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Category Archives: Helpful hints

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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Distressed Property Market Affects FHA loans

HUD has been hit as hard as anyone in the distressed housing market over the past few years, and we can see the effects in multiple changes to FHA loan requirements and guidelines in recent years. HUD (U.S. Department of Housing and Urban Development) insures all FHA loans and guarantees the lender originating the loan against losses in case of a default by a borrower. HUD has one of the more borrower friendly processes to assist a struggling homeowner who finds themselves in a hardship situation and unable to continue paying on their upside down home loan.

HUD’s short sale program is called a Pre-Foreclosure Sale and contains several beneficial features:

  • Pre-approval of the borrower to participate and a pre-approved listing price.
  • Once approved the borrower and Short Sale Realtor have 120 days to obtain a contract to buy
  • Guaranteed forgiveness of the debt with no deficiency judgment for the unpaid balance
  • Junior lien holders can receive up to $1,500 at closing
  • Possible $1,000 Borrower Incentive paid to seller at closing

HUD has taken major losses due to the large number of defaulted loans in recent years. The most recent series of changes were announced by the Federal Housing Administration (FHA) on January 30, 2013. These changes are designed to further strengthen the Mutual Mortgage Insurance (MMI) Fund and encourage the return of private capital to the housing market. The MMI fund is the insurance pool that each FHA borrower pays premium into, and insures the lender against default on the loan. Some changes will affect borrowers on certain FHA loans with case numbers initiated on or after April 1, 2013 and others for case numbers issued on or after June 1, 2013.

Following are a few of the changes:

  1. Standard Fixed Rate and Saver Fixed Rate HECM pricing options are consolidated. This change is effective for FHA case numbers on or after April 1, 2013. For more detailed info see HUD Mortgage Letter 2013-01.
  2. The annual Mortgage Insurance Premium (MIP)for most new FHA loans will increase by 0.10 percent. Premiums on jumbo loans will increase by 0.05 percent, excluding certain streamline refinances.
  3. Most FHA borrowers will now have to continue to pay annual MIP premiums for the life of the loan. Previously it was possible to quit paying MIP once the principal balance was reduced to 78% of the original loan balance. For more detailed info see HUD Mortgage Letter 2013-04.
  4. Manual underwriting will be required for borrowers with credit scores below 620 and DTI ratios above 43%. See DTI Mortgage Letter
  5. Down payments for jumbo loans will go up from 3.5% to 5%.
  6. More stringent enforcement of guidelines for loans to borrowers, only 3 years after a foreclosure.
 
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Posted by on February 6, 2013 in Helpful hints, Short Sales

 

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The Hidden Cost of bankruptcy

…and Options You May Not Have Considered

For someone who is considering declaring bankruptcy it may feel like the whole world is upside-down, when in reality it is only the mortgage on their home that is upside-down.

“Individuals considering bankruptcy are too wrapped up in the emotions of the situation to see other options. But when you’re standing on the outside and not in the middle of the financial mess, it’s easy to see other alternatives.” – Dave Ramsey (daveramsey.com)

I am not here to tell you that there is never a time when filing for bankruptcy is a necessary solution, and if that is in fact the case I will be glad to introduce you to the best guy in the Denver metro area to help with that process. However, in most cases where an unmanageable mortgage is the main reason for considering this alternative there are much better options available that will cost you a lot less.

Count the Cost

Bankruptcy and Foreclosure are two of the most devastating things to a person’s credit rating and can affect more areas of your life than one may think initially. In addition to making it difficult to purchase a home again it will be difficult to get a loan for anything in the near future. These negative items stay on a credit report for 7 to 10 years, and can also affect current and future employment, security clearances, and insurance rates just to name a few. There is also an emotional cost. Declaring bankruptcy is ranked among the top life-altering events one can endure and it can negatively affect one’s emotional and psychological state.

Alternatives

Most of the time it is possible for a distressed homeowner to avoid bankruptcy by avoiding foreclosure. In many cases the mortgage payment is the largest portion of an individual’s debt. It’s helpful to look at one’s debt without the mortgage payment in the picture. Would this alleviate the strain? Is the debt that is left after the house payment enough to go through all that is required to file for bankruptcy? If the answer is no, then there are certainly better options available to deal with the mortgage problem.

For example a short sale is a dignified alternative to foreclosure, with less harmful effects on a homeowner’s credit score. Many government and lender programs allow a short sale with relief from the debt owed with no deficiency judgment, and may even put cash in the homeowner’s pocket for relocation assistance. This type of program gives the homeowner the dignity of selling their home and leaving on their own terms.

 

 
 

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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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FHA Short Sale Process

The official name for FHA Short Sales is Pre-Foreclosure Sale. There are 2 parts to the process for FHA Pre-Foreclosure Sales administered by HUD. The first part of the process is qualifying the borrower (homeowner) for the Pre-Foreclosure program, and establishing a pre-approved list price for the property. Once approved, HUD will issue an ATP (Approval to Participate in the Pre-Foreclosure Short Sale Program). Once that step is accomplished the property can be listed with a Short Sale Specialist Realtor at the approved price. The borrower can receive up to $1,000 in relocation assistance at time of closing.

If the property is already on the market, the price must be adjusted to the approved price and if there is an offer on the property it can be submitted at that time for approval. If there is no offer at the time the ATP is issued, the borrower has 120 days to obtain an offer without threat of the property going to Foreclosure Auction.

Below is a list of required documents for each stage of the process

*Required Initiation Documents:

  •                 Occupancy Letter
  •                 Authorization Form
  •                 Authorization/Acknowledgement
  •                 Financial Worksheet: Hardship letter (signed and dated)
  •                 Verification of Information and Occupancy
  •                 Current, non-expired Listing Agreement (signed and dated by seller and  agent)
  •                 Current, non-expired copy of MLS listing or proof of consistent marketing
  •                 Pay stubs (30 days consecutive; dates, amounts, names, institutions)
  •                 Bank statements (all pages, accounts and borrowers)

NOTE: (Submit as one package; all signatures must be “wet ink”; do not leave any fields blank, use “n/a” if necessary)

*Required Prequalification Documents:

  •                 Signed ATP (Approval to Participate)
  •                 Purchase Contract
  •                 HUD-1
  •                 Listing Agreement
  •                 Current MLS
  •                 Buyer’s Acknowledgement and Disclosure
 
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Posted by on January 21, 2013 in Helpful hints, Short Sales

 

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GSE’s now agree to implement HAFA

Originally when the HAFA program was initiated by the Obama administration via the U.S. Treasury Department, the  GSE’s (Fannie Mae and Freddie Mac) refused to participate. This seemed a little strange to most of us involved in the Short Sale industry since the GSE’s are considered by most to be quasi government organizations and pretty much controlled by the government. Not to mention they control over 50 % of all mortgage activity. They have now agreed to implement HAFA with some revisions and compromises by the Treasury Department to simplify the process, but keeping the following important elements:

  1. Release of Borrower Liability – A borrower who is approved for a Short Sale under the HAFA program will not owe the amount of the loan(s) which is not recovered by the sale of the home. The borrower, therefore, will not be saddled with a Deficiencey judgement which could be collected by the investor after closing. This is a Huge benefit to Distressed Homeowners since there is an automatic Deficiency and potential Deficiency Judgement on any property which goes to Foreclosure Auction for less than the full amount owed on the property. In Colorado the investor has up to 6 years after Foreclosure Auction to pursue collection. One Very good reason to attempt a Short Sale rather than just let the property go to Foreclosure Auction.
  2. No dual tracking – The Servicer on the mortgage is not allowed to begin a Short Sale process and then Foreclose on the property in the middle of the process.
  3. One point of contact – The Servicing company on the mortgage must assign a single point of contact for the file so there is one person who is familiar with the file and can answer questions, give updates, and potentially assist in getting things moving forward when a log jam or problem occurs.
  4. Caps on subordinate lien payoffs – Having a cap on the amount a subordinate lien holder can receive from the transaction helps prevent situations where the Short Sale process cannot move forward to approval because of an unreasonable 2nd or 3rd lien holder insisting on getting more from the transaction than the first position lien holder is willing to allow. In many cases the junior lien holders would get zero if the property went to Foreclosure auction so it is a better situation for them to agree to the Short Sale plus the Treasury Department adds an incentive for them to play ball.
  5. Simplified documentation – The GSE’s insisted on a more simplified process with less documentation required. For example some documents required a signature from the borrower to acknowledge that they understand the terms of the process before the process could continue to the next step. This was an unnecessary step which could be incorporated later in the process and was easily holding things up for an additional 2 or 3 weeks.

I will go into more detail about this in a future post on this subject. Post 2 of 5 on this subject.

 

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