Is Your Short Sale or Loan Modification Being Turned Down?

Has your short sale or loan modification been turned down and you have no idea why? Let's examine some of the reasons. These reasons may not make you feel any better or maybe they are just excuses by your lender, however there are a few things you may not even know about your loan.

Let's say that you make your mortgage payment to Wells Fargo. You can no longer handle your payments so you ask Wells Fargo to modify your loan- to do a loan modification for you. You are behind in your payments. You are in fact, in foreclosure but you are still living in your home and the judge in your case has not ordered the sale of your home at auction yet. You are scared. You see your neighbors losing their homes all around you. You are hopeful because you see on the news and in the newspapers that the Federal Making Homes Affordable Program has been helping some folks keep their home and get a loan modification.

You are no longer making your mortgage payment because your adjustable rate has been applied and your mortgage payment has gone from $1600 a month to $2300 per month. You just can not make these payments. You have been trying for almost 2 years now to get Wells Fargo to approve your loan modification. You even hired an attorney to help you with your foreclosure defense.

Wells Fargo turns down your loan modification request. You wonder, how could this be? After all, Wells Fargo is one of the large lenders and is participating in the government's Federal Making Homes Affordable program.

But Wells Fargo tells you that the investor is the one that will not allow you to get a loan modification. What in the world is an investor doing making decisions on your loan you wonder. Well, you are not alone in your confusion. Every day we are explaining the whole mortgage note owner thing to buyers agents, real estate agents and homeowners.

Just because you make your house payments to Wells Fargo does not mean they own that note that you are paying on. They are the servicer. Other words you will hear them called are  asset management companies.

The very first thing you need to do before you ask for a loan modification is to find out who actually owns your note. You can do this by calling who you make your mortgage payments to and asking them.

If it is Freddie Mac or Fannie Mae that own your note- you have a much better chance at getting your loan modification approved if you qualify. If it is a private group of investors, your chances go way down. Why would this happen?

One in eight homeowners' loans were sold to investors on Wall Street. What happens is that a bunch of loans are packaged together. These are called mortgage-backed securities. They are then sold off to investors. Homeowners who have mortgage-backed securitized loan are five times more likely to be late on their house payments. Many of these borrowers were given loans they were not qualified for from the beginning. Many of the homeowners getting these loans did not read the fine print and did not realize how high their mortgage payments might go when adjusted.

The rules to allow modifications, short sales and terms of foreclosures and deficiencies are ambiguous at best. Homeowners who are told no by the investor have little recourse.

The federal Making Homes Affordable program lenders who participate in the program must modify all homeowners that qualify. The exception is when the investor has a rule that they do not allow modifications.

The Federal Housing Finance Agency reported to Congress on June 3rd that these securitized mortgages are a "hurdle" to the success of the Making Homes Affordable program. The treasury department has not disclosed why the modifications are denied so there are little to no facts to go on.

Why would the investors say no to your loan modification? Well, Wells Fargo's response is that the investors need their money. Wells Fargo has one situation where the borrowers ( the homeowners) are trying to get their loan modified but Goldman Sachs is the issuer and Deutsche Bank is the trustee. But when you go and talk to these investors and we have on several occasions when doing short sale negotiations for our sellers; the investor passes the buck back to the servicer. For instance, Deutsche Bank says that Wells Fargo is solely responsible for the decision to modify a loan or not.

Some people say that the investors are the scapegoats. Everything can easily be blamed on them. Since you rarely get to speak to anyone at the investors' group it is hard to tell who is telling the truth. In this particular situation Wells Fargo is saying that the investor is not forgiving the past due debt and that makes the payment go up on a loan modification because then Wells Fargo would have to put that past due balance along with all the penalties and fees into the loan modification which then may cause the homeowner to not qualify financially for the loan modification.

Servicers have agreements, contracts that they sign with investors. These agreements contain the rules for modifications. These agreements are called Pooling and Servicing Agreements which is known as PSA's. The PSA is most often what the servicer says is the reason for them not being able to do the loan modification or release the deficiency on a short sale.

But when you talk to other people in the management areas or to the investors they claim that there is nothing in the PSA's that would prevent the servicer from approving loan modifications, short sales and releases. There is a new study coming out from a law school wherein they state that only 8% of these mortgage-backed securities  agreements contain any language that says the servicer is not allowed to do a loan modification for these notes. That means that about 92% of all the NO's; could actually be YES's. So why would that even happen?

Fear of law suits! The language in the PSA in question here, Wells Fargo and Deutsche Bank- it says that Wells Fargo can "waive, modify or vary any term" as long as Wells Fargo as the servicer makes a "reasonable and prudent determination" that the modification is in the investor's best interest. Attorneys examining these agreements say there is quite a bit of room for servicers to make these decisions. But the language itself in this agreement is enough for the servicers legal counsel to be concerned with the investor suing them for not acting in the best interest of the investor. They can not, no matter how inhumane this sounds, put the homeowner ahead of the investor. This is about business and if they want business from investors they need to make sure they are looking out for the interests of the investors.

The treasury department has stated that the fear of law suits is the biggest deterrent to getting the servicers to approve loan modifications and short sales. So doing little or simply turning down the loan modifications are the answer many servicers choose. This is not personal and this is not against you, the homeowner. The position of the servicers is to watch their own backs and to protect the assets to which they have been entrusted with, your mortgage-backed security. The Treasury Department says they can relieve some of the pressure of the fear of lawsuits by standardizing requirements for loan modifications and also provide some type of calculation to figure out if the investor will make more money by the loan modification or by the foreclosure.

We need to keep in mind one big thing in all of this and that is that these investors end up being regular people because most of these mortgage-backed securities were bought by pension funds and retirement plans of folks like your parents or even yourselves. You may well be one of the shareholders of the very loan you can not pay.

 

        

 

 

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Is Your Short Sale Or Loan Modification Being Turned Down?-was first published on South- Florida-Luxury-Living.com.

Copyright © 2009 By Katerina Gasset, All Rights Reserved.*Is Your Short Sale Or Loan Modification Being Turned Down?* 

 

Hometown Realty of Duval, Inc. of Jacksonville, Florida

Time is running out for first time home buyers tax credit

How to tell if your home is overpriced - the creepy crawly test.

How do  you know when your home is overpriced?

Well you could have your agent pull comps and if they're half way competent you could take their word for it.

Or you could wait until the lock box on your front door sits long enough for all the creepy crawly things to feel safe enough to make it their home.

Bottom line if the spider living in your lock box is netting more visitors than  you are chances are you're priced out of the market.

Statistically they say it takes two to three times longer to sell a home through price reductions than it does to price it right up front.

If your home is priced right for it's condition, for it's competition, and for the market, your agent shouldn't have to proceed with caution when removing the lock box from your door.

You can save yourself time and net a bigger return doing the research upfront and gettig the equation right from the start.

As for me I don't like spiders so if I show up at your door and your lock box looks like this, I'm going to leave it and it's inhabitants for the next agent.

 

 

VIDEO of 3BR/2B Home for Sale in Jacksonville, Florida - Built for and around FUN!

Are Real Estate Prices Being Held Back?

Like many real estate agents I am getting more than a little ticked off at how the government banks are handling the foreclosures and the sale of homes and condos. In my opinion, they are running the real estate market right into the ground. Of course, right behind them are the appraisers who are actually "untouchable" now thanks to the HVCC Home Valuation Code of Conduct. One of my favorite blogger's Chris Griffith wrote about this recently. Right behind them are the underwriters who yes work for the banks.

So do I sound ticked off? Well I am and right now I am beginning to think it's some kind of conspiracy to cripple the middle class. No I am not going nuts it's just I am seeing first hand what is happening to the real estate market here in Macomb County, just outside Detroit. I just can't take it anymore and I think people need to know what's going on. I think the banks are holding real estate prices back.

Here's why -

• last month we sold a home that was listed at $149,000 it had 7 offers and our buyer offered $169,900. Now that means the market is talking right? Not quite - although our buyer's offer was the best and his offer was accepted the appraiser brought the value in at $152,000. So much for the market talking. The best part is this home sold in 1988 brand new for $150,000 and the township well they are collecting taxes based on a value of $241,000.

• a few weeks back we sold a condo for $92,000 actually we thought it was a pretty good deal.  Guess our 20 years of real estate experience means nothing - the appraiser said it was worth $83,000. The estate was appalled because their mom paid $80,000 in 1979. Of course, they were forced to sell since we could not fight the appraiser.
  

• this tops them all - a condo sells for $83,000 this time the appraiser says it's worth $85,000 - ready for this one? The underwriter says No - she ran the automated evaluation system and said it was worth $73,000. What???
  

• here's one that I have first hand knowledge of - we bought a condo in 2003 for $105,000 bank owned. These units sold back in 1994 for $65,000 and in 1988 brand new for $58,000. But in the past 3 years the banks have ran the market right into the ground - $95,000, $62,500, $59,900, $49,900, $44,900, $40,500, $38,000. Urgh
  

Now remember Macomb County was NOT an area that went way up in value. No this area did not see double digit appreciation in a couple years. We had normal appreciation and then the banks came in and ran it right into the ground. The other day I saw a home selling in Detroit for $850 yep you read that right. No it was not a wreck. It was a 3 bedroom brick home with a basement and a garage and a few miles from where I grew up. Sick just sick.

So what do you think?

 

3BR/2B Home for Sale in Ft Caroline Club Estates - 1680SF + 350SF Recreation Room

Video Press Release: PowerListing for Jacksonville, Florida Real Estate

SHORT SALE FLIPS - TITLE INSURANCE PROHIBITED

The short sale flip apparently is alive and well for some investors - and it is causing havoc with title insurance underwriters.  Now the title insurance underwriters are making their case simply by declaring that they won't insure such transactions.

This decision is not surprising. As pointed out in SHORT SALE FLIP - QUESTIONABLE METHODS, some investors have seen the reluctance amongst knowledgeable (and ethical?) title insurance agencies to question and usually refrain from being involved in such transactions. The result was the new "twist" of using one title closing agent (and underwriter) for the initial sale and another title closing agent (and underwriter) for the higher sale.

These transactions are also being examined by the shorted lenders - but the current safeguard of having the parties sign affidavits and "disclosures" is seriously not going to stop any investor that sees dollars at the end of the transaction. 

Attorney Title Insurance Fund (in Florida) just today released an Alert and directive to its agents and it is reproduced below.  They are not the first nor will they be the last to take this position.

FUND ALERT: SHORT SALE PROGRAMS The Fund has become aware of several "short sale programs" advertised on the internet and elsewhere that promise to make the investor lots of money with little or no work by purchasing and selling property through short sales.  The programs involve the investor entering into options or similar contracts with the homeowners for the exclusive right to purchase their property for a period of time.  The investor negotiates a short sale with the lender, convincing the lender that the price they are offering is the market value of the property.  The investor then finds a buyer for the property at a much higher price.  Once the buyer is lined up, the investor buys the property from the seller, pays off the seller's mortgage at the short sale rate, and simultaneously sells the property to the buyer at the higher price, pocketing the difference.  In most cases the original lender is not told that the buyer is flipping the property on the same day for thousands more than the lender has been told is the market value of the property. In the cases we have seen, the investor has not put any of his own money into the transaction, and uses the new lender's money to fund the entire deal. A variation of this program involves the investor having the seller convey the property into a "trust" with the investor as "trustee". The Fund has made a business decision not to insure these types of transactions.  Before you insure any kind of transaction involving a short payoff to the existing lender, or a simultaneous closing, make sure that the following requirements have been met: •1.    There are no violations of any restrictions listed in the short sale payoff letter or closing instructions. •2.     There have been no misrepresentations as to the value or ownership of the property to the existing lender, the new lender, or the purchaser. •3.     All disbursements must be made exactly as stated on the HUD-1 settlement statement, and only to parties involved in this specific transaction. •4.     Each half of the simultaneous closing must be kept separate and stand on its own.  The sale from A to B must be fully funded and disbursed with money coming from and going to all appropriate parties.  The sale from B to C must also stand on its own.  The money from C's lender must not be used to fund any portion of the A to B transaction. If the circumstances of your transaction do not meet the above requirements, you must contact a Fund underwriting attorney for approval prior to insuring the transaction.

Attorneys' Title Insurance Fund, Inc. 6545 Corporate Centre Blvd., Orlando, FL 32822 1-800-336-3863 www.thefund.com

THIS IS AN AUTOMATED EMAIL LIST -- This email address is not monitored. Please do not reply to this message. ©2009 Attorneys' Title Insurance Fund, Inc. The Fund is a registered trademark of Attorneys' Title Insurance Fund, Inc.

Why You Can't Sell Your Home In This Market