The housing market is crashing, many families have felt the strain of loosing one or both incomes.  We are working with a family right now that is loosing their home due to job loss for one and reduced hours for the other.  They could not afford to keep the home with their wages, even with a loan modification.

I want to share this families  experience with our readers.  We get so many questions relating to Jr. lien holders and recourse or non recourse loans.  We’ve talked to many reputable attorneys at length on the subject and have learned some very interesting and useful information to pass along to our clients.  But as we always remind our readers and clients, we are not attorneys so please consult with an attorney that specializes in Real Estate Law.

Mr. and Mrs. ” Smith” have a first and a second on their property, (Jr. Lien Holder).  The second holds a note for about $150,000.

After long negotiations with both lenders we have hit a road block….

There is no problem with the first accepting the short sale offer, they are ready to release the property from their inventory and avoid having to foreclose.  They have offered the second $2000, the maximum allowed to be paid a Jr. Lien holder accoding to their investor.

Jr. Lien Holder will not accept that pay-off.  They will not release the lien for $2000, they requested the “borrowers” sign a promissory note for the entire balance due.  Well, this was not favorable to the sellers for obvious reasons!

Round Two:

We negotiate a lower amount for the promissory note and present that to the borrowers.  In the mean time they have consulted with an attorney about filing Chapter 7 Bankruptcy.  Their consultation was not what they expected to hear….they make too much money! In their world they are insolvent…loosing a home, lost 2 vehicles to repossession and are still trying to find a place to live that they can afford to rent.

They now are faced with some very serious decisions.

According to attorneys that we have consulted with a Jr. Lien holder has a statute of 4 years to “lie and wait” in other words attempt to collect the balance due them.  This can happen even if they “release the lien” and allow the property sold at short sale.

With that said, even a foreclosure does NOT RELEASE that possibility, unless you are able to file a Chapter 7.

Attorneys will most likely tell you this:  There are two types of foreclosure on real property in California.  Judicial Foreclosures done through judicial (court system) and Non Judicial Foreclosure done by trustee under California Civil Code Section 2924.  Most lenders foreclose Non Judicial as it is relatively fast and inexpensive.  In this case the lender waives right to deficiency against borrower.

For those that don’t qualify for bankruptcy and only have one loan on the property a foreclosure (as long as the lender uses non judicial) appears to protect you from the lender going after the deficiency.

Now if your following this, and asking yourself what if I have a second on the property???  (Most of our clients here in California do)

Again, not being an attorney….

Unless you are able to file BK to release your debt the Jr. Lien holder has 4 years to “lie and wait”.  So a foreclosure still leaves you open to that Jr. Lien Holder balance.

We have been working with more and more homeowners recently that have made the decision to Short Sale their home due to the fact they just want to cut their losses now and rebuild instead of back peddling for years before they regain any equity.  To date, not a single lender has refused the Short Sale.  Although for some of our clients with means, the Jr. lien holder has required a “settlement” either paid over a period of years with zero interest,  or a lessor amount if paid at close of escrow.  These settlement terms have insured the sellers that they will not be sought after for a deficiency judgment.  For some, a small cost to “release” in most cases several hundred thousand dollars of negative equity.

Something to think about……

It’s not often that I get a Short Sale Negotiator on the phone that has the willingness, skill and desire to do their job.   I had spent the entire morning on calls to multiple lenders, my last call was to Washington Mutual.

While on hold trying to find out why it had been nearly 3 weeks and we still had not recieved approval to sell after meeting their counter offer….?  We started talking about Wamu’s internal process…wow, it’s no wonder they are taking up to 90 days to process a Short Sale!

“Wamu” expressed true concern for her co-workers.  The fact is, this lender is not equiped to manage through the volume of Short Sales that are coming in.  From our conversation, it sounds like what they have done to handle the volume is  “Add additional Steps” to process the Short Sale…in other words…DELAY.

It’s no wonder that these Short Sales are taking so long to complete.  Think about it, these lenders don’t want to approve too much loss…too quickly.  Prior to the Short Sale utilizing “Mark to Market” economics the property is looked at as an asset… Can you say…SHADOW INVENTORY!

I’m not an economist, far from it.  But in my humble observasion….

Short Sales ensure a buyer, the home then generates city taxes.  The community gains a homewoner that will most likely have pride in ownership and utilize local business to maintain the home.  Values in neighborhoods start to stabalize with each home sold…contrary to declining with each foreclosure.

Enough already! I’m sick of the lip service….

Hope for Homeowners is an embarrassment to Mr. Obama.   If you live in California, you have realized that a loan modification is easier said than done….

Lenders have been instructed to help their borrowers find alternative to foreclosure and since the loan mods are out for most of us….the solution…Short Sale!  Along with that, President Obama rolled out a wish list of mandates to get these lenders on board to support these Short Sales.  Obama states that their needs to be a  Short Sale Process, and shorten the approval time…yada…yada…yada  this rolled out May 14th, 2009

Makes perfect since…So what’s the problem?

Below, a series of emails between a negotiator at Countrywide/BofA and us.

(Countrywide/BofA)

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“Mimi Bishop” <Mimi_Bishop@Countrywide.Com> wrote:
Please read carefully…….
Please email &  fax the documents to 888-491-4947

I am the short sale negotiator that will be working on the above

referenced file.  Please make the following revisions to the HUD & return
to me no later than 2PM CST time on 04/24/2009 or the file will be canceled. Please read the disclosure at the bottom of the email for
further instructions.
PLEASE BE ADVISED THAT THE CHANGES MADE TO THE SETTLEMENT STATEMENT ARE
NOT NEGOTIABLE & IF CHARGES NEED TO BE PAID, THE SELLER (HOMEOWNER), BUYER
OR AGENTS WILL NEED TO PAY FEES.

PLEASE MAKE SURE ALL DOCUMENTS ARE BACK TO ME WITHIN TIME FRAME OR FILE
WILL BE CANCELED!

PLEASE MAKE SURE LOAN NUMBER IS ON ALL PAGES. FAX THE DOCUMENTS AT LEAST
24 HOURS PRIOR TO THE DEADLINE TO ALLOW TIME TO UPLOAD THEM INTO THE
SYSTEM.

Thank you.
Mimi Bishop
Workout Negotiator III
> LP-Short Sale R
> Mimi_Bishop@countrywide.com

(ME)

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<!--[endif]-->This is my 7th offer. The buyer is capped out at $XXXXXX. The buyer cannot afford the HOA costs. Can your investor please take this into consideration?  Also, could you tell me the investor on these loans?

(Countrywide)

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<!--[endif]-->****transfer to buyer settlement cost ; all HOA fees, assessments; transfer
fee; doc fees; refundable padding; doc prep fee, sub escrow , overnight
mail /wire fee, misc recording fees, *****

(Me)

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<!--[endif]-->My 1st offer was submitted in November 2008. The buyer finally walked in January with no response from Countrywide.

I have had over 7 negotiators on this file and 6 months of work now everything is urgent? Can I have until Monday?

I appreciate your position, however, I am at a loss with your demands of this request and getting them achieved by tomorrow

(Me)

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I just saw that these items were all to be faxed 24 hours ahead of deadline?  That was an hour ago? Should I just forget about it?

 

(Countrywide)

NO RESPONSE

 

We met Countrywide’s deadline…but they took an additional 22 days to “PROCESS THEIR PROCESS” and send approval to sell. You guessed it, by…by…buyer!

 

****We are not alone in the Countrywide Quagmire…I’m  dealing with them are experiencing the “90″ Day Plus response time.****

 

Good News….New offer $30,000 higher than the approved offer.

Bad News.…Countrywide is going to close the file because their policy wont allow them to “swap out buyers” ??? yes, that is a direct quote from the negotiator when I asked her if she could review the new offer with the investor!

 

President Obama….stop spending so much time, energy and money telling America how lenders Need to Find Alternatives to Foreclosure!  Your the President of the United States…you can put enough pressure on these lenders to comply! STOP THE LIP SERVICE.

 

USE THE MEDIA TO CALL OUT “BAD LENDERS” POINT FINGERS…YOU DO IT IN YOUR CAMPAIGN’S!

Check this out…Wachovia is setting the benchmark for the Short Sale process…the days of 30, 60, 90 days waiting for a short sale approval are over.

 

Today on a call with Robert “Bobby” Jackson; Asset Manager, Wachovia, we were treated to one of the most exciting and industry moving initiatives that will change the way Real Estate is bought and sold for many years to come.

 

“Wachovia Short Sale”…as it’s branded…was rolled out in Northern California and has been a huge success. Wachovia is partnering with Real Estate Agents to expedite offers on short sales. Imagine…45 days to close a short sale…that’s 45 days from the day the offer is sent to Wachovia. This “Best Practice” will change the way short sales are done by every bank…nationwide and it’s brilliant!

 

Of $160Billion in real estate loans held by Wachovia, $80Billion is in California!!! Wow…Of this…30,000 of Wachovia’s California mortgages are 60 days + late with no notices of default…People need help…Our economy needs help!

 

With pressure on banks to dump bad assets…banks have been bundling these mortgages and selling them for pennies on the dollar just adding to the foreclosure epidemic. With moratoriums placed on foreclosures, Wachovia’s pro active measures will set the standard for mortgage economic recovery

 

Putting a buyer into a short sale accomplishes many things:

• Stimulates the economy

• Helps to re-establish communities

• Prevents future damage to neighborhoods

• And not to mention…it saves the bank from the high cost of foreclosure and rehabbing

 

As you may know…Wachovia was bought by Wells Fargo and the “Wachovia Short Sale” is only a test…but it has the potential of changing the Real Estate industry. You’d think the geniuses that run Chase/WAMU and BofA/Countrywide would follow this program and embrace the successful trail that Wachovia’s cut.

 

What next…Wells Fargo must expand this program nationwide and do it’s part in Helping Homeowners!

 

This initiative has the potential of changing our economy. The stigma of the short sale is no more. Buyers will make offers on properties knowing that they will get a response in a few days…not months.

 

“Wachovia Short Sale” is Epic!

Today was one of those days…

Up’s and down’s from the moment the phone calls started at 6:00AM.

In the world of Short Sales, there are  so many moving parts.  Usually a seller has 2 loans to deal with and most of the time they’re not the same lender. Needless to say that’s a circus in itself!  Even when the lender holds both liens on a property we find that the departments don’t share information…

Then there’s the buyers agent…oh boy, could I say a lot on this topic.  But to keep it “light” let’s just say that some buyers agents don’t communicate with their buyers, at all!  Nothing like getting a long awaited approval and calling the buyers agent to tell them we are ready to open escrow and get….”well…I need to call the buyer to find out if they are still interested!”

Now, you have to realize that we have been talking to this buyers agent at least once a week for at least 45 days giving updates on when we should be getting an approval! ahhh…so, keeping it “light” if your buying a short sale, make sure you are talking to your agent once a week, don’t leave it up to them to call you.

After 6 hours of calls dealing with lenders, agents and escrow it felt like everything that could go wrong had…

Then, within 2 hours we had 2 calls from people that needed help with selling their home.   After talking to each of them and listening to the emotional and  financial devastation that these properties  are causing them…I realized we  do what we do to help others through these tough times.  Having gone through losing a home, we really understand what your going through.

At the end of the day, I don’t know if I could say “I love what we do”.  But I do know that we love what we “can do” for those who seek to find relief from a property that’s just no longer an option to keep…for whatever reason.

Once you have listed your home for Short Sale, you have agreed to let the bank/your lender decide the ultimate "Terms" on which the home will be sold.

A Short Sale is unique.  Although you are the homeowner according to the note & or deed recorded when you purchased your home...because the home is selling for "Less" than that original note, the lender/bank now has to approve the terms of the sale and will decide howmuch of a reduced price will be accepted for the property.  With that,  the bank will also decide if they are going to offer money towards closing costs, home warranty, termite...fees etc.

When you are asked to sign a purchase offer, the buyer may ask the "seller" to pay closing costs.  Remember, the bank holding the title has ultimate say on what will be paid in the transaction. These fees or costs will be paid from the proceeds of the sale.  If approved...the closing costs will be paid from the proceeds.  You as the seller, will not be responsible to pay for the closing costs at close of escrow. This is also true of real estate broker commissions. Commissions are negotiated by the broker and are also paid from the proceeds. Again, you will not be responsible to pay commissions.

Another very important thing to be aware of as the homeowner-

When you list your home for Short Sale, in most states (California) you will be asked to sign a Short Sale Listing Addendum.  This form explains the Short Sale process and ultimately allows you to cancel the sale at anytime, for any reason.

What does this mean for you?

If you are not comfortable with the terms the lender has offered as an approval, CANCEL the sale.  You are in complete control.  Do remember that you will have to deal with the possibility of Foreclosure if you refuse the terms as agreed by the bank.

Make sure you have an experienced and trained Short Sale Agent represent you through the sale. Experienced? 5+ closed short sales. Ask to see previous clients Approved short sales.

We have never had a sale approved that the homeowners were not thrilled with.  This equals ZERO dollars to sell the property.

Obama Administration To Incentivize Servicers When They Approve Short Sales! by Kris & Kim on May 14, 2009 It’s not everyday that we get such amazing news from the White House….today the Obama administration announced new and updated details regarding the Making Homes Affordable (MHA). Program updates include details on Foreclosure Alternatives. These alternative will help to prevent costly foreclosures by providing incentives for servicers and borrowers to pursue Short Sales. Some Highlights: 1. Borrower incentives to cover relocation expenses to homes that are affordable. 2. Incentives for servicers to pursue alternatives to foreclosure. 3. Servicer must give borrowers/homeowners at least 90 days before any foreclosure measures are initiated if home is listed for sale. A streamlined and standardized way that lenders will process these Short Sales are hopefully going to minimize the complexity of the transaction. What this means for you the homeowner?…..A shorter time to get the approval! It’s a mixed bag of emotions as I put all of this down in words. Loosing a home is emotionally devastating, it knocks the wind out of you. If you don’t control that emotion it can completely permeate every aspect of your life… Having experienced that loss a few years ago, I am excited to know that there is real help for people that need it now. There was no help when we were going through it. So, if your reading this thinking I feel excitement about this news; your right-but I am excited because the recovery for anyone facing the hard decision to do what is necessary to survive and move forward will now be much easier and recovery will be much faster….

The Feds just released...

1) Short sales: lenders can receive $1000 for accepting a short sale. (we understand that this is in addition to the $2,000+ Freddie Mac was paying as well)

2) Borrowers (Sellers)  can receive up to $1500 for doing a Short sale or deed in lieu.

3) Lenders are successfully doing loan mods and the fed is putting more money in the loan mod pot.

 

What a great time to be in real estate...

1. Great for Sellers underwater
2. Great For Banks Who Are Overwhlemed by REO's
3. Great for Buyers as Short Sales are sold a great value!

Great news today for anyone contemplating a Short Sale....Also validation that Banks don't want to Foreclose if there is another alternative. Citi Mortgage announced that their pre-foreclosure preventions  outweighed their Foreclosures 10 to 1 during the first quarter!

With this great news also comes the reality that lenders/banks are taking the time....and lot's of time to review these Short Sales.

We work with all the major lenders and servicing companies, and it's obvious that some of these "guys" have a great process in place.  One major lender, Wachovia, is outstanding to negotiate with, they only require a few documents from the homeowner and have an approval process in place that is taking just under 30 days!!! To the extreme, Chase Mortgage is taking 30 days to even recognize that an offer has been received....making their approval time nearly 120 days...hmmmm?

We're confident that these delays will be corrected, and a smooth process put in place in the near future, Short Sales make real $$$$ and sense.