I blogged on this subject many months ago. Recently the debate has popped up again.  

A recent study determined that homeowers are willing to walkaway after their homes start to decline by more than 10%.  

http://news.prnewswire.com/ViewContent.aspx?ACCT=109&STORY=/www/story/06-26-2009/0005051034&EDATE=

 

There is a debate here on activerain about whether this is a moral issue or not. 

1.  By giving credit to anyone with a pulse the banks allowed to demand to outpace supply. Prices went up. 

(The fed created the bubble by allowing credit to loosening during a bubble.  The fed is owned by regional member banks.  Those banks are owned by shareholders.  Banks like JP Morgan Chase own those shares.) Therefore the banks created a bubble and then they created the contraction by tightening lending standards.  

By controlling credit, the banks allowed prices to rise, and then by tightening credit the banks forced prices to fall.  

It can be argued the banks as a group do not deserve the benefit of their bargain.  

Real homowers who have lost their equity seem to have entered into the arrangement in good faith.

I can not say the same for many if not most lending institutions.  

 

2.  The banks were in league in with the builders.  The builders took large blocks of relatively worthless land and built new overpriced, over upgraded homes on formerly almost worthless lots.  Because homes look good people wanted them.  By forming joint ventures with the lenders the banks found ways to have under qualified buyers overpay for properties.  When those buyers could not flip for a profit they stopped paying. Leaving their neighbors hundreds of thousands in the hole.  The lenders sold and the banks lent on over developed homes.  This should be the real function of an appraiser.  They should stop over payment for over developed properties.  Oh wait the lenders were rigging those as well.

3.  The banks did not just accept an borrowers promises to pay.  In california they secured that promise to pay with real property.  In doing so they entered into a statutory framework which in my opinion replaces doing the right thing with following the law.  

For instance with CCP 580b California decided that the risk of a property being over priced should be placeed on the sellers and the lenders -- not the purchasing homeowner.  If a person defaults and the bank forecloses on a residence with purchase money loans, the bank gets the property back as full settlement.  see CCP 580b for full details.  Therefore, the borrower pays off the entire loan after a foreclosure in this situation.

The bank was the short term profit making  "fool" who took the risk by not requesting 20% down. The lenders irresponsible actions (and short term profits) have virtually bankrupted america.  

While I think every situation is different, in many cases I see walking away from the property as the right thing to do.  Especially for those who can not afford the tax consequences of a short sale.  

for more on walk away

for more on short sales 

 

 

 

 

 

 

 

 Bank of America’s short sale approvals and Countrywide short sales approvals are issued with similar “flaws” (from the standpoint of home sellers).    

Their short sale approval letters reserve their right to come after the seller for the deficiency and they do so in writing.

However, they also seem to include a vague disclaimer which states that these terms apply as long as they are allowed by state law.   

 

Almost every short sale negotiator to whom I have spoken states they advise their clients to go ahead and do the short sale as long as their clients have "Purchase money loans".

This happens so much I have just had to bite my tongue.  It annoys me when people give out legal advice in such a brainless manner.

However, just this week a tax attorney told a Realtor in my office that Bank of America can not go after sellers with purchase money loans because of CCP 580b.

I just wish one person making this statement would back it up with case law. 

This is legal advice which could expose many sellers to 6 figure collection actions and I just do not get how people can make statements so cavalierly.

 

So far I have had at least 20 phone calls from people facing post short sale collection activity and quite a few of these people had  CCP 580 b protected loans.  

When I read the case law, the cases refer to foreclosure sales and non judicial foreclosure sales.   I have seen no cases extending the law to short sales in San Diego or short sales in California. 

If anyone has any reason to believe CCP 580b applies to short sale and you are correct, I will anoint you my favorite person on the internet.

I promise to be respectful of all submissions as I know you just may be playing devil’s advocate.

Lets settle this issue.  

 

In the meantime I advise anybody who has a future to protect to consider compromising their second loan via a short payoff prior to listing a property for a short sale. 

Most of these banks have become very reluctant to release the deficiency in writing since the TARP and Fed trillions have floated into their accounts. 

Also when you could be facing hundreds of thousands of dollars liability – I highly suggest you “trust but verify” and demand your short sale advisor put their advice in writing.   

 

Bank of America short sales

 

 

This new real estate values mapping tool was provided to San Diego Realtors as part of their subscription to the San Diego MLS.

Real Estate Homes for Sale Real Estate Values

 

I was recently going through the san diego tax records via Realist when I noticed a new link to software which mapped sold properties and for sale properties.

(just like zillow it does not seem to do too good a job pricing property, but hey that is our job anyway.)

I said to myself wow that would be a zillow killer if they provided that to us.

Two days later I got an email from the mls saying we could frame this into our sites.

 

I suggest we confer with a seo guy but that 20 -200 of us here at active rain set up pages on our websites for doing property valuation for each area and then we provide backlinks to each other's pages. 

If you have this setup on your site in your area. 

I suggest you make a comment below and do a back link to your site.

If an SEO guys says this is wrong.  I will be happy to remove any links people make. 

I am open to any suggestions which would help Realtors compete with the larger lead generation companies. 

I have nothing against lead generators...  I would just like to beat them at their own game.

 

 

 

 

 

 

 

Quote from the this week's Realtor.com mass email to Realtors:

 

"Legal specialists have recommended that practitioners avoid identifying themselves as experts in foreclosures and short sales, because such self-identification can expose them to legal liability if a deal collapses. A safer approach from a liability standpoint is to identify their experience and training but not refer to themselves as an expert."

 

This goes under the category of "you think". 

 

As an attorney and a Realtor, I have always wondered how Realtors could be so bold as to call themselves short sale experts. The name implies a skill set which will almost make any failed short sale a liability trap.

short sales and foreclosure information

san diego real estate values

 

 

Well maybe - see my updated comment below.  Not really

 

The new foreclosure act signed by the governor does not really buy any more time for Califonia homeowners.

We still have the same 110 day countdown from the Notice of default and the extra 90 days does not really gain any more time.

I am not aware of any homeowner who has seen a Notice of Default prior to being 90 days in default.

Most if not all residential notes or loans in California require an acceleration time period which require a letter of accelaration and then 30 days period in which the property owner is given at least 30 days to get current.

The lender frequently waited at least 30 to 60 days before they sent out those notices. For all pratical considerations this new act does nothing. 

If the California legislature really wanted to do something interesting they would focus on two things:

1. requiring lenders who recieved TARP money to release the borrowers from the deficiency if they complete a short sale: and

2. have the attorney general enforce a law they already have on the books which states lenders should offer loan mods which tie payments to the fair market value of the property.  I belive that act was passed as SB 1137.

 

for more on san diego short sales and negotiating with lenders.

 

 

 

 

Here is a quote for the California attorney generals website.

http://ag.ca.gov/consumers/general/foreclosure_reg.php

"After July 1, 2009, with certain limited exceptions, it is illegal to operate as a mortgage foreclosure consultant in California unless the foreclosure consultant has obtained from the Department of Justice a Certificate of Registration as a Mortgage Foreclosure Consultant. In order to obtain the Certificate of Registration required by California Civil Code section 2945.45, a foreclosure consultant must complete the application and provide all required documents to the Department of Justice.

 

California Association of Realtors says Realtors are short sale consultants when they are contacting the banks on behalf fo upside down homeonwers who have received Notices of Default.  (see the car legal letter on short sale.)

 

After July 1, 2009, realtors will need to change the way they do short sales. 

1. Full service Realtors might consider engaging and attorney to do they negotiating after the Notice of Default is filed. or

2.  They might consider having the homeowner do all the communicating with the lender.  However, before a Realtors instructs a homeowner to do this, they might wish to have the homeowner speak with an attorney about the downside of speaking with the lenders collection department personally.  

 

In summary - this looks like the Caliornia Attorney General is putting teeth into the foreclosure consultant law. 

 

Realtor magazine sent out an email warning Realtors about legal pitfalls. 

If you have the email, you may wish to click on the link to the article. 

 

the director of legal affairs for the state of maryland is quoted warning Realtors that negotiating with banks may be seen as the unauthorized practice of law. 

 

http://www.realtor.org/RMODaily.nsf/pages/News2009051503?OpenDocument

 

Does any one see a pattern between the New York times last weekend warning that lenders are seeking repayment for deficiencies and Realtor.com now doing this little cya. 

 

short sales

 

 

 

 

 

 

Did you see the headline in our emails today from Realtor magazine?

"Lenders Chase short sale sellers"

 

The Wall Street Journal quoted Bank of America, HSBC and other lenders and they

The take away from the article is the the lenders look at a number of factors before they start to collect. 

http://online.wsj.com/article/SB124104990739271023.html

 

For more information about short sales and relief from a deficiency go to www.FavoriteRealEstate.com or UpsideDownRealEstate.com

 

 

 

 

 

 

 

 

 

There seems to be a growing consensus among the Mortgage lenders and loan brokers that a short sale is just as damaging as a foreclosure to a persons credit. FICO reports a short sale will drop your credit score just as much as a foreclosure. Does that mean everyone who said short sales preserve you credit are wrong? (I am thinking back to those billboards and direct mail pieces I have seen where the lead was SAVE YOUR CREDIT.) I think it depends on the context. There may still be some benefits to a short sale: 1. Fannie Mae and Freddie Mac may be willing to back you loan more quickly. Within 2-4 years. Depending the circumstances. 2. Investment bankers have told me that can get peoples credit history going back 20 years. They say that having a short sale or a Deed in Lieu on your record looks far more responsible than having a foreclosure on your record. My take way from this is that in some circumstances your credit history may be more important than your computer score. 3. Some industries frown upon foreclosures. If your job involves security (as in miltary or homeland) or securities (as in wall street) you probably do not want a foreclosure on your record. sorry about the format I will reformat later.

President Obama announced today that people making over $250,000 a year are going to lose some or all of their their mortgage interest tax deduction.

 

1. Give away taxpayer trillions of dollars to zombie banks.

2. Destroy those banks underlying assets by making the assets securing big residential loans much less valuable.

3. Annouce gun control laws.

 

Does anyone see a pattern?