Check out this great MSN video - Why keep paying the bank?

Check out the video and the accompanying article.

Click on the video below.

Will the Govt. force you to declare bankruptcy as a result of a short sale?

Short sales are becoming more common, banks are becoming more accommodating, and the process has shortened up quite a bit…but that could change if the tax break that currently does not force homeowners who do short sales to claim the forgiven debt on their tax returns is not extended.

On December 31st, 2012, the Mortgage Debt Relief Act, also called the Mortgage Forgiveness Debt Relief Act, will expire if changes are not made to the legislation. When this happens, the “deficiency”, or difference between what your bank ‘nets’ on your short sale and what you owed, if forgiven, once again, will be viewed as taxable income.

This  will  make short sales far less attractive to nearly every distressed property owner. And it could slow down the short sale market long before the end of this year, because “short sales take a while to get approved. If there isn’t an extension of this legislation by June or July, there probably won’t be as much incentive to do short sales in the latter months of 2012 as short sales with some lender can exceed six months from start to finish.

Additional fallout could take the form of more strategic defaults once short sales are no longer an option, warn analysts. If homeowners stand to lose money in the form of additional taxes on the “forgiven” debts on their homes, they may simply opt to walk away from the property at some point. Of course, in the case of strategic defaults – or other forms of foreclosure as well – lenders can pursue the delinquent borrowers for the difference between the amount that they owed on the property when they stopped paying and the amount the lender was able to make when the property was sold. These debts are often difficult to collect, but some lenders opt to wait years before pursuing them in the hopes that former homeowners to get back on their feet and once again have some assets to go after.

Some banks sell the debts to third-party collections companies. Even if this part of the debt is ultimately written off, it can create tax problems years down the road for homeowners because when the debt is written off it may be considered income to the homeowner.

We are hoping that the Mortgage Debt Relief Act will be extended long before it expires on December 31 of this year. If the legislation is not extended, many homeowners may be forced to declare bankruptcy in order to avoid paying income taxes on their “forgiven” debts.

If you are in a position where you think a short sale may be an option for you, please give me a call sooner rather than later.

Thanks…Steve Jackson

561-602-1258 – Direct

email: ShortSale@thejacksonteam.com

Are you “choosing” foreclosure?

It frustrates me to see homeowners continue to stick their head in the sand and choose foreclosure.  Yes, I said CHOOSE! 

Foreclosure is a choice made by uninformed homeowners who have simply given up.  No matter how frustrated you are or how grim the situation has become, foreclosure is almost never the right choice.

Below I’ll explore a number of ways to avoid foreclosure:

1)  Loan Modification

A loan modification is an adjustment to the original loan terms agreed upon by the lender and the borrower. There are three areas that can be adjusted:

1   Interest rate (lowered either temporarily or for the life of the loan)
2.  Length of the loan (extended to 40 years!)
3.  Principal owed/Principal reduction (this is the least likely to occur)

Loan Mod Requirements

You will need to provide extensive documentation to prove why you need a modification.  Your bank will go through a credit check, run an income vs.. expenses analysis, and then will do an appraisal on your home.

By most accounts, the loan modification programs, the most popular one was HAMP (Home Affordable Modification Program), many called it the “Obama plan,” have been an absolute failure.  The criteria to qualify for one of these programs continues to change and most borrowers who have attempted them have been denied.

And those who were approved many times did not get approved for terms that would allow them to keep their home long term.  That is why the re-default rate is over 50% within 12 months after a loan modification.

Our position on Loan Modifications has never changed: If your financial hardship is temporary and the savings from the loan modification will enable you to keep your home, then this is a viable option.

What to Watch Out For: Trial modifications that entice you into paying 3 straight payments and then once you do, they deny you for a permanent modification. But a crucial thing to watch for is when you are in a month over month holding pattern and keep getting told that your file is being reviewed the bank is moving forward with a foreclosure action!

2) Refinancing

If you are upside down, where you owe more than your home is worth, then the only chance to refinance will most likely be through the Home Affordable Modification Program (HARP).  The Obama administration recently loosened the requirements to get into HARP in an effort to assist more underwater homeowners.

HARP Requirements:

• Your loan must be guaranteed (owned) by Fannie Mae or Freddie Mac and have been since prior to May 31^st 2009.
• You must be current on your existing mortgage and current for the prior 6 straight months
• You can only have 1 late payment on your mortgage in the last 12 months

Contact your existing lender to see if they are participating in HARP.

HARP can be a long term solution if a homeowner can get into a lower payment they can afford.  However distressed homeowners need to remember that this does not solve the fact that the home is underwater.  In addition, it pushes your loan out 30 years again. 

What to Watch Out for: Be on the look out for loan modification and refinance scams.  Any time the media shines the light on some of these programs, scam artists try to take advantage of distressed home owners.  Never pay any up front fees of any kind or any fees throughout the refinance process!

3)  Forbearance

Forbearance is a special agreement between the lender and the borrower to delay a foreclosure and come to an agreement as to how missed payments (and associated fees) are to be paid back.

Is Forbearance Right for You?

Forbearance should only be used for a temporary financial hardship.  If someone has a more long term hardship such as unemployment or underemployment then this is not a good option.  The lender will not agree to forbearance unless the terms are favorable to them which may include a lump sum payment or tacking on any missed payment to the back end of your loan. Remember all of those payments that you don’t make get ADDED onto the end of your loan.

What to Watch Out for:  Trying to obtain forbearance because you can no longer afford your home and you are upside down is a bad idea and only makes you further upside down.

 

4) Bankruptcy

Bankruptcy is the legal status of an insolvent person or business that cannot repay debts owed to creditors.

Is Bankruptcy Right for You?

Bankruptcy does not stop a foreclosure forever. But it will delay it and it may eliminate the responsibility for the deficiency balance on your mortgage.

Bankruptcy Requirements

Income and assets guidelines dictate if an individual or a household would qualify for it.  If a foreclosure date does not allow for enough time to find another place to live, there are additional liens on the property that would prevent the home to be sold on the open market, or you are concerned that the bank will come after you for the difference, than a bankruptcy may make sense.

What to Watch Out For:  Bankruptcy has the worst possible effect on your credit and should only be used when absolutely needed.

5)  Deed in Lieu of Foreclosure

A deed in lieu of foreclosure occurs when a borrower conveys all interest in their property over to the lender to satisfy the loan that is in default and avoid foreclosure proceedings.

Is Deed in Lieu of Foreclosure Right for You?

A deed in lieu of foreclosure, is basically a “voluntary foreclosure,” since you are essentially handing over the property to the bank without them having to go through the actual foreclosure process. While a deed in lieu is easier than foreclosure, the only party who will reap the benefits of this program is the bank. The credit implications and impact on your ability to borrow money in the future are identical to a foreclosure. It is not looked upon favorably.

What Are The Deed in Lieu of Foreclosure Requirements?

Like many foreclosure alternatives, there is a long list of requirements that prevents many people from qualifying for a deed in lieu of foreclosure.

For example, other liens and mortgages may limit this option, and a true hardship must exist.   Since the bank is not in the business of owning properties they will only consider this option if the loan is in default and they truly believe they will have to foreclose if they do not agree to it.

Lenders prefer short sales over a deed in lieu because with a short sale they don’t have to take over the property. Even under the Treasury’s HAFA program you are required to first attempt a short sale and if that fails after 120 days then you can apply for a deed in lieu of foreclosure.

What to Watch Out for: A deed in lieu does not automatically forgive the deficiency balance on the loan. Just like with a short sale you need to be sure the language in your Deed-in-lieu agreement waives any deficiency balance.

6) Short Sale

A short sale is the process of selling a home through which the lien holder(s) agrees to settle for less than they are owed.

Any unpaid balance owed to the creditors is known as the deficiency which, if negotiated effectively, is forgiven.

The main reasons our clients opt for a short sale over the other options are: debt forgiveness, credit impact, ability to purchase another home more quickly, the likelihood of a continued depressed housing market, selling with dignity, and moving in a more predictable and controllable timeframe.

We have found that many distressed homeowners will attempt some of the above methods such as loan modification, forbearance, and then leave a short sale for last. Then once the short sale is complete almost all of them wish they had done the short sale from the beginning!

Please…don’t wait until you get the “notice of foreclosure sale” served to you…give me a call now, we’ll discuss what your best option is and how to accomplish it. My direct line is 561-602-1258.

Thanks for reading, Steve Jackson

Foreclosure/Short Sale…1099 differences

  The following is from a great blog post entitled; IRS Form 1099-A, 1099-C and the Cancellation of Debt in Foreclosure on The Accounting Consortium blog:

Okay, so misinformation and confusion about the tax implications of foreclosure arising from the cancellation of debt seems to be piling up. In particular, folks seem most confused by the receipt of Form 1099-A from lenders who have taken property back in foreclosure.

First, remember the basic principle: Cancellation of debt MAY result in taxable ordinary income.

Second, because a foreclosure is viewed as a “sale of property,” if you let real estate go in foreclosure and it results in a cancellation of debt, then that foreclosure may be a taxable event.

There are three exceptions:

1. First, if the property lost in foreclosure is a principal residence-literally the home in which you live-then the cancellation of the debt (“COD”) generally won’t be taxable. This is a result of the Mortgage Forgiveness Debt Relief Act of 2007.

2. Second, if your are “insolvent” at the time that the debt is cancelled (not at the time of the foreclosure, but more on this below) then you will not be taxed. Insolvency is a simple balance sheet test: If your liabilities exceed your assets, you are insolvent. Don’t over think it. You will have to submit IRS Form 982 with the tax return in the applicable year in order to demonstrate that insolvency.

3. Third, if the debt is cancelled as a result of a bankruptcy filing, then there is also no tax. (This is one of the reasons I call bankruptcy “the ultimate mortgage modification tool.”)

So what about this Form 1099-A business? Form 1099-A is the form that the lender sends you (and the IRS) that documents that the lender has accepted real property in partial satisfaction of a secured debt. It does not create the tax liability. It is not documentary evidence of cancellation of debt. It is a tax neutral document.

The document that causes the problem is the IRS Form 1099-C. This is the one that tells you that the bank has cancelled the debt. It has two effects: First, it can be used as evidence in a later lawsuit by the lender to refute an allegation that the debt is still due and owing. It is not proof; it is just evidence, or as lawyers like to say, it is “probative but not dispositive.” Second, it will likely give rise to the possibility of a taxable event precisely because it constitutes a statement by the lender that the debt has actually been cancelled. (The above exceptions still apply, but how you need to deal with the problem will change.)

Remember: Foreclosure doesn’t ‘per se’ cancel the debt; it merely satisfies that part of the total debt which is equal to the value of the property.

Here’s the down and dirty of it: You are not likely to receive a Form 1099-C from a foreclosing lender on a recourse obligation because they want to hold out the possibility of recovering a deficiency for as long as they can. (Assuming, of course that the anti-deficiency laws allow it…But that’s a whole different topic that I won’t get into here.)

So since only part of the debt is paid by the foreclosure, and since you’ve only received a 1099-A, without that 1099-C, the claim stays alive until it dies by some other means. Prudent tax pros generally counsel that it is wise to provide some sort of estimated liability if the property has been lost to foreclosure, and you still haven’t received her 1099-C. I tend to disagree with that somewhat, because there is no COD tax until the debt is actually cancelled, and the debt isn’t cancelled until the lender or the law says it is. Estimating the liability based on an assumption that recourse debt will be cancelled eventually may create a need to amend the return later if the lender comes after you. Of course, if the debt is unambiguously non-recourse, meaning that no deficiency is possible, then it makes sense to go the estimate route because the debt is now cancelled by operation of law.

Last, an issue related to this is the difference in bankruptcy dischargeability status between a mortgage debt owed to a lender, and an income tax debt owed to the government. They are not treated the same in bankruptcy: If you owe the bank and you file, then the debt is immediately dischargeable. But if you wait until you have filed the tax return and income tax on the COD (cancellation of debt) is actually assessed, then it is no longer as easily discharged in bankruptcy. Because back income taxes are not dischargeable until two years after the tax return was last due and ten months (approximately…it’s actually 280 days) after the tax is “assessed,” if you wait to file bankruptcy until after you have filed your tax return, you have converted an immediately dischargeable mortgage deficiency owed to a bank into a tax debt owed to the government that you will have to live with through that waiting period before you can dump it in bankruptcy… Capiche?

Because these problems involve the interplay between basic contract law, mortgage and anti-deficiency laws (all of which are state law issues), and federal tax law, these can be gnarly problems to sort out. Unfortunately, not many attorneys understand them, and not a whole lot of tax pros either. This is because no one’s ever lost money on a real estate investment before now. Well, that’s not really true of course, but we are seeing things that are changing history, and testing the limits of most general practitioners. If you think you may have a tax problem arising from a past or pending foreclosure, make sure you seek professional advice from someone who understands the issues. It will vary from state to state, due to the differences in anti-deficiency legislation.

If you would like to schedule a confidential meeting to explore your foreclosure avoidance options, please call me directly at 561-602-1258 or email me. SSinfo@thejacksonteam.com

Thanks for reading…Steve Jackson

Fannie Mae forebearance extension just announced

Just this afternoon I received an email bulletin from Freddie Mac that give some relief to unemployed individuals having difficulty making payments on a Freddie Mac loan.

Here is a brief overview with a link to the actual Freddie Mac document I received:

Freddie Mac, (Bulletin 2010-17), is introducing new forbearance requirements to provide a “short-term
unemployment forbearance” relief option to assist Borrowers who are unable to make their Mortgage
payment due to unemployment. In addition, Freddie Mac is introducing an “extended unemployment
forbearance” relief option to provide an extension of the forbearance period if such Borrowers have not
regained employment after the short-term forbearance period has ended. Including these additional relief
options in our loss mitigation tool kit gives unemployed Borrowers an opportunity to retain
homeownership by providing Mortgage payment relief while they seek re-employment.

Servicers will have delegated authority to approve eligible Borrowers for a short-term unemployment
forbearance period of six months during which time the monthly Mortgage payment is either suspended
or reduced. If the Borrower remains unemployed at the end of the short-term unemployment forbearance
period, the Servicer must consider the Borrower for extended unemployment forbearance in accordance
with the Guide. If the Borrower meets the eligibility criteria for extended unemployment forbearance, the
Servicer must obtain Freddie Mac’s written approval before entering into an extended unemployment
forbearance plan with the Borrower.

EFFECTIVE DATE: Changes announced in this Bulletin are effective February 1, 2012 for all new Borrower evaluations for an alternative to foreclosure. However, Servicers may begin implementing the unemployment forbearance relief options earlier for all new requests for assistance in which an eligible Borrower’s hardship is unemployment.

If you have any question about Freddie Macs new plan, above, or any other questions regarding foreclosure alternatives, please pick up the phone and call me directly at 561-602-1258...or send me an email

Florida Hardest Hit Fund Info

Program Fact Sheet

Background:
In February 2010, US Treasury (Treasury) created the “Housing Finance Agency (HFA) Innovation Fund for the Hardest-Hit Housing Markets” (HFA Hardest-Hit Fund) and allocated funds under the Emergency Economic Stabilization Act of 2008 (EESA) to five states: Arizona, California, Florida, Michigan and Nevada. The funds were allocated to these states because of their excessive housing market depreciation and to assist in foreclosure prevention efforts. In March 2010, Treasury allocated a second disbursement of $600 million to an additional five state HFAs based on high unemployment rates. On August 11, Treasury again expanded the HFA Hardest-Hit Fund to include a total of 18 states and the District of Columbia, and added an additional $2 billion. Florida received another allocation of funds, $236.8 million, from the third round of funding, which added to the initial allocation of $418 million, brought Florida’s total funding to $656.8 million. Most recently, on September 29, 2010, Treasury announced a fourth round of funding, awarding Florida an additional $401 million; this brings Florida’s total award amount to more than $1 billion.

Current Programs
Florida Housing Finance Corporation (Florida Housing) was directed by Treasury to use a portion of these funds specifically for targeted unemployment programs that provide temporary assistance to eligible homeowners.
These targeted unemployment programs are as follows:
               • Unemployment Mortgage Assistance Program (UMAP) will provide up to six (6) months of payments (with a cap of $12,000) to the mortgage lender to assist unemployed/underemployed borrowers with their first mortgage until they can resume full payments on their own.
                • Mortgage Loan Reinstatement Payment (MLRP) Program will be used to bring a delinquent mortgage current (up to $6,000) for a homeowner who has returned to work or recovered from underemployment.

A pilot program was implemented in Lee County, which concluded on March 18, 2011. Homeowners from across the state will be able to submit applications via the HHF website on April 18, 2011.

For additional information (including detailed eligibility criteria) and/or to apply for these programs, visit the HHF website at www.FLHardestHitHelp.org

Documents typically required for a short sale file to be submitted

Below are just some of the documents lenders are likely to require when we submit a short sale file:

Financial Information

• Tax information
  • Two most recent 1040′s
  • Two most recent W2′s
  • 4506t
• 60 days of current bank statements (Updated every 30-60 days)
• 30 days of current pay stubs or commission check stubs (Updated every 30-60 days)
• If self employed-pay stubs or YTD profit and loss statement
• Monthly budget/financial statement 

Hardship information

• Hardship letter
• Any docs supporting the actual hardship

Mortgage & Other Relevant Property Information

• 1st Mortgage statement
• 2nd Mortgage statement if applicable
• Recent Real Estate tax bills
• Recent condo/HOA association bills if applicable
• Any unpaid tax and hazard insurance bills

Other Pertinent Documentation

• Authorization form
• Short sale disclosure
• Dodd/Frank
• Listing agreement/CMA
• Offer/P and S
• Listing/pricing history
• Buyer proof of funds letter or Pre Approval letter

      

         Drawn by me…for you!

 

Merry Christmas…Happy Holidays!

Loan Modification...who really benefits?

Over the past 3 years, banks have been given trillions of dollars from Congress (otherwise known as the US taxpayers) to motivate them to modify their home loans as the housing bubble collapsed. However, very few people have actually had their loans permanently adjusted, and instead, banks have been pursuing foreclosures at enormous rates.

Our opinion is that when it comes to loan mods, the homeowner who needs to be wary. On the surface, having the ability to lower ones payments an underwater mortgage certainly looks like a great deal, but we also know that the banks are on the edge of collapse due to the fact that the states and the courts are showing many of these entities do not have the proper documentation and ownership to actually foreclose on property.

The issue at hand is ownership of title, and rightful ownership of the actual note. When banks made their original loans to home buyers, they had the simple contract of title and note. However, when they sold the note to investments banks, who then separated the note from the title, and bundled these obligations with hundreds of others to create the RMBS, they simply put the title into a dummy holding company called MERS, and there was no longer a true and legal chain of ownership of the lien.

As time went on, some courts began to realize that the original banks, or the servicing agents who were simply collecting monthly mortgage payments, did not have the legal right or proper paperwork to foreclose on someones property.

So now, as a last ditch effort to compile the proper paperwork to satisfy the courts, banks are now suddenly offering loan modifications so that homeowners will by default, re-affirm the loan and justify a chain of ownership to the banks they did not have at the time of the foreclosure proceedings. Another important back-door trick of the banks is that they offer these "trial" loam mods, requesting all manner of financial documentation. And to get a loan modification, the homeowner needs to show income and assets enough to sustain payment on the lower payment. So most homeowner will go to great lengths to find and disclose and affirm assets and income that the bank may not have known about otherwise. Now, the banks know what assets to go after when they terminate the "trial" modification and foreclose instead.

In an article by Bruce Krasting on one of my favorite blogs, Zerohedge, he makes this assessment of the modification offers to homeowners:

One possible response would be to get all troubled borrowers to reaffirm their debt, the second is to get the trouble borrowers back to paying something on the mortgage, even if it were a fraction of what was formerly owed on a monthly basis. A loan modification would achieve both results. When a borrower signs up for a loan mod they sign new papers. A portion of this process will re-establish any loan balance that is due. The language in the mod could have new foreclosure terms that eliminate the banker’s problem with past tainted documentation. Once a borrower makes a few months of new lowered payments they are, in effect, confirming their acceptance of the new terms.

Most Mods go bust in six months or are cancelled for any number of reasons by the lender. So on the surface it would seem little is accomplished from the lenders perspective. But we think the lenders motivation for doing a loan mod is not to get a borrower to a monthly payment that they could realistically pay, but rather the motivation is to circumvent the foreclosure trap the lenders are in. A mod could legally resolve the problems.

To us, it appears to be a strong possibility that the banks and institutions that desire to foreclose on property are offering these modifications NOT as a means to help homeowners, but rather as a way to create new paperwork that will stand up in court, as well as uncovering assets and income that the banks may not have known existed, allowing the banks to foreclose and move on.

That being said, we have heard of homeowners that have received advantageous, permanent, modifications and are happy, keeping up with their payments, and keeping their home.

As we always recommend, any time your bank want documents from you or wants you to sign anything, contact a well educated and experienced real estate attorney.

You can also call us to discuss your options and the relative benefits/drawback to each...

or call me on my direct line at 561-602-1258

Thanks for reading...Steve

Merry Christmas From Aunt Fannie and Uncle Freddie

  Fannie Mae and Freddie Mac are suspending evictions of foreclosed properties from Dec. 19 through Jan. 2, 2012.

The government-sponsored enterprises are the first institutions this holiday season to announce their annual moratoriums, which is a common practice in the housing sector to provide families a greater measure of certainty during the holidays.

During this period, legal and administrative proceedings for evictions may continue, but families living in foreclosed properties will be permitted to remain in the home.

The suspensions apply only to eviction lockouts related to REO properties owned by Fannie Mae and Freddie Mac and will not affect other pre- or post-foreclosure processes.

  “The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” said Terry Edwards, executive vice president of credit portfolio management at Fannie Mae, in a statement.

“No family should have to give up their home during this holiday season," he said.

Explanation of how our corrupt central banking system works

The New Face of Foreclosure: Strategic Default

Fox Business.com

Written By Laura Rowley Published September 19, 2011 Daily Finance, (Excerpts of the full article)

If you find yourself “upside-down on your property…be it your primary residence or an investment property, please give me a call on my direct line: 561-602-1258. Thanks,  Steve  Jackson

(or send me an email:  Steve@ShortSales123.com)

Gene Kessler, 67, may be the new face of mortgage default. The tech industry retiree is in the process of walking away from the home he purchased for $166,000 in 2004 in a small town 75 miles southwest of Minneapolis.

Its value has plummeted to $111,000, wiping out Kessler's $45,000 down payment and leaving him with a mortgage that's more than the home is worth. He stopped paying the loan six months ago, and estimates he'll have to vacate by March 2012.

But Kessler isn't in financial trouble, and he could afford the monthly payments. He has no other debts and two pensions from former employers, as well as Social Security. He also has a woodworking hobby, and runs a small business selling the artisan lamps he makes in galleries. He's single now, and his two children are grown and gone…

First notices of default jumped 33% in August, a nine-month high and the biggest month-over-month increase since August 2007, according to figures by RealtyTrac released Wednesday.

"There are 3 million to 4 million seriously delinquent mortgages that under normal circumstances would be in foreclosure but have been kept out by procedural delays and paperwork problems," says Rick Sharga, RealtyTrac senior vice president. The recent spike in foreclosure starts suggests lenders are "hitting the restart button" on cases that were delayed by documentation problems such as robo-signing, he explains.

There's no data on the demographics or financial histories of the people receiving recent default notices. But among them are some homeowners who have never defaulted on a loan before, at least according to one poll. YouWalkAway.com surveyed several hundred of its clients earlier this year, and just 23% said they had previously shirked a financial obligation.

"The people we are now seeing are nearing retirement age, who never missed a payment on anything in their lives," says Jon Maddux, co-founder and CEO of the Carlsbad, Calif., firm. "They are trapped. They can't sell or get a modification and they need to downsize or move for a job."

Attitudes toward default have also shifted, Maddux says. "Back in 2008 people were very emotional, very scared, in disbelief or denial," he says. "Now they are simply fed up. It's a very calculated, black-and-white business decision. People feel very relieved."

A more widespread understanding of the consequences of default may be a factor, says Brent White, a University of Arizona law professor and author of Underwater Home.

"The conventional wisdom is you are ruined and are not going to recover," says White, who wrote a widely circulated discussion paper on the topic. But in so-called "non-recourse" states such as California, the bank can only foreclose on the property and resell it. If the price is less than the amount owed on the mortgage, the lender can't sue the homeowner to recoup the shortfall, says White. Even in recourse states, the bank is unlikely to go after the homeowner following foreclosure, he argues.

"The vast majority of those who default end up doing a short sale and that (sometimes) discharges the deficiency," he says. "If they are pursued, they can (sometimes) negotiate to pay less than the full amount. A savvy person who retains an attorney or other knowledgeable person to walk them through the process will likely get through default without having to pay a deficiency judgment. Most people will have a good credit score again within a couple years."

But John Ulzheimer, president of consumer education for SmartCredit.com, disagrees, at least for consumers new to default. "If someone who has never missed a payment suddenly puts their home in foreclosure, their credit score is destroyed," says Ulzheimer, who previously worked for a credit bureau.

"If you already have payment problems on the mortgage and defaulted on other accounts, [foreclosure] may not have a material downward impact, but it will lock in a lower score for a long time," Ulzheimer says. People who stop paying the mortgage can minimize the credit score impact by using that free cash flow to pay down other debts, such as credit cards, he adds.

But just because the bank doesn't pursue homeowners today doesn't mean it won't tomorrow, argues Ulzheimer. The statute of limitations to sue on contract debt in recourse states ranges from three to 15 years. "Some people think that's the next shoe to fall," he notes….

White says underwater homeowners should figure out if they are paying substantially more to own a house on a monthly basis than they would pay to rent a similar property. "Even if you are thousands of dollars underwater, if you are paying the same as you would to rent, you don't gain that much financially by defaulting," he says. (The survey by YouWalkAway.com found a quarter of respondents saved 50% or more on housing expenses when they rented after their default.)

In addition, someone who will need a good credit score to run a small business or borrow to meet a goal, such as a child's college education, should avoid strategic default. "If you have a particular need for easy credit in the future, then it doesn't make financial sense," White notes.

As for Kessler, he is looking forward to biking, tennis and skiing in the Southwest next year. "I don't feel guilty at all about walking away from the place," he says. "The banks really did it to themselves. They made a ton of money with me over the years. I owned four or five houses. But I don't think I'll ever buy another house. I'll probably just rent until they put me in a nursing home."

Read the full, original article here: http://www.foxbusiness.com/industries/2011/09/19/new-face-foreclosure-strategic-defaults/#ixzz1ektafvO9

A Thanksgiving message to our readers

Time to get your snorkle! 50% with mortgages are under water...

Take a look at this short CNBC video about the situation many of my clients find themselves in:

If you find yourself upside-down, or very close, you can stay put, do nothing, and hope that everything gets better. Or you can email me for information that may be helpful in getting your lender to agree to a loan modification, which may lower your payments and help you be able to stay in your home.

Also, if you don't want to stay in your underwater home,  we have been very successful in processing Short Sales for our cleints, with NO out of pocket costs closing costs or commissions...and in some cases, we have obtained for them a"relocation bonus" as high as $23,000! You can call me directly if you'd like to speak or meet coonfidentially regarding this subject.

If they keep predicting a market bottom…eventually they’ll all be right!

 

Just to say it at the outset of this post…why don’t any of the reporters, be it newspaper, online outlets or television, ever do any research and ask any tough questions when they continue to interview and quote the “experts” regarding housing?

Case in point: Here is a headline of an article/interview of Zillow chief economist, Stan Humphries, 18 months ago:

As Housing Market Nears Bottom, Pent-Up Supply Waits…And here is the prediction directly from the article: We forecast that the nation will hit a bottom in home values in the third quarter of this year, (which would have been July-Sept 2010) but that there will be negligible appreciation in home values for three to five years after we’ve reached bottom…

Case-Shiller, an oft quoted research firm has this on-the-money prediction from an interview from November 30th 2009:

U.S. home prices are unlikely to fall much further in the next year even after a “discouraging” report on values in September, said Karl Case, the co-creator of the S&P/Case-Shiller Index.

“If I were betting even odds, I’d bet that we don’t have much further decline, but that we bounce along the bottom,” Case, a retired professor of economics at Wellesley College, said today in a Bloomberg Television interview…

And then here is a quote from an interview Shiller did less than 60 days ago: SHILLER: “House Prices Probably Won’t Hit Bottom For Years”

And the icing on the cake has been our own chief economist(s) of the National Association of Realtors:

04/2006: We can expect a historically strong housing market moving forward, earmarked by generally balanced conditions across the country and fairly stable levels of home sales with some month-to-month fluctuations.”, NAR

07/2006: “Right now we are on course for a soft-landing in housing.”, NAR

10/2006: “The worst is behind us, as far as a market correction. This is likely the trough for sales. When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.”, NAR.

12/2006: “At least the bottom appears to have already occurred. It looks like figures will be improving.”, NAR.

01/2007: “It appears we have established a bottom” David Lereah, NAR Chief Economist.

07/2007: “Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year.”, NAR

11/2007: “I don’t anticipate any further major sales declines,” Yun said. However, the NAR didn’t anticipate the sales declines of the past two years, and it’s been predicting a bottom nearly every month since early 2006. (from Marketwatch)

02/2008: Reuters reports that “The NAR’s chief economist, Lawrence Yun, said the market is ‘scratching the bottom,’ with sales holding at a deflated rate of around 5 million units for the past several months.”

02/2008, There is no chance of a large price decline in Rockford, Lawrence Yun told a crowd of more than 400 at Cliffbreakers, 700 W. Riverside Blvd. There is not a price bubble in Rockford., BusinessRockford.com (see July, 2009 news report below)

07/2008: There are signs of pent up demand . I think we are very near to the end of the housing downturn, Yun said.

12/2008: I would not have done anything different. But I was a public spokesman writing about housing having a good future. Ex-NAR Chief Economist Lareah.

04/2009: “We are close to the bottom, says Lawrence Yun, chief economist for the National Association of Realtors. Once home sales begin to rise that could boost home buying confidence and get others off the sidelines.”

04/2009: The “worst may be over” in parts of the West, said Lawrence Yun, NAR Chief Economist.

07/2009: Follow up from 2/08 quote above: BusinessRockford.com – The local housing market showed few signs of rebounding in the first half of 2009, with sales of single-family homes and condominiums falling nearly 20 percent and median sale prices falling in all but two of the Rock River Valley’s largest municipalities... In Rockford, the median prices of the 61104 ZIP code are down 52.3 percent from the first six months of 2008, dropping from $64,950 to just $31,000.

Now, more than ever, it is so important to work with an agent that will consult, diagnose and recommend solutions based upon a multitude of factors…with the MOST important one being; what is in YOUR best interest.

In the past several years, I have ‘converted’ many buyers into renters, but also, some renters into buyers, because that's what we decided, together was the best option for them. I have also dissuaded many sellers from becoming ‘landlords by default’ and putting tenants in their homes while waiting for “prices to go up’ because they didn’t want to “give their house away”. On the flip side of that coin, I just had a conversation with a prospective client yesterday and we decided AGAINST selling, as the cash-flow the home would generate, along with the tax benefits of renting outweighed the prospect of home value declines…their time horizon was sufficiently long to mitigate the risk when compared to the monthly cash flow.

If you would like to discuss all of the factors that you should be considering, whether it be on the selling or buying side, please call me at 561-602-1258…or email me at Steve@TheJacksonTeam.com

Thanks for reading,

Steve Jackson

Why does a British Bank do a better job than the American Banks? (Is HSBC British?)

We have always liked short sales with HSBC. They respond promptly and are easy to work with. The bottom line is that they do a solid, competent job handling short sales.

I think the reason is because they never got a bailout from Uncle Sam. If they are incompetent and lose money, then they, and their stockholders, take the loss.

Menawhile, the large American Banks are awful to work with. I have countless stories of real estate agents working on a large national bank’s short sales for 6-9 months with no answer, documents transmitted ,and lost, multiple times, etc., etc. Want an answer to an e-mail? Be prepared to wait 1-2 weeks for that. Leave a voice mail? Don't ever expect a call back! The people at the TBTF banks are undertrained, overworked and disorganized. In my opinion, the reason these TBTF (too big to fail) don't care is because they don't own the loans, and, if they do lose money, uncle Sam will be there to be the backstop.

I remember hearing that Bank of America only owns 20% of the loans they handle, they are just the servicer for the rest. And there is a good chance that a big slice of the 20% are probably guaranteed by the government (taxpayers).

Contrast this with HSBC. They own most of their loans. That means they are the ones that stand to lose money. I couldn't find HSBC ever getting a bailout on the bailout search page. They have to have a well run bank.

Based upon our experiences, their short sales are handled properly and professionally. Here is why. They are acting as a principal. If they do a lousy job, then they lose the money themselves.

On 80% of Bank of America's loans, someone else is losing the money. That is why there is no sense of urgency at Bank of America. It's like monopoly money. It just makes sense that people do a better job if their own money is on the line. The big banks are handling other people's money. There is no accountability.

At HSBC, if the short sale department does a lousy job, then it affects HSBC's quarterly statement. If things go bad, then people are held accountable. In my opinion, there is nothing of the sort happening at American Banks such as Bank of America or JP Morgan Chase, Wells Fargo, etc.

Thinking about a short sale? We have lots of experience with all of the lenders out there. We can help you short sale your property, at NO COST TO YOU, and allow you to get back on your feet. Send me an e-mail at ShortSaleInfo@thejacksonteam.com. Or, if you prefer, you can call me at (561) 602-1258.

When we meet, I will explain how the process works in detail and answer any questions you may have.
Steve and Jackie, The Jackson Realty Group Inc.. Lake Worth, Boynton Beach Short Sales Realtors

Phone: (561) 602-1258. ShortSaleInfo@thejacksonteam.com.

Personalized...Not Franchised


Steven Jackson specializes in short sales in Palm Beach County, Florida.

Have a loan with BofA? NOW IS THE TIME TO DO A SHORT SALE!

If you have a loan with BofA and owe more on your loan than your home is worth…DO NOT WAIT…CALL ME TODAY

(you’ll see why below)

Below is a partial screen-shot of an email that I recently received from Bank of America.

 

They are offering a MINIMUM of $5,000 paid to you, the short sale seller, at closing…and possibly as much as $20,000!

BUT…we only have about 6 weeks to get started.

Really, no kidding…if you have a Bank of America (Countrywide too) loan and are upside down…this is a great opportunity.

My direct # is 561-602-1258…if you reach my voicemail, leave me a message…or you can also send me a text to that number.

 

Thanks for reading…Steve Jackson

Foreclosure filings down 70% year over year…but all is not as it seems!

Excerpts from a report in today's Palm Beach Post:

In an unexpected bit of fallout from the real estate crash, lenders are filing far fewer foreclosures.

Alas, that's not because the economic picture is improving but because the housing market is flooded with repossessed homes, and banks and courts are inundated with default proceedings.

Foreclosure filings in Palm Beach County plunged 70 percent in July, August and September compared to the same three months a year ago, research firm RealtyTrac says in a report to be released today.

In normal times, a sharp decline in foreclosure filings would be cause for celebration. But these aren't normal times.

Nearly 2 million Floridians owe more than their homes are worth, and the state's unemployment rate has been stuck above 10 percent for more than two years.

Foreclosure experts say several factors have lenders taking back fewer homes. One is simple supply and demand; banks typically sell properties they repossess, and they know that putting more homes on the market will hurt values.

"The banks don't have a motivation to push these through quickly," said Tom Ice, a foreclosure attorney in Royal Palm Beach. "There's a lot of expense involved in owning the houses. And they understand that flooding the market with properties is going to push down the resale value of their own properties."

John Tuccillo, chief economist for the Florida Realtors, agrees.

"Banks are in business to make as much money as they can, or to lose as little money as they can," he said. "It's a bad business decision to flood the market."

Once a lender takes back a home, it pays the costs of owning the property, including insurance premiums, homeowner association fees and maintenance. So banks seemingly have decided that it makes sense to leave a deadbeat borrower in the home.

"There is an economic benefit to them of leaving the homeowner in the property," Ice said.

Another factor: Legal controversies surrounding foreclosures have caused banks to slow their court filings. Palm Beach County Clerk Sharon Bock pointed to the "robosigning" debacle and to the difficulties lenders have faced in proving ownership of foreclosed homes.

"The banks just simply are holding back," Bock said. "They have many more loans in default than they're putting through into foreclosure."

RealtyTrac's Daren Blomquist agreed that legal concerns have created what he called an "artificial slowing."

"Trying to adjust to the huge volume of foreclosures in 2010, lenders were resorting to questionable (illegal) procedures," Blomquist said. "To make sure they don't get into trouble again, they have to take longer and can't process as many as they used to."

Yet another reason: Lenders have begun to push short sales as an alternative to foreclosure. In a short sale, a homeowner owes more than the home is worth and finds a buyer willing to buy the property. The bank agrees to forgive the difference between the loan amount and the sale amount.

While lenders have been notoriously slow to approve short sales, two major banks have begun to encourage short sales by giving homeowners as much as $20,000 at closing.

"Bank of America and Chase have rolled out more aggressive incentive programs for short sales," said Damian Turco, an attorney in Palm Beach Gardens. "Lenders are recognizing that it's a better business decision to avoid foreclosure."

While banks take a hit on a short sale, they're likely to incur an even bigger loss on a foreclosure.

"Lenders are getting smarter," Tuccillo said. "I talk to a lot of people who say the process is getting more rational."

Strategic default OK for Mortgage Bankers Association…but not for you?

The article below is from a recent post on the Mortgage-Mod_Monster blog:

Again we read the guilt trip that the mortgage industry places on distressed homeowners when dealing with their distressed mortgage. But it’s OK and even advisable for the corporations to walk away from their obligations. I’ve written about this before, but when the Mortgage Banker’s Association double deals, this is just too juicy to not publicize.

Freely quoting from Mandelman’s post: “The CEO of the powerful Mortgage Bankers Association, John Courson, has said that underwater borrowers should keep paying on their mortgage loans and ‘should not walk away from lawful debts’.  In an interview this past year, Courson appeared genuinely concerned adding: ‘What about the message they will send to their family and their kids and their friends?’

Just last year, you pointed out that defaults hurt neighborhoods by lowering property values, so borrowers would do less harm to our society were they just to repay what they owe.  You know… like the responsible homeowners.

This past week, the Co-Star Group, Inc., indicated that it had agreed to buy the MBA’s 10-story headquarters building in DC for $41.3 million.  The only problem is that $41.3 million comes up a skosh shy of the $75 million first mortgage on the building that the MBA took out from PNC Financial Group way back in 2007, when they purchased the property for $79 million.

The very same MBA also defaulted on their payments and secured a forbearance agreement, prior to the short sale.  Nicely done, Johnny-O.

What kind of message are YOU now sending to Your family, Your children, and Your friends by walking away from Your lawful $75 million debt?  Are they being morally harmed by your decision to stick the bank with close to $25 million?  And why aren’t You simply paying Your mortgage as agreed, Mr. Courson?

Again, advice to the distressed homeowner: Answer the emotional question first – do you want to keep your house? or walk away with the least damage and purchase another home in two years? Then consider the financial questions. Do you have steady, although significantly reduced employment that you can count on for the foreseeable future? Do you believe your property recover any lost value in 5 to nine years?

Currently, the best answer to solving a distressed mortgage is the REST Report. The REST Report calculates Net Present Value and enables a distressed mortgage owner to negotiate an unbiased mortgage modification with court support if the mortgage servicer chooses to ignore the calculations and pursue foreclosure…

If you don’t believe your property can recover value in 5 to nine years, give the keys back to the bank…It even now has a name, compliments of firms like the Mortgage Banker’s Association. It’s called a ‘strategic default’. Do not even consider for one minute any ethical responsibility to anyone but yourself. Your bank cares not one whit for your well-being. You owe them, or anyone else, not one red cent.

Ocwen rolls out a new loan modification for underwater borrowers

 

Finally a lender gets a brain! Locally based Ocwen recently revealed a plan that incorporates many of the components of a loan mod/refinance that I suggested over a year ago: Reduce the loan amount to today's value, write off the ‘underwater portion’ over a number of years if the owners stays current on all mortgage obligation aspects, and if/when the home is sold, Ocwen will recoup some of the regained equity…Brilliant! The other big added benefit to the lender is that they get to draw up new loan documents without all of the defects that are being challenged in court right now…and I wouldn’t be surprised if they slip in some new restrictive language to the now docs too!

For all of you with an underwater Ocwen loan…CALL THEM TODAY to see if you can qualify, then call me and let me know the details of the process/qualification/final terms so I can spread the news.

Below are excerpts from the article that was in the Palm Beach post.

The company is rolling out a new loan modification plan for underwater borrowers that lowers the amount owed on the loan - thus reducing the monthly payment - but asks for a share in the appreciated value when the house is either sold or refinanced.

The kickback to the lender may deter people who can afford to make their payments from defaulting, while giving an incentive to either the lender or investor to modify the loan.

"We think this answers some of the critics who say that by reducing principal, you are rewarding imprudent borrowing behavior," said Ocwen Executive Vice President Paul Koches. "What we see is unprecedented delinquencies, and we're doing our best to resolve them."

Offered in 33 states, including Florida, the plan is available only on loans where it will earn more for either the lender or investor than if the home went into foreclosure.

Called a shared appreciation modification, it's fairly simple on its face.

A home's principal amount is reduced to 95 percent of the current market value. That portion is forgiven in equal amounts over a three-year period as long as the owner stays current on the loan.

When the house is later either sold or refinanced, the homeowner must give the lender 25 percent of the appreciated value of the home.

For example, say the principal balance on a loan is $125,000, but the current value of the home is only $100,000. Ocwen's plan would reduce the balance to $95,000, putting $30,000 in a non-interest-bearing account that will be forgiven over a three-year period.

If the house is later sold for $120,000 - marking an appreciation of $20,000 - the homeowner would get to keep $15,000, while $5,000 would go to the lender. If the home doesn't appreciate, then the sale occurs as it normally would.

Ocwen, which has about 245 employees in its West Palm Beach office, estimates about 53,000 home­owners nationwide will be eligible for the principal reduction program.

The company specializes in servicing the nation's riskiest home loans and has a portfolio of about 460,000 loans. Ocwen's recent acquisition of Litton Loan Servicing will add 250,000 loans to its portfolio.

A test of the new loan modification program that was launched last year found that of borrowers offered the plan, 79 percent accepted it. The default rate has been about 2.6 percent.

"You have folks breaking their necks to make payments on a home where there is no hope in their lifetime of it regaining equity," Koches said. "A homeowner in a negative equity situation is one-and-a-half to two times more likely to go into delinquency."

In Palm Beach County, nearly 43 percent of homes with mortgages were underwater during the first quarter of 2011, according to real estate analysis firm CoreLogic.

Most home loan modifications result in an interest rate reduction, which can do little in the long run for homeowners who owe more on their loan than their home is worth, said Kathleen Day, spokeswoman for the Center for Responsible Lending.

"We've felt for a long time that unless you do principal write-downs, you really aren't getting at the problem," Day said. "It's in everyone's best interest to keep a credit worthy person in their home."

 

Thanks for reading…Steve Jackson

10 million more foreclosures in the pipeline

In August, the Obama administration asked the housing industry for ideas on how to more efficiently sell or unload this overhang, and the Senate heard testimony from various housing players Tuesday.

Roughly 10.4 million mortgages, or one in five homes with a mortgage will likely default if Congress refuses to implement new policy changes to prevent and sell more foreclosures, according to analyst Laurie Goodman from Amherst Securities Group.

At the end of the second quarter, more than 2.7 million long-delinquent loans, others in foreclosure and REO properties sat in the shadow inventory, more than double what it was in the first quarter of 2010. With the market averaging roughly 90,000 loan liquidations per month, it would take 32 months, nearly three years, to move through the overhang…and that number is contingent on NO other loans going into default.

"Many analysts looking at the housing problem mistakenly assume it is limited to loans that are currently non-performing (or 60-plus days past due). Such borrowers have a high probability of eventually losing their homes. However, the problem also includes loans with a compromised pay history; these are re-defaulting at a rapid rate," Goodman told a Senate subcommittee Tuesday.

Most of the proposals included recommendations to sell properties ‘in bulk’ to investors with one of the stipulations being that they be turned into rentals. (italics mine)

Stan Humphries, chief economist for Zillow, said the rental market is currently booming and would be able to handle a mass conversion of foreclosures into rentals. "Investors smell a distinct opportunity in this situation: The chance to buy an asset cheaply and rent it out. In fact, close to one-third of the purchases of existing homes this year have gone to all-cash buyers, the bulk of whom are real estate investors," Humphries said.

This sounds to me like the housing equivalent of ‘cash-for-clunkers’ which resulted in the removal from the market of tens of thousands of good, affordable used cars, as the requirement was to “junk’ the clunker trade-in (the dealers were not allowed to re-sell them)…The same thing will happen with homes; currently, a lot of buyers can’t purchase a great many of the foreclosed homes as they require too much work and/or don’t qualify for an FHA loan. Typically, the buyers in the under $250k market, (where a great percentage of the foreclosed homes sell), are FHA buyers because they DON’T have a lot of cash…so they are not able to ‘buy and rehab’. BUT, that is where cash buyers come in…they buy, rehab to move in condition, and re-sell…quite often to FHA or other low-down-payment buyers and they make a little money doing it…as they should. But if you take away these homes by requiring that they be converted to rentals, how does that help? Well, it helps the big companies, REITS, and investment groups that will get a piece of that sweet deal!

Just read my recent posts regarding the scary legislation working its way through Tallahhssee now…going to make it sooo easy, cheap and fast for the banks to get these homes back…We need everyone to PAY ATTENTION…and thanks for reading!

Steve Jackson

Foreclosures ramp up: County's 13% jump the trickle before the dam breaks, experts warn

More Palm Beach County homes received first-time foreclosure notices in August than the previous month, and experts warned Wednesday that the 13 percent increase is just a trickle before the flood.

Statewide, new foreclosure filings were up 10 percent last month from July, according to findings to be released today by the Irvine, Calif.-based company RealtyTrac.

Nationally, initial notices of foreclosure were up 33 percent.

But unlike previous reports that found increases and decreases in foreclosure activity were similar nationwide, there was a marked difference in August between judicial states, where a judge is required to sign off on a home repossession, and non-judicial states.

In the 25 states RealtyTrac considers non-judicial, initial foreclosures leapt 46 percent in August from July, although they were still down 10 percent from August 2010. In judicial states, including Florida, there was only a 21 percent increase in August from July, with a 25 percent drop from last year.

"I've been told by a number of banks' lawyers that they have cases ready to go and are just waiting for approval to file," said Mike Wasylik, a foreclosure defense attorney with the firm Ricardo, Wasylik & Kaniuk, which has an office in Boca Raton. "I've been expecting the dam to break for months now and I think there is still uncertainty about what is going to happen with regulatory actions and pending settlements."

Foreclosures were suspended last fall following questions about the validity of court documents used to take back homes. Activity remained on a simmer through early spring and has jumped around since then as lenders continue to patch up their foreclosure processes.

The nation's largest home lender and servicer, Bank of America, confirmed Wednesday it had ramped up foreclosures in non-judicial states, including Nevada, which saw a 31 percent increase in new filings in August from July. California, also a non-judicial state, saw a 55 percent increase.

"Strong gains like that from July to August demonstrate our progress, clearing more volume to advance to foreclosure once we pass the numerous, improved quality controls we have in place and only after all other options with homeowners have been exhausted," said Jumana Bauwens, a Bank of America spokeswoman. "The industry has not yet returned to normal or necessary foreclosure activity levels, but progress is certainly being made."

Still, lenders face more uncertainty.

Earlier this month, the Federal Housing Finance Agency sued 17 financial firms for selling Fannie Mae and Freddie Mac billions of dollars' worth of risky mortgage-backed securities that turned sour when the market collapsed.

Also, settlement negotiations continue between banks and the nation's attorneys general. The attorneys general joined last year in an effort to investigate the robo-signing scandal, penalize lenders for their paperwork missteps and help struggling borrowers.

"The banks don't know what their exposure is from past problems or that they have resolved the problems to the satisfaction of the attorneys general," said Guy Cecala, chief executive officer and publisher of Inside Mortgage Finance.

But foreclosures have not come to a complete standstill.

Last month, 715 Palm Beach County homes were sold at auction - the final step in a foreclosure - according to Palm Beach County Clerk of Courts data released Wednesday.

Just 31 percent of scheduled auctions were canceled, a decrease from a high of 51 percent in January when banks hurried to delay sales in the wake of the robo-signing scandal.

The Palm Beach County clerk's office tallied 1,126 initial foreclosure filings last month. That's slightly higher than RealtyTrac's 926, but could be a function of when the numbers were gathered.

"We were anticipating another wave of foreclosure filings this year, based on expert forecasts, but so far an influx of new cases has yet to materialize," said Clerk Sharon Bock.

RealtyTrac has lowered its nationwide prediction of total foreclosure filings - initial notices, sale notices and auctions - for 2011 from 3 million to 2.5 million.

"As painful an issue as foreclosure is, it has to get back on track, otherwise we'll slip further and further behind," Cecala said. "The year 2011 will go down as the year that nothing got done."

If you have been reading my blog, you have read about the scary pro-bank bill under review now in Florida…my guess is that the banks are holding back going forward here in full force in the hopes that this bill gets passed in the dark of night. Then, the banks can EASILY FORECLOSE AND TAKE POSSESSION OF HOMES. The bill even has a provision that if you defend your foreclosure but the bank eventually does get to foreclose…YOU AND YOUR ATTY HAVE TO PAY THE BANKS LEGAL FEES!

Thanks for reading…Steve Jackson

No deficiency...no problem?

Once a short sale has been successfully negotiated and you have the appropriate language in your short sale acceptance letter from your lender indicating that they will not pursue a deficiency, you're in the clear, right?

Not so fast!

What normally comes next is a 1099 C forgiveness of debt. This is now income to you in the year the debt was written off. WHAT? You bet. A creditor is required by law to issue a 1009 C to any individual who settles a debt or has a debt written off that is in excess of $600. This is a very big trap that people with lots of debt find themselves in. If you have received one of those in the mail, you may have to declare the amount on that form as income. (see your tax person) Then you will have to (maybe) pay tax on it.

Using a debt management firm to settle your debts? You settle your $5000 credit card bill for $3000. Don’t be surprised when the 1099 C comes in the mail. House sells at foreclosure sale, the bank has not been paid all the money. You should be on the look out for a 1099 C.

There are 2 exceptions to the 1099 C rule for most debt. The first applies when you are insolvent as the time the debt is written off. This is defined by the IRS. The second is if you file bankruptcy before the debt is written off and the 1099Cc is issued, there is no income to declare. If you file bankruptcy after the 1099 C is issued you still have to declare that as income. (again, check with your tax preparer). Here is a debt insolvency worksheet that you may find helpful. Also, the IRS’s website has examples to help you determine if you can qualify for this exception.

There is a third exception that is only good for real estate. It is the The Mortgage Forgiveness Debt Relief Act and Debt Cancellation. It applies to the owners of residential real estate only under specific circumstances. The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure also qualifies for the relief.



as always, the above is not intended to be legal or tax advice...consult the appropriate professionals for details regarding how this affects you, specifically.

Is Florida the Next Non-Judicial Foreclosure State

Please forward this blog post to every Floridian that you know…if this gets passed, it will be devastating for tens of thousands of homeowners. It will take away the right to challenge the banks foreclosure (fraudulent documents and all) AND includes a huge disincentive to foreclosure defense attorneys from even taking your case.

If the mortgage industry has its way, the passage of a new bill floating around Tallahassee will ensure that Floridians will be displaced from their homes without legal representation or due process.  In typical Orwellian style, this bill is entitled the Fair Foreclosure Act – it’s anything but . . .

Florida often makes the national news when it comes to foreclosures, and it’s never positive.  According to a recent 24/7 Wall Street study, three of the ten housing markets most likely to collapse in 2012 are in Florida.  Naples, Miami and Ft. Lauderdale all make the top 10, and the rest of the Sunshine State isn’t far behind.

In its preamble, the FFA actually says, “Once suit has been filed, the public interest is served by moving foreclosure cases to final resolution expeditiously in order to get real property back into the stream of commerce.”  Of course, it is this glut of foreclosed homes flooding the real estate market that has all but ensured its collapse.  REO properties typically sell far below market value, and when so many REOs exist, it drives the overall market to new lows.  The vicious cycle is complete as more homeowners suffer increased losses from a down market.

So the bill’s stated purpose is flawed right from the outset, but getting our homes back into the “stream of commerce” really isn’t the purpose of the Fair Foreclosure Act.  Its sole design is to take Floridians’ property without due process or equal protection under the law.

Florida has a proud history of whoring for the mortgage industry, and while states across the country are fighting to restore honor and integrity to our judicial system, Florida has taken a different approach.  In Florida, the Supreme Court and our elected state officials are doing what they can to ensure their benefactors . . . the banks . . . get what they want.

Remember Foreclosure Court?   It unconstitutionally employed retired senior judges to act as mortgage mercenaries – ramrodding defective foreclosures through the judicial system despite national ridicule.  I am actually shocked it fell victim to Governor Scott’s massive spending cuts.  That must have been a mistake.

Then, with the addition of Pam Bondi as our new Attorney General, the mortgage industry took firm control of our prosecutors as well.  Ms. Bondi all but killed any investigation into foreclosure fraud, and fired two assistant prosecutors who gained national attention for piecing together a massive conspiracy by the mortgage industry to defraud our state court judges in foreclosure cases.

BUT, these acts of treason pale in comparison to the Fair Foreclosure Act, which proposes to do the following:

• Where the amount of principal and interest equals or exceeds 120% of the just value of the home, it will allow the mortgage company to foreclose without going through the judicial process.  That means no foreclosure complaint, no defense, no due process, no justice.  It will be as easy to take your home as it is to repo a car.
• It will repeal Florida Statutes § 57.105, which awards attorney fees to homeowners who successfully defeat mortgage companies in court.  At the same time, it assesses attorney fees against a homeowner and his lawyer (in equal parts) if the mortgage company prevails.  The design here is to stop consumer lawyers from taking any more foreclosure cases by making it impossible to make money and even personally expose the lawyer to penalties.  Consumer lawyers will have no upside potential and all downside risk.
• It will eliminate the right of a homeowner to set aside a wrongful foreclosure, even if the plaintiff committed fraud in the process of taking the home.  The ONLY recourse would be awarding money damages.  This language is to appease the title companies by retroactively ratifying all that foreclosure fraud that has taken place over the last decade.  Once the bank takes your home, you’ll never get it back, no matter what.

The typical knee-jerk response is always that these homeowners are people who “got in over their head.”  But such banking propaganda ignores the fact that 1 in 2 houses in Florida have no equity.  So, according to bankers, half of Floridians are irresponsible homebuyers. Wall Street and greedy bankers created this horrible mess, but they want no part of shared sacrifice in cleaning it up.  Middle class America didn’t cause this problem, and Middle class America shouldn’t pay for it.

We Floridians suffer from foreclosure fatigue, and the FFA will send us all over the edge.

This article comes courtesy of Chip Parker, A Jacksonville Bankruptcy Attorney. About Chip Parker, Jacksonville Bankruptcy Attorney

Chip Parker is the managing partner of the fastest growing law firm in Northeast Florida (two years running), Parker & DuFresne, P.A., and according to The Jacksonville Business Journal, he is an Ultimate CEO. Mr. Parker represents businesses and consumers facing bankruptcy, and homeowners in foreclosure defense actions. He is the recent recipient of Jacksonville Area Legal Aid's Award for Outstanding Pro Bono Service. Mr. Parker is an active member of the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates

Banks Now Prefer Short Sales to Foreclosures

Below are excerpts from a recent article that confirms what we have been saying for about the past 9 months. Last December, just a few months after the ‘ROBO-SIGNING’ scandal really became widely publicized, we saw a noticeable shift in lender attitudes during our short sale negotiations. Lenders were much more open to approving short sales.

If you owe more than your home is worth…now may be the time to contact us about the possibility of doing a short sale. Here’s my direct line: 561-602-1258

 A lender’s interest is in profit, and a foreclosure used to be more lucrative for a bank than a short sale. Now, however, the average foreclosure takes more than 300 days to process; time where no profit is being made on the house, it remains as a negative entry on the bank’s books, and the time and work that goes into the process now costs banks more profit than a short sale – wherein a bank approves the sale by the homeowner for less than the loan amount, losing the difference between the sale price and the loan. . This shortcut is becoming an increasingly more popular option for the nation’s three largest mortgage carriers, Bank of America, JPMorgan Chase and Wells Fargo. 

Banks dealing with lengthy, complicated and frequently messy foreclosures are starting to see "short sales" as a quicker and cheaper way of getting bad loans off their books.

"We think the short sale is a good solution for many struggling homeowners and we let them know that it's an option," said Christine Holevas, spokesperson for JPMorgan in an email. Foreclosure can be an expensive and lengthy process for all parties. It's a good deal for the homeowner and a good deal for us (a cheaper way to get a bad loan off the books.)"

A short sale is seen as a more palatable alternative to foreclosure for borrowers. In its simplest form, borrowers with underwater mortgages sell their homes to a buyer at a price that is approved by the lender. The lender normally forgives the difference between the loan and the sale proceeds- in essence the bank is being shorted for the loan amount.

Previously, lenders were said to prefer foreclosures to short sales because they -- or the investors in the loans -- figured that more money could be made from the former.

But the average time for the foreclosure process- from the time of notice to the completed foreclosure- is now 318 days in the U.S., according to RealtyTrac.

The longer it takes for a foreclosure to be approved, the longer bad loans stay on banks' books. Foreclosures are also more expensive, because of the legal expenses involved as well as the expenses for maintenance and upkeep while the property is in foreclosure.

According to real estate analytics firm CoreLogic, the number of short sales in the market have tripled in the last two years and transactions are anticipated to grow by 25% in 2011. The markets with the largest short sale volume are California, Arizona, Colorado and Florida.

"Lenders often consider short sales as the lesser of two evils when compared to foreclosures," Core Logic noted in a May 2011 report on short sales. "While significant losses may be incurred in both foreclosure and short sale scenarios, the overall negative financial impact of short sales is typically less than that of foreclosure. In many cases short sales represent the best way for lenders to minimize their overall losses. In general, all parties fare better when a foreclosure is prevented."

Still, the short sale process is not easy and industry observers say sellers and buyers of short sale properties must set realistic expectations.

For one, borrowers should realize that their credit scores aren't any less affected under a short sale than it is in the case of a foreclosure. In both case, the borrower is considered in default.

However, in a short sale, the borrower's debt is often forgiven, at least on the first lien. Also, a borrower who does a short sale might be able to apply for another mortgage sooner than he or she could in the case of a foreclosure, where the wait can be as much as 7 years.

And, the more parties involved on the lender side, the more complicated the short sale process is. Investors, junior lien holders and mortgage insurers often want more documentation to prove financial hardship of the seller, proof of funding for the borrower and they may want to negotiate the price.

The short sale process can go a lot more smoothly when the real estate agent is someone who understands how to do a short sale. "This is not a regular sale where there is just one contract between a buyer and a seller,".

This article was republished with permission from The Street.

If you’d like to discuss your short sale options, call me directly at 561-602-1258

Steve Jackson

Thanks for reading my blog

SHORT SALE SUMMIT REVELATIONS BY BANK OF AMERICA

Some of my short sale staff and I met with Bank of America in Miami today at their “Short Sale Summit”. We had a nice small group that met twice this afternoon - and I got to ask and have answered several questions which I think are important to those agents who are working short sales.  

 THEY SENT THE BIG GUNS

First, we definitely had the top end management for this discussion. Bob Hora is the Short Sale, Deed in Lieu, REO, LandSafe Field Services Executive for Legacy Asset Servicing at Bank of America. He leads a team of 5,000 associates – those that you speak to regarding short sales and deeds in lieu through Bank of America as lender or servicer. Joining him was David Sunlin, Bob’s immediate junior who is Senior Vice President and Operations Executive for Short sales, Deed in Lieu and Real Estate Management for Bank of America – meaning he is in charge of real estate operations for Bank of America’s default loan servicing operations.   On a more local side, Matthew McCain is the Home Loans Manager for BoA and his territory is all of South Florida, and he acted as moderator. He is a go to guy for this region (his base is in Naples) and will make presentations to individual agent and Realtor groups if requested.

BoA FAVORING SHORT SALES OVER MODIFICATIONS

It seemed from the discussion, that BoA wants to do short sales more than they want to do loan modifications through HAMP or in house programs. There seemed to be a more significant emphasis toward short sales for avoiding foreclosure than through modifications. In fact, although they flew in about a dozen “expeditors” available for us to share specific file processing issues – none of them dealt with loan modifications. There was zero mention of principal reduction programs.

INVOLVING REAL ESTATE AGENTS IN THE DEED IN LIEU OPPORTUNITY

BoA is seriously floating the idea that if a short sale is denied or a short sale cannot reasonable be consummated, the real estate agent can become involved in the process of a deed in lieu of foreclosure process. This will have some limitations on the degree of involvement by agents as they cannot be forced into an unauthorized practice of law situation. Watch for this to develop over the next several months…

CASH FOR KEYS WITH DEFICIENCY RELEASE TO AVOID FORECLOSURE DELAYS

This is on the front burner for implementation beginning September 2011 - Another program that we should begin to see put into operation is “an aggressive and meaningful” program to encourage homeowners to not ride out a foreclosure process for all its worth (i.e.: living in the property for as long as possible without paying the mortgage). This is a “cash for keys” type program that more realistically takes into consideration the benefits to the homeowner of the extended foreclosure lawsuit timing vs. a waiver of deficiency rights coupled with a “cash for keys” that takes into consideration more than borrower income, but also loan size and size of home to make this successful – but expect it to be more meaningful than similar programs through HAFA.

DO I NEED TO STOP PAYING MY MORTGAGE TO GET BANK ATTENTION?

Still think that you have to stop paying the mortgage to get a short sale? You are still wrong and this time we heard it not just from me - but straight from Bank of America.  Although proving up hardship can be easier with a stoppage of payments (and indeed some investors serviced by BoA require delinquencies ranging up to 120 days before a hardship is deemed “valid”), the specific statement of policy was that delinquency is NOT necessary provided other factors of hardship and imminent default can be shown.

NEGOTIATION MINUTIA AND FRUSTATION WITH NEGOTIATOR DEMANDS

They acknowledged that some of their negotiators sweat the small things (like “we won’t pay for the termite inspection”) instead of looking at the big picture, and they are working on training improvements to even-out the process of analysis and create consistency in the process. Still, there are plenty of quirks in their systems.

“THAT MAKES NO LOGIC” STILL PREVALENT  

One expeditor, who was trying to help us on a HUD issue regarding a seller contribution to the closing proceeds, listened to my explanation to my seminar attendees of the issue with “why is the bank thinking this way?” At some of my seminars I have a PowerPoint slide that asks 3 simple questions that can be answered with logic. Everyone get them right and we all agree that everyone applied logic to get a 100% score. I then tell the seminar attendees to take a 10 minute break and go to their cars and lock their logic in their car trunks – and then come back so we can continue the seminar. Logic has no place in the short sale negotiation process. The BoA expeditor (who was from California) said it was the best and most accurate analogy of the actual “without logic” process that she had heard.

RELATION OF CREDIT SCORES TO DEFICIENCY WAIVER

A conflict arose regarding a statement made many times that a low FICO score was a determining factor in obtaining the coveted waiver of deficiency in the short sale approval letter. The conflict was relative to the statement that you can do a short sale without defaulting on the mortgage. David remarked that no conflicting statement was intended, and that waivers can be determined not merely on FICO scores but on other factors as well. Our experience in our office cannot correlate credit scores with whether or not BoA provides a waiver of deficiency.

CONFUSING SHORT SALE APPROVAL LETTER LANGUAGE

We recently received a very confusing approval letter that said both that the lender was reserving its rights to a deficiency and in the same letter that the lender will report to the IRS with a Form 1099 the forgiveness of income from the short sale. Bob took the letter from me and promised a review from their legal staff and a response. The letter is discussed in my article, NEW AND CONFUSING BANK OF AMERICA SHORT SALE "APPROVAL" LANGUAGE.

ESCROWS MAY INCLUDE ASSOCIATION ASSESSMENTS FOR FUTURE LOANS

Lastly, expect some pilot programs on new loans that add on to the escrow list not only real estate taxes and insurance, but condominium / property / homeowner association assessments. The fight to get short sales through is constantly being waged between lender and association. BoA is also considering setting up an association lien subset of negotiators to improve the short sale opportunities even with unpaid association fees. [We maintain that the better course of action for homeowners is to continue paying the association, as unpaid assessments can be the straw that prevents the short sale from succeeding.]

The bad news is that the BoA time-line for short sales still deems 4 and a half months as acceptable. So the educated buyer (educated by their agent) is a key element for retaining the buyer through the short sale process.

Bank of America actually put together a meaningful program for agents and attorneys that process short sales and the experience was well worth the 3 hour drive. Stay tuned for updates and developments!

--------------------------------------------------------------

Copyright 2011 by Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com

See our easy to find articles at TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES.