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Distressed Homeowners: Focus on the Numbers, not the Distractions

THE FOLLOWING ARTICLE APPEARED JAN. 23, 2011,
IN THE RIVERSIDE PRESS-ENTERPRISE

Homeowners having difficulties making their house payments face a confusing and treacherous path.

But committed to finding the right direction and guided by skilled advisers, they can emerge from their misfortune with dignity and financial future intact.

And they can re-enter the housing market while prices are still at the bottom.

Amid threatening lender phone calls and letters, and “experts” knocking on their doors and filling their mailboxes and front steps with free offers to help, finding the right path is critical.

So how do people caught in the whirlwind of noise and promises and distraction find the best solution to their problems?

It’s simple: They stay focused on the numbers.

The Best Deal

Despite what many consumers think, banks do not want to foreclose on any more homes.

Banks always look at the numbers, and statistics prove that foreclosure almost always nets the bank less money than other options available to a distressed homeowner.

The bank will foreclose if it has to, but usually only because homeowners don’t address their problems correctly or quickly enough.

In 2010, banks took back more than 1 million properties, according to online foreclosure marketer RealtyTrac. And they recorded nearly 4 million foreclosure filings on almost 3 million properties last year. All of those numbers were record highs.

But in the meantime, lenders also continued to streamline other solutions for distressed homeowners.

Loan Modifications

Banks do not like loan modifications. Why? Because of the numbers. Though permanent loan-mod approvals increased in the past year, success remains well below 25 percent, and re-default rates are well above 50 percent in the first nine months following a modification.

“Trial modifications,” however, have been a boon for banks. While modification applicants undergo a 90- to 180-day test period at a reduced house payment, the lender continues to collect money on a loan that previously was in default.

Some banks have been accused of approving trial modifications for applicants even though the applicants had zero chance of permanent approval. Meanwhile, the foreclosure process runs concurrently. And all too often, on the heels of a modification rejection letter comes a notice of foreclosure sale.

Short Sales

Banks love short sales because they almost always net a larger profit than if the bank is forced to foreclose on the homeowner.

The time and cost to foreclose, evict, take possession, repair, market and sell a property can mean an 8 percent to 12 percent decrease in the bank’s bottom line. Once considered “short” if completed in less than 12 months, short sales now can legitimately be negotiated in 45-60 days with another 30 days to close the transaction.

But they still can carry heavy consequences if not handled correctly by a seasoned negotiator who knows how to prevent banks from pursuing the homeowner for more money later.

1st vs. 2nd

Banks will pursue homeowners for the “deficiency” – the difference between what was owed and what the bank received – whenever possible.

As of Jan. 1, it is now unlawful in California for a lender in first position to pursue or collect a deficiency after a short sale on residential property, regardless of whether the owner lived in the property, even if the loan was a refinance. This law does not address loans in second position.

Some 2nd TD lenders still have the right and ability to go after a homeowner after a foreclosure. And that can be the obstacle that prevents a short sale – if the numbers don’t make sense for the bank.

In those cases, a seasoned and skilled negotiator may be the only solution to move forward without liability for the homeowner.

California is a non-recourse state and prevents a lender from seeking a deficiency judgment after the most common form of foreclosure.

Do Your Numbers Add up?

Homeowners who focus on the numbers and avoid the distractions can begin the process of finding the best solution to their problems.

The first step is find a proven real estate professional to help guide them through their options.

For a free evaluation to determine if a loan mod, deed-in-lieu, short sale or one of the many other alternatives is right for you, call 951-778-9700 today. There is no obligation. Or, for a free copy of the Brand-New Special Report, “9 Alternatives to Inland Empire Foreclosure,” call 1-800-941-1900, ext. 9003; email PE@DreamBigRealEstate.com, or visit www.DreamBigRealEstate.com.

(Brian Bean and Timothy Hardin are Realtors and Ambassadors for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. They can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean and Timothy Hardin
Real Estate Professionals
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers

 

ACTIVE RAIN - Dream Big Real Estate and Inland Empire Short Sale Pros Blog Dream Big Real Estate and Inland Empire Short Sale Pros Blog FACEBOOK - Dream Big Real Estate and Inland Empire Short Sale Pros TWITTER - Dream Big Real Estate and Inland Empire Short Sale ProsLINKEDIN - Dream Big Real Estate and Inland Empire Short Sale ProsRSS FEED - Dream Big Real Estate and Inland Empire Short Sale Pros BlogSTUMBLE UPON - Dream Big Real Estate and Inland Empire Short Sale Pros SEND EMAIL to BRIAN BEAN @ Dream Big Real Estate and Inland Empire Short Sale Pros YAHOO PULSE - Dream Big Real Estate and Inland Empire Short Sale Pros GOOGLE BUZZ - Dream Big Real Estate and Inland Empire Short Sale ProsDIGG - Dream Big Real Estate and Inland Empire Short Sale Pros

If one advances confidently in the direction of his dreams,
and endeavors to live the life which he has imagined,
he will meet with a success unexpected in common hours.
 

 

Henry David Thoreau

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Is a HAFA Short Sale Right for you? New Rules Make Qualifying Easier

January 16, 2011 2 comments

THE FOLLOWING ARTICLE APPEARED IN THE JAN. 15, 2011, RIVERSIDE PRESS-ENTERPRISE

After months of criticism that government had created another ineffective program, the Treasury Department has eased the guidelines of the Home Affordable Foreclosure Alternatives program.

Though the rule changes don’t fully address compensation for second lien holders, they do relieve the restrictions on relocation for jobs and distance.

The HAFA program was created by the Obama Administration in 2009 as an alternative for homeowners who could not qualify for a loan modification. Officials expected more than 1 million people to take advantage of the government-subsidized program that provided, among other things, $3,000 relocation assistance to the homeowner.

But as of Sept. 30, 2010, in the first six months of the program, only 342 HAFA program short sales were consummated. The biggest challenge to the program: limits on compensation paid to second lien holders, which are prevalent in California, Nevada, Florida and Arizona, states with the highest concentration of distressed homeowners.

Last week, the Treasury Department announced new standards for the HAFA program, to take effect Feb. 1. However, the changes do not fully address the most common obstacle that applicants face – acceptance by the second lien holder.

The program changes include:

  • One of the biggest changes is that the borrower can now qualify even if the property is currently rented to a tenant, as long as the borrower lived in the property as a principal residence within the 12 months prior to applying for the HAFA program. Additionally, the relocation does not have to be job-related, and the distance requirement for relocation has been removed.
  • The servicer is no longer required to verify the financial information of the homeowner, though the servicer still can require the borrower to provide updated paystubs, bank statements and tax returns. And a hardship affidavit is still required. That makes this change effectively toothless, since banks routinely require these documents before they’ll even open a loan mod or short sale file.
  • The servicer is no longer required to determine if the homeowner’s current mortgage payment exceeds 31 percent of their gross income. However, since the servicer still is allowed to ask for updated paystubs, it already has the ability to make that determination
  • Servicers are no longer capped at 6 percent to compensate subordinate lien holders. However, the $6,000 cap is still in force, which makes this change ineffectual and will continue to make HAFA program short sales difficult in California, where many distressed homeowners have more than one loan and the loan amounts are higher. (Anecdotally, most successful HAFA short sales have occurred when the borrower had only one loan or two loans from one bank.)
  • The servicer must provide HAFA short sale paperwork within 30 days after the homeowner applies for the program. And it must respond with an approval, decline or counter-offer within 30 days after receiving the file.
  • HAFA applicants already in process before Feb. 1 are not covered by the new rule changes, though the servicer can re-evaluate them at their own discretion.

Homeowners interested in the HAFA program must tread carefully. There are several alternative contracts and methods to pursue HAFA. One method requires the homeowner to surrender the property as a deed-in-lieu of foreclosure, which has essentially the same impact as a foreclosure on a person’s credit report and future ability to purchase a home.

It’s critical that a homeowner choose the proper method. Waiting for the bank to take control and set the price is a recipe for failure. To determine if the HAFA Program is the appropriate solution for you, contact us immediately for a free HAFA evaluation. There’s no obligation.

Or, for a free copy of the Brand-New Special Report, “9 Alternatives to Inland Empire Foreclosure,” call 1-800-941-1900, ext. 9003; or email PE@DreamBigRealEstate.com

(Brian Bean and Timothy Hardin are Realtors and Ambassadors for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. They can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean and Timothy Hardin
Real Estate Professionals
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers

 

ACTIVE RAIN - Dream Big Real Estate and Inland Empire Short Sale Pros Blog Dream Big Real Estate and Inland Empire Short Sale Pros Blog FACEBOOK - Dream Big Real Estate and Inland Empire Short Sale Pros TWITTER - Dream Big Real Estate and Inland Empire Short Sale ProsLINKEDIN - Dream Big Real Estate and Inland Empire Short Sale ProsRSS FEED - Dream Big Real Estate and Inland Empire Short Sale Pros BlogSTUMBLE UPON - Dream Big Real Estate and Inland Empire Short Sale Pros SEND EMAIL to BRIAN BEAN @ Dream Big Real Estate and Inland Empire Short Sale Pros YAHOO PULSE - Dream Big Real Estate and Inland Empire Short Sale Pros GOOGLE BUZZ - Dream Big Real Estate and Inland Empire Short Sale ProsDIGG - Dream Big Real Estate and Inland Empire Short Sale Pros

If one advances confidently in the direction of his dreams,
and endeavors to live the life which he has imagined,
he will meet with a success unexpected in common hours.

Henry David Thoreau

HAFA Program falls woefully short …

THE FOLLOWING ARTICLE APPEARED DEC. 18 IN THE P-E

By Brian Bean & Tim Hardin

Banks completed just 342 short sales through the Home Affordable Foreclosure Alternatives program in the first six months, according to a report from the Special Inspector General for the Troubled Asset Relief Program.

HAFA launched April 5 and was designed for homeowners to short sale a home and avert foreclosure if they couldn’t complete or qualify for a loan modification through the government’s Home Affordable Modification Program. Through Sept. 30, the Treasury Dept. paid out $1.6 million in TARP funds to banks, investors, servicers and homeowners on 342 short sales or deeds-in-lieu of foreclosure, according to Treasury data in the SIGTARP report.

Banks and servicers dispute the results but thus far have not produced their own HAFA numbers. Servicers canceled 699,924 HAMP trial modifications as of September and another 29,190 permanent modifications, according to an October report from HousingWire.

HAFA guidelines provide $1,500 to a servicer for a completed HAFA short sale, and the lender cannot pursue the borrower for the remaining loan balance. The investor also receives $1 for every $3 it allows to compensate a junior lien holder, up to $2,000. Junior lien holders can receive a maximum of $3,000 each. The borrower receives $3,000 for “relocation.”

In the Inland Empire, junior lien holders often derail HAFA transactions because the program severely limits their compensation while requiring lien holders to waive the deficiency balance. The government program, despite what many believe, is not mandatory.

For information about the realities of HAFA and HAMP, call 951-778-9700 or email PE@DreamBigRealEstate.com.

* * *

MLS Home Sale Data

Here are monthly sales statistics for Riverside-San Bernardino single-family residences. The data is reported by CRMLS, the regional database Realtors use to market properties for sale and lease and to track sales activity. Sales data, which is updated by individual brokers, can change.

SOLD

November 2010

Riverside County: 2,463

San Bernardino County: 1,466

October 2010

Riverside County: 2,554

San Bernardino County: 1,560

November 2009

Riverside County: 2,823

San Bernardino County: 1,628

IN ESCROW

Dec. 15

Riverside County: 7,443

San Bernardino County: 4,175

ACTIVE LISTING

Dec. 15

Riverside County: 12,730

San Bernardino County: 7,448

(Brian Bean is a real estate broker and ambassador for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. He can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean
Real Estate Professional
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers


ACTIVE RAIN - Dream Big Real Estate and Inland Empire Short Sale Pros Blog Dream Big Real Estate and Inland Empire Short Sale Pros Blog FACEBOOK - Dream Big Real Estate and Inland Empire Short Sale Pros TWITTER - Dream Big Real Estate and Inland Empire Short Sale ProsLINKEDIN - Dream Big Real Estate and Inland Empire Short Sale ProsRSS FEED - Dream Big Real Estate and Inland Empire Short Sale Pros BlogSTUMBLE UPON - Dream Big Real Estate and Inland Empire Short Sale Pros SEND EMAIL to BRIAN BEAN @ Dream Big Real Estate and Inland Empire Short Sale Pros YAHOO PULSE - Dream Big Real Estate and Inland Empire Short Sale Pros GOOGLE BUZZ - Dream Big Real Estate and Inland Empire Short Sale ProsDIGG - Dream Big Real Estate and Inland Empire Short Sale Pros

If one advances confidently in the direction of his dreams,
and endeavors to live the life which he has imagined,
he will meet with a success unexpected in common hours.
 

 

Henry David Thoreau

New Listing: Immaculate, Remodeled Santiago Canyon Home

CLICK HERE FOR DETAILS

(Brian Bean is a real estate broker and ambassador for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. He can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean
Real Estate Professional
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers

 

ACTIVE RAIN - Dream Big Real Estate and Inland Empire Short Sale Pros Blog Dream Big Real Estate and Inland Empire Short Sale Pros Blog FACEBOOK - Dream Big Real Estate and Inland Empire Short Sale Pros TWITTER - Dream Big Real Estate and Inland Empire Short Sale ProsLINKEDIN - Dream Big Real Estate and Inland Empire Short Sale ProsRSS FEED - Dream Big Real Estate and Inland Empire Short Sale Pros BlogSTUMBLE UPON - Dream Big Real Estate and Inland Empire Short Sale Pros SEND EMAIL to BRIAN BEAN @ Dream Big Real Estate and Inland Empire Short Sale Pros YAHOO PULSE - Dream Big Real Estate and Inland Empire Short Sale Pros GOOGLE BUZZ - Dream Big Real Estate and Inland Empire Short Sale ProsDIGG - Dream Big Real Estate and Inland Empire Short Sale Pros

If one advances confidently in the direction of his dreams,
and endeavors to live the life which he has imagined,
he will meet with a success unexpected in common hours.
 

 

Henry David Thoreau

Listing Brokers have a duty to disclose short sale, court rules

Real estate brokers working with distressed homeowners have the same responsibility as the seller to reveal if a home is underwater, according to a ruling from a California appellate court.

The court ruled this month that a seller’s broker can be held liable for damages and costs incurred by a buyer in a failed transaction if it was not disclosed that the existing debt on the property exceeded the sales price, according to a report on RISMedia.com.

In Holmes vs. Summers, a home being sold for $749,000 had three deeds of trust for a total debt of $1,141,000, and the seller’s real estate brokers did not inform the buyer that the home was “upside-down,” RISMedia reported. Even though the information was readily available via an examination of the county tax record or a title report, the court reasoned that the buyer might not have even proceeded to open an escrow and spend money on inspections and an appraisal had they been made aware of the actual circumstances.

The court also ruled that the duty to disclose facts about the desirability and marketability of the property outweighed the seller’s right to confidentiality of financial information, RISMedia reported.

I have to agree.

Having been on both sides of a short sale, it’s critical information for the buyer to know before they even make an offer. Distressed properties bring lower prices because of the uncertainty, elongated timeframe and difficulty involved, while standard sales inherently have more competition and higher selling prices.

Not to mention the Grand Canyon-like chasm that exists between the best and worst short sale listing agents, which the buyer and their agent must be allowed to vet.

Unless the seller is bringing cash to close for the difference, it’s an ethical misstep for a broker to conceal these crucial details, to effectively bait a buyer into escrow and then spring a short sale on them. And the case example is a good reason why … the deal didn’t go through and the buyer spent money they may not have spent had they known the facts.

I’ve already heard agents grumbling about this ruling making short sales even more risky for a broker. Look, hiding material facts from a buyer is risky behavior for a broker in any transaction. It’s unethical and a good way to lose your license.

(Brian Bean is a real estate broker and ambassador for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. He can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean
Real Estate Professional
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers

ACTIVE RAIN - Dream Big Real Estate and Inland Empire Short Sale Pros Blog Dream Big Real Estate and Inland Empire Short Sale Pros Blog FACEBOOK - Dream Big Real Estate and Inland Empire Short Sale Pros TWITTER - Dream Big Real Estate and Inland Empire Short Sale ProsLINKEDIN - Dream Big Real Estate and Inland Empire Short Sale ProsRSS FEED - Dream Big Real Estate and Inland Empire Short Sale Pros BlogSTUMBLE UPON - Dream Big Real Estate and Inland Empire Short Sale Pros SEND EMAIL to BRIAN BEAN @ Dream Big Real Estate and Inland Empire Short Sale Pros YAHOO PULSE - Dream Big Real Estate and Inland Empire Short Sale Pros GOOGLE BUZZ - Dream Big Real Estate and Inland Empire Short Sale ProsDIGG - Dream Big Real Estate and Inland Empire Short Sale Pros

If one advances confidently in the direction of his dreams,
and endeavors to live the life which he has imagined,
he will meet with a success unexpected in common hours.

Henry David Thoreau

We closed our first HAFA short sale today!

We’d heard rumors. Sightings whispered by weary agents. Pleas from desperate homeowners. Tons of mailers, news clippings and emails touting the elusive prey.

But we’d never actually seen an honest-to-goodness closed HAFA short sale. Until today. When we officially closed escrow on such a deal and secured $3,000 relocation assistance and a deficiency waiver for our seller.

Can’t say it was too big a deal. Took longer, and we had to restart twice because the lender messed up the process in the beginning. The forms were different. Many people wonder why more homeowners haven’t taken advantage of the Obama Administration program. On the surface, it looks like a great deal:

  • $3,000 for the seller to relocate
  • Waiver by the bank to seek a deficiency judgment for shortage
  • No cash contributions or promissory notes required
  • $1,500 to the bank/servicer for admin and processing cost, and up to another $2,000 for investors who distribute up to $6,000 to junior lien holders

So why aren’t HAFA program closings dominating the short sale landscape?

For us, it might have more to do with where we live and work. Southern California is prone to conditions that make HAFA deals difficult. Values here are higher than the national average, and a great number of distressed homeowners seem to have HELOC 2nd TDs with banks that are unwilling to settle for $3,000.

It’s more likely, though, that this is just another case of an inefficient government program created by lawmakers with little or no hands-on experience in the real world. Many servicers still don’t have their guidelines down or processes streamlined.

Hopefully, for the sake of so many homeowners in distress, it’ll get easier. Until it does, agents have to remain vigilant and resourceful and educated. There is no room in this space for agents who aren’t committed to seeing the task through. Their clients’ financial futures depend on their skill and doggedness to complete the task.

(Brian Bean is a real estate broker and ambassador for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. He can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean
Real Estate Professional
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers

ACTIVE RAIN - Dream Big Real Estate and Inland Empire Short Sale Pros Blog Dream Big Real Estate and Inland Empire Short Sale Pros Blog FACEBOOK - Dream Big Real Estate and Inland Empire Short Sale Pros TWITTER - Dream Big Real Estate and Inland Empire Short Sale ProsLINKEDIN - Dream Big Real Estate and Inland Empire Short Sale ProsRSS FEED - Dream Big Real Estate and Inland Empire Short Sale Pros BlogSTUMBLE UPON - Dream Big Real Estate and Inland Empire Short Sale Pros SEND EMAIL to BRIAN BEAN @ Dream Big Real Estate and Inland Empire Short Sale Pros YAHOO PULSE - Dream Big Real Estate and Inland Empire Short Sale Pros GOOGLE BUZZ - Dream Big Real Estate and Inland Empire Short Sale ProsDIGG - Dream Big Real Estate and Inland Empire Short Sale Pros

If one advances confidently in the direction of his dreams,
and endeavors to live the life which he has imagined,
he will meet with a success unexpected in common hours.

Henry David Thoreau