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Monthly Archives: January 2013

What are the Requirements for an LLC or Corp to Buy a Short sale Property?

When the buyer of a short sale is a Limited Liability Company (LLC) or Corporation, there are specific documents that must be completed. Typically we see this type of buyer when there is an investor making an offer on the property. If required documents are not provided, the short sale process can experience significant processing delays. Per Bank of America, the largest servicer of mortgages in the U.S., the following rules apply for this type of Buyer:

LLC required documents:
  if the buyer is an LLC, the following documentation must be provided to the Short Sale Specialist:

  1. Fully executed Articles of Incorporation / Organization and Operation Agreement (contains Members Agreement which lists Officers and their ownership interest in the company)
  2. Proof of funds in the LLC’s name
  3. Proof of the buyer’s connection to the LLC

Corporation required documents: if the buyer is a Corporation, the following documentation must be provided to the Short Sale Specialist: 

  1. Copy of Articles of Incorporation
  2. List of Shareholders and Officers
  3. Proof of funds in the Corporation’s name
  4. Proof of buyer’s connection to the Corporation

When providing the required documents specified above, be sure they are legible and all pages of all documents are included. In addition, name each document with its own specific title (e.g., Articles of Organization). Failure to provide the Short Sale Specialist with fully executed and legible required documents may cause delays in processing the short sale file, and / or may result in the file being declined.

Per investor guidelines, additional documents may be required and will be communicated, as applicable, by the Short Sale Specialist.

 
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Posted by on January 31, 2013 in Helpful hints, Short Sales

 

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Protect Yourself Against Mortgage Relief Scams

An unfortunate trend has developed involving scams by individuals as well as entire organizations, to take advantage of distressed homeowners who are already struggling and desperate to save their homes, or at least avoid foreclosure. I personally believe the main reason why more than 7 out of 10 homeowners who find themselves in financially difficulty end up in foreclosure with no assistance to prevent this catastrophe is the fact that they don’t know who they can trust. These scammers are creating confusion and compounding the situation. The good news is there are those who wish to combat mortgage relief fraud, including the Federal Trade commission.

So how do you know when you are approached by a mortgage relief scam verses legitimate assistance?

A Few Red Flags

Upfront Fees – Not only is it illegal but a certain sign that the proposed relief is fraud. Do not pay for the promise of results… if you have to pay anything at all pay only for results once the job is done.

Guarantees – Be suspicious of anyone promising guarantees. Any Iegitimate company should know the process is too complicated and dependant on many factors to guarantee results every time.

Government Affiliation – Some companies present themselves as government agencies or other authoritative entities with official looking websites ad seals, etc. Always verify the affiliation with your lender or legitimate government agencies.

Deed Transfer – Be wary of anyone asking you to sign papers transferring deed or title to your home. This can put you in a worse situation of being still on the hook for the loan and without ownership rights to the property.

Common Scams

Phantom Foreclosure Counseling – This is the most common form of relief fraud. In most cases if you avoid the Red Flag of upfront fees you will avoid this type of scam. Always check with HUD or the FTC to verify if they are legitimate.

Sale/Lease-back or Repurchase – Typically this scam involves signing the deed to the property over to a “land trust” with a promise to rent back to the homeowner until they can repurchase the home. Unfortunately, the new owner can evict, raise rent, or sell the property with little or no recourse by the former homeowner.

Fraudulent Modification – This type of scam involves a so called rescue company taking a fee to negotiate with the lender but actually just diverts the mortgage payments to themselves while the homeowner who thinks they are making payments goes to foreclosure.

So Where Can You Find Help?

The Federal Trade Commission is taking this very seriously. They issued a ruling in an effort to cut down on fraud in this area. The Mortgage Assistance Relief Services (MARS) Ruling applies to any business that provides a mortgage assistance relief services. This applies to anyone representing a plan, service, or program to assist homeowners to prevent or postpone foreclosure, or help them obtain other kinds of relief such as loan modifications, forbearance agreement, short sales, or extensions of time to cure defaults. For more information on this subject get my free report titled CAUTION: Protect Yourself Against Mortgage Relief Scams   . To view the MARS rules for individuals and companies involved in mortgage relief assistance click on The MARS Rules. To enlist help from the FTC you can visit their website http://ftc.gov/opa/2010/11/mars.shtm or to report fraud or file a complaint visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).

HUD (U.S. Department of Housing and Urban Development) also takes these fraudulent actions against Struggling Homeowners very seriously. For assistance in Colorado go to http://www.hud.gov/local/co/homeownership/foreclosure.cfm for counseling assistance or to verify the legitimacy of a would be mortgage relief person.

 
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Posted by on January 31, 2013 in Foreclosure, Helpful hints

 

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Four Things NOT to do if You Fall Behind On Your House Payment in Denver

Getting behind on your Denver Home Loan may feel like the world is coming to an end, but it’s not. However, there are several things that you should not do if this occurs. First of all, you are in good company. Around 25% of homeowners are in some stage of delinquency or under water on their mortgage. In many cases due to circumstances beyond their control. Loss of income or reduction in pay, along with a myriad of other scenarios, has contributed to homeowners falling behind on payments on properties in Denver and across the nation. So what four things should you NOT do?

1. Do not ignore the situation. This seems to be the most common response for the majority of homeowners who find themselves in this situation, and it only makes matters worse. There are a number of options available and the sooner you check them out the more options you will have. The longer you wait the fewer options you will have to avoid a foreclosure. Foreclosure should never be an option, considering the damaging ramifications to credit, possible pursuit of collections, and difficulty of getting loans in the future.

2. If you are considering selling your home, do not let an interested buyer convince you to price it far below market value. Pay attention to what similar homes are selling for in your area. A slight reduction for the distressed situation you find yourself in may be in order, but your lender will not allow you to give the home away to a buyer who wants to steal it at a price that is way below market. Be wary of these type offers no matter what they are promising you.

3. Do not give a buyer wanting to make an offer on your property the authorization to negotiate directly with your lender. There is a good chance the buyer’s primary objective will be to get the lowest price possible for your property. This approach likely will not be in your best interest. If your Denver property is worth less than what is owed it might require your lender to accept less than the amount you owe on your home loan in a short sale approval. There are certain things that need to be negotiated properly on your behalf, such as guaranteed relief from any deficiency balance (the difference between what is owed and what the property sells for). This will not be the primary concern of the buyer trying to get a deal. An experienced short sale realtor will look out for your interests in the transaction. NEVER SIGN A CONTRACT WITHOUT THE ADVICE OF A PROFESSIONAL. Consult with an attorney or real estate professional. If the situation requires a short sale, the fee for the professional representation you receive will be paid by your lender.

4. Do not deed your Denver property to anyone without making certain the loan is paid in full. Until your lender has agreed to a short pay or transfer in writing you are the one on the hook for the unpaid balance. You do not want someone else having ownership interest while you are still on the hook for the loan.

 
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Posted by on January 29, 2013 in Foreclosure

 

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FORECLOSURE ALTERNATIVES

The current U.S. housing market and national financial crisis has caused untold stress and heartache for many American families. Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. The options available to Colorado residents for foreclosure help are many. Following is a brief explanation of these solutions, including their benefits and drawbacks:

Reinstatement
A reinstatement is the simplest solution for avoiding foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender’s approval and will ‘reinstate’ a mortgage up to the day before the final foreclosure sale.

  • Benefit: Does not require the mortgage company or lender’s approval.
  • Drawback: Requires that a homeowner be able to pay all back payments, fines and fees.

Forbearance or Repayment Plan
A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.

  • Benefit: Allows the homeowner to make back payments over time.
  • Drawback: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed. Some mortgage companies will require a homeowner to ‘qualify’ for forbearance.

Mortgage Modification
A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.

  • Benefit: Reduces the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan
  • Drawback: Requires that a homeowner ‘qualify’ for the new payment and will often require full documentation. Lender has to be actively pursuing modifications.

 Rent the Property
A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, is able to convert their property to a rental and use the rental income to pay the mortgage.

  • Benefit: Allows homeowner to keep property indefinitely.
  • Drawback: The issues that can arise with a rental property are many, and rent often does not cover the full cost of property ownership and maintenance.  Requires homeowner to first acquire enough money to reinstate the loan.

Deed in Lieu of Foreclosure
Also known as a ‘friendly foreclosure’, a deed in lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property.

  • Benefit: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment.
  • Drawback: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure.  Most lenders require an attempt to short sale before considering this option.

Bankruptcy
Many have considered and marketed bankruptcy as a ‘foreclosure solution,’ but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.

  • Benefit: Does not require lender approval.
  • Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will only stall—not stop—the foreclosure process. Bankruptcy can be costly, is damaging to credit scores, and can only be declared once every seven years.

Refinance
If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.

  • Benefit: In some cases, this will lower payments.
  • Drawback: In today’s market, a refinance will almost always raise mortgage payments, and is an expensive process.  With current guidelines it is almost impossible to refinance once payments are late.

Service members Civil Relief Act (military personnel only)

If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Service members Civil Relief Act. The American Bar Association has a network of attorneys that will work with service members in relation to qualifying for this relief.

  • Benefit: If qualified, this will lower payments on all consumer debt in addition to mortgage payments.
  • Drawback: Must be active military to qualify.

Sell the Property
Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in the Denver area.

  • Benefit: Allows homeowner to avoid foreclosure and harvest some of their equity.
  • Drawback: In many cases today, homeowners do not have sufficient equity to sell their property without negotiating a short sale (see next solution).  If payments are delinquent homeowner and realtor are working against an increasing payoff amount with interest, fees, and penalties accruing.

Short Sale
If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.

  • Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individual’s credit record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).
  • Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent to guide the way.

This represents only a summary of some of the solutions available to homeowners facing foreclosure in Colorado. For more information on this subject contact me for a free report on this and other related subjects.

 
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Posted by on January 28, 2013 in Foreclosure, Short Sales

 

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2013 HAFA Short Sale Overhaul – Increased Incentives

Supplemental Directive 12-07 initiated a number of changes to the HAFA (Home Affordable Foreclosure Alternatives) short sale program, which will take effect Feb. 1, 2013.  HAFA was instituted in 2009 by the U.S. Treasury Department. Along with several changes discussed in previous posts on this subject, the purpose is to further streamline the short sale approval process.

More and more distressed homeowners struggling to pay their mortgage payments are discovering the opportunity to avoid foreclosure by choosing a short sale. If qualified for the HAFA program, the homeowner can avoid any deficiency judgment, continue to live in the property through the entire process until closing, and receive $3,000 at closing for relocation assistance.

One important aspect of this program is the fact that the government will add to the money that the primary lien holder allows a subordinate lien holder to receive from the transaction at closing. With this revision the government contribution to a subordinate lien holder is increased to $5,000, and the total amount that a subordinate lien holder can receive is increased to $8,500. This provides more of an incentive for a second mortgage company which would otherwise get zero in the case of a foreclosure, to receive $8,500 for participating in the approval of a short sale.

Additionally, the waiting period for a buyer of a short sale property to resell the property is reduced from 90 to 30 days. This will help a short sale realtor find a buyer for the property, as the 30 day waiting period is more attractive to investors.

With the implementation of these new guidelines a good short sale specialist realtor who knows what they are doing should be able to assist a distressed homeowner to avoid foreclosure, walk away with some cash in their pocket, and without any concern about being chased down for the deficiency judgment after the closing. Considering the fact that here in Colorado the bank has 6 years after a foreclosure to collect on their losses, this is a great opportunity for a struggling homeowner who is under water on their property.

 

 

 

 
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Posted by on January 28, 2013 in HAFA, Short Sales

 

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What Happens When the Service is Released on Your Short Sale?

Most mortgage loans are contracted out to be serviced by a third party servicer to perform such activities as collecting payments, tax and collection activities, as well as default mortgage activity, includingshort sales. Release of service, where the investor decides to move the servicing activities from one company to another, is business as usual in the in the mortgage industry. However, it can be a real pain in the case of a short sale transaction already in process. Short Sale Realtors should make homeowners aware of this possibility when considering a short sale, so they can keep an eye out for a notification letter. A homeowner should receive notice of such a transfer 15 days prior to the service release date.

We are currently seeing a lot of service release activity among some of the larger servicing companies. The company servicing the most loans is Bank of America. The following is a table of possible impacts on a short sale taken from the Bank of America online agent resource center. The impact varies among servicing companies but this will give you an idea of the possibilities and what you can do to be proactive when a service release occurs during your short sale transaction.

What are the impacts to a short sale?

Short Sale initiated but no approval letter issued

Traditional When servicing rights are released from Bank of America, the new servicer will decide how to proceed with the loan retention options.
HAFA The new servicers may participate in Home Affordable Foreclosures Act (HAFA).The new servicer will need to review the file documents to make a decision on the short sale.
Cooperative The new servicers may not honor the cooperative short sale since this program is proprietary to Bank of America.When possible, Bank of America will request to maintain servicing of loans in the cooperative short sale program through short sale completion or decline.

Short Sale with an approval letter issued and a closing date established

Traditional The new servicers will honor the approval letter terms up to the expiration date listed on the approval letter.
HAFA
Cooperative The new servicers may not honor the cooperative short sale since this program is proprietary to Bank of America.When possible, Bank of America will request to maintain servicing of loans in the cooperative short sale program through short sale completion or decline.

Some key activities that may occur during the servicing transfer:

The old servicer should send the homeowner a letter 15 days before servicing transfer date.

The new servicer should send a letter advising the homeowner of the transfer.

NOTE: IF A LETTER IS NOT RECEIVED FROM BOTH COMPANIES ALWAYS CHECK WITH THE OLD SERVICER TO MAKE SURE IT IS A REAL TRANSFER AND NOT A HOAX OR FRAUD. THERE HAS BEEN A LOT OF DECEPTION IN THIS AREA.

What should the homeowner and their short sale realtor do?

Contact the new servicer to determine the options available to the homeowner.

Keep in mind; it may take 30 days or more for the new servicer to access the loan.

Keep copies of all documents on the short sale transaction in case the new servicer requests documents

 
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Posted by on January 27, 2013 in Short Sales

 

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Uncle Sam May Pay You to Sell Your House!

Find Out How the Government’s HAFA Program Could Put Thousands of Dollars In Your Pocket to Eliminate Your Mortgage Debt!

When it comes down to it most struggling homeowners cannot qualify for or complete the HAMP mortgage modification. A more popular option offered under the government instituted Making Home Affordable Program is the HAFA short sale designed to help distressed homeowners avoid the catastrophic ramifications of Foreclosure. Under the same HAMP umbrella, the HAFA (Home Affordable Foreclosure Alternatives) program provides struggling homeowners with a number of benefits that help them escape an unmanageable mortgage and move forward with their lives. This government-sponsored initiative is overseen by the U.S. Treasury Department and administered by Fannie Mae.

Some of the most important benefits to the homeowner are guaranteed forgiveness of debt with no further threat of collection on the deficiency balance left after the property is sold, and $3,000 to the homeowner at the closing table for relocation assistance.

Under HAFA the government has also created uniform guidelines and timeframes for lenders, making the short sale process easier and more efficient. This gives the Short Sale Specialist Realtor a much better chance of finding a buyer willing to stick with the short sale approval process and close successfully.

To learn more about the benefits of this program and see if you can qualify order my free report called “Struggling to Make Your Mortgage? Uncle Sam May Pay You to Sell Your House!”

 

 

 
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Posted by on January 25, 2013 in Foreclosure, HAFA, Short Sales

 

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