This blog post for this week it to present an opportunity to homeowners who are  “upside down” in their mortgages, as well as mortgage lenders, may want to take advantage of the federal Home Affordable Foreclosure Alternative program, or HAFA.

In 2009, the Treasury Department introduced the HAFA program to provide an option for homeowners unable to keep their homes through the Home Affordable Modification program. The HAFA program took effect April 5, 2010, and sunsets on Dec. 31, 2012.

The benefit of a HAFA short sale is that borrowers are no longer responsible for the difference between what they owe on their mortgage and the amount the home sells for, so it doesn’t affect sellers’ taxes.

This is a great opportunity for homeowners. The U.S. government is allowing individuals who have purchase a home to be able to walk away while still maintaining there credit through a short sale as an incentive that they would be able to purchase a home within the next two years to revamp the housing market.  However,  depending on the mortgage companies some may have to wait longer than others.

Dealing with recent real estate price declines has proven to be difficult for homeowners and industry sellers. For your convenience I have provided insightful information  ABOUT Loan Modifications. The Obama Administration started the Making Home Affordable Program.  Last week administration held a Homeowners Community Event in San Jose, Califonia.   Fortunately, they will hold yet another even in Phoenix, Arizona on March 24th.

Over the past year  reports indicate how homeowners that are looking for a loan modification in order to avoid foreclosure are taken advantage of. The market may not be something to write home about however, there is no level of concern from the Banks. For example, in a number of cases the homeowner managed to go through the initial trial period only to realize  that the bank has decided to proceed with the foreclosure anyway. How can this be? It is painfully clear, no one is communicating. It is counter productive.

Reportedly, attempting loan modification has made things even worse. There have been numerous class-action lawsuits that have been started against servicers like Wells Fargo, Bank of America, Chase and Citibank.

However, the persuasive  market maintainer the U.S. Department of Housing and Urban Development (HUD) claims that not everything is as bad as it is potrayed. Someone has to maintain confidence in our market. One positive thing is that new and existing homes sales have increased and affordability remains high.

Home prices have not completely stopped and are still “unsettled”, but Obamas program has helped “millions more to save money by refinancing”. “That’s why we’re committed to continuing to provide help to homeowners by implementing the broad range of programs the Obama Administration has put in place,” said Raphael Bostic, assistant secretary of HUD.

In case you are interested to attend this even, bring two recent pay-stubs, bank statements, and information concerning your credit card and other debt. Bring your recent mortgage statement to the Phoenix Convention Center, 100 North Third Street, Phoenix, AZ 85004. The event starts at 11 AM and lasts through 7:30 PM.

Quick Overview of Short Sales

Most of you probably know what a short sale is and I know I’ve mentioned it quite a few times on the blog, but I’ll do it again just for good measure. A short sale means the seller’s lender is accepting a discounted payoff to release an existing mortgage. Lenders don’t accept all offers and that is where the negotiation comes in. Enter Me.

The seller doesn’t have to be in default or late on their payments to go through a short sale. It’s possible that the lenders will accept a short sale because the value has fallen. The seller may owe more than the home is worth, so a discounted price might bring the price in line with market value, not below it.

Public Record Check

Research is necessary. Always. I will do mine and you should do yours. Among many other things I will find out who is in title, whether a foreclosure notice has been filed and how much is owed to the lender(s). The amount owed is important because it will help you to determine how much to offer.

Problems arise when there are two loans. I’ve seen it happen many times. If a seller owes $200,000 on the first and $60,000 on the second, offering $200,000 leaves nothing for the second. The first will need to give something to the second to gain its cooperation. Definitely should stay away from short sales with two loans.

Experience a Must

It’s one thing when your listing agent has never handled a short sale, but if the buyer’s agent hasn’t either then you are in a world of hurt. It’s called growing pains and it hurts. Experience is definitely a plus (I have experience by the way, in case you were wondering).

First major difference between experienced and inexperienced is a quicker transaction and the second is negotiation skills protecting your interests. It’s my job (if I was your realtor) to make sure you are informed and everything is going smoothly. You’d be surprised to know how many people hate their jobs in the real estate business especially loan officers and the title company employees and they are the most important ones. They keep your file moving along.

Qualified Short Sale

If the seller has no equity and is unable to repay the difference between your sales price and the existing loans then a lender is likely to agree to a short sale. The hardship letter is the most important thing the sellers need to provide to qualify for a short sale. I explain that in another blog. Also many other things regarding short sales. Please feel free to look around.

Sellers should not receive a dime from the buyer just so the seller could give the buyer first dibs on the property. That would constitute fraud. Stay away from those type of people. You don’t need to be a part of that. The seller should receive no money because the lender is losing money on a short sale.

Purchase offer and other Documents

Sellers really have no say in the matter regarding purchase offers. The lenders call all the shots. If they accept get ready for a fun ride. The rest of the real estate purchasing ensues and your agent’s time will be spent dealing with the lenders on everything. For example, the earnest money deposit. Do not be astonished if the lender asks you to increase it.

You will have to go through the loan process per a usual transaction. Hopefully, a good company that will work with you and your agent.

The Response

Wait and wait and wait and…nope keep waiting.

Some lenders submit short sales to committee, but most can make a decision within two to three months. Get a name and phone number for the appropriate contact at the lender. Don’t send an offer blindly to a department or that paperwork is gone for good.

Commissions

The lender will pay the commission. Why? Because the seller receives no money to pay a commission. The lender will likely negotiate the commission directly with the listing broker, who will then share the commission with your agent (lucky me right?).

If you have signed a buyer’s broker agreement with your agent, ask if the agent will waive the difference due or you might have to pay it out of your pocket (Ask and you shall receive). The lenders penalize us for reasons I can’t explain. Don’t worry, I don’t like them any more than you do.

Inspections

The lenders usually doesn’t pay for anything that a seller would pay in a normal transaction like home protection plans for the buyer, buyer credits of any kind and pest / termite inspections. A buyer will be asked to purchase the property “as is,” which means no repairs. With that being said PLEASE because this is extremely important obtain a home inspection.

Thank you for your time. Bye.

1.      Walking away is better than a short sale:

You’re taking a risk. There is a risk of deficiency judgment which I have discussed in a previous blog. There could be some tax consequences involved. There are some huge consequences that legal and tax attorneys will discuss with you before you decide to walk away. That’s my advice. Don’t walk away until you’ve heard all sides and please don’t listen to your friends and family. I know they mean well, but they don’t have the experience necessary to make a good judgment (unless they are a legal or tax attorney). Therefore, walking away is not better than a short sale (in most cases, but not all).

2.      Short-selling your property will be the same as Quit Claim Deed:

Another risk. In short, a quit claim deed is a deed that transfers part or all interest in piece of real estate from one person to another. You are still responsible for your loan amount until the new owner refinances. Don’t fall for investors saying that if you do a quit claim deed with them they will let you stay in your home for your original monthly payment. That won’t happen. Investors care only about profit, not you. Now that they have legal ownership over your home they can kick you out whenever they want. Simply stated, a quit claim deed is not a viable or wise option to stop the foreclosure process. Therefore, a short sale is not like a quit claim deed.

3.      The bank/ loan company is obliged to do certain things:

Wrong. They can refuse your short sale and just foreclose on you as Bank of America has done to most of their clients. They can ask for whatever they want (within their legal rights and that’s why you need legal counsel to know what they can and cannot do). It all depends on certain factors and who you are working with. Sometimes you win and sometimes you lose. It’s a crap shoot, but unlike Vegas you can come prepared and have a group of experts supporting your every dice roll. But until you do banks will do only what they want and not what you ask of them.

4.      A short sale is simple and anyone can do it because there are simple guidelines:

Nope. False. Incorrect. Wrong. There is absolutely nothing standard or regular in a short sale transaction. Just like us humans they are all different. The more you do the better you get at it. The key component is negotiating. The key factor of negotiating is having experts doing the talking and paperwork for you. That’s where I come in.

Don’t assume anything. Question everything. I will do everything I can to help you. Please don’t listen to one opinion or even two. If you talk to me please talk to someone else and then someone else. That’s my advice. Until next time.

A successful loan modification can you put you into the same loan as a person with 800 credit score and a big down payment.

Imagine that. Your loan modification can put you into a situation like nothing ever happened.

Can this be possible? Can you be a part of this?

These are true examples of what a loan modification has done for clients.

Case #1

Client went from 11.25% to 5.625% and saved $1082 a month. Boom! Take that greedy bank.

Case #2

Client had 18 days prior to the sale of the home. From 11.25% to 4.875% with a savings of $2,000 a month!

Case #3

Saving $1,700 per month coming from behind 4 months and staying current with a 7% 5 year ARM.

Case #4

Typical story. 2 months behind at 10.25% to being current at 4.85%, saving more than $1,300 a month.

I wish I could help everybody. I wish this never happened. Well, that doesn’t matter anymore. We’re here now and it’s time to fight. Let me fight for you and I will do everything I can to save your home.

OK, so debt has piled up beyond your control. Things seem suffocating and you want a breath of fresh air. You look into bankruptcy just to see what your options could be. Questions roam around in your head, “Do I qualify for a Ch. 7 or Ch.13?” or “What happens to my assets when I file for bankruptcy?”

You delve a little further into your research. You want a qualified Arizona Bankruptcy Attorney, but how do you get there? You use a “qualifying standard” before hiring any attorney. This is imperative because the problems could keep spiraling downward and to add insult to injury you could end up deeper in debt.

Let me list a few tips to make the decision on a qualified Arizona bankruptcy attorney a little easier:

The LexisNexis Martindale-Hubbell Ratings

Comparing lawyers by their experience, ethical standards, legal knowledge and overall capacity for excellence is a good way to start. The best thing about using the ratings means the work has already been done for you. LexisNexis & Martindale-Hubbell established the LexisNexis Martindale-Hubbell Peer Review Ratings and is a 3rd party ranking system. They are two of the largest legal firm servicing companies on this planet and have active profiles of over a million lawyers.

There are three ranks available: AV attorneys, BV attorneys and Rated attorneys.

An AV rating is designated for attorneys with only the highest level of achievement & experience.  An attorney with an AV rating is typically top-tier, the type of attorney that is highly respected among other attorneys, boasting an extremely vast list of satisfied clients & partners.

A BV rating is designated for attorneys with some level of experience and is a respected mark of achievement.  BV rated attorneys are still very qualified for the job.

A Rated rating is your average attorney in terms of reputation & ethical standing.  While this ranking falls short of both the AV & BV ratings, attorneys that are rated with LexisNexis Martindale-Hubbell still remain among the finest of attorneys.

Something to keep on your mind.

The Bankruptcy Option

Don’t rush into bankruptcy. Look at all the options even when you think you don’t have time. You may miss the first step which is debt settlement where you negotiate with your creditors.  Don’t let a bankruptcy attorney submit paperwork and represent you in court for a ridiculous amount of money. Find an attorney who is willing to give you general counsel for little to no cost, but guess what? You’re very lucky if you find a lawyer to do that who is not a Pre Paid Legal attorney. Who wants to declare bankruptcy? Nobody, but if you do decide to do it explore every option.

General Legal Counsel Fee

Average cost for regular attorney is $200-300 an hour for general legal consultation. Guess what? You should pay no more than $16 a month for unlimited consultation. No need to get billed $800 for a few coffee talks with an attorney.

Attorney Experience

• Verify track records.
• Licensed and reputable firm is not enough.
• Length of time in business of around 15-25 years is good. If less it doesn’t mean they can’t get the job done. Just a number to look out for.

Phoenix Short Sale Blog endorses the use of Arizona’s Pre Paid Legal Firm for general counsel and discount bankruptcy services. The founder of this firm is an AV ranked attorney with 25+ years of experience in law. If you decide to file for bankruptcy I recommend using Pre Paid Legal to obtain general legal counsel and have their designated Bankruptcy Attorneys begin the process.

Making choices is part of life. I’m here to give you as much information as possible to make the best one for you and your family. Until we meet again.

Now let’s explain a little about an Arizona Loan Modification.

Arizona Loan Modification:

• Permanent change in one or more of the terms of your loan
• Allows the loan to be reinstated
• Results in a payment you can afford.

I’ll state some facts about Arizona Loan Modification:

If you are late on your payments and begin the loan mod process you can get those accrued late fees waived by the mortgage company. That is a goal of the loan mod. It brings the delinquent mortgage current and gives you a new start.

You can reduce (or increase, but they are at record lows right now) your current mortgage rate to the current market rate when you complete a loan modification. The date the mortgage company approves the loan mod (all verification completed and servicing notes documented, reported to SFDMS) is the date that mortgage company is to use in determining the interest rate.

Your total unpaid loan amount that is due will re-amortize over a 360 month period (30 year). This will be from the due date of the first installment required under the newly modified mortgage.

Let’s say you recently became unemployed, but your spouse is still employed. However, your spouse is not on the mortgage. What happens next is that the mortgage company will look at your household income and expenses and figure out if the spouse’s income is sufficient to satisfy the new modified mortgage payment, but insufficient to pay back the arrearage (amount of loan that is overdue). Basically, they are considering whether they should do a loan mod with you in your current situation. Once they figure that out the mortgage company will talk with their legal department and discuss legal things and decide again if they should do a loan mod with you because your spouse is not on the original mortgage.

There are many more little things that happen or can happen in a loan mod. All mortgage companies are different because they have different people working for them and have different rules regarding loan mods. There a set of rules they must follow and like everything else if you have an expert on your side these rules can work for you and not against you.

Please click here to speak with a loan modification expert before you make any decision regarding your home.

Yes, foreclosures can be swift and easy. Yes, the lender takes over the property. Yes, you no longer own nor do you have the right to live in your ex-home. Technically, a foreclosure can begin as soon as you are late with the mortgage payment, but they don’t usually do that because they are in the lending business not real estate business.

Alternatives are usually mentioned and followed through before trying to repossess a home. On average, if you’re in contact/negotiation with the lender, you can add an additional three month window before foreclosure is initiated.  Now if it doesn’t work out and an alternative cannot be found foreclosure proceedings may begin. Now most of you have a trust deed so that means the lender doesn’t have to go to court to foreclose on your home. Again this makes it more simple and quick.

The lender has begun foreclosure proceedings:

• They appoint their trustee (the person or entity that has the legal right to sell the home in a trustee sale) to handle the appropriate paperwork. The trustee records in the county recorder’s office a “Notice of Trustee’s Sale” as stated by law.

Notice of Trustee’s Sale:

• Legal notice that the home is to be sold no sooner than 90 days from the recording date of the notice.
• Published a minimum of once a week for four consecutive weeks in a “newspaper of general circulation” in that county.
• Mail a notice within five days of the recorded notice of trustee sale to you and other parties affected by the foreclosure.

Now comes the bidding process (this is assuming that you have not reinstated the loan):

• Sale conducted at a previously disclosed location.
• $1,000 deposit required to bid on the home.
• Home is sold to the highest bidder
• Bidder has until 5:00 p.m. of the following day (assuming that it is not Saturday or a legal holiday) to pay the remaining balance in cash or other acceptable forms of payment as determined by the trustee.
• Failure to pay the amount bid, the bidder is liable to any person who suffers loss or expenses as a result, including attorney fees and also forfeits the deposit.
• As a result, the second highest bidder is given until 5:00 p.m. of the next day.
• Proceeds from the sale are used to pay off the primary lien (trust deed) against the home (as noted on the trust deed).  Any proceeds that are left go to the junior lien holders in order of priority and finally in the event that any remaining balance is left over from the sale, the trustee will remit the balance to you. (That usually doesn’t happen).

And finally the transfer of title:

• Title is conveyed to the winning bidder by a trustee’s deed.
• This transfer of title relinquishes any right you have from reinstating the mortgage or redeeming the property after foreclosure.
• The trustee’s deed clears the title of any liens and encumbrances that are junior to the trust deed.

In certain situations, junior lien holders may pursue a deficiency judgment against you to recover the balances owed.  However, you may be protected by such lawsuits under the law.  I discuss this on a previous blog.

Problem #1:

The mortgage company usually sells the house for less than what is owed. For example, a lender loans a person $200,000 to purchase a home. A few years later, payments aren’t being made and you get foreclosed upon. The home sells for $180,000. Final result is a $20,000 loss to the lender.

Problem #2:

Now let’s discuss the money owed by you. It can contain the previous mortgage amount, any late payments, lawyers’ fees, and administrative costs incurred during the foreclosure process.

Now we get to where you’re legally bound to those costs (the two problems state above). In Arizona, the company may be entitled to receive the deficiency judgment in court and come after you for the remaining balance owed. The bad news is this means that the lender could sue you for $20,000 using the example above. The good news is there are limitations to a deficiency incurred during foreclosure in this great state.

Arizona’s “anti-deficiency” statutes prevent a lender from suing a person for any losses on a home after foreclosure. As outlined in Arizona Revised Statutes, Title 33, Chapter 6.1, a person may not be sued by his or her lender if the property is:

• Located on 2.5 acres or less
• A single family residence or duplex

This only applies if the decrease in value is not due to the home owner’s neglect.

The lender has 90 days after the sale of the property to begin judicial proceedings to recover any losses if they decide to seek a deficiency judegment. If they don’t pursue it they lose the right to recover the deficiency. That’s a lot of time to get the paperwork in though.

Let’s say you don’t qualify for the exception. What can you do? Well, one option is to deed the property back to the lender prior to foreclosure. This is known as a deed-in-lieu of foreclosure. If the lender accepts the deed they agree to accept the property for the amount that you owe, thus eliminating any potential deficiency.

Note: If you deed the property back to the lender, you may be taxed on the amount of the deficiency that was forgiven by the lender. You (in the previous example) deed the home to the lender, the lender will forgive the $200,000 loan and accept the $180,000 as payment in full.  However, you may now have to report the $20,000 as taxable income on your next tax return. Ouch! There is a lot of legal jargon that goes along with this, but I’m not an attorney.

The one loan that the exception doesn’t apply:

• VA Loans

Recent litigation has stated that VA is allowed to obtain a deficiency judgment despite current state laws that prohibit such actions.

Please click here to consult an attorney before proceeding with any course of action. Until next time.

“Can credit repair actually remove foreclosures from credit reports?

“How long does a bankruptcy stay on my credit report”

“How long does a foreclosure stay on my credit?”

“Short sales take more than 90 days, how will that affect my credit score?”

“Does a short sale hurt my credit?”

“How does a foreclosure affect my credit score?”

… there are many more so don’t fret if I didn’t mention one.

First, the answer is yes, a short sale and foreclosure will impact your credit score. A foreclosure will affect your score more and will stay on your report longer than a short sale.

Short Sale:

• Minimum of 200-300 point reduction to your FICO score, depending on the borrower.
• Minimum 24 month wait before obtaining another mortgage.

Foreclosure

• Minimum 200-300 point reduction to your FICO score, depending on the borrower.  (What do you know it will almost be the same as a short sale).
• 7 years it will stay on your credit report.  Minimum 24 month wait before obtaining another mortgage.  Even obtaining a standard interest loan will be difficult.

Bankruptcy:

• 7-10 years it will stay on your credit report.  A huge hit to your credit score, probably the same as a short sale or foreclosure

The solution:

Your credit will get hit no matter what you do. That’s where you need to know some things that they don’t tell you.

The FCRA (Fair Credit Reporting Act) requires certain steps to be made by creditors before reporting an item on a credit report, and if a creditor misses one or more of these steps (which they often do), the FCRA will not allow the item to appear on the credit report.  This includes unverifiable information, clerical errors, mistaken identities, etc.

Simply put, if there are inaccuracies in your credit report negative items such as a short sale, foreclosure, late payments (30/60/90 day lates) and sometimes even your BK can be removed from your credit report. This is not illegal! The FCRA requires conditions beyond accuracy for your benefit and creditors must abide by them or face having the negative items they have on you to be deleted. To delete those items you must request that they verify the information that the creditors provided. I’m not saying all of them will be deleted, but from my experience a good portion of them do. You can attempt to verify information on your credit report one of two ways:

• By yourself
• Have a professional credit repair company do it for you

This alone will not raise your credit score. There are other things that you must do to accomplish that.

When you want to purchase your next home don’t use hard money lenders who charge ridiculously high interest rates for bad credit applicants. Your post-short sale or foreclosure situation should not be taken advantage of and there are other options before you should even consider doing that. Remove negative items using our lawyers, raise your FICO score and obtain a standard, low interest mortgage when purchasing your next house.

Credit Repair & Deletion:

Start with a clean slate. It will take time. Everything does, but you will be happy with the results. With the help of one of our partner law firms, it is possible to remove foreclosures from credit reports, as well as short sales and other negative items.

—> Use this link to access the Credit Deletion section of this website and repair your credit today

Do your due diligence and listen to all the angles before you make your decision. You should feel good when you are repairing your credit, but like I mentioned before it just takes time. Rome wasn’t built in a day.