Here is a resource that agents can use to find help for troubled short sale cases:
HelpWithMyBank.gov is administered by the U.S. Department of the Treasury Office of the Comptroller of the Currency (my hands cramped just writing that!) … even if you can’t remember the name of who’s administering the service, the website is provided to file legitimate complaints against national banks.
However, we haven’t heard a lot of news or stories about using this site. If you have experiences, please share! Your story might be able to help another agent find a way to help clients in need.

As soon as the lender gets hold of a foreclosure deficiency judgment against you, they can immediately act to implement the judgment. This will be implemented by garnishing your work, halt your bank accounts or worst, they can take away your other personal property. However, you have few options when it comes to mortgage deficiency if the lender is authorized to obtain a foreclosure deficiency judgment. First option would be bankruptcy. You can opt to file for bankruptcy protection to protect yourself and your property. On the contrary, it usually requires an attorney who may cost you a lot compare to the restitution for your debt. Moreover, your credit is damaged for an additional three years because a foreclosure only remains on your credit history for seven years but a bankruptcy will last for ten years. For you to avoid this kind of dilemma, you have to take care of the problem before it becomes worst.

Talking about dealing with a mortgage deficiency through a foreclosure or a short sale, you must discuss with the lender the amount of foreclosure deficiency judgment. You can choose to use a firm that is experienced in dealing with foreclosure deficiency judgment and negotiation processes for you to obtain a better settlement rather than attempting to do this on your own. You must never ignore a foreclosure deficiency judgment because before you know it, you will be facing a bigger problem. The finest way to deal with this problem is to be proactive. Get help from an experienced firm that will be able to negotiate on your behalf and obtain the best settlement possible and go on with your life happily without having to continue to pay for the debt for years to come.

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

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

We are excited to close more of our Short Sales this week. Things are starting to move faster. We are currenlty negotiating on our 40 Short Sale listings. Hopefully we will have approval letters on all of them soon.

Shorts Sales can be a frustrating and long process. It may be easier to buy an Island but you will have to check with Casey on that one:).

Angel

In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank’s loss mitigation or workout department. 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, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower’s financial situation.

A short sale typically is executed to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack of), by determining the probable selling price from a Broker Price Opinion BPO (also known as a Broker Opinion of Value (BOV)) or through a valuation of an appraisal. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

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.

When a borrower falls behind on their payments the loan is usually sent to the lender’s loan loss mitigation department. Most lenders also consider short loan payoff sale requests in their loss mitigation departments.

Your chances of success with your lender improve if your communications with them is organized and complete. Your contact with your mortgage lender’s loss mitigation department should be professional. You’ll want to send them the appropriate documentation and provide them with any additional information that they may require.

Keep in mind that lenders will approve a short sale as a last resort to avoid foreclosure. If a home was purchased at the height of the market and has depreciated considerably, the home may be “upside down”, or is worth less than is owed. The lender may consider a short sale. The same is true for a property was recently refinanced at 100% or on an option arm leaving the property without equity.

Keep in mind that lender is not in a position to manage property they are in the lending business. A home, while it’s sitting vacant waiting for sale, is accruing costly insurance premiums, taxes, repairs and bringing in nothing. The lender is losing even more because the lost interest they could be receiving on their asset. They have their money invested, but are making nothing from the investment until the property sells. If a short sale can be accomplished, their money is returned and they are no longer losing money on the investment. In a short sale the bank may even be willing to finance a new owner, making it a win/win for all parties.

A real life short sale scenario.

To help you to better understand the short sale process, we have assembled a recent case study for your own review and study. The scenario will help you better understand the reasons and motivations behind a short sale transaction.

Alex and Rita owned their 2,500 square foot ranch home for 7 years. The year prior to their Alex losing his job, they had obtained a new mortgage on the home in the amount of $240,000 with their bank.

Over the course of the past several years, the home had suffered from deferred maintenance on the walls, doors, carpet and exterior. Given the softness of the real estate market and their desire to vacate their home, they initially they put the home on the market at $220,000. 75 days on market produced no offers, so the price was reduced to $205,000. After a number of weeks on the market, several offers were received, one at $195,000 and the other at $197,500.

The lender involved in this short sale counter-offered at $200,000, based upon the expectation the their net proceeds would amount to no less than $194,500, after seller-related closing costs, commissions and past due property taxes. The buyers agreed to increase their purchase price from $187,500 to $190,000 and the Sellers received a letter of investor acceptance, outlining that the loan would be considered “paid in full”, with the remittance of the net proceeds.

The lender, in this actual transaction, accepted a loss of $52,095 or a 23% loss on their total balance owed. This home was listed at the reduced list price on September 21, went under contract on October 22 and closed on November 15, just one month before the scheduled foreclosure auction date.

Most of us are overleveraged here in Sacramento – owing more on the home than what the home is worth. That’s why if you can’t afford your payments, selling the house “short” may be your only way out if you want to settle your mortgages, avoid foreclosure and save your credit.

The best part is…

A Short Sale is FREE to you!

What’s the catch?

Basically, your lender pays for the real estate agent commissions.

Typically the commissions are paid by the sellers from the equity in the property. Well, you don’t have any equity, otherwise you wouldn’t be doing a short sale, right? And we as short sale specialists cannot afford to work for free either. So the bank allows the commissions to be paid out of their proceeds.

The issues is, the lender is already losing money so they will typically reduce our commissions. That doesn’t seem too fair since short sales take MUCH more work than a typical transaction.

So What Exactly Does a Short Sale Real Estate Agent Do?

Realtors specializing in short sales do some of the hardest work in real estate:

1. Collect all the documentation for the short sale package. This includes filling out a bunch of forms, financial statements, and help you write the Hardship Letter. We put all the info into a nice short sale package and send to the bank to get the ball rolling.

We do all this and then the bank cuts our commissions! (But it’s OK, because somebody has to do it!)

On short sales the banks will typically reduce the commission from 6% down to 5% or even 4%. (Split between the buyer and seller agencies.) Also sometimes last-minute problems come up and because the lenders take so long to respond we will sometimes kick-in our commission to make the deal close.

With all that and the work required, no wonder so many agents hate doing short sales!

However, since short sales is our specialty we don’t mind the challenges. Having done hundreds of short sale transactions has given us the experience and confidence to handle whatever comes up.

At the end of the day, the satisfaction of rescuing overleveraged homeowners is what keeps us going.