WORD: Recourse

And the WORD for Today Is...

Recourse – in mortgage banking, recourse represents a loan investor’s right to obtain reimbursement of loan losses from the seller of the loans. The amount of the obligation is recognized as a reduction of the gain on the sale of the loans. By contrast, a mortgage sold without recourse means that the new holder assumes the risk of default.

These are states that also allow non-judicial foreclosure, and/or where non-judicial foreclosure is more common and deficiency judgments can be obtained more easily:

Michigan
Minnesota
North Carolina
Rhode Island (lender can seek deficiency judgment)
South Dakota
Utah (lender can seek deficiency judgment)
Wyoming

Now, because you have a mortgage in one of the above states does not necessarily mean that you have the get out of jail free card. Please review your loan documents and I also strongly recommend you consult an attorney who specializes in real estate law. There are a lot of laws to protect the consumer and educating yourself as to your rights will help you greatly in deciding a course of action. If you have refinanced or have a second mortgage, they are usually recourse loans so your options there are more limited, however not insurmountable. Banks are hurting so badly right now that for those that are in distressful situations (ie you have very little assets), you have some good negotiating leverage. From the banks perspective, something is better than nothing.

"Remember, knowledge can be empowering!"

Mildred

Host: Home Ownership Matters Preservation Center, Inc. www.HOMPCI.org

Copyright © 2010. All Rights Reserved. Mildred Wilkins Consulting, Inc.

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.)

Assessing HAMP a year later

H A M P—Home Affordable Loan Modification Program was discussed in detail yesterday. If you missed it, it would be valuable to read it before you read today's blog.

First, let’s analyze what has been accomplished under the program. The program was projected to reach over 4 million homeowners with much needed help to sustain home ownership. The end of the year report indicates that fewer than 100,000 have, in fact, been granted permanent (5 year permanent) mortgage modifications since the program was implemented in March, 2009. For those 100,000 or so, they see it as a success (even if they do feel 20 years older because of the process). I feel pretty sure that the other 3,900,000 would consider it a failure. The horror stories of run-arounds, and lost paperwork and so on and so forth defies explanation and even the most mild-mannered person can be pushed too far.

Why Has HAMP failed?

The simple reasons are that it was created without a clear understanding of how the bank world works (the role of the guarantor behind the loan) and some other critical components were just overlooked.

Capacity—The dilluge of consumers instantaneously seeking help totally overwhelmed servicing shops who were already stretched past capacity because of defaults. Without funding for the hiring and training for substantial increases in staff to handle the flood of requests for help, the plan was doomed to be as ineffective as history has shown it to be. Individual lenders have sent PR teams across the country to talk about the way they handle modifications, but I am talking about a massive, organized, on-going effort to train the staff within the lender shops what was expected from the government and how the program was to be implemented. For a simple look at the capacity issue—I have folks tell me all the time, “You should be offering this and you should be doing that and why aren’t you answering questions online from individual borrowers?” I look at them like they’re crazy. HOM is a small company with 3 employees and the company’s income is generated almost exclusively from speaker fees. You want production equilvalent to a large company but you are not offering any funding or staffing just creating more jobs. The NEED for something does not translate into the CAPACITY to provide it without resources which include funding and personnel. HAMP did not adequately address the capacity to get the job done.

Resources—The expectation that only HUD approved housing agencies or similar non-profits should be the ONLY endorsed sources for help totally belies the fact that the program was designed for borrowers with mortgage balances up to $725,000 and non-profits primarily restrict their services to folks who earn less than middle income. Hence, no provision for a referral to anyone if you are not at the lowest end of the income spectrum. Worse, a condemnation (by our President no less) of any organization which offers help for a fee (to middle and upper income borrowers who are looking for such help). This major oversight means there were no guidelines, training, or criteria established for this needed service and YES, some vultures stepped in to fill the gap. California now has some pretty strong anti-vulture legislation which pushed most of the loan modification businesses there out of business, and not a day too soon for many of borrowers who have found that un-trained and un-regulated help can lead to a diastrous outcome.

Non-Profit Push Back

I understand that I am inviting non-profits to yell at me but before you start yelling to defend your position as the only people who care—What is your current back log? How many more people could you see? Is your staff already maxed out? Have all of your counselors received substantial modification and foreclosure law education in your state? Do you offer a sliding scale so any homeowner, any income level has access to your services? What is your success rate with completed modifications? Are borrowers re-defaulting within a few months? If the answer to any of those questions is yes, this indicate you are already serving your maximum capacity (and I am informed enough to know that most are). Stop arguing that help should ONLY be available to those whom you serve and embrace the idea that all borrowers, all income levels deserve to have representation to help them with the crazy world of banking. Businesses which have trained staff, operated ethically, with sufficient government regulations and appropriate bonds in place could go a long way to easing the foreclosure problem which continues to plague this county and will for the next several years. The time has come for the creation of Foreclosure Intervention Services—For Hire, as respectable businesses, listed in the phone book right next to non-profits as a resource for struggling borrowers. Repeat after me—Prohibition did not stop folks from getting alcohol—it just made the bootleg market prosper. When are we going to learn? Where there is a need—a provider will emerge.

Program Lacked Basic Understanding of the Bank World

It was a VOLUNTARY program. Lenders were not required to participate. In fact, they could NOT be forced to participate. It is not possible to force someone to alter the terms of a contractual agreement AFTER the fact. It doesn’t matter that the entity trying to compel cooperation was the US government. Mortgages are legally binding contracts. Lenders already had not only the contract with the borrower, but contracts with the investor, the guarantor, the hedge fund, and so on. The performance of one contract impacted several other contracts and therefore made it nearly impossible to make a significant change to the original contract (the mortgage) because of the cascading impact on all the other contracts which had grown out of the securitization of the underlying contract. Formulating a plan without a clearcut understanding of the securitization process was a major misstep in trying to implement HAMP.

Motivation Insufficient

Beyond the securitization problem, the issue of sufficient motivation to modify made the challenge almost insurmountable. While many would argue that the lenders were paid for their cooperation, that argument fails to address what they would receive by NOT cooperating. Now lenders are going to be mad when I state emphatically that they receive MORE to foreclose than they do to modify. How could that be you ask. Lenders lose money DURING the default process: they must pay the investor as agreed, incur expenses associated with the servicing of the loan, work to avoid having a lien placed against the property for failure to pay homeowners’ association dues, cover the cost of insurance to avoid an uninsured loss, etc, etc. All of these are out-of-pocket expenses—UNTIL a foreclosure is completed. Then, on ALL insured loans, which is MOST of them, the lender recoups many of the expenses which they have put out and collect the amount of the insurance on the loan. It is true that they will seldom get back the missed payments (that remains a loss to them) but the other expenses are usually reimbursable expenses. If you’ve wondered why it seems that the lender is not really trying to work with you, simply consider they need the process to be over, so a claim can be filed.

HAFA—A New Program announced on November 30, 2009 will be addressed next week.

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.)

...From the Desk of..."Are You Ready to Intervene?"

Twenty Questions for Today’s Real Estate Professional

I was recently asked by the Charleston Trident Board of REALTORS® to differentiate the (FIS) Foreclosure Intervention Specialist certification from other short sale certification programs. Please know that the Board has offered both the (SFR) (Short Sales and Foreclosure Certification) and the (LMC) (Loan Modification Certification) certifications which are excellent programs.

Both have been widely attended in Charleston and I strongly encourage you to sign up for one or both at the next opportunity. Every single licensee should avail themselves of a basic short sale class so they have a rudimentary understanding of this ‘new’ transaction which is dominating the market in many parts of the country.

(FIS) will be offered for the first time in South Carolina beginning March 2010, courtesy of a FPR (Foreclosure Prevention and Response) grant from NAR. I think the operative word of distinction is ‘basic’ as compared to ’comprehensive’. This 30 hour program is designed for the agent who has decided to commit to getting an in-depth understanding of the various facets of handling these intricate transactions—the relationship connection, the Law, the Ethics, property valuation, the process, the negotiating, getting to the closing table, the downside, the resources needed, community partnerships, the self-study to continue to grow and much, much more.

Why offer (FIS)? Because hundreds of students who had taken either the 4 or 8 hour basic short sale training classes offered by Home Ownership Matters beginning in 2003 demanded more. More time, more expansive, more details. The course evolved and in 2005, the (FIS) certification was introduced in Ohio. Since then (FIS) has been approved for CE credit in six (6) states and there are graduates from twelve (12) states. States approved for CE include: Ohio, Indiana, Kansas, Nebraska, Colorado and Oklahoma.

30 hours, 700+ pages of material.

Tried and true methodology coupled with sound philosophy

from a former Fannie Mae Broker-Specialist

Updated regularly and state specific (Law section)

I decided the easiest way to say what you’ll learn is to pose the questions which will be addressed.

Are you ready to intervene?

1. Do you know how to distinguish a ’frozen customer’ from a potential short sale client? Do you currently use an intake form to determine who is a viable candidate for this type transaction and who is just not prepared for the commitment? Can you screen OUT the 60% of folks whom you should not list as short sales?

2. Are you prepared to analyze/distinguish the many HATS which may be required to help someone who is in default: the social worker, medical counselor, marriage counselor, human resources helper, spiritual advisor, budget counselor, salesperson extraordinaire, valuation expert, etc.

Are you real clear on what role you can and/or should play? Are you connected to/familiar with the community resources to address those needs which are outside of your scope of expertise? Do you currently utilize a referral form for this purpose? Can you see the potential for a fair housing complaint (or other complaint) without some standardized referral policy/form?

3. Do you know how to ‘handle’ the law while avoiding the ‘practice of law’? Do you clearly understand that it is necessary to understand some components of the law (and be able to explain them to your client) as part of a short sale attempt or an REO purchase?

4. Do you understand the impact of the seller filing bankruptcy on a potential short sale? The increased likelihood of a deed-in-lieu? Do you currently discuss this at the onset with your customer since it could/should end your relationship if they file later?

5. Are you familiar with the new Treasury guidelines for short sale—other than the fact that the commission cannot be reduced below 6%? Have you studied the guidelines? Do you understand them?

6. Are you familiar with the foreclosure law in your state? Is it a judicial or non-judicial process? What difference does it make? The guidelines for service on a defaulted borrower? Familiar with what the customary forms are and what they look like? Are you aware that violation of state foreclosure law can work in a borrower’s favor to gain extra time which could be used to facilitate a short sale? Or a reverse mortgage?

7. Do you have the expertise to accurately determine the value of a property in today’s declining market? Are you familiar with the professional BPO which is used as the industry standard (fanniemaebpo.com)? Could you complete one and do you understand why it can be much more accurate than the more commonly used CMA or market analysis? Are you clear on why accurate property valuation, from the beginning, plays such a critical role in the success or failure of your short sale effort?

8. Do you feel you clearly understand the unique protocol for short sales, not to be confused with REO and traditional sales? Who signs what? When? Presentation of offers? To whom?

9. Have you figured out what to disclose? To whom? And when?

Are the guidelines set by your Broker consistent with both Federal and state requirements/prohibitions on disclosure? Are you clear on the Who? What? When? HOW?

10. Are you familiar with your Board and Broker’s position on:

a. Disclosure—Who? When? How?

b. Commission—Who? What? When? How?

c. Signing of offers/amendments/price reductions—Who? When?

d. Presentation of offers—To whom? When? Signatures? Why?

e. Multiple offers—that is a whole other 20 questions

11. Does your brokerage utilize a set of disclosure forms which have been customized for the use with short sale scenarios? Are you familiar with them? Do you understand the protection that you may gain from covering the special risks associated with short sale transactions? Are you interested?

12. Do you understand the tax implications for a borrower who has completed a short sale? Please don’t tell me that you thought they were off scot free because the short sale was approved. (They are not) Do you have a referral to a tax accountant?

13. Have you read your state’s Seller Disclosure Law? Have you studied the state disclosure form? Does it include a reference to “threatened or pending litigation“? Or perhaps “notices from any Government or quasi-governmental agency”? Any “challenge to the title”? Are you clear on why any/all of these could forestall a short sale approval and therefore need to be disclosed?

14. Do you have clarity on the impact of a foreclosure on your customer’s ability to purchase down the road? Was that part of your discussion about the reason to consider a short sale in the first place? Have you discussed operating ‘in good faith’ as vital to the ability to keep the house on the market?

15. Is there a 2nd (or 3rd) mortgage? Are there other potential liens against the home (home owners’ association, taxes, personal judgment) which must be dealt with? Got a plan for how you are going to handle those? Do you know where to start?

16. Do you clearly understand the role of the Guarantor and/or the investor in determining whether or not a specific short sale can be approved? For that matter, do you know that the Servicer is merely a go-between hired to facilitate the administration of the loan but is NOT a decision maker? Who is? How can you find them? What are THEIR guidelines? Are they the same from Guarantor to Guarantor? Available in public records?

17. Are you familiar with the Qualified Written Request—backed by Federal Law (RESPA, no less) and the impact it can have as a ‘tool’ in delaying the foreclosure process if well-prepared? Used effectively and in a timely manner, you can gain valuable time to complete the short sale. We’ll cover that.

18. Has your firm/Broker created a “hold harmless” document which covers the scenarios which you cannot be responsible for with the clear understanding from your client that you will have no liability? Since the risk of lawsuit is pretty high with this new type of transaction, getting some understanding of what should be included and why should be paramount, I would think.

19. Have you identified as an agent/brokerage/Broker those scenarios which will require you to end the relationship? Have you established a policy concerning the need for a unilateral (not mutual) release? Under what circumstances, with what notice?

Certainly advance disclosure would be required: I would recommend at the inception of the agency relationship. We cover in detail during (FIS) training what I call the “Divorce Decree”. What happens if the client abandons? Files Bk? Enters into a deed-in-lieu? Refuses showings? Fails to cooperate in other ways? Policies should drive practices and both help to minimize liability.

Proper training and thorough understanding on each of these issues is paramount in order for you to be both effective at processing a short sale from beginning to end AND avoid the various opportunities to get yourself or your client into serious trouble along the way.

Short sales are the new reality for many markets around the country. They have become a major part of the market (along with REO’s) and becoming intimately familiar with how to process them successfully is paramount for any agent who wishes to thrive in today’s market.

If you do not already have clarity on ALL the issues which have been addressed in this article, then you are a prime candidate for the (FIS) certification program. Each of these will be explored and addressed during this 30 hour training program. You will leave with clarity on every single point covered here and will have the expertise to feel confident that you are representing your client with strong tools which have prepared you to be successful in getting the result you hope for and they deserve. YOUR knowledge base is a key component of your professionalism. Your success as a REALTOR® is tied directly to the caliber of your information.

Don’t miss an opportunity to learn, explore and interact with one of leading instructors on this timely topic. Her experience actually doing short sales, her time with Fannie Mae as a Broker-Specialist and expansive training (HUD, Fannie Mae, NeighborWorks, Legal Services, and National Consumer Law Center) can be invaluable to you.

Sign up today! Coming soon to a classroom near you!

Final Question

Is there someone in your office to whom you can refer a customer who needs short sale help? Within your firm? Maybe you can/should become that ‘Referral agent’ if you do not have the expertise today.

Are you Ready to Intervene????

*(FIS) is a registered trademark of Home Ownership Matters, LLC.

Other Foreclosure Resources

1. www.HOMwebinar.com

3. www.HomeOwnershipMatters.com — Calendar and Foreclosure/Loss Mitigation sections

4. www.nti.org — NeighborWorks America — Training Institute

5. www.consumerlaw.org — National Consumer Law Center

Mildred Wilkins

President of Home Ownership Matters

Author of “Your Real Estate Advisor”

available at: www.DovePublishingHouse.com

Toll-free 1 (866) 507-5105

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 Servicer

And the WORD for Today is...

Loan Servicer – handles many functions relating to a loan. The servicer:

1. Collects payments from borrowers
2. Disburses money for escrowed items such as insurance and taxes
3. Submits funds to the secondary market investor according to the guidelines in place with each individual investor
4. Is responsible for customer service functions to all parties to the file: borrower, investor and insurer
5. Is responsible to assure full compliance with each state’s and all Federal regulations
6. Performs all tasks in a timely fashion
7. Maintains and provides when necessary an audit trail of all transactions
8. Handles loss mitigation workout options with a borrower who is in default
9. May or may not be the “party of interest” on a particular file

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: 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.)

WORD: Pre-payment Risk

And the WORD for Today is:

Pre-payment Risk – refers to the possibility of receiving full or partial payment from the borrower before the principal is due. A full pre-payment typically results from the sale or refinancing of a mortgaged property. A partial pre-payment typically occurs when a borrower applies additional money toward the reduction of the principal owed on a mortgage. While such a pre-payment is not a common practice, it is an excellent way for a borrower to significantly reduce the amount of interest they pay over the term of the loan. Pre-payments reduce the value of the mortgage servicing right asset, as the anticipated servicing cash flows are effectively reduced. Many lenders in the sub-prime market strongly inhibit pre-payment activity my imposing harsh pre-payment penalties on a borrower who wishes to pay the entire loan off early. Reinvesting the money from pre-paid principal could be very costly to an investor since they would then need to reinvest and are most likely going to receive a lower interest rate (yield) than the mortgage was paying. Borrowers should be aware that pre-payment penalties can be high enough to effectively lock you into a mortgage you would prefer to pay off early. The solution: be sure your loan does not include such a penalty for repaying the principal early.

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.)

FYI: Short Sale–Slow Crawl

What they DIDN’T tell you about short sale offers  

The man back at the bank has a few things to take care of before he can respond to the offer you just made to buy a home as a short sale. Did your REALTOR mention?

The Lender must:

• Order an appraisal (could take awhile)
  
• Order title work (won’t take long but has it been ordered)
  
• Get a broker price opinion completed (hopefully the real estate agent knows what they are doing)
  
• Check to be sure there are no unpaid homeowner’s association dues or municipal bills which must be paid (could add to what YOU have to pay)
  
• Check to be sure that the SELLER qualifies for a short sale under the guidelines for the specific insurer for this property—at this time—since those guidelines are  changing pretty rapidly lately
  
• Check all the details of the SELLER’s financials to be sure they have no assets or other reasons why a short sale cannot be approved (did they even send this stuff in yet)
  
• Verify that there are no Federal liens which must be satisfied
  
• Work out a deal with the SELLER’s second lien holder, if there is one
  
• Check with the insurer on the home to be sure that the guidelines for accepting a short sale are being followed
  
• Consider ANY/ALL offers which have been submitted on this home to be sure they respond to the one which will net the lender the most, after expenses (You did know they could consider other offers, right?)
• Negotiate with the SELLER what will be done about the shortage (on certain loan types)
  
• Review a preliminary HUD statement to be sure that the numbers which were provided by the LISTING agent on a net sheet are going to allow the lender to new what is required by their insurer or investor to close
  
• Present a Counter Offer, to the buyer with the BEST, overall offer, if the preliminary HUD reflects that the net will be below the acceptable amount required
• Must not allow a closing which not protect the interest of the insurer/investor

Somebody told you all this, right? If not, maybe your agent doesn’t understand short sales as well as they need to. Sure glad you found the information on this blog. Just a word of caution:  don’t sign a notice to vacate your current residence until AFTER you get a signed approval letter from the lender granting permission for a short sale. This could take a little while. 

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: 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!)

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.)