Q: What designation will lenders look for when applying for REO's and BPO's?

A: Until 2 years ago there was NO designation available, primarily they looked for experience. Within the past two years the Five Star conference, associated with dsnews (default servicing news) has been offering a certification program which is the national , elite certification for folks trained by the default industry—to serve the default industry.

The (FIS) Foreclosure Intervention Specialist certification is less well known (been around for 3 years) but is certainly excellent additonal training if you are interested in going after foreclosure related business.

I think the combination of BOTH would make you very well prepared to handle REO/BPO work if you are trying to break into that business. That is one of the few areas of real estate which has an abundance of activity right now and will continue to do so for the next 5-10 years.

Since the instructor worked for Fannie Mae as a Broker-specialist, I strongly urge you to take the FIS training and the Five Star training.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Chattel Mortgage

And the WORD for Today is:

Chattel Mortgage—a lien on personal property. A chattel mortgage may also be called a security interest.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Agent

And the WORD for Today is:

Agent—any person who is authorized to act for or represent another (principal). Such authority may be expressed or implied. It is always recommended that such authority be in writing. In issues related to defaulted loans a housing counselor is working as an ‘agent’ for the consumer. An attorney or real estate person who is helping is also acting as an ‘agent’. It important to note that a lender is prohibited from sharing details of your mortgage situation with any one other than the mortgage holder without WRITTEN notice that such person is in fact, acting as your agent and has given WRITTEN, SIGNED authorization for the lender to discuss your personal finances.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Myth #11

Myth #11: That non-profits agencies are the ONLY option consumers should have for default counseling and other real estate professionals (especially REALTORS) should stick to selling houses and keep their nose out of foreclosure intervention.

Reality: As stated above, many borrowers who need help are prohibited by income from receiving help because their income is too high. Even if they were not, non-profit agencies across the country are staggering under the volume of requests for help. While they are reluctant to see any other professionals step onto what is perceived by many to be “their turf’ consumers need help; they need it today not four months from now.

Reason: The shocking answer if that a turf war has emerged over who should claim the defaulted borrower. Should it be the lender? (whom the consumer does not trust and who has made no inroads in connecting with such borrowers). Should it be non-profits who gleefully tell everyone ‘that is our job”? (while distraught borrowers by the HUNDREDS in HUNDREDS of thousands say they called the toll-free number to no avail. Funding, staffing and training are the issues for the organization and the politicians. The consumer issue is they are in default NOW and need someone who can provide them with some clarity and direction NOW. Many will disagree but I am the author of this article and I believe that history will show that real estate professionals will step to fill that gap in significant ways during the next 3-5 years as we see this housing crisis run its course.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Equity

And the WORD for Today is:

Equity—the current market value of the property MINUS any and all liens against it (mortgage, etc or any other legally enforceable liens). Example: You have a home, which cost you $150,000. You have an outstanding 1st mortgage of $120,000, a 2nd mortgage of $10,000 and no other applicable liens. The current market value of the home is $160,000 with total debt of $130,000 the homeowner’s equity is $30,000. If property values have declined in the area and the current market value of the above mentioned home is only $125,000 the house is what is being called ‘upside down’. There is NO EQUITY and instead the owner owes $5,000 more than the market will bear.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Upside Down

And the WORD for Today is:

Upside down—refers to a situation when a consumer owes more on a house than the mortgage pay-off. Also called Underwater.

Underwater—relative to housing—this is a term which means a home cannot be sold on the open market today for enough money to pay-off the existing mortgage. There are a number of factors which might contribute to this being the case; an over-supply of houses in this price point perhaps because of over building, a limited supply of buyers for this type house, lack of easily affordable financing, a declining market because of excessive foreclosures, or various other factors might impact the seller’s ability to get an offer for as much as the current indebtedness on the property.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Crisis Budget

Q. We have been in our house for several years and did not refinance or get a second mortgage like so many people seem to have done over the past few years. We have managed to make our payments on time and things were fine until they cut back my hours at work six months ago. We struggled but we were still getting by until my husband was laid off two months ago. He cannot find a job even though he is trying really hard. We have already talked to the bank about trying to work with us on the mortgage but they can’t with the little bit of income we have. I don’t even care about the house any more. What can we do to try to keep food in the house until we have to move? We need help just to survive. Can you make any suggestions? We will try anything.

A. For many people today the truth is that they, like you, are in survival mode. I will not address any possibilities for saving your home since your focus is survival of your family. First, you should be applauded for looking at the survival issues as being more urgent than your housing issue.

I would encourage you to immediately adapt a crisis or survival budget. I will cover a whole list of things to do, some I am sure you’ve already thought of but some which you might not have considered. Here goes.

1. Household necessities—food and medicine

• Cook at home—no fast food
• Switch to store brands, minimize food purchases when possible by using simpler dishes (spaghetti instead of lasagna)
• Use coupons and watch for store specials
• Check again to see if you NOW qualify for food stamps
• See if the “Angel Food Ministries” is available in your area
• Look for short dated meats which are dramatically reduced (use immediately or freeze)
• For prescriptions—switch to generics and/or ask your doctor for samples

2. Car expenses

• Can you switch to a lower car payment? Use public transportation?
• Get rid of a second car? Carpool?
• Reduce the number of miles you drive, saving on gas
• Increase the deductible on your insurance to get a lower monthly premium
• Barter for an oil change but DO NOT delay when one is needed

3. Minimize household expenses

• Get rid of cable and minimize the expenses with a land line if you also have a cell phone
• Go to a minimal package with your cell phone company
• Reduce personal care expenses for haircuts, nails (can you barter for the hair or do it at home?)
• Change entertainment to free park or other community events instead of movies, bowling etc
• Cut out playing the lottery or other gambling
• Give up cigarettes or drinking (big saving on 1 or both of these)

4. Look for ways to generate income such as:

• Selling items on eBay
• Holding a garage sale
• Taking items to a consignment shop
• Take in a roommate—be upfront with them about your mortgage situation
• Sell items you don’t need at a flea market
• Look at your skills to see if anyone will pay you for a skill you have (mowing lawns, painting, childcare, fixing items, any one of 50 things)
• Do you have a hobby which could generate income (cake decorating, sewing)

5. Other possibilities

• If the car is paid off, reduce the insurance coverage to liability only
• Change the number of dependents on your W-2’s
• Use conservation methods to reduce your utility bills

6. Housing

• Apply for government subsidized housing (Section 8), even if there is a long waiting list
• Consider moving in with someone (family/friend) for a period of time
• Use techniques for “buying TIME” to stall foreclosure until your situation improves

This is typically called a crisis budget, you can get the definition, and more information, here.

Please share any suggestions you are already using which are not included in the list above. We’ll use them in a future blog and you can help someone else to make it over the hump. We really are all in this together. (You can either leave a comment here, or send an email to Heather at homeownershipmatters@gmail.com).

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Note

And the WORD for Today is:

Note—refers to a piece of paper which both acknowledges a debt and includes a promise to repay. A promissory note. A note is a written promise to pay a specified sum of money to a designated person or upon their instructions to the holder of the note, at a fixed time or upon demand.

A unilateral agreement which includes an express and absolute promise from the signer of the document to pay the person named a defined sum of money at a specified time or on demand. The holder of a note may assign their right to receive payment to another party, sell or otherwise transfer the note to another party without changing the obligations of the party who gave and signed the note. A note usually includes provisions for the payment of interest. For real estate purposes the note is secured by a mortgage or deed of trust.

“Note”- [in reference to the mortgage document] means the promissory note which is signed and dated by the Borrower. The “note” details the amount owed to the lender and includes the Borrower promise to make periodic payments.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: 2-1 Buydown

And the WORD for Today is:

2-1 Buydown—means the interest rate is reduced by 2% points for the 1st year of the mortgage and reduced by 1% point for the 2nd year of the mortgage. After that the mortgage levels out for the remaining 28 years of the note. The initial lower rate helps to qualify consumers for a mortgage higher than they might otherwise qualify for and is especially helpful to builders as a financing tool to help to move homes.

The definition of buy-down is here.

You might also want to read this article, where Mildred was quoted on 2-1 Buydowns:
http://www.homeownershipmatters.com/news_articles/perfectstorm%5B1%5D.pdf

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Did You Know: Loan Screw-ups

FYI—Loan Screw-ups

It is important that you know some of the ways the servicer of your loan frequently fails in their responsibility to handle their job as they should. Their failure could give you the reason you need to block a pending foreclosure. There are many things they do wrong or fail to do at all but the more common items include:

• Failing to make timely payments from your escrow account
• Failure to aggressively work at a loss mitigation attempt when requested to do so
• Sending you inconsistent letters demanding payment
• Failing to honor forbearance agreement (not you—them)
• Failing to give you proper notice of a servicing transfer and your rights related to that transfer
• Failing to properly apply payments during the transfer period, possibly creating a default
• Failing to provide a timely or complete response to a qualified written request
• Choosing to apply force-placed insurance when you, in fact, already had coverage in place
• Returning mortgage payments
• Improperly placing your payment in a suspense account
• Posting your payment late and/or misapplying your payment
• Threatening foreclosure when, in fact, you are not delinquent
• Charging excessive fees for the use of attorneys, inspections, etc
• Charging fees for services which have not YET been performed
• Creating a default by misapplication of the payments you have sent in

This is just a partial list of things which servicers do on a regular basis which can wreck havoc with your loan. At the least, it can be an inconvenience. At the worst, it can actually cause you to be in default and in foreclosure through no real fault of your own. It happens. Even when you have actually missed mortgage payments and are struggling to keep your home, the loan servicer is still required to handle the account with certain fairly standard and reasonable guidelines. Too often, they fail to do so and you end up getting the short end of the stick. Unless consumers demand they stop the unfair practices and produce documentation of how they have handled your file (via a qualified written request) they will continue to operate like they all got training in the wild, wild west where anything was okay.

What should you do if you suspect your servicer is not dealing with you fairly?

Step One: File a qualified written request following guidelines discussed elsewhere on this blog. (Do additional research on the web; see this entry on Buying TIME from our blog).
Step Two: Try to find an attorney who will represent you in challenging their right to foreclosure.

You must move quickly and with a firm action plan so that you don’t become another foreclosure because the consumer didn’t know that they could fight back.

The “Buying TIME” Foreclosure First Aid Kit, available at www.DovePublishingHouse.com would be of great benefit to you as well.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Loan Sharking

And the WORD for Today is:

Loan Sharking—no longer a common expression even though the practice is alive and well. Loan sharking means to loan someone money at a rate or on loan terms which clearly takes advantage of the borrower. Many states had statutes in place which set a cap on how much could be charged by unscrupulous lenders as far back as twenty-thirty years ago. Many consumers began using their credit unions as well as traditional lenders and loan sharking declined. Then cam the 90’s and the hey day for mortgage brokers and sub-prime lending. The availability of loan via the internet expanded access to loans by borrowers who were credit challenged. Limited regulations and almost total lack of oversight regarding the day to day practices of mortgage brokers ushered in the return of loan sharking. Predatory Lending is the new name for a practice which has been around for centuries. *Borrowers Beware!

See this post, "Buyer Beware", this post for the definition of "predatory lending", and this post for more information on "Avoiding Loan Sharks".

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Loan Package

And the WORD for Today is:

Loan Package—refers to the file of all the items necessary for the lender to decide to grant or not grant the loan. These items would include the information on prospective borrower such as loan application, credit report, financial statements, and supporting documentation, employment verification and any other personal information to verify the credit worthiness of the applicant. In addition, the file would also include information related to the acceptability of the proposed property such as an appraisal to substantiate value and a survey. There is usually a charge for “packaging” the loan.

Loan package also commonly refers to the bundle of papers sent from the lender to the title company in order to finalize a real estate transaction. The /loan package/ usually contains all the necessary paperwork to “close the loan.” The mortgage or deed of trust, note and all required disclosures, from anybody to anybody, would be included. A loan closing package might include as many as 60-80 pages of material.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Signing Documents

Q. Signing Documents

My wife and I purchased a home a month ago and we have not felt good about the whole deal from the time we left the closing. The lender we used had told us that we would have to pay points to get the rate down so we could afford the payment and we agreed to that. The problem is that when we got to the closing, the amount they had on the loan documents was a lot higher than what we had been told earlier by our lender. The title company said there was nothing they could do about it and that we just had to sign the papers? Is that true? We felt trapped, had all our stuff packed and felt we had no choice except to go ahead. Now we are not so sure. Did we make a mistake and if so, what can we do about it now?

A. The answers to your questions, in the order in which you asked them are: No. No. Yes and Probably not much.

Let’s talk about your problem which, unfortunately, happens all the time to folks. I will address first this specific situation and then the general problem of papers which don’t match up to what you had been led to believe would be included.

It is the responsibility of a title company to handle all the details of the closing in accordance with state law and in compliance with the details in the contract signed by the seller and the buyer. In addition, the title company is obligated to accept instructions from the lender for many details associated with the closing. Those details include what forms should be in the closing package what amounts should be inserted in all the documents related to money, etc. SO, when the title company said there was nothing they can do, what they meant was, “There is nothing we can do UNLESS the bank gives us some other instructions.”

When you are closing a real estate transaction the title company is the facilitator for that transaction. For a large percentage of closings, the title company has no relationship with either party and is simply being paid to process the paper work and assure that it is a transaction which was properly and legally handled. But there are times when the title company is, in fact, an agent for a party to the transaction. This is called dual agency. This means they are working for one specific party to the deal. This is most common if you are buying a new construction home and the title company is the company picked by the builder (sometimes owned by the builder) to handle all their transactions.

In addition, if the home you are buying is a bank-owned home, then the title company is, in fact, working for the owner of the foreclosed property (whether that is a lender, servicer or insurer/investor). SO, when the title company said there was nothing they could do, what they meant was “There is nothing we can change UNLESS we get different instructions from our principal (the lender/servicer/insurer).

Did you make a mistake? I have to tell you that you did. It probably doesn’t make you feel a lot better to know that almost everyone makes the same mistake.

THE MISTAKE: Believing that because someone presented you with papers that you must sign them. You DO NOT have to sign them. No, you can not go ahead with the transaction unless you sign them, but that also means that the other people can’t get what they want either. If you insist that the papers have to be changed to what you were told before (especially if you have a good faith estimate which documents the amounts you should be paying) then there is a very strong chance that the lender will change their instructions to the title company, the papers will be changed accordingly and then all of you can re-convene in order to close the deal.

This is almost certainly not going to happen this afternoon. But it can happen. It is worth holding out for. It is worth making everyone else uncomfortable until you get the deal you were told you would be getting.

Is there anything you can do now? I doubt it because you signed all the papers. You used your most prized possession and endorsed yourself into a pickle. You can hold on to the lesson you learned, share it with others and promise yourself to never again sign documents which you don’t clearly understand or which do not correspond to the agreement with the other party.

JUST DON’T DO IT!

© Copyright 2009, Home Ownership Matters, LLC. All rights Reserved. "Answer Book in a Foreclosure Climate" by Mildred Wilkins, available in 2009 from www.DovePublishingHouse.com.

(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)

WORD: Signature

And the WORD for Today is:

Signature—your most prized possession. You should guard it like precious gold. Most people worry about having someone steal their possessions or the dangers of natural disasters. The reality is that the most financial harm caused throughout your life is likely to be caused by your “signature” on some document you did not fully understand. Whether that was a re-finance, an option arm, a new build with a 2-1 buy down or co-signing for your brother; your signature can directly lead to financial ruin. Promise yourself that you will never again sign any document that you do not fully understand. Take time to read it carefully, preferably a day or two before you sign it.

See yesterday's post for more information on just how powerful your signature is.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Did You Know? Your Most Prized Possession

FYI: Your most prized possession is not your house, your stocks and bonds, your vintage car, your bank account. You, in fact, own just as much as the folks you feel have it all together and are financially secure.

Unfortunately, what most folks do not realize is that the most valuable possession any of us have, (which ALL of us have) is, in fact, our SIGNATURE.

Your SIGNATURE.

If you were asked to name the most valuable possession you have, almost none of you would have thought to say your signature. Most of us fail to realize the significance of our signature and how we alter our lives when we sign documents, totally changing the course which our lives will follow.

Consider: Your signature is required to validate:

• A marriage license
• A divorce decree
• Accepting a mortgage
• Agreement to build a house
• The co-signing of a loan
• A surgical procedure
• An abortion authorization
• A birth certificate
• The authenticity of your will
• The beneficiary on your life insurance policy
• Acceptance of a lien against your home when you refinance/take out an equity line
• Your acknowledgment of baptism
• Accepting a plea agreement
• The truthfulness of your tax returns
• The responsibility for a minor’s actions
• Your willingness to grant an adoption
• Your granting the power of attorney for another to act on your behalf
• Signing documents to authorize Madoff to invest your money
  

I could go on and on but I am sure that you would agree that your signature on any of the above mentioned documents all signify agreement with a life changing activity. It is simply a short step in thought process to see that if you withheld your signature, then the pendulum would have swung in a different direction. Consequently, your power to change the outcome hinges on whether or not you allowed the activity or prevented it: and that power is as simple as whether or not you signed the necessary documents.

How Should This Impact Your Behavior?

First, it should shake you up pretty seriously. Really. Think about how casually most of us sign things without thinking about the long terms implications. My personal commitment, since I realized this several years ago, is that I will NEVER sign important papers which require a signature to be valid the first time I see them. The ONLY reasonable exception in my opinion is in order to get medical attention, in an emergency. Since I have high blood pressure as well as a possibly fatal allergic reaction to bee stings, I would sign papers without even reading them for treatment of either one of those conditions.

For any other situation, I need to see the papers a day or two in advance so I have a chance to read over them. Then I can ask questions, do some research if I feel I need to, seek out the counsel of someone I trust and make an unrushed, educated decision about whether or not this is something I clearly want to do.

This is turning out to be a very long blog but I need to share this.

DON’T DO IT. Several years ago, just out of the blue, I started coughing up blood while on a vacation with my children. They were terrified and I was pretty scared myself. I had not even been sick. I spent a week in isolation in an out-of-state hospital while they checked for everything, including TB.

Since these little coughing spells occurred several times during that week, the consensus of the specialists there was that it was best to remove a lung in order to avoid a possible lung embolism and the likelihood of death. I REFUSED to sign and agree to the surgery because they could not tell me how the blood got into the lung in the first place and it appeared they wanted to remove a LUNG as a precautionary measure. That’s pretty serious, based on a hunch. I steadfastly refused, against their continued pressure to sign and agree to the surgery.

Five months later, two more little blood coughing spells, two exploratory surgeries and lots of tests and X-rays they finally did a thyroid scan. I had previously had thyroid surgery but who would have thought the stupid thing would regenerate and cause havoc again? We didn’t, but it had. Turns out my thyroid was totally out of control and causing bleeding, which pooled in my lung, leading to the coughing fits. Now we had an explanation which made sense.

I quickly granted permission for a second thyroid surgery (this time TOTAL removal of the pesky little gland). My family had not understood my refusal to have the lung surgery, but I will forever be grateful that I made a decision based on my strong conviction that I need to UNDERSTAND why I am doing something before I do it and that it cannot happen until I have signed papers granting permission.

My refusal to agree to the wrong surgery saved my LUNG.

Never forget: your most prized possession is in fact your scraggly signature. If it is significant enough to require a signature then it is significant enough to take some time to consider.

Check out the post for tomorrow to get the "definition" of Signature.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Home Equity Loan

And the WORD for Today is:

Home Equity Loan—a term used to describe any mortgage loan, which is not used to purchase the home. It is frequently a refinance loan that the homeowner uses in order to “pull” equity from the home for any number of different reasons. Those reasons include home repairs which are needed, payment of credit card debt, taking a vacation or some other use of the funds. Home equity loans can be a good option when used wisely; they can lead to mortgage default if handled improperly.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Buy-Down

The WORD for Today is:

Buy-Down—a sum of money paid to the lender at closing to reduce the borrower’s out-of-pocket monthly mortgage payment. Buy-downs are usually temporary. In the last several years it has been common for the amount of the buy-down to be added to the purchase price for the house so that in effect the buyer is borrowing the reduction. This is a dangerous practice for several reasons: it adds to the indebtedness by inflating the mortgage/appraisal and causes the borrower to be upside down.

Buy-Down is also an inducement to a lender to reduce the interest rate on a loan during the early years of a loan. The buy-down payment to the lender may come from the seller, buyer, a third-party or a combination of these. The buy-down may be for the first 1-5 years of the loan; most common is the 2-1 buy-down. Buy-down sounds good but in a practical way it is seldom helpful to the borrower. If the borrower is not very strong financially and able to pay the buy-down totally out of pocket then it will be financed into the loan, which hurts them over the long haul. An artificially reduced rate now only means you have to catch up later. The lender is entitled to, and must receive, a certain rate of return. There really is NO FREE LUNCH.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Fast Fact: Borrower cooperation required for Workouts

FACT: Lenders can offer an assortment of workouts and are now much more willing to do so than they were even a few months ago. There is a lot of pressure from all sides, the government, their insurers as well as the economic reality that they really don’t want to take the house back (AND THEY MEAN IT THIS TIME) which is encouraging them to be a bit more serious in their efforts to complete a workout with you. However, there are still guidelines which must be recognized and they cannot do any kind of a workout without your full cooperation.

It is not as simple as saying “I want a workout”. You must provide documentation of income and expenses, show the ability to make a reduced payment if you want to keep the home and provide whatever supporting documents are requested to justify your desire to keep your home. If you are serious, show them you are. Comply with their request.

If you need help with how to be proactive—order the “Foreclosure First Aid Kit” available at www.DovePublishingHouse.com today.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Security Agreement

And the WORD for Today is:

Security Agreement—a commonly used “catch-all” term which is used to describe a variety of debtor-creditor relationships. In order to be legally enforceable there must be a written agreement between the party who borrowed money (or contracted for services) and the creditor who loaned money or performed the services. These agreements are then documented in a number of different ways such as a chattel mortgage, a trust receipt, an inventory lien or other security agreement.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

PS—Happy Easter!!

Fast Fact: Modification of Loans

FACT: A modification of your loan is possible for all loan types. However, that possibility can be complicated by:

1. Whether or not you still reside in the home
2. The lender has sold the loan into a loan pool
3. The insurer/investor is willing to allow a modification

To modify a loan means that the old loan is permanently changed and new loan terms exist. It can be a powerful option for a borrower who is in default. The things which can be altered or modified on a loan include:

1. The interest rate being charged (usually lowered by the modification)
2. The term (or length of the loan) (can be reset for another 30 years)
3. The principal balance (can be lowered if the value of the property has decreased)

Either one of these can be modified or a combination of them. The goal is to create a NEW loan which is reasonable and sustainable based on the borrower’s current circumstances including income and the current value of the real estate.

New legislation is slated to allow bankruptcy courts to force lenders to agree to a reduction in the outstanding balance (the so-called cram-down) when a borrower can demonstrate that the value of the home is less than the mortgage payoff.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Crisis Budget

And the WORD for Today is:

Crisis Budget—refers to a temporary budget which a consumer needs to create in the event they are struggling with house payments. Particularly in current times when many are facing a default on their mortgage devising a crisis budget could be helpful both in trying to get some relief as well as having a sense of making headway in getting control of your finances again. On their own or with the help of a foreclosure prevention counselor the consumer needs to first take an honest and realistic look at their current income and ability to make payment for any and all expenses. Then choose which debts they can pay. A way to determine that is to consider which creditors can take quick action against their home, utilities, car and other essentials. Then establishing a priority of whom you will pay (perhaps being realistic that even necessities must be reduced). So:

• Household necessities-food and medicine: cook at home, switch brands, minimize food purchases as best you can. Look into "Angel Food Ministries" for help with food prices.
  
• Housing-mortgage, insurance Contact the lender for help with loss mitigation.
• Utilities-can you get help with these?
• Car loan-is the car necessary for work? Can you switch to a lower car payment? Get rid of a second car? Use public transportation?
• Child support debts can bring prosecution if you do not pay them. Try to maintain these.
• Income tax-file and make payment arrangements.
• Student loans-have a low interest rate and should be a low priority on a crisis budget.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Conditional Sales Contract (Land Contract)

Conditional Sales Contract—a contract utilized for the sale of real estate (or other goods) whereby the title remains with the seller until the terms of the contract, usually payment in full of the agreed amount. This kind of contract is commonly called a land contract if it refers to the purchase of real estate.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Myth #10

Myth #10: That consumers who are behind do not have any money to pay for professional representation when they are in default.

Reality: This is one of the most common myths out there (and nothing could be farther from the truth). Just because a borrower can not:

• Find the right office to accept their money
• Pay the 8 months they are behind plus attorney’s fees
• Understand the process well enough to know who to go to when they keep getting thrown around like a rag doll
  

DOES NOT MEAN THEY ARE BROKE

Reasons:

• First, everyone who is struggling is not lower income.
  
• Second, borrowers have demonstrated through their willingness to pay scam artists thousands and thousands of dollars for "phantom help”, that they are indeed willing to catch up on their payments.
  
• Third, Non-profits organizations frequently have income guidelines which exclude many of the middle and upper-income borrowers who are struggling.

Copyright © 2008, Home Ownership Matters, LLC.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Fast Fact: Short Sale Denial

Too many folks have unrealistic expectations concerning a possible short sale. While it is now pretty common knowledge that lots of homes are “upside down” or “under water” most consumers (and too many REALTORS) don’t really understand how a short sale listing works.

FACT: The lender must approve a short sale in order for there to be a “closing”. Frequently the lender DOES NOT approve a short sale attempt and the homeowner eventually loses the home to foreclosure.

REALITY: When an agent lists a home for ‘possible short sale’ that listing is always based upon getting the approval of the lender to accept a shortfall if the new buyer will not pay enough to pay off the mortgage in full and pay all related expenses (commission, taxes, etc). All parties need to understand that it is a possible real estate transaction where the homeowner does not have the final say so about whether or not the offer being presented is or will be acceptable to the bank. There are numerous reasons why a lender may ultimately choose not to approve a possible short sale. Some are connected to the seller but the issue could just as easily be a second lien holder who refuses to budge on the amount needed to lift or satisfy their lien again the home. Or the lender could decide that they are not willing to accept the terms of the offer, as written. The possibilities could fill a rubix cube.


Several precautions are advised for sellers who are upside down:

a. All offers submitted to your agent should first be forwarded to your lender for their consideration. (That’s what “lender approval” means.)
b. Sellers would be ill-advised to sign a purchase agreement to sell the home to Mr./Mrs. Smith PRIOR to receiving, in writing, approval to do so.
c. Sellers should be aware that if you ignore item #b above (because your agent said you had to) and you agree to sell for $159,00 and your bank eventually says that you can close for $$175,000, you have a few thousand dollars to find real quick. (I suggest you get your agent to help you FIND the money since they gave you the advice).

The point is this; if you sign a legally binding contract which the bank later declines; you still signed a contract agreeing to sell your home for a specific amount. You can be sued by the potential buyer for “failure to perform”.

You were warned!

Copyright © 2008, Home Ownership Matters, LLC.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Community Service Announcement: Funding for Foreclosure Training

Home Ownership Matters is pleased to be able to tell you that NAR (National Association of REALTORS) announced on March 1, 2009 a grant of $3 million dollars which is to be used for foreclosure training by state and local real estate boards around the country.

As part of their “RIGHT TOOLS—RIGHT NOW” initiative, NAR has made the funds available by launching the Foreclosure Prevention and Response Program (FRP). Unlike many government programs which are complicated, with unclear guidelines and take months to implement, this initiative could easily be dubbed as the real estate professionals “giving back”. The funds can be used for either professional training and/or community outreach programs and it is very likely that the bulk of the funds will be utilized for training for agents who need to better understand the changes associated with helping a consumer who is either already in default or expects to be in default.

Personally, I’d vote any day for someone to help my agent afford the training they need to better understand my situation. Since REALTORS are self-employed many of them are struggling right along with other segments of the community, and would have difficulty paying for the specialized training which these funds will make possible.

Comprehensive training on how to manage a short sale is rather expensive, but is now attainable as a result of this program. If you need to sell a home and it is "upside down" would you rather have a well-trained "short sale specialist" or someone who has taken a 4 hour class on what to do?

The application process is easy (2 short pages) and while it requires coordination between your local board and the state board, it should not be difficult to have quality foreclosure training approved and scheduled within the next 6 weeks. The entire $3 million is set aside to be used by the end of 2010. For more information, log onto NAR for details.

(NAR) offering you the "RIGHT TOOLS—RIGHT NOW"

How is that for stepping up to the plate?

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Cash Out

And the WORD for Today is:

Cash Out—is a term most commonly associated with refinancing. The popularity of the cash out refinance has resulted in a depleting of home equity across the nation and left millions of homeowners who were financially secure and confident of continued home ownership teetering on the edge of foreclosure. A cash out refinance means to take out some (or the entire) amount of a seller’s equity in cash rather than retain some interest in the property. The borrower is trading equity, which has accumulated over a period of time for cash which will usually be utilized for something less stable than their home. Aggressive marketing and slick salespeople have been exceedingly successful in convincing the American public that the cash refinance made great sense as a way to have or do whatever you want to do—RIGHT NOW. Unfortunately, there has not been a corresponding educational campaign about the risks associated with undermining the stability of your single largest investment—your home. Nor have there been meaningful conversations about the long-term implications of the cash-out craze during the past 10 years. Unprecedented foreclosures among seniors who had substantial equity is the fall-out.

Cash-Out Refinance—has become a very popular way for consumers to get money for any number of things by refinancing their home and getting cash back at closing. Also commonly called “taking out your equity” this is not a bad idea IF you actually have equity. It is a problem if you borrow to the extent that you either owe as much as the home is worth OR borrow in EXCESS of the value of the home. You will have created an upside down situation, making it difficult or impossible to sell your home.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Your Real Estate Advisor: Deal or No Deal?

This catchy title from a popular game show has increasingly become a weekly nightmare for real estate professionals. In a market where an alarming number of clients are behind on their mortgage AND upside down, many agents are finding themselves sitting for ever increasing amounts of time—sometimes months—waiting for the lender in some distant city to notify the interested parties that, “Yes, we have a workable deal”. Now, get it closed in short order (7-10 days is not uncommon) and “No, we will not allow any contributions toward the buyer’s costs”.

Common practices (seller concessions) are not part of this transaction. Local real estate agents negotiating with a distant third party who does not, in fact, own the real estate (lenders’ loss mitigation department) has become a new reality for many real estate professionals. This practice will continue and become more commonplace as more consumers find themselves in a position where they are unable to make their mortgage payments and the local market will not support the full amount needed to cover mortgage payoff and the expenses associated with the sale. It’s called a “short sale” and the rules of the transaction are markedly different from how you used to sell homes.

“DEAL” means yes, we will allow the closing to occur. You must close quickly or we will change our minds. Seldom will any seller concessions be allowed. Worse yet, seldom will full commission be allowed. Frequently, the lender will notify all parties of a counter offer only after an extended period of time of complete silence. Then you are basically in a “take it or leave it” situation. It is critical that you get an actual letter of confirmation which includes ALL terms of the transaction from a representative of the financial institution, so that you know that the deal can be finalized with a closing and exactly which terms are acceptable.

“NO DEAL” means the lender/servicer has determined that the offer(s) is not workable for them or their insurer. There are a number of reasons why this might be true, but in essence you have been told they will not allow the closing and will most likely move forward with completing foreclosure action against the current owner of the home. There are a few options for intervention, but unless you have been trained in foreclosure intervention this an excellent time to utilize a mutual release. “NO DEAL” usually means go home—whether you’re on a game show or trying to sell real estate.




Mildred Wilkins, founder and president of Home Ownership Matters, LLC. She is the trainer for the (FIS) Foreclosure Intervention Specialist certification program. Visit her website www.HomeOwnershipMatters.com or call toll free (866) 507-5105.

Copyright © 2007. HOM, LLC. All rights reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Myth #9

Myth #9: Processing a deed-in-lieu of foreclosure is such a simple process that there is no need to involve an attorney and pay their high fees.

Reality: While the deed-in-lieu process is exceedingly simple (the consumer simply signs the one-page document produced/presented by the lender, gets it notarized and sends it back) the process has MAJOR, POSSIBLY DISASTROUS consequences for the borrower. Therefore, it is never a good idea for a consumer to relinquish a property via deed-in-lieu without adequate legal and insurance counsel. Real estate professionals should have nothing to do with this simple, disaster-prone activity.

Reasons:

1. Any number of things could happen between the time the borrower MAILS notification of a title transfer to the lender/servicer and the time when that transfer is, in fact, recorded. The Ohio Attorney General’s Office has shared with me that the office has received numerous complaints of the lender’s failure to do so for MANY months. In the meantime the borrower remains responsible for any damages, costs, injuries, etc associated with the property.
2. Lender/servicer may claim to never have received the MAILED deed-in-lieu if the problem which has arisen is a particularly expensive one.
3. Acceptance of the title to the home does not absolve the consumer of the financial obligation for the full indebtedness; i.e. possible deficiency judgment.
4. Additionally, there is always the possibility of a tax liability associated with eventual transfer to a new purchaser if the home sells for less than full pay-off plus costs.

The risks are substantial: Hiring a competent attorney is the only smart thing to do. REALTORS, you are advised to keep your nose out of this.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)