REUTERS: Prepping For The Summer Wave Of Short Sales

Coming soon to a neighborhood near you: A late-summer wave of short sales, as homeowners, mortgage bankers and potential buyers all race to settlement on bargain-priced homes that are worth less than the mortgages written on them.

“We’re seeing a rush already,” said Daren Blomquist of Realtytrac, a firm that monitors real estate foreclosures and distressed sales. “There was a big increase in the first quarter and we’re expecting that to continue.”

A short sale occurs when the lender agrees to let the property be sold for less than the amount owed on the mortgage.

2012 may be the year the short sale market peaks, because of a number of factors. Bankers, pressed by the Obama administration and their own bottom lines, realize they are better off accepting partial payment on a mortgage than taking a home in foreclosure, said Blomquist. Some have created expedited short sales procedures in which they will pre-approve a home for a distress sale and even pay the seller as much as $45,000 to get the deal done.

Sellers with one eye on the clock realize that they could lose a valuable tax break if they fail to complete their short sale by year end

Sellers with one eye on the clock realize that they could lose a valuable tax break if they fail to complete their short sale by year end. And some sellers — who have been hanging on “by tooth and nail” to homes worth less than their mortgages for years, according to Elizabeth Weintraub, a Sacramento, California, real estate agent who specializes in short sales — have decided now is the time.

“It seems to be doubling every year, but 2012 is particularly busy,” she said.

In the first quarter of 2012, some 109,521 properties were sold in pre-foreclosure — a proxy for short sales, according to Realtytrac. That was a 25 percent increase from the same quarter the previous year and a three-year high, Blomquist said.

So it seems like this is the time to make a move. Here is some advice for sellers and bargain hunters.

— Sellers should start with their banks. Several lenders including JPMorgan Chase & Co and Bank of America Corp now have expedited short sales programs in which they pre-qualify sellers and their homes for short sales at agreed-upon prices. That dramatically cuts down on the amount of time it takes to push through all the paperwork that a short sale requires. In addition, these big banks are cherry-picking some troubled properties for extra owner incentives: Your bank may actually pay you as much as $45,000 to agree to sell your distressed home. Weintraub said she has one client who was offered $25,000 to sell a $95,000 house.

— Sellers should start soon to get that tax break. Lenders are also routinely wiping away any extra debt left after the short sale. So if you owe $200,000 on your house, and you sell it for $150,000, the bank would theoretically be able to come after you for the additional $50,000. They are forgiving that, and it is that forgiven debt that is normally subject to income tax. It will not be, under a special provision that expires at the end of this year.

“If you can, you close this year,” Weintraub said she is telling her clients. That means would-be sellers should start soon, if they have not already — it can easily take three or four months to close a short sale once you have a buyer.

— Sellers should realize that “hardship” is a relative term. In order for a lender to approve a short sale, the seller is supposed to make the case that financial hardship will keep him or her from paying off the loan. But in their rush to get these deals done, banks are considering a wider array of situations to be hardships. An impending retirement or job change can be a “hardship” if the rest of the deal is right. “It’s a great opportunity,” says Blomquist.

— Buyers should look for deals but not expect anything amazing. Bankers and real estate investors have caught on to the fact that these distressed houses are a good deal, so there is competition. They are often a better buy than foreclosures, because short-sold homes typically are owner-occupied, well cared-for and come with guarantees. Foreclosures, on the other hand, may have been stripped of appliances (and walls) by displaced borrowers on their way out. Weintraub tells people to expect to pay market price for a short sale.

But that market price still could be good for the buyer. “The average price of these properties is $175,000 — that’s still 20 percent below the average price of properties not in distress,” said Blomquist.

— Buyers should go for long locks on their mortgage rates. It is a long trip from finding an appealing property on a site like Realtytrac to actually buying the property. If you have a buyer’s agent, you can also ask your agent for a list of properties that are in distress. In the meantime, you can try to line up a mortgage at today’s near-record-low interest rates. Don’t even think about the 30-day locks; even 60 days may not be enough to get you through to closing. Buying a home that has been pre-approved through one of the banks’ accelerated programs can cut closing times down to as little as 10 days, said Weintraub.

SOURCE: Reuters

Short Sale News: Home Affordable Foreclosure Alternatives Program Extended Through 2013

Please tell anyone you suspect in jeopardy of foreclosure about this breaking news

Don’t assume that because you’ve heard of the Home Affordable Foreclosure Alternatives (HAFA) program, that your friends, family and neighbors have too. There has been a lot of speculation as to whether HAFA would be extended. Recently, we received confirmation that it has been extended through 2013.

The HAFA program was established in 2009 to help the homeowner avoid foreclosure and move on with their lives without the longstanding negative impact of foreclosure. As always, the first step for any homeowner living under the cloud of an unmanageable mortgage is to talk to their bank to see if a loan modification is possible.

If the bank can not approve the loan modification, the homeowner should talk to a Realtor who is a short sale expert; (CDPE designation and has experience selling homes under short sale terms).

Foreclosure and Danger

It is critical for people to understand that a foreclosure posts on an individual’s public record and therefore can cripple opportunities for gainful employment, obtaining future credit and potentially buying an affordable home. This negative impact can last for up to seven years. For people who qualify, HAFA is an alternative to foreclosure.

This YouTube Video produced by the National Association of Realtors explains HAFA.

Why you should get involved

Many of us know families, often they are neighbors, who packed their things and left home without saying goodbye and without warning. They didn’t do it to be cruel or rude. Likely, they did it because they knew they were going to lose their home and they felt overwhelmed and embarrassed.

This is how the story goes

Eight months ago, your neighbor called their bank to tell them they could no longer afford their mortgage. They’ve worked very hard all their lives, and have been responsible with their finances, but something changed and now they’re facing a hardship.

Maybe they have an adjustable arm that has come due and their mortgage increased to the point that they can no longer afford it. Sometimes your neighbor is still paying the mortgage by going into their savings or 401K. They’re trying not to ruin their credit score but they know they’ll run out of money soon so they try to start the process of refinancing or a loan modification.

Unfortunately, the house isn’t worth what they paid for it (it doesn’t appraise) and so they can’t refinance. Every week they call the bank and the bank tells them someone will call, but they never do. Each time they call, they get a different person on the phone. They explain their situation again and again but because they’ve been paying their mortgage, the bank doesn’t “care”.  There are homeowners who haven’t paid their mortgage in many months – they’re the priority. By the way, your neighbor has no idea, that all this time, they’ve been talking to the wrong department within the bank.  They’re going in circles, not making any progress. They feel frustrated, helpless and overwhelmed.

Finally, they don’t have any money left to pay their mortgage and since they’ve already tried for months with the bank, they think it’s futile and they leave. They didn’t have an advocate and now they have a foreclosure that will be on their record for seven years.

The HAFA Short Sale Update

HAFA Supplemental Directive 12-02, effective June 1, 2012, impacts short sales with loans from non-government-sponsored enterprises in which the homeowner is eligible for the HAFA program.

Key enhancements include:

  • Time frame extended: The program has been extended to Dec. 31, 2013. The HAFA short sale or deed in lieu of foreclosure can be initiated up to Dec. 31, 2013; however, the transaction must have a closing date on or before Sept. 30, 2014.
  • Eligibility updated: Occupancy requirements for HAFA eligibility have been removed; however, the property can’t be owned or secured by a business entity.
  • The second lien maximum has been increased from $6,000 to $8,500. 
  • HAFA relocation assistance of $3,000 will be paid only to the primary resident (borrower or occupant) of the property at time the agreement is executed. The resident must vacate upon closing. Vacant properties are not eligible for HAFA relocation assistance.
  • Nonborrowers (tenant, legal dependent, parent or grandparent) can now qualify if occupying the property and must vacate upon closing.

Additional information: 

  •  This policy is effective June 1, 2012, for new HAFA-eligible short sales initiated. It also applies to current HAFA short sales prior to closing.
  • Tenants will be eligible only for the $3,000. Any money available from additional incentive payout opportunities must be paid to the borrower. The HUD-1 must reflect the breakdown.
  • The borrower will be responsible for requesting and managing the tenant relocation assistance, including submitting required proof of occupancy and other documentation.

We can help! For questions and urgent needs (such as a pending default notice and/or pending foreclosure action) contact Debra Hall or George Martin, Jr., as both brokers are trained & experienced local short sale specialist at 208-928-SOLD

George Martin, Jr. Earns Real Estate, Short Sale Designation to Help Homeowners in Danger of Foreclosure

Hailey, Idaho – June 2, 2012 – According to Owner/Broker, Debra Hall, George Martin, Jr., of Hallmark Idaho Properties in Hailey Idaho has earned the prestigious Certified Distressed Property Expert® (CDPE) designation, having completed extensive training in foreclosure avoidance, with a particular emphasis on short sales. At a time when millions of homeowners are struggling with the possibility of foreclosure, the skills and education amassed by Martin will help benefit Blaine County area residents and communities.

Short sales allow the distressed homeowner to repay the mortgage at the price that the home sells for, even if it is lower than what is owed on the property. With plummeting property values, this can save many people from foreclosure and even bankruptcy. More and more lenders are willing to consider short sales because they are much less costly than foreclosures.

Today, more than 13 percent of homeowners are delinquent on their mortgage or in the foreclosure process. This is occurring across all price ranges, and the fastest-growing category of homes in foreclosure is the luxury home market.

These experts better understand market conditions than the average agent, and can help sellers through the complications of foreclosure avoidance, Charfen stated.

“The CDPE designation has been invaluable as I work with homeowners and lenders on complicated short sales,” said Martin. “It is so rewarding to be able to help families save their homes from foreclosure.”

While Martin has successfully closed over 2,500 single family transactions during his career and had  taken other “Short Sale” education/designation classes and seminars prior to completing this comprehensive course, he felt his education and resources were still lacking in order for him to provide the type of professional “Short Sale” help required too impact peoples lives in a productive and positive way.

Alex Charfen, co-founder and CEO of the Distressed Property Institute in Austin, Texas, said that agents such as George with the CDPE Designation have valuable perspective on the market, and training in short sales that can offer homeowners real alternatives to foreclosure, which can be devastating to credit ratings.

“These experts better understand market conditions than the average agent, and can help sellers through the complications of foreclosure avoidance,” he said.

Our goal is to help as many homeowners as possible

The Distressed Property Institute provides live and online courses to train real estate professionals how to help homeowners in distress, with a strong focus on handling short sales.

“Our goal is to help as many homeowners as possible, by educating as many real estate professionals as possible,” Charfen said. “George Martin, Jr. has demonstrated a commitment to struggling homeowners, a commitment that can provide much-needed stabilization to the community.”

For more information about CDPE Designation, visit: www.cdpe.com.

For more information about Hallmark Idaho Properties, visit: http://www.HallmarkIdahoProperties.com

Strategic Default: When is it Right for Homeowners?

Can clients get over the shame of defaulting on a mortgage?

Executives who improve a company’s bottom line by backing out of bad deals through strategic defaults on their commercial real estate loans often get bonuses. But when homeowners choose not to pay their mortgages because their homes have lost value, they are often vilified as deadbeats who are impeding the housing market recovery. Nevertheless, are there circumstances in which a financial advisor should recommend strategic default?

Executives who improve a company’s bottom line by backing out of bad deals through strategic defaults on their commercial real estate loans often get bonuses.

Some industry observers say yes. When the value of a property has fallen so much below what is owed that it would take years to recover the lost equity, it’s foolish to go deeper into debt to pay for it, according to Jon Maddux, CEO of YouWalkAway.com, a foreclosure company that charges a fee to help homeowners default. Rather, owners should use the laws to their advantage to forestall foreclosure while saving money to secure a better financial position in the future. James Surowiecki, a financial writer for The New Yorker, recently wrote that it’s time for owners who have no hope of recovering their losses to ignore the perceived stigma of default and do the “smart” thing rather than the “right” thing.

BIG STIGMA

But deciding to default is not simple, easy or painless. For homeowners, ignoring the stigma can be difficult, says Lee Munson, the founder and chief investment officer of Portfolio LLC, an asset management firm in Albuquerque, N.M. He says that while companies “don’t write nasty letters” when another corporation reneges on a debt, neighbors often do become incensed when a homeowner does. They’re angry because foreclosures lower neighborhood home values; meanwhile, defaulters who stay in their homes while the foreclosure process drags on often get months – and sometimes years – of a mortgage-free ride.

Default is also disastrous to the borrower’s credit rating, often knocking 100 points or more off a FICO score, and the hit can take years to remedy. Moreover, defaulters may not be able to get a traditional loan again for as long as seven years afterward (though that may not matter if a client is wealthy and already owns several other homes).

The downsides of default are serious enough that owners shouldn’t do it if their home has lost value but isn’t actually under water, or if the borrower still has the ability to pay, Munson says. Yet that’s not always the case, he adds, so planners should take a “holistic view” when a client reveals that he wants to default. “The first thing a planner should ask is, ‘What situation is prompting the client to do this?'” he says.

Typically, the answer has something to do with a problem, such as job loss or divorce, which has become financially and emotionally overwhelming. Rather than call the lender to work out a deal, the distraught and embarrassed homeowner simply stops paying. Munson says that’s an avoidable mistake, since most banks are willing to work with an owner to avoid the expense of foreclosure. And after several recent pushes from the federal government, lenders are now more willing than they have been for several years to restructure loans on more friendly terms, or to agree to a short sale, he says.

EXCEPTION, NOT RULE

For similar reasons, John LaPann, president and chief investment officer of Boston-based Federal Street Advisors, says he would be “unlikely” to recommend that a client walk away from a mortgage under most circumstances. “The exceptions are few and would involve truly extraordinary situations,” he says. Among them are catastrophes that sharply reduce the value of a home and fall outside an owner’s insurance policy, and structural problems in a condominium that association members are unable or unwilling to cure.

But sometimes default just can’t be avoided. In those cases, it may make more financial sense to stay in the home while the case works its way through the foreclosure process rather than simply giving the bank the keys, especially if a lot of money is owed. A recent analysis by Lender Processing Services for The Wall Street Journal found that nationally, banks allowed homeowners with loans topping $1 million to stay in their homes for an average of about six months longer than those with loans less than $250,000. The wait is even longer in states where judges must approve foreclosures before banks repossess properties, such as New York, Florida and Connecticut.

If foreclosure is inevitable, Munson says it’s smart to hire a good real estate lawyer who can comb through documents for improprieties. Clients who have already gone through foreclosure should also hire counsel, since so many lender abuses have allegedly occurred over the past few years that compensation is being offered to consumers who can prove they were harmed.

Miami-based attorney Douglass Lodmell says legal help is important so clients don’t inadvertently give up any rights during the foreclosure process or get socked with a deficiency judgment that requires them to repay the defaulted amount later on. Before they get to the point where they stop paying the mortgage, clients with substantial assets other than their distressed home should also look into establishing protective trusts so that creditors “can’t just go in and grab them,” he says.

PAST THE PEAK

Although headlines predicted a tsunami of strategic defaults once housing prices began to fall, so far it hasn’t come to pass. Defining a strategic defaulter as someone who doesn’t pay the mortgage but does pay other non-housing debt, credit bureau Experian and consulting firm Oliver Wyman figured that strategic defaults peaked at about one in five foreclosures at the end of 2008. But such numbers are squishy because it’s impossible to know from the data whether someone can’t or just won’t pay debts. After all, even when a financial situation seems desperate, there may be other ways to raise funds, such as borrowing money from a friend or relative, raiding the kids’ college funds or taking a second job.

Borrowers are more likely to make the effort to keep paying if the amounts owed are relatively small; if they’ve amassed a large amount of equity in the home; or they expect the housing market to perk up soon, according to Michael Seiler, founder and director of the Institute for Behavioral and Experimental Real Estate at Old Dominion University in Norfolk, Va. They’re also highly influenced by what their peers do.

Seiler says that while most people denounce defaulters because it violates their deep-seated beliefs that we all should pay our bills, in a few cases the group-think works the other way. One woman he interviewed for his research said she had been paying the mortgage faithfully on her Florida home, even though her community’s home values had tumbled over the last few years. Yet many of her neighbors – who had defaulted – kept constant pressure on her to reverse her choice. “They talked to her as if she was an idiot to keep paying,” he says.

Lodmell contends that letting go of an underwater home allows the market to establish true prices and converts a bad “speculation-prone” loan into a good long-term asset. “It’s morally just to strategically default,” he declares.

But such attitudes are troubling to Seiler, who says strategic defaults create broader problems for society. He says it’s up to “mavens” like financial planners to guide their clients so that the interests of society, as well as individuals, are protected. “They can help cure the disease,” he says.

SOURCE: Financial Planning

VIDEO: Beware of Foreclosure Rescue Scams!

Real Help is Free!

Foreclosure rescue and mortgage modification scams are a growing problem that could cost you thousands of dollars – or even your home.

Scammers make promises that they can’t keep, such as guaranteeing to “save” your home or lower your mortgage, usually for a fee, often pretending that they have direct contact with your mortgage servicer – which they do not.

Tips to Avoid Scams:

  1. Beware of anyone who asks you to pay a fee in exchange for counseling services or the modification of a delinquent loan.
  2. Beware of people who pressure you to sign papers immediately or who try to convince you that they can “save” your home if you sign or transfer over the deed to your house.
  3. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
  4. Never make a mortgage payment to anyone other than your mortgage company without their approval.

The federal government provides the help you need for free!

Just call 888-995-HOPE (4673) for information about The Making Home Affordable Program ® and to speak with a HUD-approved housing counselor. Assistance is available free, 24-7, in 160 languages.

 

Will short sales save the housing market?

Foreclosures are down and short sales are up, but what does this mean for the real estate market as a whole? The answer depends on who you ask.
Short sales now outpace foreclosures

But first, some background: Short sales occur when a lender agrees to sell a home for less than what is owed on the mortgage. The lender forgives the difference, and the borrower unloads a home they can’t afford.

In an effort to avoid adding to their already large portfolios of bank-owned homes (REOs), lenders are beginning to seriously consider short sales as an alternative to foreclosure. According to a Bloomberg report released Tuesday, banks including Wells Fargo and JPMorgan Chase last year started giving away cash to select homeowners who agreed to do a short sale instead of allowing the house to fall into foreclosure.

Experts at the National Association of Realtors (NAR) hear the short sale process is becoming more streamlined, which is good news for buyers and lenders. This more organized process means short sales can be unloaded quickly [Read more…]

Short Video: What is a “Short Sale”

If you are experiencing financial challenges that have made your mortgage payment unmanageable, you may well be surprised at how much help is available. The kind of help depends on a number of factors depending on your lender, the amount owed on your mortgage, your current payment status, and a range of other factors.

The most important fact for financially distressed homeowners to keep in mind:

the sooner help is sought, the better.

Too often, once homeowners find themselves on what feels like an inevitable path toward foreclosure, they become frozen in action.

The situation is complicated; the stakes are high, and that’s why you need an advocate who is knowledgeable and adept at navigating among solutions that will lead to a fresh start.

Here is a short video explaining the basics of one possible option, the “Short Sale”.

In a short sale, sellers who owe more on their home than its current market value, work with a real estate agent who finds a buyer and then negotiates with the lender to accept a loan payoff that is less than the amount owed.

A short sale is one of many options available for financially distressed homeowners.

We at Hallmark Idaho Properties are totally  committed to rolling up our sleeves and working closely with financially stressed homeowners to find the solution that best meets their needs.

Now is not the time to go it alone or to allow present circumstances to undermine future prospects. Give us a call today.

Avoid foreclosure. Get the help you need online.

If you are struggling with your mortgage payments or facing foreclosure, you may feel overwhelmed and frustrated. Many homeowners simply don’t know what to do or where to go for assistance, and they feel too helpless to take action.

We understand and look for additional ways to help our clients on a daily basis.

Fannie Mae has created the website KnowYourOptions.com to help homeowners just like you.

The’ve  made it easy to find the information you need, so you can get help before it’s too late.

SOURCE: Fannie Mae

Short Sales Get Shorter: New Deadlines to go into Effect

As part of a settlement with state attorneys general, the five largest mortgage servicers are adopting new requirements for short sales, which is expected to speed-up what has been known as a lengthy process.

Here are some of the new requirements for servicers under the settlement:

  • Servicers must provide borrowers with a decision within 30 days after receiving a short sale package request.
  • Servicers will be required to notify a borrower, also within 30 days, if any necessary documents are missing to process the short sale request.
  • Servicers must notify a borrower immediately if a deficiency payment is needed to approve the short sale. They also must provide an estimated amount for the deficiency payment needed for the short sale.
  • Servicers are also required to form an internal group to review all short sale requests.
  • Banks will be considered in violation of the settlement requirements if they take longer than 30 days on more than 10 percent of the short sale requests. Violations can carry fines of up to $1 million and $5 million for repeat offenses.

Hallmark Idaho Properties is a specialest is both Short Sale and Bank Owned Properties.

If you need help  . . . give us a call