September 19, 2015

How Difficult is your Short Sale?

Filed under: Florida,Short Sale

Me: I tried calling at 5pm and again at 6:30pm and thought it would be best to send you a detailed email that you can digest at your own pace. I have completed the research on the property and it is not good. On a scale of 1 to 10 with 1 being a simple transaction and 10 being the most difficult, i would assign your file an 8.5.

The HOA, second mortgage, and first mortgage (in that order) have all filed for foreclosure. The first of the three cases to reach summary judgment and auction/sale will result in you no longer owning the property and the termination of the listing. This means you have very little time.

It is most doubtful that the payoff on your first mortgage with Ocwen is $189k. The balance may have been listed as that amount on a statement, credit report, or alleged in the foreclosure complaint, but the payoff is not the balance. If payments have not been made on the property then the lender force places insurance at a cost of 3-4 times the actual policy, advances escrows for property taxes, charges late fees, interest, court filing fees, attorney fees, etc. I would guess your actual payoff could be more than $50k higher than the $189k. This means the first would have to be shorted even if the purchase price on the first was $265,000 or higher.

Next is the second mortgage. It is a line of credit. These are typically looked at like credit card debts and there is a good chance that BB&T will reject the short sale because Ocwen will only allow them a small payment ($6,000 to $12,000 depending on loan type). My guess is that they will require a promissory note or contribution from you and/or your ex – neither of these are good.

The HOA is in foreclosure. The amount of the past dues appears to be $3,800. The first mortgage will only allow a payment of one years worth of the dues which is $2,268. Unfortunately, the amount the HOA will require because it is in foreclosure will probably be closer to $8,000.

We also have a judgment attached to title from Citibank for $4,700. This is a lien on the property and you will not be able to sell the property without this being satisfied or by some other legal means. The first mortgage will not allow the judgment creditor any money.

Then, we have a bankruptcy filed by ex-husband in May. It appears there are entries in the docket after the suggestion of bankruptcy – i don’t know if this means the cases have stalled or they are all still proceeding at this stage. Either way, the property is still tied up in the bankruptcy estate and either a dismissal or trustee’s consent to abandonment of asset would be required to short sell. This is not an easy task and can be very time consuming.

I appreciate the referral and talking with you on the phone today. I have closed transactions with all of the problems listed above but it is a lot of extra work. On our phone call today i did not sense a strong motivation to get this closed (as a short sale) and so based on all of this information I am going to respectfully pass on the transaction.

Her: I appreciate you taking my call and the research and information that you passed along about the property, I’m glad that you emailed the details as I’m certain that my ears would have fallen off, as I had no idea the matter this complicated!! Nor that ex filed for bankruptcy.

I regret any misunderstanding that I wouldn’t be interested in a short sale; I was hopeful that there could be a better outcome, or creative options, but clearly, that is not the case. I plan to receive guidance as it relates to the bankruptcy side, so that I can plan that angle as necessary.

Paul; respectfully, your hesitation is understandable as there are challenges with the legal side of the property, along with the length of time for resolution, however, I’d consider myself fortunate to match your experience in the world of short sales.

I invite you to look at the house in person for you to access the possibility for moving forward with me. Obviously, I’d like a bit of help sorting out the path of least resistance to make the best of these real estate issues to where both parties are equally represented. Thanks kindly for your help thus far and ask you reconsider, or perhaps an offer of a referral to another broker.

Me: There were some redeeming attributes. For one, the standard incentive on a short sale is $3,000 typically paid to the seller who resides in the house; however, the incentive changed for certain loan types. if you type into Google ‘fannie mae loan lookup’ and then do the same with ‘freddie mac loan lookup’, enter your details and see if you have a match. if you do NOT have a match with Fannie or Freddie then there is a very good chance you would be eligible for the new incentive which started 2-15-15 of this year and is $10,000. $10k can be life changing to many of my sellers.

The fact that you mention ‘I plan to receive guidance as it relates to the bankruptcy side, so that I can plan that angle as necessary’ evens the field with BB&T because that could be used as leverage. if they insist on a promissory note but believe that you and ex will bankrupt then there is a very good chance they would accept the $6,000 they are offered from Ocwen as a full settlement.

All of the negatives i listed in that email can be countered and overcome, but having been doing this for seven years i can tell you the main reason for short sales not closing 9 times out of 10 is because the seller gives up. For this reason, the most important consideration in accepting an assignment is to gauge the seller’s motivation. We got off on the wrong approach/strategy to the short sale (by looking at it is an equity sale) and we did not discuss the other primary motivators for doing a short sale – namely, that the transaction is contingent uppn the first, second, and HOA all agreeing to the transaction as a full settlement. Florida is a deficiency judgment state and lenders can foreclose and then ask the court to grant a deficiency decree which can be used to levy a bank account or garnish wages.  Closing the short sale would mean that we have estoppel letters from all three agreeing to waive any deficiency.

I suppose what i am saying is that i am on board as much as you and ex would be on board. You’d have to talk to your ex and let him know that you found an agent who will condition the short sale as being a full settlement and make sure that he is on board with completing all paperwork timely. if that is the case then let me know and i’ll come to see you at the property.

January 2, 2015

Mortgage Debt Relief Act Extended

Filed under: Short Sale

Taxes on phantom income for short sales just received a break for consumers.  The Mortgage Debt Relief Act was extended.

October 18, 2014

Mortgage Debt Relief Act

An article on Housingwire suggests “extending the tax break through 2015 and making it retroactive to cover all of 2014 would be a good start. Congress should follow the leadership of Sen. Debbie Stabenow, D-Mich., and Sen. Dean Heller, R-Nevada, and move immediately to extend the bipartisan Mortgage Forgiveness Debt Relief Act before more damage is done”.

I like the sound of that but these articles always center around the 1099-C which a short seller can receive on a short sale but never discuss the 1099-A that they get when they do a deed-in-lieu or complete a foreclosure.  On top of that the foreclosing lender can also pursue a deficiency judgment in the state of Florida where a short sale can provide debt forgiveness with no deficiency collection.

Even if the Mortgage Debt Relief Act is not extended, there is always the insolvency exclusion to debt forgiveness, so please be sure to check with your tax advisor.

October 5, 2014

EverBank FHA Short Sales

Filed under: FHA Loan,Short Sale
Looks like FHA caught up with EverBank and their short sale shenanigans recently.  HUD OIG reports:

“EverBank did not ensure that the mortgagors’ default on the FHA-insured mortgages was due to an adverse and unavoidable financial situation….Also, EverBank did not conduct a thorough and independent verification of the mortgagors’ income, claimed expenses and personal resources to properly determine if they had the ability to pay their mortgage payments. Lastly, EverBank did not substantiate that mortgagors’ need to vacate the FHA-insured property was due to the cause of the default.”

But is anyone really surprised?  I mean, this is EverBank after all.

August 21, 2014

Fannie Mae Florida Deficiency Judgments

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It took longer than I had anticipated but it has now officially arrived – a real life nightmare for thousands of homeowners who simply walked away from their upside-down Florida home.  They knew the bank would foreclose but they thought that would be the end of it.  Now they realize this is just the beginning, as the mortgage behemoth Fannie Mae has hired creepy debt collector company Dyck O’Neal to pursue deficiency judgments through the Florida courts.  The Palm Beach Post reports:
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“People are getting served with these deficiency suits and are absolutely shocked,” said Paul Baltrun, director of corporate development for the Law Office of Paul A. Krasker in West Palm Beach. “The size of the judgments — we’re not seeing $30,000 — these are at a minimum of $100,000.”
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But there is a silver lining for those of you who are presently upside-down and facing foreclosure.  A short sale can provide a full release of liability meaning once it’s closed you no longer owe anything to Fannie Mae or her creepy red headed step-child Dyck O’Neal.
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August 10, 2014

BofA HIN Short Sale Incentive Still Pays

Filed under: Florida,Short Sale
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My client went missing for three weeks and then called me out of the blue.  I asked him where he was living and he said on the street.  I said you mean you are sleeping outside on the ground?  He said no, i sleep in a cardboard box behind the Cumberland Farms on Seminole Boulevard.  I said why aren’t you living in the house?  He said i didn’t know i could.  I said i’m coming to get you right now.  OK, I’ll pack my bags he says.
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I pull up to the Cumberland Farms on Seminole Blvd and there he is with a glad trash bag filled to the max about four feet tall.  We put it in my trunk and my trunk still smells today.  Anyways, brought him back to the house and explained that BofA’s short sale letter states that you may be eligible for $5,000 if you live in the house.  He wrote a handwritten letter that i attached to the HUD that was submitted stating he was now living in the house.
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BofA tried a couple times to get me to remove it but fortunately they agreed to pay it in the approval letter i received today even though they knew he wasn’t living in the house at the time he made application.
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I think this $5,000 is going to change his life.

April 24, 2014

Completing A Short Sale Without Paying A Dime

Filed under: Florida,Mortgage,Short Sale

If you’re curious why your short sale lender is asking you to pay them either by way of cash contribution or promissory note executed at closing of your short sale then the below information may be useful.  Here is an excerpt from the article:

Is your mortgage current or delinquent?  And if delinquent, how delinquent?  Shorting lenders are going to look at your short sale through different glasses depending on whether your mortgage is up-to-date or past due at time of short sale request.  When a mortgage is current and not past due, the short sale lender presumes there is no hardship.  We’ll get into this in more detail in a future article but generally, a short sale lender will not even consider completing a short sale for a borrower who is current unless there has been a death, divorce, disability, or distant employment transfer.  The ideal situation for completing a short sale with no contribution is when..

June 18, 2012

HAFA Short Sale Credit Report

Filed under: Credit Reports,Short Sale

There is something that the readers of the Broken Credit Blog will learn today that hasn’t been posted anywhere on the internet.  Of course, once it’s posted by yours truly it will then become fodder for so-called pseudo credit experts to post on their blogs but I say so be it!  The accurate, correct, credit reporting information is what is most important – accurate, correct, credit reporting – now there’s an oxymoron!

OK, enough with the suspense.  There’s been a change to non-GSE HAFA short sales that went into effect this month.  Quoting from HAFA Supplemental Directive 12-02 (page 19):

The requirements in Section 11.2, Chapter IV of the Handbook related to credit bureau reporting of HAFA transactions are amended as follows:

If the real estate is sold for les than the full balance owed and the deficiency balance is forgiven, report the following Base Segment fields as specified:

Account Status Code = 13 (Paid or closed account/zero balance) or 65 (Account paid in full/a foreclosure was started), as applicable.

Do you know what that means Broken Credit Bloggers?  That means that a short sale under HAFA guideleines for non-GSE loans is required to appear on a credit report the same as a full sale.  Did you do a short sale they will ask in the future?  Shhhhhh!  We’ll keep it a secret.

This has been a public service announcement from the Broken Credit Blog.

We now return to our previously scheduled programming.

April 13, 2012

Two Florida Mortgages, Ten Headaches, One Answer, One Realtor

I have a home in Clearwater, FL under contract for a short sale since 12/5/2011. Second lender ($80,000 heloc) wants $6,000 from first lender to release the lien plus 50% promissory note and will not bend. First lender has approved us for HAFA, which will require full release from second who will not do so. How can this be reconciled- if at all? If closing occurs outside HAFA, we don’t have confirmation that the first will waive their deficiency. We’ve talked about bankruptcy but would like to avoid it if possible. Any suggestions?

Mike (more…)

April 8, 2012

Banksters Eyeballing My 401k

If I Florida short sale my property my understanding is the mortgage holder / home equity second lien holders do not have rights to my 401K which is basically all I have left in terms of assets.  Due to loss of job I may be forced to cash in the 401K in order to survive unemployment.

Would the banks have recourse to this cashed in money?

Are there actions I can take to prevent this?

Scott (more…)

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