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: Deed-in-lieu

The WORD for today is:

Deed-in-Lieu—is an option for avoiding foreclosure. The consumer is allowed to voluntarily relinquish the home when they have not been able to make payments as a last ditch effort to avoid foreclosure. While the consumer will not be able to stay in the house this is still a better option for them than a foreclosure. When the lender eventually resells the home, if the amount they net is less than the amount of the mortgage the lender is very likely to file for a deficiency judgment against the consumer.

Literally means to return the deed to the lender in lieu (instead of) forcing the lender to take back control of the property through foreclosure action. It will be reported as a deed-in-lieu to credit reporting agencies which is much better than a foreclosure and perhaps slightly worse than a “short sale.” When the loan is an FHA backed loan the borrower is entitled to $500.00 when they sign the deed-in-lieu and vacate the home as agreed. The borrower may still incur a tax liability for some or all of the debt which has been forgiven. It would be wise to talk with a tax accountant before agreeing to this relinquish of the property in this manner.

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 #9

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

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

Reasons:

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

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

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

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

Word: Orphan Houses

Today’s word is “orphan houses”, a new concept and a direct consequence of the dramatic increase in foreclosures across the country. There are numerous ones in your town and we hope your home doesn’t become one.

What’s an “orphan house” anyway? Unfortunately, it is a home which has been lost as a consequence of foreclosure or was voluntarily relinquished by the homeowner via a deed-in-lieu in order to avoid foreclosure. As if that were not bad enough, the insurer has neglected to transfer the title into their name which can cause major problems for the former owner down the road. 

As long as the title remains in the borrower's name, then any and all liability fall upon that borrower—who remains the owner of record. Thus the name “orphan house”, you lost it, and they have chosen not to legally claim it.

Now why would they do that? Obviously you are smart enough to know that when financial institutions do (or fail to do) something it usually is associated with saving them money. The catch this time is liability.  Whomever owns the property (has the title legally recorded in their name) bears the risk or liability for anything which occurs at or on the property.  If there is a fire and the vacant house burns, the insurer does not have a risk, it is NOT in their name. If the local municipality mows the 4 feet high grass and processes a bill for that address, it will have the former borrower name attached to it. (No new deed has been recorded). The homeowner’s association may continue billing in the name of the former borrower (that would be you) and those bills can be attached to the property as liens. 

As a practical matter, if there has been a foreclosure there is a clear date when the ownership rights in the property ended. That is very murky when you mailed off paperwork to process a deed-in-lieu. Lenders are very willing lately to let you walk, complete the simple form and leave the property (within some guidelines of course). I am simply telling you that they are covered, YOU, however, are not.

How do you avoid an “orphan house” in your future? The best advice is to seek legal counsel about the aftermath of a foreclosure or deed-in-lieu. A competent attorney should be able to help you work through the details so you don’t end up with an unpleasant surprise down the road.

Yes, it is definitely worth the legal fee you will incur to avoid possible financial risk down the road.

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: Bankruptcy "Stay" and Short Sale Listing

Q: We have not been able to keep up our mortgage payments and finally decided to list the house for short sale so maybe we can save our credit by not having a foreclosure on our record. Nobody seems to be buying houses in our area and several folks have said we just need to go ahead and file bankruptcy but keep the house out of it. Is this possible?  We don’t want to make a mistake while trying to resolve this issue.

A: You can’t file bankruptcy and ‘keep the house out of it’. The house is an asset and the Trustee of the court will ultimately decide what will be done with any and all assets. The closing of a short sale can not be completed while a home is still in bankruptcy. Only after the Trustee has made a decision to allow removal of the home from the petition and allow it to be placed (or put back) on the market should this be done.

If a borrower has a home listed for a potential short sale and then files for bankruptcy protection an “automatic stay” goes into effect as soon as the bankruptcy is filed. The “stay” means several things. Including;

1. All creditors are prohibited from calling or harassing the borrower until there is a disposition of  the bankruptcy
2. All assets are “frozen” until the court has made a decision about what is to be done with them
3. All loss mitigation discussions must cease until the bankruptcy is completed (that includes a possible short sale)
   

Deed-in-lieu dilemma

For the reason just discussed, a person who believes they might be able to complete a short sale would be ill-advised to file for bankruptcy protection since it blocks this option. Additionally, since the Trustee of the Bankruptcy court might order a deed-in-lieu (forcing the person to relinquish the house) you should make this your last, last option.

You relinquish any control of the situation by filing bankruptcy. Additionally, there is the possibility that if you are required to sign a deed-in-lieu of foreclosure that you might later be faced with a deficiency judgment which you might have negotiated away if you had worked directly with the lender to complete the short sale.

I would encourage you to work aggressively with your real estate agent and your lender to try to get the short sale approved. In the meantime, stay in your home, no matter how far behind you are in the mortgage payments.  

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.)

Did You Know? Avoid that Deficiency

Avoid that deficiency

FYI: In today’s market a lender accepts a property via deed-in-lieu (lets you give it back); grants permission for a short sale or sells a home they have acquired through foreclosure there is the possibility of a deficiency. A deficiency simply means that the lender receives less than the full amount which was owed on the property. You should not assume that because they accepted the deed-in-lieu or granted the short sale that they will not come after you legally of the shortage. This is business, more importantly, this is bank business.

What to do? Try to avoid the impact of the deficiency. You should attempt to negotiate with the lender PRIOR to the approval of a short sale or deed-in-lieu to agree wot waive their right to a deficiency judgment. If they agree, it must be written into the final documents that they have agreed to accept either the return of the deed or the funds from the short sale as settlement in full for the indebtedness.

If you do not feel confident to do this yourself or you have tried without success, it is definitely worth the investment to engage an attorney (who has expertise in this area) to help facilitate getting such an agreement. It could save you thousands of dollars.

P. S. Don’t ask me where to find such an attorney.
I’m smart but I am not the Wizard of Oz.

(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!)

...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.)

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!)

From the Desk of: REO Landmines

Let’s start with the basics: REO (real estate owned) refers to real estate which is owned by entities such as lenders, servicers or corporations. There are several ways property becomes REO but most often it is through default of the borrower who is either foreclosed upon or voluntarily relinquishes the property through deed-in-lieu. Corporations also become entitled if they acquired the home as part of an employee relocation package buyout.

Whatever mechanism resulted in the acquisition, a piece of real estate is now owned by an entity who needs to sell it. A special division, either called the REO or disposition division, is usually charged with the task of turning REO properties into liquid assets. As the foreclosure problem worsens the percentage of homes on the local market for sale which are, in fact, REO’s has increased. Strategies for dealing with the holders of these properties are somewhat different than purchasing from a private citizen. Those differences can be looked at as potential landmines if you are not familiar with the process.

Landmine # 1. Most REO properties are sold using a standardized contract which will be used throughout the nation. (for instance, HUD, Fannie Mae, VA). The language and terms in these contracts will supersede anything you write in your local purchase agreement, therefore, it is critical that you understand all the language in their standard contract.

Landmine # 2. Most REO properties are sold “as is”. While entities must allow for an independent inspection if one is allowed by state law, there is no requirement that any repairs be made as a result of the inspection.

Landmine # 3. Buyer are frequently charged a per day fee for delays in closing caused by their side of the transaction. Whether caused by the borrower, their lender or the realtor does not matter. It is not uncommon for the delay fee to be $100.00 per day.

Landmine # 4. Transfer of title will usually be granted with a special warranty deed or a Sheriff’s deed. Both provide a MARKETABLE title; not a CLEAR title. It is common for liens to remain attached.

Landmine # 5. When submitting an offer on an REO property, you buy the whole “kit and kaboodle.” What’s in the “kaboodle.”

Copyright 2007, Home Ownership Matters, LLC. All Rights Reserved.

(As always, if you have any questions, comments or feedback, we welcome and appreciate them. Just e-mail Heather at homeownershipmatters@gmail.com. Thanks for reading, and come back soon to see what else we've posted!)

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!)

From the Desk Of..."Nothing from Nothing"

Nothing from Nothing Leaves Nothing

“And that ain’t nothing, believe you me” is a refrain of a popular song from my youth. Who knew they were talking about real estate commissions? In today’s tight market it behooves you to start with the end in mind. Literally. It would seem obvious that licensees would always do that since they’re self-employed, paid only via commissions. Unfortunately, keen observation signals that far too often REALTORS® focus on the accumulation of listings without focusing on the realistic possibility of a completed closing. They bought into the myth that whoever has the most listings is the winner of the trophy and therefore is most productive.

Something is Wrong With This Picture . . .

Can you imagine an agent who regularly carries an inventory of 25+ listings (average price $125,000) but is seriously struggling. Obviously, the agent has no problem convincing folks he can sell their home. The problem lies in failing at some other very basic issues which are likely to prevent someone from converting a listing into a “closed” transaction. Let’s consider the most likely culprits.

Silly Details

This will surely not be stepping on your toes to mention “silly” reasons why a listing is unlikely to result in a sale.

• The owner filed bankruptcy, two weeks ago
• The spouse never signed the listing contract
• The lender will be “short” and no one mentioned it
• The house is already scheduled for a sheriff’s sale
• The paperwork for a deed-in-lieu was mailed the day you had your listing appointment
• The “summons” was received two (2) days before they called you

Shame on YOU

In today’s market it is not intrusive to conduct a thorough analysis of the reasons why a potential seller chooses to sell at this junction—that just reflects market savvy. Further, it is a disservice to the potential client and to your agency/yourself to list property without addressing the most common reasons why real estate becomes “unavailable” for the completion of the transaction in today’s market. What a shame to have unearthed the proverbial needle in a haystack (a qualified, ready and able buyer) only to discover you don’t have anything to sell. If you are lucky—really lucky—this qualified buyer will be too busy to sue your client for “failure to perform,” with yours truly as a co-conspirator.

Price ‘em RIGHT…from the beginning

The operative word is RIGHT. The correct view is from a buyer’s prospective. Must I tell you I mean for today’s market, not the market THAT WAS—which is no more. If you’re not able to convince a potential seller of the appropriate listing price based on your BPO/CMA and supporting documents, are you a good enough salesperson to convince someone to buy it at the inflated price you listed it for? Think about it.

Is the owner committed?

I’m sorry, I didn’t mean “should the owner be committed” or perhaps, “the owner plans to get committed.” I mean, IS THE OWNER, TODAY committed to selling their home? Well, how can you tell? That’s easy. An owner who is committed to selling has some basic awareness of the market and will be receptive to your education/documentation of current value. They will already be working on getting their home ready for showings and quite willing to set a definite date when those preparations will be complete. A committed seller is not “testing the water.” They have concrete plans for moving. In other words, they’re an active participant in their real estate process, not your reluctant sidekick.

Ready for the debut?

Not you, the house. Too often, in their anxiety to seal the deal and tally another listing, agents list homes which are not only not ready for showings (clutter, minor cosmetic issues which need to be addressed, lack of curb appeal, etc) but whose owner has demonstrated a lack of commitment to making them ready. It’s such a simple practice to ask “How long will it take to get your home ready for showings?” (Notice, I did not say for listing). Then clearly say, “Call me when it is ready for showings. We can then do the paperwork needed for the listing agreement and I will take photos for marketing.” There, wasn’t that simple? Don’t list a home you are ashamed to have viewed. Day One. Dot. Period.

The Four Rules for Listing

The “rules” I encourage you to implement assume your relationship with your client is strong enough to have resolved any issues related to:

1. a. Appropriate market-based pricing
2. b. Acceptable condition
3. c. Provisions for showings
4. d. Possible impact of “undisclosed pertinent information"
5. e. Any “other” current realities

Rule #2—List at no more than 3-5% above the current market (short sale is an exception to this rule)

Rule #3—List only when the home is “camera ready”

Rule #4—List only AFTER the seller has demonstrated they are committed to selling

Closing = Commission Paid

Now for the first and most important rule. The FIRST rule for listing should be: Don’t list anything you don’t REALISTICALLY believe you can close. It was a good rule to live by when I started my real estate career in the early 90’s. This was not a company rule, but my personal standard in order to become a successful REALTOR®. My logic was that if I closed everything I listed, then folks would believe that I was a good REALTOR®. Such a novel idea. But it worked. My fall-thru rate with buyers was less than 5%, almost always because of inspections issues. My expired listings—less than 1%. Time on market—well below the average for the market then. I appreciate that times have changed. Nonetheless, it was an excellent idea then. I encourage you to consider adopting it as your personal mandate today. You’ll accept fewer listings, but if you close 90-95% of what you list, will you be better off in 2009 than you were in 2008? You do the assessment. It’s a business decision. Marketing listings which are not likely to sell is costly.

6% of Nothing is Nothing

One of the prime reasons I teach and write is because I recognized that the strategies which are being used by many agents are counterproductive and therefore, very frustrating. Handling foreclosed properties for Fannie Mae, after some well-meaning agent had tried to sell them—the traditional way—predictably resulting in foreclosure—I decided to teach agents how to better understand the lender/insurer’s position, and how to successfully structure a short sale. It works, IF YOU WORK IT.

Getting to the closing table is the ultimate goal for all real estate professionals. Strategies for posturing yourself, from the inception of the transaction, with the goal of getting to the closing is the cornerstone of the foreclosure related classes taught by HOM. The (FIS) certification is wholly focused on GETTING TO THE CLOSING TABLE.

Want to learn more?

Web: www.HomeOwnershipMatters.com.

Blog: http://www.HomeOnwershipMatters.blogspot.com/

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.

You can find more articles by Mildred at HOM's website.

(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—“As is” means inspection is unnecessary

MYTH: One of those myths which will not seem to die is that there is no need to have a home inspection on a property which is being sold “as is” since the seller has already indicated they are not going to repair anything. Failure to get an ASHI certified home inspector to thoroughly evaluate the home you are about to put down hard cash for is by far one of the riskiest things you can do when dealing with real estate.

REASON: You can’t judge a book by its cover (or a house by a walk-thru) 

The need for an inspection has been recognized by laws in almost all the states which grant the buyer the right to have an inspection and further to have certain types of issues addressed (to their satisfaction) or they have the right to walk away, retain their earnest money and go on about their business to find something more acceptable. 

In today’s climate with so many homes being offered for short sale it is increasingly likely that a traditional seller will offer a home for sale ”as is” because they have no money to provide repairs in the event an inspection shows there are items which need repair. 

Additionally, the market is currently flooded with bank-owned homes (REO’s which have been acquired via foreclosure or deed-in-lieu.) In either case the home has been vacant for an extended period of time, almost certainly without utilities on, and likely with delayed maintenance prior to the borrower losing it. Mold you see is definitely an issue: mold which has not yet manifested itself should cause you greater concern. There are so many major problems which can lie dormant in a long vacated home that you couldn’t give me one, much less convince me to buy it, even at a deep discount. (I rented a very nice, expensive Florida home which had been vacant for 3 years; I could tell you stories). To buy such a property without the benefit of a home inspection is foolhardy. If your REALTOR doesn’t advise you to have one, you need to 

start looking cross-eyed at the person you have trusted to advise you in your housing matters.

REALITY: A side benefit of an inspection is to know what repairs you want to ask the seller to take care of as a condition of moving ahead with the transaction. The core purpose of a home inspection is to determine what is the actual condition of the property (structurally, mechanically, etc) in order to determine if you wish to buy it: whether repairs are made or not. You may find a problem which is so expensive to repair or cannot be fixed to your satisfaction no matter what is done, which could cause you to decide to walk away from the transaction. As a real estate salesperson I had a couple walk away from a home after the home inspection found major termite damage as well as an active infestation of termites which we had not seen during our tour of the home. It could have been fixed but they were not certain that they would ever feel quite right about the integrity of the kitchen floor when so much of it (and the support beams) had been eaten away by the little varmints.

An inspection is for your peace of mind about the quality and condition of the home you are acquiring. It matters not whether it is being sold ‘as is’ or otherwise. You still need to know you’re not paying for a ‘pig in a poke’. Get the toughest inspection company you can find and ask for their TOUGHEST inspector. 

Good luck with your purchase.

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: 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.)

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.)

WORD: Non-Recourse Loan

And the WORD for Today Is …

Non-Recourse Loan

His bark is worse than his bite. You’re familiar with the expression but who knew that it applied to banks as well. If you are behind on your mortgage—and millions of people are—you have probably been barked at by someone at your bank. It is reasonable that they make an effort to collect the funds which you owe them, but when you are unable to do so, you have conveyed that you are unable to do so, frequently some barking gets started.

A non-recourse loan means the bank has NO BITE. They have no recourse, or option to do anything else to you after they take the house. They cannot seek a deficiency judgment. Without a deficiency judgment there is no way for them to:

1. Attach your pay check (/garnishment/)
2. Pursue any of your other assets
3. This includes any/all retirement accounts

Once they acquire the home/property, whether that is via foreclosure, a deed-in-lieu or by trustee auction when the home was secured by a deed of trust, ALL THAT THEIR BANK CAN EVER GET IS THE HOUSE. There is no legal provision for them to ever come after the borrower for anything else.

The states listed below are generally non-recourse states:

• Alabama (some exceptions apply)
• Alaska
• Arizona
• Arkansas
• California (as long as non-judicial foreclosure is used, which is the most common)
• Colorado
• District of Columbia (Washington DC)
• Georgia
• Hawaii
• Idaho
• Mississippi
• Missouri
• Montana (as long as non-judicial foreclosure is used)
• New Hampshire
• Oregon
• Tennessee
• Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
• Virginia
• Washington (as long as non-judicial foreclosure is used, which is the most common)
• West Virginia

*It is critical that the homeowner do several things:

1. Seek legal counsel to be sure they understand the implications, based the specific mortgage or deed of trust involved
2. Consider the specific financial resources and have clarity on what is at stake
3. Evaluate the total picture,  then make a decision based on a full assessment of  the situation

***This should not be construed to be legal advice.  SEEK COUNSEL.

"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.

WORD: Deficiency

Deficiency—in real estate it is a shortage in the amount of proceeds a lender receives AFTER they have disposed of an acquired property. When a lender sells a home they have acquired, whether by foreclosure or deed-in-lieu or insurance claim, the deficiency is the amount still unpaid after the sale. This represents the amount of loss to the lender(s) or other entities, which may have a claim against the property.

The amount not covered by the offer to purchase. This represents the amount of loss to the lender(s) or other entities that may have a claim against the property.

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

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

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

Myth #3

Myth #3: That bank-owned property is always free of any undisclosed liens or other encumbrances.

Reality: Many of the homes being purchased as REO or bank-owned properties are being transferred with liens already attached or the possibility of liens becoming attached.

Reason: The kind of title policy which is used for REO sales is a special, limited coverage policy. The holder of REO properties makes no warranties about possible clouds on the title prior to their acquisition through foreclosure or deed-in-lieu. Title is transferred using a special warranty deed or a sheriff’s deed and most importantly all the documents which the purchaser has signed states that they understand these facts.

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

WORD: REO

And the WORD for Today is:

Real Estate Owned (REO)–Real Estate Owned by a lending institution. An institution becomes the owner by foreclosure or by accepting a deed-in-lieu. A lender may also receive property through an insurance settlement. The disposition of the property will be handled by their REO Disposition Department.

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

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

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

WORD: Deficiency Judgment

And the WORD for Today is:

Deficiency Judgment—is a possible court judgment against a borrower, which can be requested by the lender who has not received full payment of the amount, owed. A deficiency judgment is the difference between the amount the borrower owes to the lender (including all additional acceptable costs) and the actual amount the lender receives through an eventual sale of the property. As the rate of foreclosure has increased, lenders are pursuing consumers more frequently for this deficiency. However, if the loan is an FHA backed loan the consumer can avoid a deficiency judgment by making a good faith attempt to sell their home prior to foreclosure. Even if the home does not sell and even if they later relinquish it through a deed-in-lieu they still avoided the deficiency judgment. While consumers who are owner-occupants are rarely pursued for deficiencies by FHA, investors almost always will be. Federal employees who have a deficiency judgment on either an FHA or VA loan can expect to have their checks garnished for the repayment. Consumers should be aware that walking away from their home does not mean they will not have any further obligation related to the mortgage.

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.)