Wendy

—————–

Hello Wendy,

The lender will require that the transaction be at Arm’s Length and will require an affidavit similar to this one now required to be notarized on all Freddie Mac short sales.  Take note of two of the following provisions:

2. The Parties acknowledge and agree that the Subject Property must be sold through an Arm’s Length Transaction. An “Arm’s Length Transaction” is a transaction between parties who are independent of one another, and unrelated by family, marriage or commercial enterprise, other than the purchase and sale of the mortgaged premises between the Buyer(s) and the Seller(s) that is the specific subject of the proposed Short Sale.

3. The Parties acknowledge and agree that there are no agreements, understandings or contracts between the parties that the Seller will remain in the mortgaged premises as a tenant or later obtain title or ownership of the mortgaged premises, except to the extent that the Seller is permitted to remain as a tenant on the mortgaged premises for a short term, as is common and customary in the market but no longer than ninety (90) days, in order to facilitate relocation.

So, the shorting lender makes such an arrangement unlawful. 

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

Of course, if the property is located in Pinellas, Hillsborough, Manatee, or Pasco counties then send me an email: paul @ brokencredit.com

Freddie Mac will require a $15k promissory note over 120 months at 0% interest = $125/month or $7500 cash contribution at closing instead of promissory note.  The loss to Freddie Mac is very large, so they will require one of these two things to consider approving this transaction.  Please let me know what the seller agree to so we can try and wrap this up.

Thanks,

Clueless Ken
Fifth Third Bank 
Homeowners Assistance Specialist
*****************************************************
Hello Ken,

This borrower applied under the HAFA.  Please advise why this borrower was rejected for the HAFA?

Thanks,

Paul
*****************************************************
Paul, 

It was not reviewed by HAFA because there is a current offer.  If there is no offer, it can be reviewed.  Please be advised, I spoke with the borrower about this today, the prom note or cash at closing option, he said he wanted to discuss with his wife and you.  please let me know by tomorrow what is decided.

Clueless Ken
Fifth Third Bank 
Homeowners Assistance Specialist
*****************************************************

Hello Ken,
 
Can you please verify that?  According to the MMA Handbook page 127, the Alternative RASS applies “[i]f the borrower has an executed sales contract and requests the servicer to approve a short sale under HAFA before an SSA has been executed”.  Page 120 of the MMA Handbook goes on to state:
 
“If a borrower requests a short sale or DIL (whether such request is in response to a servicer’s solicitation under the first paragraph of Section 4 or initiated by the borrower), within 45 days of such request the servicer must consider the borrower for HAFA and send the SSA, DIL Agreement, a written notification that the borrower will not be offered a SSA or DIL or a written response to the Alternative RASS, in accordance with Section 4.2 and Section 7.4.”
 
Ken, this 74 year old borrower is the ideal candidate for the HAFA Alternative RASS program.  If there are additional forms 5/3rd or Freddie Mac would like to have completed for this then please let me know or send them to me.  Every page of the fax stated that the borrower was requesting HAFA!
 
Thanks for you help.
 
Paul
*****************************************************

(clueless Ken cc’s Nancy presumably his Supervisor)

Paul,

I can’t answer a HAFA question because I’ve never worked in the HAFA department, so I don’t know their guidelines.  On another note, they have income and they have assets, they can afford the prom note or contribution….the estimated loss is $128k…why should Freddie Mac assume all that loss and not put any responsibility back on the borrower?

Nancy,

Please review Paul’s email and advise.  I will hold this file open until I get an answer on this tomorrow.  Also, seller has bank statements showing $22k in CDs and checking account combined.  They also have a current offer on the property.  Please advise.

Thanks,

Clueless Ken
Fifth Third Bank 
Homeowners Assistance Specialist
*****************************************************
(I reply to both emails)

Hello Ken & Nancy,
 
Per the hardship letter, the money in the bank is the remains of insurance proceeds from their daughter’s death (I can get a death cert if needed).  The deceased daughter also had a daughter (borrower’s granddaughter) and as the executor of the estate your borrower is obligated to care for the granddaughter with those funds.
 
She makes approximately $500 per month from her job.  He doesn’t work.  They are in their 70′s and receive SSI.
 
Thanks and please help!
 
Paul

HAFA was designed to provide an incentive to servicers for completing short sales and deeds-in-lieu of foreclosure for loans that fail out of the larger Home Affordable Modification Program. Through June, servicers started 21,412 short sales and DILs, up 20% from the month before. A total of 10,754 were completed, up 25%.

JPMorgan Chase (JPM: 36.03 0.00%) is the programs leading performer, completing nearly 3,600 through the program, including nearly 1,000 in June alone.

Wells Fargo (WFC: 24.55 0.00%) was second, completing more than 3,100 since the program launched and roughly 700 in June.

Bank of America (BAC: 7.40 0.00%) completed 1,873 HAFA transactions, an increase of roughly 200 in the month.

Pam Marron, a senior loan officer with Gold Start Mortgage Financial Group in Tampa Bay, Fla., said more and more homeowners in negative equity view a short sale as their only way out. Many, she said, are defaulting because banks require them to do so in order to qualify for a short sale.

“The growing problem in Florida is the alarming increase in the number of short sale listings that are coming onto the market. These people are still employed but severely underwater and are having to short sale because they are not able to pay the vast difference owed between the mortgage amount and the value of these homes,” Marron said. “Banks are requiring homeowners to default in order to qualify for the short sale.”

In 22% of the HAFA agreements started — equal to roughly 4,700 mortgages — the homeowner began a HAMP trial but later requested a HAFA agreement or was disqualified from HAMP.

Source – HousingWire.com

Can you tell me how short selling 3 rental homes will affect our credit? Our scores are 750 currently.  Haven’t found any information on the impact of 3 homes compared to doing just one. Is it true that actual missed payments on the loans is what hurts your credit more then the short sale itself? I currently have offers on all 3 and am about to be 60 days past due on the loans. We have two rentals in AZ (a non-forgiving state) and one in CA.

Just wondering if we should try and make arrangements with the collection dept to lessen the impact on our credit report or does this not even matter? Once it goes to collections, it is done? Do you know that if we do pay on the loans, will this affect the lenders decision to accept the short sale?

Any advice you can give would be great. Thanks so much for your time and expertise.

Gina

————

Hi Gina,

As far as credit scoring goes, a 60 day late is worse than a 30, and a 90 is worse than a 60, and so on; however, the impact that payment arrangements would have on a short sale rejection or approval is entirely up to the investor who owns the loan (i.e. Wells Fargo, Deutsche Bank, etc.). 

One way to find out whether or not the lender would agree to a short sale while receiving timely payments would be to read the investor guidelines for workouts.  This can be accomplished by writing to the servicing lender requesting the identity of each loan’s investor and specifically the identity of the securitization trusts.  Armed with the specific name of a trust, the pooling and servicing agreement can be located on Sec.gov and scanning the document for prerequisites for loan workouts might provide the answer.

A simpler way might be to ask the short sale account manager assigned to your file at each lender whether or not payment arrangements will prevent the successful closing of your short sale.  The answer you get may or may not be truthful and most likely not reliable based on rampant bank incompetence. 

A third option would be to try it and assuming there is a legitimate hardship where default is imminent coupled with persistent follow up by your real estate agent and/or yourself, the files could probably be pushed through.

Thanks for the questions and hope this helps.

Paul

I have heard a lot of talk about what to do when we get a 1099c.  What about if we *don’t* get a 1099c?

I am currently in the process of negotiating a shortslae with my lender, CHASE.  I am using a very qualified third party negotiator (law firm) to help me.  So far, we have gotten acceptance of our offer and all of the terms we wanted *except* the release.  In other words, the “investor” who owns my loan says they will not sign a release for the debt amount if I go through with the short sale which means there is a very good chance I will *not* get a 1099c and therefore my debt is not “cancelled”. 

So, my question is, if my first mortgage debt is still hanging out there and is not cancelled, what effect will that have on my credit??  I happen to know that lenders are not currently pursuing borrowers for outstanding debt…YET.  If they were, they would start sending me letters and asking for payments and eventually, if I don’t pay, send the whole thing to collections where it could potentially be “charged off”.  However, lenders aren’t doing that…and my lender has said they won’t cancel my debt either.  So, without a cancellation or charge off, what do I have?  What happens to my credit?  Do I just have this open credit line hanging out there with no payments against it?  By the way, we are talking about nearly $100K in debt in the state of Florida.  And this is not my primary residence.  Supposedly, the “investor” is Wells Fargo…even though the loan is serviced by CHASE.

I may still have some negotiating room with the lender because nothing has been officially signed yet.
THANKS!
Greg

————–
Hello Greg,

Based on what you’ve written, Chase will be treating the proceeds of the sale the same as if you made a payment on the account and the remaining deficiency balance will be reported as owed.  This is referred to as a lien release only and is far from the desired full release solution.  Bear in mind that Florida’s statute of limitations is five years and if at any time in the next half decade following a lien release in Florida, the debtor appears collectible, a separate lawsuit may be brought to recover the remaining balance plus interest.

Overall, this does not sound like much of a solution to the problem and I would recommend clicking on the ‘short sale’ category on the right hand side of the blog to become familiar with the difference between lien release and full release and ways to defeat the sneaky tricks and games that lenders play when negotiating short sales.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

JPMorgan Chase & Co. and Wells Fargo & Co. say they give select borrowers behind on their mortgage payments $10,000 to $20,000 for agreeing to short sales, which means the homes are sold for less than what’s owed on the mortgages.

Most banks figure they’re doing homeowners a favor simply by signing off on short sales and forgiving the amount owed. But in some cases, Chase and Wells Fargo borrowers receive that and cash at the closing.

Lenders routinely hand homeowners a few thousand dollars if they leave the properties in good shape after foreclosure. That’s known as “cash for keys.” Also, homeowners are entitled to $3,000 of government money if they complete short sales through the Home Affordable Foreclosure Alternative program.

But real estate agents and other industry observers say they aren’t aware of other major lenders offering such sizable incentives for successful short sales.

“It looked, to me, like it was a come-on,” said Allison Adler, an agent for the Keyes Co. in Weston.

But Adler checked and discovered it was legitimate. Her client, Sara Horowitz, received $10,000 last week from Chase when she completed a short sale of her Davie townhouse.

“I have to say, this extra bonus from Chase was a lifesaver for me,” Horowitz, 39, said Monday. “I used it to help me get into a rental unit. It was perfect.”

Wells Fargo and Chase don’t specifically address why they offer the money for short sales. Rather, they explain they’re cutting their losses in choosing to forgo the potentially lengthy process of foreclosure.

“Our goal is to help as many people avoid foreclosure as possible,” Chase spokeswoman Nancy Norris said, pointing out that the bank has completed more than 110,000 short sales nationwide since early 2009.

Wells Fargo offers the cash to homeowners in Florida and other states “where the foreclosure process is lengthening,” spokesman Tom Goyda said.

The average foreclosure in Florida took 619 days for cases completed in the first three months of 2011, according to RealtyTrac Inc., a foreclosure listing firm. That’s more than 30 percent longer than cases completed a year ago.

The lenders decide whether to make payments after considering individual circumstances, and they don’t disclose what those are. The banks won’t say how many people have been offered the cash.

Wells Fargo and Chase are the nation’s second- and third-largest lenders, respectively, behind Bank of America. A spokeswoman for Bank of America said she couldn’t provide any information on incentives for short sales.

Chase and Wells Fargo don’t say how many home loans they own in Florida.

Wells Fargo has 700 offices and $66.1 billion in deposits statewide, according to Federal Deposit Insurance Corp. data as of June 2010, the most recent period for which statistics are available. Chase has 247 offices and $10.4 billion in deposits in Florida.

In 2008, Chase acquired Washington Mutual, and Wells Fargo took over Wachovia Corp.

The money for short sales is an effort by the lenders to be viewed as good corporate citizens as they expand aggressively in Florida after the banking takeovers, Miami-based banking analyst Ken Thomas said.

Ward Kellogg, chairman of Paradise Bank in Boca Raton, said his community bank occasionally has offered money to homeowners who cooperate in short sales. He figures Chase and Wells Fargo are agreeing to the incentives so that they can write off the bad loans as soon as possible.

“Without cooperation, it’s going to take a year and half,” Kellogg said. “With cooperation, it could be 30 to 60 days.”

Source=SunSentinel.com

Please post what you’re finding with the following:

brian.gramlich@rtresolutions.com grant.mones@rtresolutions.com eric.luna@rtresolutions.com eric.ordinerio@rtresolutions.com

214-599-6390 877-469-7325 214-599-6460 214-599-6441

Let the people speak!  What say ye?

We listed our home for sale July 2009 with one agent with 4 total showings and 3 open houses with ZERO attendees. (lovely, eh…). We re-listed with her as of Feb 1, 2010==but as I learned two weeks ago she did NOT receive the paperwork (what the?…..) and has NOT listed the house since Feb 1, 2010.

I called mortgage holder in January-EverHome Mortgage- and asked what to do. Was told that I was NOT a candidate for loss mitigation since I was current on my payments, the only way to get attention is to be late on payments, “Although I’m not telling you NOT to pay your mortgage.”

Right.

So we stopped paying.

Three months behind, foreclosure notice sent with payment four. Paid it, and got the financial package paperwork to move forward with deed in lieu, short sale–something.

Found a new agent last week, signed him and he has shown the property four times in the last week including a possible rental. There is ONE interested family looking to initially offer 250,000 on the home and our mortgage is 277,900.

Ok, so now do we accept the short sale and go through that process with Everhome and take the credit hit, and request the full release from extra debt? Or do we take out a 40,000 personal loan (if we can even get one….) to cover the difference?

Will it STILL show as short sale if we bring the $$ to the table to cover the difference? What if we accept the 250,000 from the buyers and pay the difference?

Sharon

———–

Hi Sharon,

It will not be a short sale if you “bring (all of) the $$ to the table to cover the difference”.  If you are paying other bills on time and/or have the financial means to do so then it is likely that EverHome (or the mortgage insurer if applicable) will condition the approval of the short sale on your signature of a promissory note for the difference – and in that scenario, it will still be a short sale.

Lenders call what you’ve described as ‘Ruthless Default’.  Borrowers call it ‘Strategic Default’.   What I call it doesn’t matter.  What matters is that ‘congrats you’ve been approved for a $40k signature loan from EverHome’ which begs the question: is that a good thing?

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.