Short Sale Fast Facts for Consumers

Short Sale Fast FACTS for Consumers

1. Short Sale could be your solution—but it has some pitfalls

Get informed and Get started

2. Short Sale is an Option Not a RIGHT

You will need to “qualify” for the option to dispose of the house by using a short sale.

Most lenders use the same basic criteria—what I call the “Universal Hardship Test”

• Was the default ‘trigger’ something beyond your control
• Did the trigger lead to an increase in expenses or a decrease in income?
• Are you still an occupant in the home secured by the loan?
• Have you depleted all of your assets available to make mortgage payments?
• Are you willing to pull together the documents required by the lender/guarantor to determine if they believe you qualify for a workout?
• If there is a co-borrower, are both parties committed to this workout attempt?

3. Finding a competent REALTOR could be difficult

A short sale is a Speciality transaction. You need to find a

REALTOR who:

• Works full-time—yes, even in today’s climate
• Is experienced in short sales (means they closed)
• Is familiar with your area and price point
• Whom you feel comfortable with
• Who is able to demonstrate to you what the value of your home is compared to similar homes in the neighborhood
• Has the ability to effectively market your home
• Is pleased to share with you that they have had specialized training in Short Sales (I mentioned this last, because if they haven’t mentioned by now, it is because they don’t have any—Not a good sign)

4. You can list the home for short sale—BEFORE the lender approves the

short sale—

**As long as you indicate that “all offers are subject to lender approval” This should be included on your listing contract, on the seller disclosure form and within the comments on the MLS sheet

**You can’t ACCEPT and CLOSE without the lender’s approval but you don’t have to wait to get started. Why not start today? Is your house ready? Do you have the documents needed for the hardship package?

5. Might leave you with a deficiency—which could be used to get a judgment against you

Negotiate to get the lender to agree to “waive their right to a deficiency judgment” as part of the short sale approval letter.

You should NEVER assume that because the lender agreed to the short sale that they have waived their right to pursue you for the shortage.

If it’s not in writing—signed by an authority—you should expect them to pursue you for the shortage.

6. Foreclosure process—will most likely continue, even while you have the house on the market for sale

FHA loans which are subject to HUD regulations—require that the foreclosure process STOP while the home is marketed for short sale

Foreclosure action continues on ALL other loan types

7. Listing Termination—can be mandated by your lender when you are in default

The Lender is not a party to the listing contract and you might logically assume that therefore they had no say so about what does or does not happen with the attempt to sell your home.

Unfortunately, you would be mistaken.

Government guarantors, HUD, VA, USDA, Fannie Mae, Freddie Mac, and Rural Development have the right under Federal regulations to compel you to withdraw the listing IF:

You are cooperating with showing the property as a show of ‘good faith’

Title issues are uncovered which would prevent the transfer to a new buyer

The condition of the property is such that a sale is unlikely

You have failed to comply with request for information to determine your eligibility for a workout. Remember: This is an Option, not a RIGHT.

8. Second Liens can present a challenge—also known as a ‘stumbling block’

Second lien holders seldom initiate foreclosure; they block short sales all the time with their obstinacy. You cannot transfer real estate to a new buyer when there is a second lien holder without their cooperation.

They must either:

a. Release the lien

b. ‘Lift’ the lien and permit the closing

Usually they can be enticed to do one of these things, preferably the first. Many will accept a token payment as a settlement for the obligation if foreclosure is imminent and they stand to get nothing after the lien is wiped out. Other they may agree to an unsecured loan in exchange for

their cooperation.

Your lender may make a contribution toward getting this second released, especially if you have a government backed loan. Their regulations have a stipulated amount set aside for this purpose. Get your facts and get going.

9. Tax Implications—Didn’t Your REALTOR mention that?

When there is a deficiency (difference between what you owe on the house and what the new buyer is willing to pay for it) you are taxed on that amount as though you received it as a gift.

IRS rules require that the lender provide this information directly to IRS for tax purposes.

You should NEVER assume that because the lender agreed to the short sale that they have waived their right

10. Now about signing those papers…….WAIT

I believe strongly that the seller of a property which is upside down would do well to pretend their fingers are broken once they have signed the listing contract and seller disclosure form until Mr. Smitherman, the supervisor at the bank, has:

a. Approved their short sale, with all continguences

b. Given them permission in writing to sign something

As a trainer, I take the position that ‘lender approval’ means getting the lender’s approval before you agree to anything with a potential buyer.

That means do not sign a purchase agreement, no matter what contingency clauses have been included by a so-called sharp REALTOR. Do not sign a counter offer. I said, ‘pretend your fingers are broken until the supervisor at the bank tells you to sign something.

If you sign BEFORE he tells you to, you are agreeing to terms which he has not yet agreed to. You cannot perform (or deliver the deed to the house) without his agreement. He may:

a. Select a difference ‘potential purchaser’

b. Counter and ask for a lot more money

c. Go ahead and foreclose, then you have nothing to sell.

Don’t get ahead of the bank. “Lender approval required” means the bank gets to decide everything: to whom we will sell, and for what amount, on what terms. Don’t allow yourself to be lulled into thinking it’s okay to make an agreement and then get his approval. That is risky business. Remember, your fingers are broken.

Please share today’s blog with someone you know who is struggling and not sure what steps to take next.

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.)

Your Real Estate Advisor: 4 Prudent Rules for Buyers of Short Sale Listings

Four Prudent Rules for BUYERS Who Write Offers on Short Sale Listings

Rule 1: STAY PUT: Do not give notice in your existing housing until after you have closed on a short sale listing. Even if you have to pay a significant amount to go to a month to month arrangement where you currently live. The path to a closing on a short sale listing could get bumpy. The seller might:

1. File for bankruptcy which removes the home from availability
2. Receive an offer from another potential purchaser which the lender decides to accept instead of your offer
3. Lose the home to foreclosure in which case you will no longer have a valid offer and will need to attempt to purchase it as an REO, if you are still interested

Rule 2: BE SUSPICIOUS: If your offer is signed by the seller very shortly after you write the offer (within a few days) then the chances are pretty good that the seller signed without the lender’s approval. There is no guarantee that the lender is going to approve. Most likely you have a listing agent who does not clearly understand that “lender approval required” means the “Lender has the right to accept or reject any offer which is not to their liking”. Everyone should wait until you have the lender’s “required” approval for the acceptance of a short sale.

You should not be celebrating that you are going to be closing if the seller signed but you do not have the lender’s approval. Lenders make the final decisions on short sales, not the sellers who are upside down nor the REALTORS who are unfamiliar with or unwilling to bend to the way short sale transactions are typically handled.

Rule 3: BE PATIENT: We mean be prepared to be ‘seriously’ patient, like for a few months. Literally. Buying a home which is listed for a short sale can get you a great deal on a property, but you must be prepared to wait for an extended period of time (2-3 months is common). The lender has numerous things they must check and cross-check before they can approve a short sale. Watch for a future blog on “What is Taking Them So Long?” We’ll address the laundry list of things which must be checked before a short sale can be approved.

Rule 4: EXPECT A COUNTER: Four things you should understand from the beginning:

1. Your offer is likely to be set aside until the lender gathers the information they need to make a decision
2. Your offer is likely to be ‘joined’ by additional offers during this waiting period
3. The Lender is likely to present a COUNTER OFFER to the potential purchaser who they believe has the offer which will net them the most
4. That this COUNTER may not be presented to all potential buyers

Consequently, you should write the offer for the amount you are willing to pay since you can not be guaranteed a second opportunity to increase that amount. Short sale transactions are a real estate gamble; you’ve got to realize that going in and decide if you have the stomach for this kind of acquisition. If not, find a regular listing which will offer you the comfort of more traditional negotiating and timing.

It’s all in the game. All in the wonderful game that we know as: Short Sale.

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.)

Q&A: Lender Approval Required

“Lender approval required”

Q. I am a first time buyer and it seems to me that quite a few of the listings which I am interested in have the words “lender approval required.” My real estate agent has said it is no big deal, nothing to be concerned about. My gut tells me it must be important or they wouldn’t have it in there. Can you explain what those words mean to a potential buyer like myself?

A. First, we should thank God for guts. Our gut has a remarkable way of warning us when we are in danger, even when we can’t see it. You are absolutely correct to be concerned that the phrase must be important. It is. Either your agent does not understand the implications of the phrase (lots of agents do not) or is so worried about getting you to write an offer that he/she is willing to ignore their fiduciary responsibility to explain to you how a short sale purchase is dramatically different from a traditional listing.

”Lender approval required” means that the home cannot be sold until the lender who is holding the mortgage for the seller agrees to all the terms and conditions for the sale. Almost always the seller is in default and the home cannot be sold for as much as the amount owed. The lender must look at the seller’s finances, consider the current value of the property and lots of other things before they make a decision on any offer which may be presented. This process will typically take several MONTHS.

In the meantime, the seller may decide to file bankruptcy (home is then unavailable). Or the lender may speed through the process of foreclosure, which also means the home becomes unavailable. Or the borrower might decide to process a deed-in-lieu of foreclosure in order to avoid having a foreclosure on their record. A number of things could happen so there is no home to buy. Or the lender may not be able to agree to the amount that you wish to pay because the two of you cannot come to an agreement on the current value.

Most important, perhaps, is the uncertainty for an extended period of time until the lender is able to make a decision. Consider yourself warned—proceed with caution if these words are included in the listing of a home you especially like. There is no reason to avoid a short sale listing—as long as you know the real deal. Trust your gut—continue to consult with it as you move through your housing purchase

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!)

Q&A: Deed-in-Lieu Dilemna

Q: My wife and I are behind on our first mortgage. The lender has sent us paperwork which says they are willing to consider taking the house back and would like to ask for a deed in lieu of foreclosure. My question is: what would happen to our second mortgage?

A: This is a question which a lot of people who are struggling with their mortgage payments need to consider.

First, the lender will make a decision as to whether or not they will ACCEPT a deed-in lieu (which allows voluntarily relinquishing the house instead of foreclosing on you) based on whether or not you have a second. Most often, when there is a second mortgage involved, they will decline accepting the deed-in-lieu because their claim to ownership of the property would be encumbered by your second. Essentially, they can say, we don’t want your troubles. This is especially likely to be the case if you took out the second during the past few years and paid off credit card and other debt. In such a case, not only did you convert consumer, unsecured debt, into secured, mortgage debt but you also created a scenario where the investor who is actually carrying the risk on your home does not want to be held responsible for the portion of liability which they did not insure.

Why the lender might still choose foreclosure

Let’s discuss the second thing. Most states’ legal process will allow the 1st mortgage holder to be relieved of any responsibility for the second lien holder’s loss IF THE FIRST FORECLOSES. This caveat means your lender may decide, purely as a business decision, that foreclosure against you is their best option.

As a practical matter, even when a lender has sent you paperwork or indicated that a deed-in-lieu might be an option or you decided to request such resolution to your problem, there is no automatic RIGHT to do this. You will still be required to complete an extensive hardship package to determine whether or not you qualify for the ‘option to give back your house’. In addition to the difficulties tied to having a second loan the lender is required to be sure that you have exhausted all efforts and resources to try to meet your obligation to them.

Deed-in Lieu Warning

While the process is very simple (signing and notarizing a single page document) there are significant risks associated with your future LIABILITY if you do not have an attorney to both prepare the deed-in-lieu document and facilitate a transfer of the property.

Specific risks:

1. Documents never reaching the lender
2. Lender’s failure to record the transfer of the deed in a timely fashion (or ever)
   (becoming very common and a major problem for you if it happens)
3. Possible insurance liability if something happens on the property while
   it is still in your name (Nasty possibility)
4. On-going bills for maintenance or citations from the local health and
   hospital board for health hazards, weeds, etc
5. On-going on home owners’ association dues which could be very costly.

Deed-in-lieu is a slightly better option than foreclosure but should be handled with care and the professional services of an attorney who will address the risks I mentioned above.

FOREWARNED is FOREARMED.

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.)

Short Sale Buyer: 10 Critical Areas of Concern

Short Sale BUYER

Ten (10) Critical Areas of Concern

If you are thinking of buying a home in today’s market, there is a pretty good chance that you will find a home you like which is upside down (seller owes more than the house is worth in today’s market and the sale will require that the lender approve a short sale). Buying a ‘short sale’ is not necessarily a BAD thing but it is definitely a DIFFERENT thing than a regular purchase and so you need to ask yourself some important questions before you embark on this journey. I am going to assume that if you know the right questions to ask that you will be diligent about getting some good answers before you move forward.

Here are areas where you need to do your homework:

1. AGENT—Is your real estate agent experienced in working with short sale buyers? Know how short sale transactions differ from regular transactions? Provided you with sufficient documentation to help you know what the current value of the property is?
   
   
2. TIMING—Are you aware that it could take months (several months) for you to get an answer and go to closing on a short sale? Can you afford to wait for an indefinite period of time? Can you STAY in your current housing until you get closed—however long that might be? Did you know you can decide to walk away anytime you want to even though you have made an offer? Simply tell your agent to rescind your offer if you want to consider another house. (You know to do that in writing, yes?)
   
   
3. NEIGHBORHOOD—Have you done the research you need to do to be sure that the back side of the neighborhood is as appealing as the front side? Are you comfortable with the mix of owners vs. tenants in the neighborhood? Is the neighborhood moving more toward tenants? Are homes well-kept or more of them in disrepair? Have you driven the area at night—do you feel comfortable with the nighttime look and feel of the area you will be calling home? Is there a significant numbers of homes empty—whether for sale or otherwise available for occupancy (rent, lease, etc)? Are property values still falling or have they hit a plateau? Where did you check? (and don’t tell me you just asked your agent). Are you comfortable with the levels of taxes in the area? Are there any special assessments which you need to consider? If there is a neighborhood association, how financially sound is it? Have you stopped and talked to neighbors to see what is REALLY GOING ON IN THE NEIGHBORHOOD?
   
   
4. PROCESS—Did your agent carefully explain the short sale process to you? Did you ask for a response based on how long you are willing to wait (2-3 months) or based on the traditional practice of allowing only a few days? You wrote an offer which was presented to the local owner/seller but then forwarded to their lender/servicer for consideration. Are you aware that the lender may/will consider multiple offers and then make a decision on ONE of them? Were you warned that the Lender may counter your offer—after a very long time—even months after you initially wrote the offer? Are you prepared to increase the amount you are willing to pay or risk losing the house? Have you pre-determined how much you are willing to pay? May I suggest that should be the amount you should offer in the first place?
   
   
5. RISKS—Are numerous but forewarned is better than being caught off guard. Risks include:
   
   a. The SELLER may file bankruptcy—and the house cannot be sold to anyone
   
   b. The LENDER may foreclose and the property become unavailable
   
   c. ANOTHER OFFER may be accepted instead of yours (even if the seller signs your offer that does not mean that the LENDER/SERVICER is going to approve your offer instead of another one which they have received)
   
   
6. LONGTERM—Have you carefully considered whether this house meets your long-term needs (say for the next 10 years)? Lifestyle? Location? Size? Amenities? Condition? Does it have ‘growth potential’?
   
   
7. FINANCING—Do you already have a firm loan commitment from your institution—not a pre-approval? You should start out with a /loan commitment/ to increase your chances of getting your offer accepted and to avoid any surprises down the road. Can your lender use the appraisal recently acquired by the selling institution in order to speed up the process at the end? Did you know that your earnest money check should not be cashed until AFTER you have an offer accepted by the LENDER who is the real decision maker on a short sale transaction? (That could be 3 months from now.)
   
   
8. INSPECTION—Are you aware that most states allow you to have inspections on any property which you wish to acquire (including REO’s, short sales and anything listed ”as is”?) Is your agent encouraging you to have a full property inspection as a way to be sure you fully understand the ACTUAL condition of the property you want to acquire? (Good agents will insist that you should, especially on a short sale which probably has not been well maintained if the home is in foreclosure). Are you aware that you can decide NOT to move ahead with the purchase if the inspection shows some substantial issues which are unacceptable to you?
   
   
9. REPAIRS—Are you prepared to cover the cost for any repairs which are needed immediately (and in the near future) once you close? Have you gotten estimates based on the items uncovered during the inspection?
   
   
10. GETTING TO THE CLOSING—Are you prepared to wait a few or several months to get to the closing date? Are you comfortable knowing you may be asked to increase your offer amount at the last minute, once the lender knows EXACTLY how much is needed to make the deal work under the guidelines from the Guarantor on the loan?

I am a firm believer that if you point someone in the right direction, they will usually get where they were headed. These are not ALL the questions you need to be asking but you are certainly headed in the right direction.

A short sale does not have to be a nightmare. Not with an experienced agent and a well educated consumer. Good luck with your new home experience.

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.)

Q&A: Pended House—Available?

Q: My wife found this house which we really, really love from looking at the outside and peeping in the windows. When we called our agent to tell her we wanted to look at it she told us ‘It is pended’. If a sale is pending on a house, can I still take a walk-through with my agent and if I want it, make an offer?

A: Yes and Maybe. Real estate is changing at break neck speed these days and things which were iron clad just a few months ago are not so concrete any more. Coupled with the fact that all real estate agents do not understand exactly what certain terms mean, causing them to misuse terms and confuse the general public as well as other agents.

“Pended” is SUPPOSED to mean that there is an accepted offer between a bona-fide buyer and a seller. It is SUPPOSED to mean that the parties have agreed on all terms and are waiting for a closing date in the near future. However, it does not always mean that in today’s market. Today there are agents who “pend” properties which have been listed as potential short sales once they have an “offer in hand”. Such an offer must always be accepted not only by the homeowner who is upside down and possibly in default, but also by the lender who will be ‘shorted’ at a potential closing. When this is the case, an offer being submitted does not equate to an acceptance by the lender. Additionally, the fact that the homeowner who is attempting to sell has agreed, does not necessarily mean that the lender will go along with that specific offer.

Under the scenario I just described, it is possible to have an offer ‘pended’ in your local mls which has not been lender approved and which could be viewed, followed by an offer being written which the lender could entertain. On short sales, the lender reserves the right to consider all offers until THE LENDER has granted approval and ordered a closing. They reserve that right up until the time of the actual closing

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.)

Q&A: Short Sale Dickering

Q: The phone call was from an acquaintance, who had her friend on the line to discuss what to do about a proposed short sale which was stalled. The REALTOR seemed unsure what to do and both women felt he was looking out for the bank’s interest. Her problem: the lender wanted her to sign a promissory note for the deficiency—$25,000 on a $120, 000 loan in order for them to approve the short sale and let her go to closing. They agreed, after some haggling, to accept $6,000. She was frustrated because she felt they should just approve the short sale; further, if they didn’t she was considering just letting them foreclose. She had already moved out of the house and quite frankly, just wanted this to be over with. The question: What is a short sale suppose to do anyway? I thought it was to wipe out what I owed and the bank wrote that off as a loss.

A: There is NOT a simple answer to the issues raised in the above phone call. I will address what a short sale is (and isn’t) and then address a couple of other issues from the query above. First, short sale means that the lender permits a defaulted borrower (under certain circumstances) to close on the sale of the mortgaged property for less than the full amount allowed. There is a broad misconception that a short sale will be without conditions. Nothing could be further from the truth. The lender has the right, under the terms of the mortgage note (or the deed of trust), to pursue the consumer for the deficiency when less than the full amount due is received from a new buyer. The lender has several options to cover the deficiency: a. submit a claim to the insurer (when applicable, subject to certain restrictions) go for a deficiency judgment against the borrower (can be used to get a wage assignment) ask the borrower to sign an unsecured note for all or a portion of the shortage some other alternative I have not heard of yet

If the borrower does not agree to the ‘conditions’ for the approval then the lender has the sole right to reject the proposed offer and move forward with foreclosure.

Foreclosure is an option the borrower should try to avoid in almost all situations. Pretty much the only time foreclosure has limited power to hurt you is: if you are much older (say 70) never plan to buy a house again, you have NO ASSETS (no savings, no retirement, nothing) and you are judgment proof. Otherwise, you need to work something out. Try to negotiate a lower amount on the promissory note ($6,000 is an excellent compromise). She should take it, run get it signed and notarized and thank the Lord for helping her avoid the full impact of the deficiency. It is important that the document state that the payment of the note “satisfies the indebtedness in full” and is signed by someone of authority at the lender’s shop.

The ‘friend’ from this phone call has several other extenuating circumstances which made the decision to advise her to negotiate and agree to the lowered amount very easy. She is younger (early 50’s), wishes to purchase again, is currently employed, already vacated the house (abandonment, which was discussed on Jan 23-24—here and here) has a significant retirement account and for all those reasons she is not in a strong position to refuse to cooperate with a lender whom she owes $120,00 with an offer of $90,000 on the table. She agreed to repay the full amount, with interest. Circumstances such as her escalating variable rate do not alter the terms of the initial contract. Please understand that I empathize with the situation but must still give you the best answer I can, based on your overall situation. Look to save yourself to fight another day by protecting your financial future with each choice that you make.

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!)

Q&A: Smoke & Mirrors

Q. I am extremely frustrated trying to getting my lender to work with me on getting a modification of my loan. I have already received notice that they have started foreclosure but I have also received a couple of letters which says they are willing to work with me on trying to keep my home. The problem is that the letters I have received do not have a name so I don’t know who to speak to. Every time I call I get a different person who gives me different instructions on what I need to do. Why don’t they provide a name so I can talk to the same individual and get something worked out?

A. The problem you are experiencing is a common one. It is amazing that lenders/servicers who claim to be doing everything they can to work with borrowers can’t provide a name for a contact or REAL numbers so you are not going through a series of numbers and extensions which frequently lead you nowhere. Most folks would assume if you got an unsigned letter that the sender was not serious about having you reach them.

Lenders and Servicers are under a great deal of pressure:

a. Pressure from the GUARANTOR who will ultimately absorb any loss via an insurance claim after an acquisition (foreclosure or deed-in-lieu)

b. Pressure from the government (whether or not they received TARP funds) to try to avoid foreclosures

c. Pressure from any investor who has purchased the underlying mortgage to collect and forward payments on a monthly basis, in a timely manner (or cover them themselves)

d. Pressure created by the INHERENT CONFLICT because the lender/bank needs to look out for their own best interest which is NOT best served by a lengthy loan workout and the guarantor whose BEST interest is not served by an acquisition. Essentially, the lender and their servicing partner have the responsibility for looking out for the guarantor which conflicts with their personal best interest. It’s kind of like a kid who has to appear to be compliant with a parent’s instructions since blatant defiance is totally unacceptable. S-o-o-o-o, you get surface compliance but lack of depth and sincerity. So consumers get telephone numbers which deadend nowhere and letters which say reach out and call me, but fail to say who sent them.

SMOKE & MIRRORS

There is the strong possibility that the failure to make it easy be in touch and get clarity for a workout could be a smokescreen. IF there is a foreclosure, the lender/bank closes the file and submits a claim for the amount of the shortage. End of their pain.

The behavior of SOME borrowers has become the anticipated response from all borrowers. As a consequence, practices at the servicer centers tend to demonstrate, by and large, an expectation that the home is going to foreclosure so why should they waste time and effort on genuine workout attempts.

If they work at doing a workout there is the aggravation of trying to work with a defaulted borrower who might not be totally committed to the process and either does not understand or for other reasons does not provide all the materials requested or does not do so in a timely fashion. Dragging the pre-foreclosure period out for months WHILE THE INVESTOR IS DEMANDING MONTHLY PAYMENTS can be a drag on the lender’s bottom line.

Consumers play into this mentality by not doing ALL that they can do to comply but the larger responsibility falls on the lender/servicer as the LEADER and PACESETTER for a workout to be completed. The lender/servicers could start by having a person’s name in the signature box of a letter saying call me, I can help.

IS THAT TOO MUCH TO ASK?

Copyright © 2009, 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.)

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.)

Myth: Modification vs Refinance

Myth: There is a widespread myth that a modification is just a re-financing of the loan. The two options have some things in common, but they are worlds apart. Let’s get some clarity.

Fact: Modification is usually a much better option for a borrower, especially if you are behind on the mortgage and want to use this option to get a loan which you can afford.

Both a modification and a re-finance will result in the old loan being paid off and a new loan being created. However, almost everything else about the two are dramatically different.

A modification:

a. Will be handled by the lender/servicer currently holding the loan (a big plus)
b. Will NOT require a new appraisal or upfront fees to be paid (a significant financial blessing)
c. MAY be used even when a person’s credit score has already been lowered by late or unpaid payments
d. Should definitely be considered if your interest rate is scheduled to reset

Under the terms of a modification:

1. the term of the loan can be stretched out (which reduces your monthly payment)
2. the interest rate can be changed from a variable to a fixed rate
3. the interest rate may be lowered
4. the principal balance on the loan (the amount you owe) can be reduced with documentation that the actual value of the home has declined (almost a given in today’s market)

A re-finance has major differences which are not as consumer friendly.

1. You probably won’t qualify for a re-finance if your credit has been dinged.
2. You must go to an outside source (different lender) apply, and pay fees for processing a new loan
3. There will be fees associated with the process such as an appraisal and possibly a lender’s inspection
4. Closing the transaction will cost another substantial fee
5. Strong possibility of a higher, rather than a lower, payment

When it’s all said and done, the climate is right for your lender or servicer to be willing to consider a modification of your loan if you are struggling to make payments. It is definitely in their best interests to help you resume making regular payments even if those are at a reduced amount.

There will be paperwork required for either of these options. You will need to demonstrate your ability to make payments and fill out the hardship documents which are required, but it is well worth the effort to get a PERMANENT change to your loan which makes it a workable situation for you as well as the lender.

Call your lender today. Best of luck.

Copyright © 2009, 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.)

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: Assumable Mortgage (With Approval / No Approval)

And the WORD for Today Is...

Assumable Mortgage – is a mortgage which has a clause; which means the lender is willing to let a new borrower assume the loan. If the lender approves the assumption then the old borrower has no more liability for the payments. However, if the mortgage holder and the new buyer make an agreement WITHOUT THE APPROVAL OF THE LENDER and the assumption has not been recorded then the original borrower still has the responsibility for the payment. A release of liability would have protected the original borrower in case the new buyer does not continue to make payments in a timely fashion. Protect yourself; get a release signed.

a. Assumable-No Approval

b. Assumable-With Approval

Assumable Mortgage-No Approval – means the lender will not do a credit check on the purchaser and the two parties may make the agreement between themselves.

Assumable Mortgage-With Approval – means the lender will require that the new buyer apply for a mortgage and go through the regular application process before the lender allows the assumption to be processed.

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.)

From the Desk of: Buying T-I-M-E

Never before has the expression “If I could just buy some time” meant so much to people. When you are facing foreclosure you need time to discover your options, analyze your situation and implement an action plan. Your most precious commodity is time…And it’s running out.

When your money is running out…

You don’t have time to wait for the trickle down effect of the stimulus package to make a difference in your personal situation. While the package will make a significant difference over the long haul for thousands of Americans, anyone who thinks it is going to quickly make a difference for EVERY American is kidding themselves. Facing reality is hard, but necessary. As a country, we have ignored hard truths with disastrous consequences for too long. Nothing will be gained by continuing to point fingers. However, we must immediately recognize that each of us has a role to play in correcting the serious housing problem we face as a country. (Even if your home is paid off, FREE and CLEAR). The housing market holds the key to stabilizing our country, so anything we can do to keep people in their homes is a step in the right direction.

First thing’s first...

DO NOT ABANDON YOUR HOME. Even when you are behind on your mortgage, no matter how far behind you are, DO NOT abandon your home until the entire legal process has been played out. You can stay in YOUR house until your right to possession has ended. Exactly when that time is will be determined by three (3) factors:

1. Type of foreclosure in your state: judicial or non-judicial
2. Whether you have a mortgage or a deed of trust
3. State statutes regarding sheriff or trustee sale and possession timeframes

Find out the answers to items 1, 2 and 3, and then abide by them. Make sure your lender abides by them as well. Things could improve while you are holding out. Hold on.

Things are changing radically and very quickly because of the magnitude of the housing problem. Your local courts could dramatically change the way they process pending foreclosures so that you have a chance to work things out with the lender. Stay in our home and fight for the chance to work things out. More banks are willing to work with borrowers today simply because they really can’t manage the huge backlog of homes which have already been lost to foreclosure. If you can present a viable plan, your chances of retaining home ownership are pretty good.

Second thing’s second…

I know you know that, but I needed to get your attention. Probably the second most valuable thing anyone will ever tell you to do to save your home from foreclosure is to

1. Demand the lender or servicer who is threatening to sue you for foreclosure produce the original note/deed of trust which says you owe them. In legal terms you are asking them to demonstrate that they are the “real party of interest.” In common language that means, prove I owe you. Prove you have the right to demand payments from me.
   
2. The most effective way to demand this documentation is with a “qualified written request”. You are entitled to request that and any other information you want which is related to servicing on your loan (any mortgage loan in the United States) under federal RESPA regulations. Details are taught in the workshop.

What Choices do I have????

Let’s consider the answer to that question. It is critical that you start with an honest inventory of your situation. How far behind are you? Do you have the resources to resume payments? If not now, when will you be able to do so? What do you want to do? What are you ABLE to do? Why should the bank consider your proposal? You’ll need to able to defend it as being reasonable, based on your current circumstances.

Space in this article will not allow me to go into detail but I will provide you with the options you can consider. Do further research on each of them, online, in the library, on websites such as HomeOwnershipMatters.com Or at the blog: HomeOwnershipMatters.blogspot.com.

1. Options to keep the house—special forbearance, loan modification or a partial claim. You need to learn what each of these means and how it works
2. Options to let the house go—short sale, assumption or deed-in-lieu. All of these options are better than foreclosure but you need to know exactly how they work to avoid creating yet another problem for yourself down the road.
3. Reverse mortgage could be considered, it could be your solution. Be sure to use a government backed reverse mortgage if you decide to use this option.
4. Receiving disability payments (if you have a claim pending) could make the difference. Hold on until you know what you will be receiving
5. Acquiring a roommate could change your finances—get started working on it (I mean a roommate who will PAY—not one who will add to your expenses)
6. Selling unnecessary items in order to cover the gap until you get a permanent solution. Ebay or Craigslist could bring in some immediate cash. (Stop crying—we are trying to save your home and Buy “T I M E”).
7. Some other solution which has not even occurred to me

“Answer” the summons

The summons is your official notification that the lender has moved to legal action. The court notifies you via the “summons”. Your response should be to the clerk of the courts, the lender/servicer and their attorney. It is critical that your answer be received within the legally stipulated timeframe in your state. It is strongly recommended that the answer be sent by certified mail, with a signature required. This is a task which you can handle on your own, with a little coaching.

Basically, an answer should acknowledge that you are aware of your situation and that you are working with the lender on a plan. Specify what that plan entails. If you are challenging whether or not the lender has the legal right to foreclose (due to failure to produce the original note or demonstrate that they are the “real party of interest”) this is your time to say so. The foreclosure is likely to be stalled based on the quality of a timely, well prepared “answer”.

Buying “T I M E” workshops offered…

Workshops to teach consumers what they can do to “save themselves” will be offered in cities across the country beginning in March. All workshops will be posted to the HOM calendar as soon as they are confirmed so look for one in your area soon. These workshops are 3 hours in length with an hour after for questions and answers. Attendees will leave with a comprehensive packet which details all the options outlined above as well as a sample “qualified written request” with complete instructions on how to use one most effectively. Each borrower who attends will also walk away with clarity on how to prepare an “answer” since this is also critical if legal action has begun.

Want to host a workshop in your town?

The commitment is simple and inexpensive. A workshop can be offered anywhere in the country if a host is willing to provide a suitable space and advertising to let the public know that the event will be held. There is no fee for the speaker (donations will be accepted) but expenses to the event must be covered. For a nominal expense you can offer a very valuable training which can save homes in your community. For details about what is required, please send an email to Heather at meade.heather@gmail.com.

Local initiative is needed

We all have high expectations of the new administration but our President has said repeatedly, and has demonstrated with his grassroots campaign, that the masses can make a difference, when they choose to become involved. If every person who reads this article would share it with the people in your personal database, you would help several people to avoid foreclosure.

If the leaders of organizations would share the articles and the link to the blog with your entire company, you might save not only their home but the home of some of their family members or friends. Driving people to the blog and website so that they can get practical, easy to understand information to help them with their personal choices could make a big difference. Anyone reading this who has the connections to have a workshop in your city or a program aired on Public Access or Government Access television or local radio show could reach thousands of folks with some concrete/self help which could make all the difference in your community. I am a teacher and a writer. I know the role I am to play. I ask each of you to find your role in helping our country get back on its feet. We must find some resolution to our housing problems.

“Working together, we can make a difference”

Copyright © 2009, 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 feedback, comments, and especially your questions. Don't be shy!)

FYI: Demand Your Note

Demand Your Note

An option for interrupting the foreclosure process which is gaining widespread attention and use across the country is called “demanding the note”. Demand the note means quite simply that you, the borrower, demand that your lender provide you with the note you signed agreeing to the loan.

You have the right to make such a demand. In fact, many courts across the country (especially where judicial foreclosure is required) REQUIRE that the party who initiates the foreclosure provide a copy of the note at the time of the original filing in order to establish that it is a legitimate debt. Unfortunately, many consumers are not aware that demanding to be provided with a copy of the note which establishes that the person demanding repayment has the legal right to do so is both a reasonable request and within the scope of their legal rights.

Cough it up…OR Compromise

Let’s say, just for the sake of discussion, that your lender or servicer could not find the note. Perhaps because your loan has been bundled with hundreds of thousands of other loans in a mortgage-backed security or perhaps because they do not really own it. Perhaps they are not the real party of interest. In that case, their ability to collect on the default is problematic since they can’t prove you owe them anything.

There are numerous lawsuits across the country where consumers are demanding that their loan be rescinded because the note cannot be produced. That option is certainly one you need to consider. Whether rescission is your goal or you just want a reasonable, affordable workout, you are in a much better position to negotiate IF the lender cannot provide documentation of the ‘supposed’ debt. Let the lender either cough it up...OR...COMPROMISE.

Who’s Gonna Make Em?

Well now, that is an interesting question. Look up information on the Qualified Written Request which clearly states that the consumer has the right to request/demand ANYTHING related to the servicing of their loan by using a qualified written request. It is FEDERAL LAW which establishes the borrower’s right to submit such a request to the lender and the guidelines are very clear that whatever is requested must be provided. We will not go into details in this blog because there are several other places on this site and numerous others (National Consumer Law Center, Center for Responsible Lending among them) which will give you clarity on exactly what a QWR is and what the law has to say about it. E-mail Heather for recommended BEST PRACTICES for using this powerful document (homeownershipmatters@gmail.com).

With adequate research and time you can prepare this request by yourself but without taking a class on how to do so you might not get the best result possible. HOM offers classes as well as webinars on the subject; either would be immensely invaluable to you if you need to submit a request.

Do I need an attorney?

If you are wondering whether you should use an attorney, I strongly recommend a good attorney for this project. It would be a wise investment of money to help you with preparing for the biggest fight you are ever likely to get in.

Call your local bar association for recommendations or try to get references from your local REALTOR or title company.

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: Assumption of Mortgage

And the WORD for Today Is...

Assumption of Mortgage – refers to an agreement by a new buyer to take over, or assume, an existing note, which is secured by a mortgage or deed of trust. It is also called simply ‘an assumption’. The transaction usually requires lender approval of the new borrower in order to release the seller from further liability.

Assumption of mortgage means a new buyer agrees to take over or assume the financial liability under an existing note which is secured by a mortgage or deed of trust. Most notes in force today do not have a provision for an assumption. If the lender does agree to allow an assumption they will almost always insist on the submission and processing of full credit application on the new borrower. The assumption cannot be completed without the lender’s approval. The granting of the approval to assume does NOT release the original borrower from their financial obligation unless the lender also signs a release of liability. A consultation with your attorney is advisable.

It is crucial that a borrower who decides to consider an assumption be aware of the assumption clause which basically states that while they allowed another borrower to take over payments on the mortgage, they have not released the original mortgage holder from their obligation. A consultation with an attorney is strongly advised prior to the completion of an assumption, even with lender approval.

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: Garnishment Worry

Q: We are behind on our mortgage (seems everyone we know is) but hope to work something out with the bank so we can keep our home. I am still working but now get fewer than 30 hours some weeks. My husband has been laid off indefinitely since January of 2009. We still have some money in a 401K and worry that the bank will either take money from the 401K or get permission to garnish my paycheck. We can hardly manage groceries and utilities now. We would be in dire straits if they did that. Can a lender garnish your check or 401K?

A: A lender does not have the right to garnish your paycheck/attach a 401K until AFTER you have lost the home to foreclosure OR given it back through deed-in-lieu AND they have gone into court and gotten a “deficiency judgment” which indicates they are entitled to additional funds since the re-sale of the property did not cover the entire amount you owed them. Once they have taken this legal step they will be able to use the judgment as proof of the financial obligation. Then they can ask an employer to garnish wages based on the judgment.

Individual state law will determine how long a lender has to file for a deficiency judgment. Additionally, the type of loan and other guidelines may preclude a lender being able to acquire a deficiency judgment. (i.e. FHA regulations prohibit the lender going for a deficiency judgment IF the borrower attempted, in good faith, a short sale prior to the foreclosure.) I hope this helps to ease your mind that you don’t have to worry about just being ‘surprised’ that they have taken part of your paycheck or the 401K. It can’t happen without you having notice well in advance.

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: Mortgage, Continued

The WORDS for Today are:

Mortgage Broker-The mortgage broker is a “middle man” who brings together a lender and a consumer who wants a loan. The broker is not an agent for the consumer and therefore has no fiduciary responsibility towards them.

Mortgage Servicer-May be a bank, mortgage company or a similar business that communicates with borrowers concerning their mortgage loan. A servicer usually works for another company that owns the loan. The responsibilities of a servicer include: accepting and recording payments, handling default issues including various workout options, and supervising the foreclosure process if that becomes necessary. In the event the servicer handling these details has changed, then the lender has the responsibility of notifying the borrower of that change. A servicer may have been hired and given servicing rights only or they may have a broader contract, which includes servicing rights with assigns.

Mortgage Servicing-refers to the handling of the necessary duties of a mortgagee, including collecting payments and making sure taxes and insurance are paid when scheduled. Servicing may be done by the lender or a company that charges a fee to provide these services on behalf of the lender. A servicer who has been granted servicing rights with assigns may initiate foreclosure action just as the lender who owns the loan might do. Releasing a lien after a mortgage has been paid in full is also function of loan servicing.

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 #8

Myth #8: The consumer does not have to worry about a deficiency if the lender agreed to a short sale.

Reality: The fact that a lender/servicer allows a short sale does not automatically grant the consumer protection from a deficiency judgment in the future. The only automatic proviso for such protection is if the loan were insured by FHA.

Reason: Being allowed to close does not negate the terms of the mortgage. On of those terms is a provision which allows the lender to come after the consumer for any shortage even when the lender has granted a short sale or accepted a deed-in-lieu if the lender has not specifically agreed to waive their right to do so.

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: Jingle Mail

And the WORD for Today is...

‘Jingle Mail’

Words come into use and then fade from the forefront in the same way that clothes go out of fashion or popular stars fall into obscurity. Then something happens and they appear again. “Jingle mail" is such an expression. It may be a new expression to you but the phrase is being recycled because we are repeating the situation which sparks its use in the first place. Specifically, huge numbers of consumers who are hopelessly upside down on their mortgage, unable to get anything worked out with the lender and finally, in frustration, they simply mail the keys back to the bank. Keys in the mail—hence the phrase 'jingle mail’. Previous recessions—the oil bust in Texas and the dot com craziness immediately come to mind from recent history—left thousands of borrowers feeling so helpless that they eventually totally conceded and simply mailed the keys back to their lender. No workout, no release from further obligation—just I give—you win—take these keys and... You get the picture.

Across the country—and in your neighborhood—jingle mail which used to be an option of last resort is now being used by a new crop of borrowers. An especially interesting twist is that sometimes theses borrowers are NOT behind and sometimes they are behind but choose not to make the mortgage payment because their home is so seriously upside down.

Another new phrase has emerged; strategic default. This concept is gaining widespread acceptance as a reasonable way to deal with an unreasonable situation, especially if that borrower has not been able to get a solution from their lender which they felt was a reasonable one. Strategic defaults are increasing dramatically across the country and creating an intense firestorm over whether it is the ‘right’ thing to do'. I will not debate the ethical or moral side of the issue but will discuss the contractual side in a later post.

Suffice it to say that jingle mail will continue on the upswing since it is frequently used by someone who could not or chose not to get a formal deed-in-lieu completed by the lender. Instead, their solution was to use our reliable postal system to give the bank access to the house without the need to change the locks. Post office + Keys = Jingle mail.

"Remember, Knowledge CAN BE Empowering"

Mildred

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Q&A: Foreclosure Workout "Trickeration"

Q: I was behind on my mortgage and did all the right things, contacted my lender, gave them all the information they requested and cooperated with arrangements for a workout. When they finally set an amount for a repayment plan not only was the monthly payment 1½ times my regular payment but they also required an initial payment of $3,000 (I am behind by 8K). Why would they demand I agree to an arrangement that obviously my current income cannot support? This makes no sense to me.

A: The sad answer is that it is what my urban friend in Indianapolis calls “trickeration”. Trickeration is a nasty little concept where I appear, on the surface to, to being looking out for your best interests, working with you with you in a spirit of mutual respect and cooperation, while in reality I am “tricking’ you into some kind of agreement or arrangement which not only totally benefits me but I get you to agree so you can’t later say I didn’t work with you. Nor can you say it was my fault because you agreed.

Lenders/Servicers will be angry at this answer, it is nonetheless the truth. Many of the workouts which they propose and/or implement either:

1. were not based on the financial reality of the borrower at the time they were implemented, or
2. the lender/servicer demonstrated a lack of good faith and was not genuinely committed to a sustainable workout, or
3. frequently there is a deliberate attempt to set the borrower up to fail in the workout SO THE LENDER CAN THEN MOVE FORWARD WITH FORECLOSURE. Unsustainable workouts are frequently just another step in the ritual leading up to foreclosure, and/or
4. may simply be a smokescreen so the lender can assure the mortgage insurer (the ultimate risk holder) that, YES, we do have a workout in place on this loan. YES, we did our best to avoid foreclosure. Too bad you, the sucker, can’t keep up with the arrangement which you were forced to agree to.

Workouts which do not have a snowball’s chance are common practice. There is no point of you signing one IF you recognize that it is not feasible. Recommendation: try to speak with a supervisor about the terms being proposed. You will be better prepared to argue for a REALISTIC workout if you have done your homework, know what loss mitigation options are available and then cooperate fully and sincerely to reach a sustainable solution to your delinquency. Best of luck.

© Copyright Home Ownership Matters, LLC, 2009 “Answer Book in a Foreclosure Climate” by Mildred Wilkins.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have. We appreciate all feedback and comments, and especially your questions!)