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Monthly Archives: February 2013

What is a Short Sale? Denver Area Realtor Has the Answers

One of the most devastating and painful aspects our struggling economy has had on numerous Denver area homeowners is the possibility of losing their home to foreclosure on top of other financial woes. There are a few options a distressed homeowner can pursue to avoid the foreclosure. One that has become the most popular and proven to have the highest rate of success is a short sale.

So what is a short sale and how does it work? A short sale allows a homeowner who cannot make the mortgage payments and owes more on the loan than the property is worth in the current market to sell the property at current market value. This requires the approval of the mortgage company holding the note on the property because they have to agree to accept less than the amount owed at closing and release their lien on the property. Most lenders agree to a short sale under these circumstances because they are still much better off than if they had to foreclose and take possession of the property.

Although there are a variety of complex issues that may come into play, an experienced short sale specialist realtor will be able to guide you through the short sale maze to a successful short sale transaction. Here are the basic steps of a short sale:

  • Homeowner lists the property for sale with a short sale realtor (hopefully an experienced one)
  • Lender reviews hardship letter and financials to satisfy themselves that the homeowner has a true and legitimate hardship.
  • Lender orders and reviews a 3rd party valuation (Broker Price Opinion or Appraisal) of the property to make sure they are getting a fair market price.
  • Lender approves the short sale transaction to close.
  • Homeowner is allowed to sell their own home and avoid foreclosure rather than having it taken away in a foreclosure action and may walk away from the closing table with money for relocation expenses.
  • Lender reports as a paid account to the credit bureaus instead of a foreclosure.

As you can see there are some major benefits to a short sale over foreclosure. There are other potential variables depending on circumstances and the lenders involved. For example in most cases lenders will forgive the deficiency (difference between the amount owed on the loan and the amount the lender receives from the closing) but in some cases the lender will require a homeowner contribution or promissory note to be signed. This is another reason it is very important to have an experienced short sale realtor negotiating on your behalf. If you are a homeowner in the Denver CO area considering a short sale, feel free to contact me any time for a free consultation about your particular situation. All of my services are free to you and paid for by your lender at closing.

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Posted by on February 27, 2013 in Avoid Foreclosue, Short Sales

 

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Wells Fargo Short Sale

Recently Wells Fargo Home Mortgage revised their method for processing a short sale. One important thing to be aware of with a Wells Fargo mortgage is the fact that they have at least 4 different entities that initiate home mortgages, and they all have the words Wells Fargo in the name. Following is the contact information for each:

Wells Fargo Home Mortgage:   1-800-678-7986

Wells Fargo Home Equity:   1-800-319-0855

Wells Fargo Financial:   1-800-421-6043

Wells Fargo Bank:  (Local Bank number)

For a mortgage with Wells Fargo Home Mortgage the process is now initiated on the Equator platform. Bank of America has been using Equator for several years to process short sales. Wells is relatively new on the Equator scene. Once the short sale realtor has initiated a Wells Fargo Home Mortgage short sale on Equator, the lender will first determine if the borrower is eligible for the HAFA (Home Affordable Foreclosure Alternatives) short sale program. If the loan is eligible for the HAFA short sale program the short sale will not be processed on Equator, but will be processed and underwritten manually following the “Making Home Affordable” guidelines according to the Wells Fargo HAFA Matrix.

All other types of short sale programs will be processed on Equator, including FHA loans. The short sale realtor listing the property and negotiating the short sale must have an account set up on Equator. There will be a series of tasks initiated on Equator. Some tasks are assigned by the system and some by the processor or negotiator on the file. Each task is given a period of time and a deadline for completion. If the task is not completed by the deadline it will go red in the system. Once a task goes red the file could be closed and the short sale denied. Communication via the messaging system on Equator is imperative to a successful transaction.

If you are a homeowner struggling with your Wells Fargo mortgage it is very important that you provide all required documents requested by your short sale realtor ASAP as they are trying to meet an important deadline. A missed deadline can have a very negative impact on your short sale approval and cause major delays in the process. Feel free to contact me any time for more information about the Wells Fargo Short Sale process.

   
 
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Posted by on February 26, 2013 in Avoid Foreclosue, Short Sales

 

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Don’t Fall Victim to the 5 Most Dangerous Mortgage Relief Scams!

 Easy Cash! …  Quick Fix! … Guaranteed!

Three of the most common tag lines used by scammers involved in some type of Mortgage Relief Fraud. Unfortunately, the mortgage crisis opened the door for fraudsters to take advantage of homeowners in distress. This is more common than people realize because the fraud is so well disguised and can seem legitimate. This is an easy area for unscrupulous people to take advantage of others because most distressed homeowners are desperate to save their homes or at least avoid foreclosure and the ramifications to their finances and their lives. It’s hard for a homeowner in a desperate situation to know who to trust and where to turn.

Recently in Florida several individuals were arrested once it was discovered that they were involved in defrauding struggling homeowners under the name of “Home Owners Protection Economics, Inc.” or HOPE, a company specifically designed to mimic a real organization called HOPE NOW, a legitimate organization providing assistance. These guys were taking thousands of dollars up front claiming they were authorized by the lender and telling them they had already been approved for a loan modification.

In New York a law suit has been filed against companies who have defrauded homeowners out of tens of thousands of dollars by promising homeowners loan modifications and lower house payments in return for thousands of dollars up front. It’s unfortunate, but there are stories like these to be told in every state in the nation.

For people in this situation, the best way to avoid the most common types of Mortgage Relief Fraud is by consulting with a professional. If you or someone you know is in this situation, don’t be the next victim. Read the report I am offering free of charge and contact a knowledgeable professional for more details.

The following 5 types of Fraud are among some of the topics covered in the free report:

1.The up front charge – Any time there is a fee paid up front there is a real good chance there is fraud involved. There is no reason for anyone in this situation to be paying fees up front for a service that has not even been completed.

2. Guarantees – There is no guarantee of a certain outcome, there are too many variables.

3. Posing as a charity or government official – This is a common fraud tactic. Talk to your lender.

4. Asking you to transfer the deed to the property – If anyone is ever asked to transfer the deed to their property while still on the hook for the loan against the property that is a HUGE Red Flag!

5. Asking you to stop contacting your lender – You should have the right to contact your lender any time throughout the process of any attempt to avoid foreclosure, whether a short sale, loan mod, or other type of foreclosure avoidance. Be in contact with your lender and stay informed.

 

 

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The Truth About Short Sale Lease Backs

A newer trend we are seeing in the short sale world is called Short Sale Leasebacks.

So what is a Short Sale Leaseback? A homeowner is living in the property. An investor purchases the property in a short sale transaction. The investor leases the property back to the homeowner for a period of time, usually with a promise to sell the property back to the homeowner.

Some of the organizations involved in this type of transaction are charities, but most are for profit investors. Fannie Mae along with most other investors has made it clear that they do not support for profit investors purchasing for a leaseback. Some confusion about the possible legitimacy of this opportunity entered in when the US Treasury Dep’t issued the HAFA Supplemental Directive 12-03 dated April 17, 2012, allowing for lease backs involving non-profit organizations in the following statement.

“A servicer may in its sole discretion approve a transaction under HAFA that provides an option for the property to be sold to a non-profit organization with the stated purpose that the property will be rented or resold to the borrower so long as all other HAFA program requirements are met.”

Prior to this supplemental directive leasebacks were considered a violation of the “Arm’s Length Transaction” provision of most short sale approvals, due to two primary factors:

1. Fraud committed by sellers who are not supposed to benefit from the forgiveness of their debts by getting the property back at a lower price while the lender/investor takes a loss.

EXAMPLE: A property is purchased by a ”Straw Buyer” (Family, friend, anyone the seller has an arrangement with) Instead of moving the homeowner stays in the home and buys the property back from the “Straw Buyer”

2. Investors taking advantage of sellers who had hopes of purchasing their home back. This same type of fraud is occurring in many “so called” leaseback short sale arrangements.

EXAMPLE: Short Sale is purchased by an investor with the agreement that the homeowner will remain in the property and buy their home back. But when it comes time to buy, the investor decides they’re not going to sell the home back to the original homeowner. They either keep the property or sell to a different buyer for a better profit.

The reality is very few lenders will allow short sale leasebacks because there is so much opportunity for fraud. Anyone involved in short sale leasebacks needs to be sure the buyer is a legitimate non-profit organization and exercise EXTREME CAUTION! Many Existing Leaseback Programs require specific training and that a commission be paid back to the program for negotiation of the leaseback with the servicer. Most of these programs use a non-profit organization as a front of with a for profit investor behind the scenes. None of the major lenders and investors have an appetite for these programs and the few pilot programs previously initiated by some lenders were unsuccessful.

As a short sale specialist my primary objective is to assist a distressed homeowner to avoid the catastrophic affects of foreclosure and have them successfully walk away from the short sale closing table as unscathed as possible, with a full release from any deficiency and hopefully a little cash in their pocket for relocation expenses. Starting the conversation by getting their hopes up to stay in the home via a leaseback arrangement, and putting them in a scenario with much less chance of negotiating a short sale and higher possibility of ending up with a foreclosure is not in alignment with my primary objective. The last thing I want to do is go back to a homeowner after raising their expectations to stay in the home and tell them that they are going to have to move after all or worse, they are out of time and the property is going to foreclosure auction.

For anyone who is still determined to take the risk and get involved in leasebacks here are a few tips:

  • Verify the buyer is a documented non-profit. Look them up at http://www.irs.gov/Charities-&-Non-Profits/Search-for-Charities
  • Review all leaseback information carefully.
  • Have all documents reviewed by an attorney that represents the seller.
  • Don’t put the negotiation of the short sale in the hands of a third party negotiator. Ultimately we as real estate brokers are responsible for the outcome.
 
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Posted by on February 20, 2013 in Avoid Foreclosue, Short Sales

 

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Colorado Foreclosures drop to 2006 level

According to a report released Feb. 12th by the Colorado Division of Housing, the number of Foreclosures in Colorado was down 18.9% from the number in 2011. That is about where we were 6 years ago. There were 15,903 reported foreclosure auction sales of properties in 2012 compared to 19,617 in 2011.

There were also a reduced number of new foreclosure filings in 2012, down from 31,975 in 2011 to 28,579 in 2012. New foreclosure filings in Colorado represent how many times a Notice of Election and Demand (NED) was filed with the county Public Trustee by the attorney representing the lender on a defaulted loan.

The NED is the official beginning of the foreclosure process in Colorado, and establishes a sale date for the property to be sold at public auction. Typically there is about a 110 to 120 day period of time between the filing of the NED and the public auction date. During that time the homeowner can either cure the loan or work with the lender, housing counselors, and a short sale realtor to try to work out a loan modification, short sale, or some other method to avoid the foreclosure of their property.

The sale date can be postponed multiple times for up to a year from the initial public sale date at the lender’s discretion, but most lenders will not postpone without a very good reason. An application for a loan modification or short sale is the most common reason that might cause a lender to consider postponement. It cannot be last minute however. Typically a lender will require that all required documentation for a short sale or modification be in their system 30 – 45 days prior to the original sale date to consider postponement.

The reduction in new foreclosure filings and completed foreclosure auction sales in Colorado is definitely good news for Colorado homeowners. However, there has been some speculation about a possible new mini-wave of foreclosures coming in 2013 as a result of the 10 major banks holding back foreclosures on many properties until the recent settlement between the “mega-banks”, the Federal Reserve, and the Office of the Comptroller of Currency (OCC). It remains to be seen how our state will actually be affected by this new release of foreclosure proceedings.

 

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My Bankruptcy Attorney Told Me to Just Let the House Go To Foreclosure

It amazes me every time I hear from a struggling homeowner in foreclosure that their bankruptcy attorney told them to just let the bank foreclose on the property. This is financially careless and dangerous advice coming from the person they are trusting to give them sound legal advice.  

Following are a couple real life examples of why this is such bad advice:

I was referred to a homeowner who used to live here in Denver Colorado. Two years ago he had lost his job and filed bankruptcy. He had to move his family out of state to find employment. The bankruptcy attorney told him to just let the property go back to the bank in foreclosure and not worry about it. Two years later he heard from a different attorney. This attorney represented the HOA for his neighborhood. As it turned out the bank had not even started foreclosure proceedings and as the homeowner he was still responsible for the HOA fees. At this point he had an HOA bill including late fees and attorney’s fees, etc., exceeding $4,000. I listed the property for a short sale. Since the loan on the property was an FHA loan and he had moved out of the property we had to apply for an exception from HUD, which they granted. This type of short sale only allows $1,500 to a junior lien holder but with the $1,000 relocation incentive he is able to apply $2,500 proceeds from the successful short sale closing toward the HOA lien. I negotiated a reduction on the HOA bill and he had to pay the difference of a few hundred dollars. Additionally, we discovered there was a water bill in excess of $2,000. Many water companies still charge fees for a vacant property which benefits from the water/sewer infra structure, drain water, etc., whether there has been any water usage or not. After previously paying the price to discharging his other debts in a bankruptcy, this poor guy owed over $6,000 for bills on a property which he was told by his legal adviser not to worry about. We were able to negotiate the water bill down a few hundred dollars and find a buyer who agreed to pay the remaining balance in the short sale closing. The seller’s credit report will not only show the bankruptcy, but 2 more years of late payments on the mortgage than necessary, which delays his credit recovery time to be able to buy a home again and obtain other types of loans. At least we were able to avoid having a foreclosure on the credit report in addition to everything else. The bank never did begin foreclosure proceedings during this entire period of time.

Another distressed homeowner was referred to me who was in trouble on her primary residence as well as a rental property. She was in the middle of a bankruptcy process when she was referred to me. Her attorney told her she needed to agree to turn the property over to the bank within 9 days after the bankruptcy was done. She was not in a position to find another place to live yet.  I explained to her that in Colorado the bank still had to go through the foreclosure process before she could be evicted from the home. We put her property on the market for a short sale. She ended up living in the property rent free for another 6 months while we completed the short sale. She was approved for a Bank of America Cooperative Short Sale, which would have given her a full written release from any deficiency on the mortgage without the bankruptcy and she received $9,000 relocation assistance at the closing table.

Sometimes in rare occasions a bankruptcy may be required for a distressed homeowner to get out from under a load of numerous debts, but never should a property be allowed to go to foreclosure auction without at least attempting to avoid foreclosure.

 

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Fannie Mae Announces New Short Sales Escalation Process

Expanded Tool Will Help Prevent Foreclosures and Stabilize Neighborhoods

In a recent press release Fannie Mae introduced an expanded HomePath for Short Sales tool to resolve short sale challenges. The tool, a new short sale escalation process, is open to any real estate professional working on a short sale involving a Fannie Mae-owned loan. Once a case is escalated, Fannie Mae will directly engage with the agent or servicer to address challenges such as valuation disputes, delays by servicers or uncooperative subordinate lien holders. Agents can also use the new escalation process to receive a recommended list price from Fannie Mae prior to listing the property for sale. Any time a short sale realtor can provide a pre-approved or suggested price from the investor it makes for a much better short sale transaction.

Fannie Mae vice president for real estate sales, Jay Ryan, said “Our goal is to prevent foreclosures and help stabilize communities. By giving agents a straightforward, transparent way to escalate short sale issues to Fannie Mae, we will close more sales, prevent foreclosures and help neighborhoods continue to recover. Getting short sales done benefits everyone involved and we’re committed to doing our part.”

Most short sale realtors will agree that this will be an invaluable tool in those occasional cases when we reach an impasse with a lender or servicer that is not being reasonable or following the guidelines that Fannie Mae has established for all of us. Real estate professionals can visit www.homepathforshortsales.com/hpshortsaleinquiry.html to escalate an issue on a particular short sale with Fannie Mae directly.

Fannie Mae also secured delegation agreements with mortgage insurers to streamline the short sale approval process last fall. In the past mortgage insurance companies were among the biggest deal killers for short sales because they had nothing to lose and would make totally unreasonable demands of the struggling homeowner. These and other recent changes should allow the short sale process to move forward more rapidly with a more favorable outcome and short sale experience for everyone involved.

 
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Posted by on February 12, 2013 in Avoid Foreclosue, Short Sales

 

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