosures. These issues include such things as lowered property values, increased incidence of financial scams, youth stress and instability, and increased crime rates. The report notes, “Abandoned homes from the foreclosure crisis have a direct effect on the rise in crime in communities.” And according to another study by Dan Immergluck of the Georgia Institute of Technology in Atlanta and Geoff Smith of the Woodstock Institute in Chicago, “When the foreclosure rate increases one percentage point, neighborhood violent crime rises 2.33 percent.”

There are some prudent steps to take when considering a short sale.

First, learn about loan modifications. Honesty is the best policy when it comes to lenders. Pick up the phone and call your lender, explain your situation, and see what your options may be that could allow you to stay in your home. The processes of foreclosure and short sale can be costly to lenders, and they may be willing to work out a payment schedule that will get you through this trying time.

Second, consult with the experts. According to the National Association of Realtors, by using a qualified team of short sale professionals, along with a real estate attorney, you can ensure that you aren’t taken advantage of during the short sale process. This team can help:

     

  • Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).  
  • Help you set an appropriate listing price for your home, market the home, and get it sold.  
  • Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
  • Ease the process of working with your lender or lenders.  
  • Negotiate the contract with the buyers.
  •  

Next, prepare for a long selling process. Waiting for your lender’s approval of your short-sale package can take several weeks to months.

Finally, a short sale is not the end all solution to your problems. Though there have been recent allowances made by the government under the Mortgage Forgiveness Debt Relief Act and the Debt Cancellation Act, debt forgiven by your lender may be considered income that taxes will have to paid upon.

If you are having issues making your mortgage payments, call me to discuss your options regarding debt programs and short sales.

Published: May 10, 2010

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By Michele Lerner , Bankrate.com

Homeowners struggling to sell their homes in a short sale are getting some relief, thanks to the federal government’s Home Affordable Foreclosure Alternatives, or HAFA, program.

Up to now, many short sales — in which the lender accepts a sale of the property for less than the full amount owed — have taken months to complete. Sometimes, the complex and lengthy process has failed, resulting in foreclosure.

HAFA establishes streamlined short sale rules and incentivizes borrowers and lenders to work together to avoid foreclosure. The rules — in effect between April 5, 2010, and Dec. 31, 2012 — also are intended to speed up the short sale process.

“The streamlined short sales process will definitely help homeowners,” says David Liniger, Re/Max International chairman and co-founder.

Prior to HAFA, homeowners often listed their home for sale without an idea of what the lender would accept.  “A lot of sellers and their Realtors have not been able to sort out the problems with short sales and have given up on the process because, even after sending in the correct paperwork, they have sometimes waited three or four months for their lender to respond,” Liniger says.Under HAFA, borrowers receive preapproved short sale terms from the lender prior to putting the home on the market. Lisa Matykiewicz, a Realtor and Certified Distressed Property Expert in Gilbert, Ariz., says the updated short sale rules establish an easy-to-understand process with predefined steps that “make it easier for everyone to understand.”

Eligibility requirements

The HAFA guidelines apply to lenders who voluntarily participate in the HAMP program. The Department of Housing and Urban Development says more than 100 servicers have signed up to participate in HAMP, covering more than 89 percent of mortgage debt outstanding in the country.

To be eligible for HAFA, homeowners must first apply for a loan modification through the Home Affordable Modification Program, or HAMP. Owners who do not qualify for a loan modification or miss payments during the initial loan modification period qualify for HAFA.

Other HAFA requirements include:

  • Property is principal residence.
  • Mortgage originated before Jan. 1, 2009.
  • Mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
  • Borrower is delinquent or default is foreseeable.
  • Homeowner demonstrates hardship.
  • Borrower’s total monthly housing payment exceeds 31 percent of gross income.
  • Unpaid principal does not exceed $729,750.

According to HAFA rules, lenders now must offer a short sale in writing to the borrower within 30 days if the borrower does not qualify for or complete a loan modification. Borrowers then must respond within 14 days to the lender’s short sale agreement.

“I think it’s great that the lenders in this program have to offer a short sale before going to foreclosure,” Matykiewicz says. When a purchase offer is made, borrowers must submit the sales contract to the lender within three days, along with the buyers’ mortgage preapproval and the status of negotiations with other lien holders on the seller’s property.

Finally, lenders must approve or deny the contract within 10 days. HAFA rules also state that lenders must release borrowers from the obligation to repay the difference between the sales price and the loan amount. No deficiency judgments are allowed for a first or second loan.

Other incentives

In the past, short sales were especially difficult for homeowners with more than one loan on their home, since the home sale typically repaid only the first mortgage. HAFA’s financial incentives include a payment of up to $3,000 for second mortgage holders.

“Second trust lien holders are often owed five or 10 times that $3,000 payment,” says Liniger. “But if the property goes to foreclosure, the second trust holder is not likely to get any money at all. This at least guarantees they get something.”

Other HAFA financial incentives include $1,000 to loan servicers to cover administrative fees, up to $1,000 for mortgage investors who agree to share short sale proceeds with second lien holders and $1,500 to the homeowners for relocation.

“The moving expense allocation acts as an incentive for them to stay in the property until the short sale goes through,” says Liniger. “Owner-occupied properties are usually in better condition than vacant homes.”

Home Affordable Foreclosure Alternatives (HAFA) was introduced to simplify and streamline the short sale process. HAFA accomplishes this in the following ways: 

  • Compliments the Home Affordable Modification Program (HAMP) by providing viable alternatives for borrowers who are HAMP-eligible
  • Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis
  • Allows the borrower to receive pre-approved short sale terms prior to the property listing
  • Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement
  • Requires that borrowers be fully released from future liability for the debt
  • Uses standard processes, documents and time frames
  • Provides financial incentives to borrowers, servicers and investors

HAFA provides financial incentives as follows: 

  • Financial incentives for lenders participating in the program include a $1,000 servicing bonus
  • Homeowners can receive up to $1,500 in relocation assistance (which, in some cases, may classify as taxable income) after a short sale or deed-in-lieu has been executed
  • Lenders pay all servicing fees – homeowners suffer zero out-of-pocket expenses

If you (or someone you know) are a homeowner looking for answers, or would like to determine if you qualify for HAFA, contact me at 303-942-0648.  I’m here to help.  

Sources:

HousingWire “Treasury to Announce New Program to Avoid Foreclosure” (2009): http://www.housingwire.com/2009/10/12/treasury-to-announce-new-program-to-avoid-foreclosure/

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Shelli Dore

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The Home Affordable Foreclosure Alternatives (HAFA) Program is a government-sponsored initiative led by the US Treasury Department assisting all Home Affordable Modification Program (HAMP)-eligible homeowners in avoiding foreclosure, specifically through short sales or deeds-in-lieu.

First introduced November 30, 2009 in Supplemental Directive 09-092 as part of the Home Affordable Modification Program (HAMP), HAFA assists eligible homeowners in quickly and effectively implementing short sales by providing financial incentives to lenders that work in conjunction with HAMP to assist homeowners in need.

The program was introduced in part with the intent to remove the stigma from short sales and help keep communities from being destroyed through massive foreclosures. HAFA in its current state is only applicable to conventional-type, non-Governmental Serviced Enterprises (non-GSE) mortgages and therefore does not apply to loans owned or guaranteed with Fannie Mae or Freddie Mac. These organizations may have plans to release their own versions of HAFA.

If you (or someone you know) are a homeowner looking for answers, or would like to determine if you qualify for HAFA, contact me at 303-942-0648. I can help.

Sources:
• 1Making Home Affordable “HAMP Supplemental Directive 09-09” (2009): https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf

• 2HousingWire “Treasure to Announce New Program to Avoid Foreclosure” (2009): http://www.housingwire.com/2009/10/12/treasury-to-announce-new-program-to-avoid-foreclosure/

• 3HousingWire “Treasure to Announce New Program to Avoid Foreclosure” (2009): http://www.housingwire.com/2009/10/12/treasury-to-announce-new-program-to-avoid-foreclosure/

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Your friend in the real estate business,

Shelli Dore

Friend me on Facebook!

Connect with me on LinkedIn!

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…Remember! The next time you are in a conversation with someone who is thinking about a move – IN ANY CITY OR STATE IN THE US OR CANADA – call me first! I can help make sure your friends, family members and work associates are very well taken care of.

For agents trained to help home owners in distress, the Home Affordable Foreclosure Alternatives (HAFA) Program  is the single most important piece of housing legislation to take place. Why?

For those trained in how to help homeowners avoid foreclosure and financial ruin by assisting them through the short sale process, after April 5, 2010, not only will trained agents  receive more requests for assistance with short sales from distressed homeowners, they will also receive increased support from the lenders that hold those distressed mortgages. HAFA shows that the government fully supports agents trained to help homeowners and work with lenders.

This is a tremendous opportunity to help homeowners facing financial hardship, and have a positive impact on communities nationwide.

If you (or someone you know) are a homeowner looking for answers, or would like to determine if you qualify for HAFA, contact me at 303-942-0648. I can help.

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Your friend in the real estate business,

Shelli Dore

Friend me on Facebook!

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…Remember! The next time you are in a conversation with someone who is thinking about a move – IN ANY CITY OR STATE IN THE US OR CANADA – call me first! I can help make sure your friends, family members and work associates are very well taken care of.

NEW YORK – In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done. For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Click here for the rest of the story

Source: David Streitfeld, The New York Times, March. 8, 2010

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Your friend in the real estate business,

Shelli Dore

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…Remember! The next time you are in a conversation with someone who is thinking about a move – IN ANY CITY OR STATE IN THE US OR CANADA – call me first! I can help make sure your friends, family members and work associates are very well taken care of.

January 25, 2010
Mortgage Support Services
www.mtgsupportservices.com

Here’s the latest tip from The Mortgage Experts:
The US Department of Housing and Urban Development (HUD), the government agency that oversees the FHA loan program, has recently announced that the up-front mortgage insurance premium that applies to FHA loans will be increasing from 1.75% of the loan amount to 2.25% of the loan amount.  The change affects all FHA loans with an FHA case number assigned on or after April 15, 2010.

Although there will probably be an outcry against the change, it really has an extremely small effect on the borrower because almost all borrowers choose to finance the up-front mortgage insurance premium into their loan.  For every $100,000 in loan amount, the monthly payment will go up by only $2.68 if the interest rate is 5%, and by only $2.84 if the interest rate is 5.5%.  Hardly a deal killer.

Call us with any questions and call us if you want to work with the best mortgage bankers in Colorado.

The mortgage industry is constantly changing.  Align yourself with the Mortgage Experts and take advantage of all the opportunities.

If your buyers need information on how to get approved, the loan application, closing costs, all the disclosures, or anything else related to a mortgage, click here.

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Your friend in the real estate business,

Shelli Dore
Friend me on Facebook!
Connect with me on LinkedIn!
Follow me on Twitter!

…Remember! The next time you are in a conversation with someone who is thinking about a move – IN ANY CITY OR STATE IN THE US OR CANADA – call me first! I can help make sure your friends, family members and work associates are very well taken care of.


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