Category Archives: Short Sales

Doing A Short Sale With Green Tree

Short sales have been around now for the last few years and supposedly the lenders have been getting better at them.   In fact there has even been a lot of publicity that many of the lenders have become more responsive and helpful to the home owners that have fallen on hard times.  To help them through the short sale process.  Many of our law makers have insisted that they become more responsive as well.   But is that not usually the case.

Our office has been working on a short sale on a property for the past year now, literally the past year.  A whole year has gone by where Green Tree is the second on this property and has consistently prevented this short sale from happening.  To the point that the first is now threatening to just pursue the foreclosure process.  This property happens to be located on 1676 Maple Ave, Unit 7, Solvang, Ca. 93436.   Now remember this lender has not received a payment for over a year now.  The balance happens to be 58k on the second and 248k on the first.  On a property selling for 120k

Now the client did cash out like so many other people so this is not a purchase money loan.  Meaning that he did not use the loan to purchase this property he took money of the property for it.   But like many others he fell on hard times and has not been able to pay the loan and now does not even live in the property but a renter.

What Green Tree is willing and wanting to do is let the home go to foreclosure, they will get nothing the first will close them out.  Then take the client to court suing the client forcing them into bankruptcy.  Rather than just take something now vs. nothing, because the first lender is only allowing them 6k out of the transaction which is customary in all of these transactions.   Even if roles were reversed Green Tree would be doing the same thing to the second, you are only allowed 6k take it or leave it.  Now  Green Tree is willing to settle for a higher dollar amount to close off this transaction for about 12k but they know the first will not allow that.  Why would they if there is any extra money it should go to the first.  The same rules that Green Tree would enforce on any other lender if they were in first place are the same rules they want broken.

Reality is rather than settling for something Green Tree would rather let this property go to foreclosure, and literally get nothing.  But they would reserve the right to sue the client and take him to court and force him into bankruptcy.   I guess getting absolutely nothing and ruining someone else credit and putting another foreclosure on the market is a better alternative.

 

 

 

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Doing A Short Sale With Bank Of America

With all the lawsuits that Bank Of America has pending against them and all the negative media in the last few years you would think they would do a 180 on their business practices by now.   I am sure they have done some improvements in their business practices in the last few years, not because they wanted to but because they have been forced to.   Especially with all the bad foreclosures that happened and with all the robo signing screw ups as well as mishandling of the paper work.  But it seems that rather than accepting responsibility for their business practices they are still using the same excuses and doing some of the same business practices that got them in the mess that they are in.   Sometimes it makes you wonder how did Bank Of America get to be too big too fail in the first place and where did it all go wrong.

I have been working on doing a short sale for the last 6 months on a property  that happens to be one of the Santa Maria homes for sale.   The property happens to be 2432 La Costa Dr., Santa Maria, Ca. and a very nice home.   Now one of the things when doing a short sale with Bank Of America is that they utilize a company known as Loan Resolutions Corp. to help facilitate the process? At least that is the idea, same idea that the Equator system is used to communicate with the agents to make things easier and more efficient.   So when doing a short sale with Bank of America you are dealing with the bank and investors and LRC as well.  So more moving parts only makes things more simple?

Well turns out that the short sale was approved since Oct. 29, 2012.  But no approval letter was generated?  Or issued ? Now every time I followed with the Negotiator assigned to the file I am told the letters are being reviewed for approval, and I was even told at one time I would have the letter no later than Nov. 08, 2012 well that did not happen.  I did follow up and then told and educated there are other loans in the process and this is a 5 step process on approving letter, writting the letter and reviewing etc etc., and to be patient.  But the suspicion did grow when my calls and emails via Equator went unanswered for days as the seller awaits for a decision as well as the buyer.  Although the huge difference is that the seller has a huge tax liability for thousands of dollars looming over his head if the short sale does not close before Dec. 31, 2012 since that is when the Debt Forgiveness Act expires.

Finally after hours on the phone 11/21/2012 and being transferred several times and even losing connection a few times who knows could of been an error. I finally did get hold of someone that let me know the letter has been generate twice just never sent to me because the buyer was getting  VA financing.  According to the internal notes on their system they did not feel that buyer could close on the transaction before 12/14/2012 because the loan was scheduled to be SOLD to another servicer.   But remember the short sale was approved since 10/29/2012?

This was unbelievable!!! The short sale is and has been approved and its been in the process for months and they had loan scheduled to be sold next month?   Forget about the homeowner having huge tax consequences, forget about the buyer making plans and being patient to buy the home.  Forget about the work and time involved to get the short sale approved and submitting all the documents requested.  Forget about the short sale process would have to be started all over again from the beginning with a new servicer once the loan is sold.

Now upon more phone calls and discussion Bank Of America is blaming LRC (Loans Resolutions Corp), and LRC is blaming Bank Of America but neither one is accepting responsibility for the current situation.   This is completely unprofessional and indifferent to all parties involved, where all parties involved are and or will be suffering some kind of financial losses due to the mishandling and just unprofessional handling of the file.   Bottom line is maybe not all banks are still operating this way but at least one is.   Rather than being truthful and upfront with their intentions.

 

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Doing A Short Sale With Chase Bank

Reality is that if you are dealing with real estate transactions you are going to be faced with having to deal with short sales.   The majority of the homes on the market are still distressed properties whether they are foreclosures or short sales.  Personally I cannot wait for the day when short sales are part of the history books and or when they do come back into fashion I am pretty much retired.   Anyone that has dealt with enough short sales, knows that they can be a little challenging.   Trying to get the bank to approve the short sale is never fun, but what is even less fun is trying to get a transaction on a home that has two loans and getting the second in agree is even less fun.

Another reality is that if the home owner is doing a short sale on his home for what ever financial reason that he can no longer keep the home, there is little to know equity or value in the home.   The home is upside down on value  and more than likely if they are two loans on the property the loan in second position more than likely will get little to nothing on what is owed to them.   Typically the way it works is that you must get approval from the first before you can even attempt the approval from the first since the first in is in first position.  Not only will you get approval from the first loan, before moving on to the second loan the first loan will also dictate how much the second can receive.  Since the first is also more than likely not going to receive the full balance of what is owed on their loan.

Now I know that there is a lot of advertising and publicity about how banks are now more responsive to homeowners.    There is even some legislation or proposed legislation to get the banks to become more responsive to the short sales we have.    There is even material out there explaining how a short sale transaction is even more beneficial for the banks to do than a foreclosure.  Now if that is the case one has to wonder why do some banks push for foreclosure or prefer that the homeowner go into foreclosure versus granting the short sale approval.

I have been dealing with a short sale transaction on 2021 Mariah Dr. , in Santa Maria, Ca. with Chase bank now for months.   Now the first has agreed on to the transaction.  Now I am the third agent working on this the first two pretty much gave up since Chase would not allow the short sale to take place.   Each and every time it has been Chase bank that as stopped this short sale from happening.  To the point where the representative has even advised the client your best option is to file Bankruptcy.  Now Chase bank is in second position and knows very well how the short sale process works  this is not their first short sale transaction as I am sure not their last.  Now  Provident bank that is in first position has been more than cooperative in getting this done.   Chase bank that received tax payer funds  has done nothing but stalled and stopped this short sale from happening.   Chase bank one of the largest banks in the country has been reacting as if they have never been involved in a short sale transaction where they have been in second position.

Typically $6,000.00 is what the lein holder in first position typically allows the second to receive.   Chase bank  has even agreed to settle on a specific dollar amount only to later increase that dollar amount  stating that the previous dollar settlement  was no longer valid.  Only to make the transaction even more impossible.   According to the representative of Chase Bank since the real estate agents are making more money than they  in the transaction they are.   So they felt the need to increase the dollar amount to close the transaction to $24,000.00.   It is unbelievable that this is the stance of one of the largest banks in the country to halt everything because the real estate agents are making more than they are.  As well as offering or insinuating to the homeowners that they are better off to file bankruptcy.    Why a bank that has already charged off this account and has basically considered this a loss and yet will not even let the client out of the lien.  Is something that should be asked, whether there is an ulterior motive for the clients to just let this home go to foreclosure or is this the bank’s way of showing  it is acting in a vindictive manner towards its former clients.   As well as holding their financial situation hostage and forcing them to let the home go to foreclosure and file for possible bankruptcy since the loan on the home is a non-purchase money loan.

The problem with short sales is that they are anything but short.   But it would be nice if all the banks were truly as responsive as all the marketing materials they seem to promote.  As well as all the rhetoric that the govt. seems to promote as well to getting the banks to become more responsive in handling these transactions.  So the sooner all these distressed properties can be flushed out maybe the sooner we can actually be on to a road of recovery.

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Do You Understand How A Short Sale Will Influence Your Ability In Purchasing Another Home

There is alot happening within the realm of real estate every where not just in the Santa Maria real estate market and that holds true with just about all the mortgage home loans having to go  bad, and unless you have been existing under a rock then you ought be some what familiar with the expression short sale which has come to be as familiar as the word foreclosure.   Quite a bit of of you that live in either a house or condo regardless of whether or not you own it or not, you have had reminders left on your building, that there are a whole lot of people eager to accommodate to do a short sale and that it is much better for someone to do than it is a foreclosure, (I have left a few myself on a few doors).  For those that do not know what a short sale is, which is basically when a homeowner sells his place for less that what he currently owes.  now there are some benefits to doing a short sale, first one is when do you need to be a homeowner again?

Supposing that you may be able to compel your lender to allow you to do a short sale even if you have not missed any payments.  Then FHA will allow you to acquire another home the next day, as long as the home you are acquiring is not at all superior to the home you now have.   The challenging  part will be getting your lender to let you to do the short sale, a lender may refuse to allow you to do a short sale, as stated before this is the difficult part procuring the approval when you have not missed a payment and a short sale transaction normally takes months to close.  Assuming that you do miss payments and you do a short sale, FHA guidelines now state that you have to wait at least 3 years, before you could purchase another home provided that you were to try to acquire a FHA loan.  This is where carrying out a short sale and just letting your place go to foreclosure genuinely does not at all make a difference in you getting financing again.  Now the 3 years is from the date of closing not at all from the date you stopped making payments or the time you initiated the process towards your short sale or foreclosure.

But now moving on to other loans outside of simply an FHA there are a few differences when it comes to obtaining a loan other than a govt. loan, and doing a conventional loan.  Currently Freddie Mac and Fannnie Mae are the two largest investors at this time.  These two humongous govt. sponsored corporations acquire pretty much all the mortgages out there that the banks are now doing, reality is that most of the homes in Santa Maria are being done via FHA.   With the condition that you do a short sale and from the date of closing your transaction your waiting period is merely 2 years to buy another house.   In any event please keep in mind if you are on a separate loan whether it is investment property or you co-signed on it, there can be no mortgage lates within the 12 months of application.   With the condition that you foreclose then the waiting period is 5 years from the date of your foreclosure date.  That is a huge difference in regards to getting back in the market in addition to becoming eligible to obtaining sponsorship and becoming a homeowner again.  Then it depends on credit, what is your credit going to be, its a fact that after doing a short sale or foreclosure you will be dealing with bad credit but its only temporary???

Keep in mind houses are so very much less now and I seriously doubt they will be doubling in 2-3 years time in essence if the house is unaffordable now you can be in a preferable financial position in 2-3 years in addition to with less stress.   In closing on the assumption that you find yourself in a position of conceivably having to do a short sale or losing your house you are not alone and for many when taking their finances into consideration a number of  homeowners have come to learn after some time that it could be a blessing in disguise.

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Do You Know The Difference Between A Recourse Loan Or A Non-Recourse Loan?

You may have had your home recently foreclosed on and part of the Santa Maria real estate market on a mortgage home loan that you were upside down on, and maybe you may be plain tired and frustrated and about to become another statistic, but what you need to know is your loan recourse or non recourse, and what does that mean?  Just keep in mind the following is intended for general information only please seek legal counsel for your own specific situation.  Most of this information will be how California treats mortgage loans if outside California you may want to see how your state treats mortgage home loans.

This blog will be focused on what the difference is between a recourse and a non-recourse loan because there is a huge difference and most are not aware of the difference.   With all the Santa Maria homes for sale that are either in foreclosure or homes going through the short sale process it is something homeowners should be familiar with. So lets go with an everyday story you bought your house 2003 you paid $280,000.00 you put no money down when you bought your home with one of those popular 80/20 loans.   A couple of years goes buy and now your home is unbelievably worth $500,000.00.  Just like everyone else you get all kinds of good stuff in the mail full of useful advice to consolidate all of you bills and even make some more home improvements and get a new car using the equity of your home and only make one payment and get so much done.  Why wouldn’t you do it, so you take out a loan against the house and now you owe $450,000.00.  Now let’s fast forward to today.

Well the economy is not so good and your home is not worth $500,000.00 in fact its not even worth what you bought it for now.  More like $250,000.00 and you can’t make the payments anymore because the payments are based on what the home is worth.  So you are forced to either do a short sale or just walk away like so many others since you can no longer make the payments on your home.   But before you do just walk away and your home is another foreclosure, here is something to think about.

Loans that are recourse are basically loans, that allows the lender to use legal means to collect the deficiency balance from the borrower after the asset has been taken back and sold.   Kind of like your home now where you have a loan for more than the what the house is worth.  That being said the bank can come after you legally for the difference, which is kind of tough for most people since they don’t carry 100k on them.  Loans that are non-recourse are loans that the bank cannot come after the borrower for the deficiency amount.   For reference you can refer to California Code.  Please keep in mind that this pertains to your home not to your rental properties and investment homes.

http://www.legaltips.org/california/california_code_of_civil_procedure/577-582.5.aspx

In California when you buy a home it is considered “purchase money” whether it be one loan or two loans.  A loan that is considered a purchase money loan is a non-recourse loan.  The problem with most homeowners is that they refinanced their homes and turned their non-recourse loans into recourse loans.    Although if the lender did a non-judicial foreclosure he cannot come after you in the state of California because that is the trade off that they have for doing a non-judicial foreclosure vs. a judicial foreclosure which means going to Court.  So you get the benefit of the “one action rule”.  Unless you had a second that got completely wiped they can come after you for the deficiency and there are still more exceptions to the rule as you read along.

Now here is where it can get tricky if you have two loans but from different lenders and you don’t have enough to pay off the second,,,,, well the second can come after you but if both loans are from the same lender lets say both are with Wells Fargo and not purchase money so for example if you took out a second later you are okay AS LONG AS BOTH LOANS ARE NOT FROM DIFFERENT LENDERS.   The lender will come after you for the difference and can sell your account to collection agencies as well.   That means they can sue you and levy your bank account or even garnish your wages.

IF YOU HAVE AN FHA OR A VA THESE RULES DO NOT APPLY THESE ARE FEDERALLY SPONSORED LOANS AND SUPERSEDE CALIFORNIA STATE LAWS AND ,,,,,,YOU ARE CORRECT ARE RECOURSE LOANS….home being financed after the collapse are FHA financed and yes they can come after you.  I am not sure if you got that all down and I do hope that this made sense to anyone reading this.  If you are unsure if you will be sued seek some legal advice.

BUT THERE IS HOPE If YOU DO A SHORT SALE BEFORE THE YEAR END. For one California has a new law that any lender that agrees to a do a short sale whether it be a second or investment property.  That they will not come after you for any funds owed.  This is a huge weight off the shoulders of many homeowners that may be thinking of having to do a bankruptcy only to protect themselves.  Due to there being a deficiency amount on the money owed to the bank.  Last but not least the home forgiveness act which expires this year DEC 31, 2012.  IRS CONSIDERS ANY DEBT FORGIVEN TO BE TAXABLE INCOME.   So do the math with me you owed $500k you short sale for $250k the IRS WILL TAX YOU $250K UNLESS YOU ARE INSOLVENT OR FILE BK or the home was your primary residence.  But that all changes on Jan 1, 2013 there will be a tax bill unless there are changes in the Govt.  but it seems that even the Govt. is looking for ways to generate money and would not expect a bailout.  If you do not qualify for a loan modification seriously consider a short sale soon.

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