Short Sales Sacramento

Get all your questions answered. Starting the month of March, Angel Lynn will be hosting homeowner awareness classes in Sacramento.  Learn about how to avoid Foreclosure, what is Short Sale and how you can modify your loan.   Classes will be held at 1913 Capitol Ave. Suite C, Sacramento. Come get your questions answered about what is going on in the market.  What to expect and how to protect your family.  Please call our office to reserve your seat.  916 443-1445.

http://hosted.cdpe.com/23409/

Wednesday Nights 6pm

1913 Capitol Avenue, Suite C

Sacramento, CA 95811

Interesting outlook on how the bank actually wins with Short Sales.

Angel

Wrong.

Former homeowners may still be on the hook if there’s a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these “deficiency judgments” are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.

“My understanding was that the deficiency was negotiated away,” she said. “Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it.”

Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called “liar loans” where they didn’t have to verify their income.

Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances — like unemployment or a job transfer — can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.

“After the banks foreclose, it’s very common now to have large deficiencies with houses not worth the balances owed,” said Don Lampe, a North Carolina real estate attorney.

Lenders mostly declined comment. Although Corey’s lender, BB&T did indicate it was pursuing more deficiency judgments.

“They follow the rise and fall of foreclosures,” said the spokeswoman, who would not discuss Corey’s account.

Can they come after you?

Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there’s a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.

“Once they have a judgment, they can pursue you anywhere,” said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fla. “They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail.”

In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.

Some states, such as California, are “non-recourse” and don’t allow deficiency judgments. But, even there, if the if the original loan was refinanced, some or all of it may be subject to claims.

Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.

But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.

“People shouldn’t have a false sense of security that a deficiency judgment may not be later sought,” Zaretsky said.

He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.

“The parties who bought those notes wouldn’t have paid money for them unless they had the intention of acting,” Zaretsky said.

Ticking time bomb

What can be scary is that the judgments don’t have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.

It doesn’t have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.

It wasn’t until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.

“I told them, ‘Hey, you guys released the title,’” he said. “As far as I know, I’m off the hook.”

He wasn’t. Releasing title does not necessarily end the debt. It’s complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.”

Lenders are also very inconsistent. One of Zaretsky’s short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.

Strategic defaults

Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.

If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.

Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.

Published by Yahoo News.

In California the banks can not go after you if the money was purchase money.  If the money was refinance money then they will come after you for the deficiency.  The best scenario is to do a short sale and negotiate the deficiency judgements on refinance money at closing.

ANGEL LYNN

The Home Affordable Foreclosure Alternatives Program providesfinancial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed, according to an announcement on the Treasury’s website.

Guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders.

The incentives, first announced in May, expand on the government’s Home Affordable Modification Program, known as HAMP, that has seen limited success in lowering payments for distressed homeowners. The Treasury earlier on Monday stepped up pressure on mortgage companies to make permanent the 650,000 trial modifications they have started.

“While HAMP program guidelines are intended to reach a broad range of at-risk borrowers, it is expected that servicers will encounter situations where they are unable to approve” or offer a modification, the Treasury said in its announcement.

Financial incentives for completing short sales or similar deed-in-lieu transactions — in which the deed is simply transferred to the lender — include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders, the Treasury said. Borrowers would receive $1,500 in relocation expenses.

Short sales are favored by real estate agents and community groups over foreclosure because they can preserve the borrower’s credit rating and leave the property in better condition than when a homeowner is evicted. While primary lenders typically realize steep losses, their recovery is typically far better than under foreclosure.

But short sales have been frustrating for borrowers and real estate agents, often hung up by negotiations with multiple lien holders and mortgage insurance companies. Real estate agents have complained that sales fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.

Among requirements, mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt.

It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.

In one of the most contentious issues gumming up negotiations between lenders, the guidance caps the aggregate proceeds to subordinate lien holders at $3,000.

Second lien holders in recent months have begun demanding more money from the first lender, seller, buyer or agent in exchange for releasing their claim, agents have said. Because primary lenders would face larger losses in a foreclosure, some subordinate lenders have felt empowered, the agents said.

The largest second-lien holders are Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co andCitigroup Inc.

Second lien holders may proceed with a short sale outside of the Treasury program, if they felt the cap was too low, a Treasury official said in October.

“If there was a short sale program that didn’t recognize the second lien holder position, it could have pretty damaging consequences for the industry,” Sanjiv Das, chief executive officer of CitiMortgage, said in an interview last week.

Okay well lets hope this all starts to go into effect asap.

Short Sale Help

Less impact on your credit score

All mortgage debt is fully discharged

Source: Dual upside to foreclosure alternative, (The Early Show (CBS))

Many clients ask the question what will happen to my credit?  The answer is a Short Sale will have much less impact on your credit.  I have several clients that have been able to buy a new home after a Short Sale.

More than 23 percent of people with mortgages owe more on their properties than they are worth, according to a report released Tuesday by research firm First American CoreLogic.

Another 2.3 million homeowners are within 5 percent of being underwater, bringing the total of those who are upside down or close to it to about 28 percent.

About 5.3 million U.S. households have mortgages that are at least 20 percent higher than their home’s value, the First American report says. Borrowers owing more than 120 percent of their home’s value are the most likely to default, First American calculates.

The majority of underwater mortgages are in the following states:

• Nevada: 65 percent of home owners are underwater
• Arizona: 48 percent
• Florida: 45 percent
• Michigan: 37 percent
• California: 35 percent

The report also notes that most U.S. homeowners have home equity, and nearly 24 million owner-occupied homes don’t have any mortgage at all, according to the U.S. Census Bureau.

Source: The Wall Street Journal