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

California Price Shows Year-To-Year Gain for First Time in Two Years

The median price of a home in California experienced its first year-to-year gain in over two years during the month of November, as the California housing market continued recent trends in terms of prices, supply, and sales. The monthly median price crossed the $300,000 threshold in November with a median of $304,520, up 2.4 percent from the October median price of $297,500 and up 5.8 percent from $287,880 a year earlier. The situation has improved greatly from a year ago during the worst of the financial crisis, when the median price had registered 41.3 percent year-to-year decline.

After a 59 percent peak-to-trough decline, the California median price has increased 24.1 percent from a trough of $245,170 that occurred in February 2009.  The increase in price has been sustained by a combination of lean supply and high demand, the latter triggered by historically high affordability (See November article). By comparison, the NAR national median price for existing single family homes, which experienced a 29 percent peak-to-trough decline, has increased by 4.7 percent from its trough of $164,200 in January 2009 to $171,900 in November 2009.

Nine consecutive month-to-month increases in the California median price have been the result of the lean inventory conditions throughout the year. The MLS-based unsold inventory index for California has averaged 4.8 months since the start of the year, well below the 7 month long run average. (See the October article for an analysis of the relationship between MLS-based unsold inventory, defaults, and foreclosures). By comparison, the national unsold inventory index for single family homes has averaged 8.4 months over the year. Inventory levels in both California and the US have trended down for most of the year.

As for sales, California returned to pre-peak levels of sales in late 2008 and sustained them throughout 2009. With sales of 536,720 homes in November, the market was 4.6 percent lower than the October sales figure of 562,400, but 4.7 percent above the November 2008 figure of 512,840. Sales throughout the year have averaged 545,600, compared with the pre-peak monthly average over the 2000-2002 period of 537,300 homes. Over the 2000-2002 period, US sales of existing homes averaged 4.8 million homes, compared with the low- to mid-4 million range of sales that the national market experienced from late 2007 until late this year when sales finally exceed the 5 million threshold.

The year-to-year increase in the California median price is the latest sign of turnaround from the dire circumstances facing the statewide housing market a year ago. Its foreclosure problems notwithstanding, California’s housing market appears to be ahead of the national market, both in terms of hitting bottom and in demonstrating important signs of market stability and improvement.

By: Robert A. Kleinhenz , Ph.D., Deputy Chief Economist

Here is the overview of the median Home Price for California.  With the banks holding on to such large percent of foreclosed homes I wonder how this will look in a year from now.  My prediction is we haven’t seen the end of this yet.  The Sacramento’s Short Sales continue to grow.

Angel

The multipronged fix calls for companies to help as many 4 million struggling borrowers by modifying loans so housing payments are no more than 31% of monthly gross income. Separately, homeowners who haven’t missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.

While borrowers are being encouraged to contact their loan servicers, companies said it would be several weeks before they can start processing applications.

The $75 billion loan modification plan will provide incentives to borrowers, servicers and mortgage investors. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments.

“This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans,” said Housing Secretary Shaun Donovan.

Administration officials once again stressed that they are not using taxpayer money to bail out irresponsible homebuyers, listing those who will not qualify for assistance: people who bought investment properties, lied on their mortgage documents or purchased multimillion dollar homes.

“The cost of not acting outstrips that of acting boldly,” said a senior administration official.

Borrowers can now contact their servicers to see whether they are eligible for assistance. Federal officials have posted additional information for borrowers to determine their eligibility at www.hud.gov. They will also promote the program at homeownership events nationwide.

However, servicers, who just received the guidelines on Wednesday, said it will take them some time to upgrade their systems and train their staffs to handle borrower calls. Fannie Mae, for instance, said the lenders and mortgage brokers it works with will be able to process refinancing applications starting in April.

Many firms, however, have said they will put foreclosures on hold until they can implement the guidelines.

The administration Wednesday released additional eligibility criteria and guidelines for the refinancing and modification prongs of the program.

The refinancing portion, which is open to homeowners who took out loans from Fannie Mae and Freddie Mac, allows borrowers with less than 20% equity in their homes to refinance to the current prevailing rate. However, borrowers cannot owe more than 105% of the value of their home and must be current on their payments.

The program ends in June 2010. Each servicer will provide details on the terms and costs associated with refinancing, which is aimed at helping borrowers suffering from the decline in home values.

The government provided far more information on the loan modification plan, which it is spearheading. This portion focuses on people who are behind in their payments or are at risk of default.

Federal officials clarified the definition of “at risk” as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.

The modification program will be in effect until the end of 2012, but loans can only be adjusted once.

Officials also unveiled more details on how servicers will modify the loans. First, they must reduce interest rates so that borrowers’ total house payments are not more than 38% of their monthly income. The government will then subsidize servicers dollar-for-dollar to lower that ratio to 31% – but the interest rate can’t go below 2%.

The new interest rate would then remain in place for five years, after which it will increase by 1 percentage point a year until it reaches either the original rate or the prevailing mortgage rate at the time of the modification, whichever is lower. This should prevent borrowers from suffering the “payment shock” that sent many borrowers with adjustable-rate mortgage into default in recent years.

If rate reductions aren’t enough to get payments to 31% of income, a lender can extend the term up to 40 years, or shift part of the principal to the end of the loan at no interest. Servicers also have the option of reducing the loan’s balance.

Servicers will receive $1,000 for each loan modified, as well as additional annual bonuses if borrowers keep up with payments. Mortgage investors will receive one-time $1,500 incentive payments for restructuring qualifying loans that are not yet delinquent. Finally, borrowers who keep up with their new payments will receive up to $1,000 a year in principal reduction, for up to five years.

While the program is voluntary, once servicers commit to participating, they must evaluate all loans that may be eligible. Financial institutions that receive government money going forward must participate.

Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify.

The government is also providing incentives to servicers and borrowers to enter into “short sales” or “deed-in-lieu of foreclosure” agreements with those who can’t afford to stay in their homes. In these cases, the bank agrees to take back the home for less than what’s owed without filing for foreclosure.

The program also includes a new provision to eliminate borrowers’ second mortgages, which will reduce their overall debt levels. Investors in those mortgages, who at times have blocked modifications because they don’t benefit from the adjustments, will be paid to eliminate those claims. Details on how much they’ll receive will be announced in coming weeks, senior government officials said. Servicers that get second-mortgage holders to participate will receive an additional $250.

While borrowers can now start contacting servicers, it may take several weeks for companies to implement the guidelines, said a senior mortgage industry official in a conference call with reporters.

Servicers are adding staff to handle the expected deluge of calls. Bank of America, for instance, just boosted its servicing staff by 1,000 people.

JPMorgan Chase, which said it “strongly supports” the president’s plan, will need a few weeks to get the program up and running, a spokesman said.

Officials warned borrowers – many of whom have complained of long waits and unresponsive staff at servicers – to be patient. Until then, they can find out whether they meet the basic criteria and can start gathering the financial documents they’ll need to give their servicer.

“There will definitely be a flood of activity, so it’s important for consumers to be patient and be persistent and to take a hard look at their own personal financial situation so they can come prepared to really move the process forward as rapidly as possible,” the official said. 

Quick Facts

-  Judicial Foreclosure Available: Yes

-  Non-Judicial Foreclosure Available: Yes

-  Primary Security Instruments: Deed of Trust, Mortgage

-  Timeline: Typically 120 days

-  Right of Redemption: Varies

-  Deficiency Judgments Allowed: Varies

In California, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.

Judicial Foreclosure

The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off to the highest bidder.

Using this type of foreclosure process, lenders may seek a deficiency judgment and under certain circumstances, the borrower may have up to one (1) year to redeem the property.

Non-Judicial Foreclosure

The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A “power of sale” clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the “Power of Sale Foreclosure Guidelines”.

Power of Sale Foreclosure Guidelines

If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:

A notice of sale must be: 1) recorded in the county where the property is located at least fourteen (14) days prior to the sale; 2) mailed by certified, return receipt requested, to the borrower at least twenty (20) days before the sale; 3) posted on the property itself at least twenty (20) days before the sale; and 4) posted in one (1) public place in the county where the property is to be sold.

The notice of sale must contain the time and location of the foreclosure sale, as well as the property address, the trustee’s name, address and phone number and a statement that the property will be sold at auction.

The borrower has up until five days before the foreclosure sale to cure the default and stop the process.

The sale may be held on any business day between the hours of 9:00 am and 5:00 pm and must take place at the location specified in the notice of sale. The trustee may require proof of the bidders ability to pay their full bid amount. Anyone may bid at the sale, which must be made at public auction to the highest bidder. If necessary, the sale may be postponed by announcement at the time and location of the original foreclosure sale.

Lenders may not seek a deficiency judgment after a non-judicial foreclosure sale and the borrower has no rights of redemption.

]]> http://www.myshortsaleangel.com/2009/12/california-foreclosure-law-summary/feed/ 1 http://www.myshortsaleangel.com/2009/12/treasury-sets-guidance-to-simplify-short-sales/ http://www.myshortsaleangel.com/2009/12/treasury-sets-guidance-to-simplify-short-sales/#comments Wed, 02 Dec 2009 13:50:02 +0000 Angel http://www.myshortsaleangel.com/?p=209 Per the NEW YORK (Reuters) – The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed “short sales” of homes and other loan modification alternatives to stem a rising tide of foreclosures. The Home Affordable Foreclosure Alternatives Program providesfinancial incentives and simplifies the procedures for completing short sales, a growing practice [...]]]> Per the NEW YORK (Reuters) – The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed “short sales” of homes and other loan modification alternatives to stem a rising tide of foreclosures.

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.