Showing posts sorted by relevance for query deficiency judgment. Sort by date Show all posts
Showing posts sorted by relevance for query deficiency judgment. Sort by date Show all posts

June 9, 2009

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.)

July 12, 2009

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.)

October 7, 2009

Q&A: Can they Take my Second House?

Q: If I have two houses and I lose one, will they take the other one too?

A: The short answer is that the lender can not just “take” your second home.

The complete answer is that you still need to be concerned about protecting your second home from liability as well as protecting yourself from future liability related to the foreclosure on the first home.

Future Risk

If the lender does not receive enough from the sale of the home after they complete the foreclosure and sell it as a bank-owned property, many states will allow them to go into court and request a “deficiency judgment”. In order for them to receive such a judgment they will need only to demonstrate that you agreed to repay a certain amount for the home and they got less than that.

Let’s say $276,000 was your mortgage amount and they only got $213,000 from the eventual sale of the property. There is a loss of $63,000. In addition, the terms of your note or deed of trust will grant them permission to also ask to be reimbursed for attorney fees and other allowable costs, based on the terms of your mortgage document and your state’s foreclosure laws.

A crafty lender might end up changing a $63,000 shortage into a request for $89,000 as a deficiency judgment request. If you do not challenge this and a deficiency is granted, the lender/insurer then has the leverage to:

a. Use a wage assignment to garnish paychecks
b. Have judgment recorded on credit reports
c. Possibly intercept income tax refunds
d. Collect from anything you earn, marry, inherit
e. Attach judgment to any other real property you own, (second home) or later acquire

Having said all that, the short answer: they can’t TAKE the second home but they sure can make your life miserable. You are wise to consider the implications for a second home and need to seek legal advice to help you determine what is your next step to protect your investment in the second home, if that is possible. I’m betting that it is, but I am a writer, not an attorney. Yell for help. It’s attorney time.

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.)

July 13, 2010

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.


July 9, 2010

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.

February 6, 2009

Q&A: Short Sale Dickering

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

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

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

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

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


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

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

February 11, 2009

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!)

March 28, 2009

Q&A: Short Sale

Q: What happens if I sell my home for less than I owe on the mortgage?

A: First, your lender would have to approve such a sale (normally called a short sale). It is important that the terms of that agreement stipulate that they will not come after you for the difference (called a deficiency). Whether or not they will waive their right to legally pursue you for the deficiency will depend on several things, including what kind of loan you have, whether or not they are likely to be able to collect on an eventual judgment, how much of the shortage will be covered by the insurance policy they have on the home, whether or not you had demonstrated that you had a hardship which made making payments impossible. In other words, there are a lot of variables.

Most important for you is that the agreement for short sale include a waiver of deficiency judgment and that you have this, in writing, prior to signing closing documents.

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.)

June 8, 2009

Q&A: Selling "Short"

Q: My house is not worth nearly as much as we owe on it and think they trying to do a ‘short sale’ is what we need to do. Will we still owe the rest of the money that we agreed to pay if the lender lets us do a short sale? Any information you can provide would be helpful.

A: First, your lender would have to approve such a sale (normally called a short sale). It is important that the terms of that agreement stipulate that they will not come after you for the difference (called a deficiency). Whether or not they will waive their right to legally pursue you for the deficiency will depend on several things, including what kind of loan you have, whether or not they are likely to be able to collect on an eventual judgment, how much of the shortage will be covered by the insurance policy they have on the home, whether or not you had demonstrated that you had a hardship which made making payments impossible, etc. In other words, there are a lot of variables.

Most important for you is that the agreement for short sale include a waiver of deficiency judgment and that you have this, in writing, prior to signing closing documents. This is one of those times when a good attorney is just what the doctor ordered to avoid addition financial liability down the road.

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.)

September 25, 2009

Short Sale Fast Facts for Consumers

Short Sale Fast FACTS for Consumers

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

Get informed and Get started

2. Short Sale is an Option Not a RIGHT

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

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

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

3. Finding a competent REALTOR could be difficult

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

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

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

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

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

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

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

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

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

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

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

Foreclosure action continues on ALL other loan types

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

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

Unfortunately, you would be mistaken.

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

You are cooperating with showing the property as a show of ‘good faith’
Title issues are uncovered which would prevent the transfer to a new buyer
The condition of the property is such that a sale is unlikely
You have failed to comply with request for information to determine your eligibility for a workout. Remember: This is an Option, not a RIGHT.

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

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

They must either:
a. Release the lien
b. ‘Lift’ the lien and permit the closing

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

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

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

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

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

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

10. Now about signing those papers…….WAIT

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

a. Approved their short sale, with all continguences
b. Given them permission in writing to sign something

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

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

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

a. Select a difference ‘potential purchaser’
b. Counter and ask for a lot more money
c. Go ahead and foreclose, then you have nothing to sell.

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


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

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

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

January 23, 2009

Welcome!

Welcome to Home Ownership Matters’ Blog!

Why write this blog? Quite simply because the time is right. Because I understand where you’re coming from. I have been urged by many students in my training sessions to start a blog for several years. It seemed like a daunting task until I hired my current Marketing Assistant, Heather Meade. Her training and expertise has made this possible at a time when the housing crisis has made it more important than ever that consumers be given basic information to help them make informed choices about so many of the challenges associated with real estate today.
Who is Mildred Wilkins?

I am a foreclosure intervention and loss mitigation trainer, a speaker. I am a consumer advocate who also happens to write. Most importantly, I’m a person, just like you, who has had hopes and dreams and inspirations blow up in my face. I have grown and survived DESPITE those blow-ups. I have lived—therefore I teach.

Writing is our most basic and clearest form of communication. The internet, via such tools as this blog (and website; www.HomeOwnershipMatters.com) has made it possible to reach thousands of folks in real time. I invite you to share my real estate lessons. I love to tell my students; “I’ve already taken the class and paid the price for this lesson. You can listen and avoid having to take it yourself.” I have benefited in other areas of my life from listening to the folks who already did it the wrong way so I could avoid their pitfall. I had no such teachers in real estate, so I had to learn the hard way—MYSELF.

I’ve gone from being born Black and poor to uneducated parents in southern Alabama, to graduating with honors from college, to middle income with a position at Purdue University, to a stay-at-home mom, to a divorcee with two children. I did my 6 months on welfare.

I’ve done most of the wrong things related to home ownership—and survived to tell the story. I’ve purchased several homes. I’ve built a new home ---and walked away at closing leaving thousands in a deposit on the table. I’ve bought without an inspection—leading to disastrous problems being uncovered a few months later. I’ve gone through foreclosure—and ended up with the deficiency judgment to prove I was there. Miraculously, I had not filed bankruptcy until AFTER the judgment for the deficiency on the car ($8 K and the house $28 K were recorded). I filed bankruptcy, started over and rebuilt my credit. I’ve lost a child, gone into depression and destroyed my credit again.

Professionally, I worked as a full-time REALTOR for 10 years in Indianapolis; I’ve helped others to buy their dream home. As a Broker-Specialist for 2½ years for Fannie Mae I sold their foreclosed properties. I was required to participate in the forceful eviction process as a representative for Fannie Mae. I was in charge of clearing out the remains of homes abandoned by folks in desperation when time ran out and the sheriff’s sale was imminent. I’ve written a weekly newspaper column on real estate to address the common concerns and complaints of consumers who don’t know where to turn. I’ve received professional training on Loss Mitigation. I’ve spent hundreds of hours studying laws, regulations, guidelines, pending legislation—all relating to predatory lending, mortgage fraud, foreclosure, bankruptcy, fair housing, appropriate disclosure and other subjects which directly impact our housing issues.

What will be included in this blog?

Each day we will share with you information we consider relevant to home ownership. For the first month or so most of the entries will be related to today’s more urgent housing issues—all those components connected to struggling to make your mortgage payment. We will eventually move on to home maintenance, taxes, insurance, and all sorts of other things, so continue to log on. Read and share. You could be just the answer someone needed today.

Contents:

  • Today’s WORD—Will be an attempt to help you learn how to ‘talk bank’. Regular folks seldom know what the bank people are talking about. You hear the words, you may even know the words, but what the words MEAN is a whole other thing. It’s hard to communicate when you don’t know the lingo—Hence, Today’s WORD. Read it, learn it, share it.
  • Fast FACTS—It is a basic fact that when you are making decisions, not just when you are purchasing a home, but ALL decisions relating to your finances become housing decisions. For instance, filing for bankruptcy impacts your future housing options. We’ll share some pearls of wisdom related to housing. We’ll make a diligent effort to give you FACTS which are relevant for most of the country. We encourage you to hold them close; treat them like the pearls they are.
  • Myths and Misunderstandings—One of life’s cruel realities is that it does not matter how sincere you are—IF YOU ARE MISTAKEN. Too many folks across the country today honestly believed they could refinance out of a variable rate loan before the rate increased. They believed because they were ASSURED by a broker that they could. They believed that the broker was: working in their best interest and regulated by the banking industry. They were wrong on both counts and now they can’t afford the home they love. They misunderstood how brokers and banking work. They did not know the meaning of the word—prepayment penalty. We’ll shed some light on some common myths—clear up a few misunderstandings and prepare you to make better choices. Pass it on!
  • Articles from the desk of . . .—will be included about once each week. These articles are slanted toward real estate professionals and many have appeared in REALTOR magazines or Broker-Agent somewhere in the country. Taking a course on the subjects discussed is the best way to become more competent in dealing with today’s transactions but reading any or all of these articles will certainly have a positive impact on your business. There is an ARCHIVE of articles available, FREE, upon request. For the complete list, please e-mail Heather at homeownershipmatters@gmail.com.
  • Did You Know?—I didn’t think so. Well, anyway, I thought should share. There are tidbits—mere tidbits—of information which can dramatically change how we operate and therefore, dramatically change our outcomes. I am ecstatic when someone shares such a tidbit with me. Whether ordinary or extraordinary, if I didn’t know then I could not incorporate it into my life. Even if they say “Millie, every body knows that” I will happily say, “I didn’t, until now”. Knowledge is truly a powerful thing–I have always had an immense respect for knowledge. I revel in trying to attain more. I humbly share any I have. Embrace knowledge–whatever the source. Use it—Share it. Benefit from it.
  • “Your Real Estate Advisor”—will be resurrected and added to the mix within the next two months. That was the name of the real estate advice column I wrote in Indianapolis for 5 years back in the 90’s. (It is also the name of my second book). We’ll talk about EVERYTHING housing: buying, selling renovating, building, maintaining, remodeling, and losing. Don’t be selfish—share the info—with family, friends, maybe even somebody you don’t particularly like. Make them wonder.
  • Give me a “Q”—we’ll take a commonly asked question and provide an answer. Please keep in mind that the answer will be MY answer. By that I mean that what you will get is my opinion. That’s because it’s my blog. I expect you to have different opinions and encourage you to share those. Unlike the “FACTS” section we can have lots of answers to a single question. I am promising neither a rose garden nor THE answer. I promised you AN answer. You mustn’t yell at me. I’m sensitive.

Enjoy the blog. It is intended to educate while keeping your attention. The words are all mine. Heather is responsible for everything else. You may reach her by commenting on this blog, or e-mailing homeownershipmatters@gmail.com

June 26, 2010

Q&A: Strategic Default


Strategic Default

Q. My house is worth considerably less than what my mortgage payoff is currently. My husband and I are still working and can manage the payment but it just does not make sense to keep making a payment every month when we are so upside down. I have heard the phrase ‘strategic default’ which seems to mean the people just decided to walk away and leave the house. Is this something we should consider?

A. The issue of strategic default has not been addressed in this blog at all until it was mentioned recently in the jingle mail blog. First, let’s get some clarity about what is being called a strategic default. As the phrase is being used currently it most often refers to someone who:

  1. Has the financial means to keep making the mortgage payment
  2. Has determined that the balance is significantly higher than the value of the property to the point that no turnaround is likely in the foreseeable future
  3. Has been unsuccessful in getting the lender to renegotiate for a reduced principal balance
  4. Has consciously made the decision to forgo additional mortgage payments and let the chips fall where they may (including the most likely outcome being foreclosure)

Now that I have provided clarity on when it might be considered, I will answer that question you asked, which is, should you consider it. My answer is that ONLY you can decide if you are willing to accept the consequences which are likely to occur as a result of a strategic default. I would not presume to try to move you one way nor the other. I will give you a glimpse of possible consequences to help you in the decision.

Possible consequences include:

  1. Foreclosure—very likely—almost a given
  2. Deficiency judgment—depends on your state foreclosure laws, highly likely where permitted
  3. Additional expenses incurred due to vandalism to the property after you abandon and before the lender/guarantor puts the property into their name. Scary thought if they never do. (or if it is six months or a year from now and the value of the home has continued to decrease.)
  4. Lender or Guarantor may be successful in going after assets you have to satisfy the deficiency mentioned above
  5. Negative impact on the possibility of a future home purchase (kind of like a separation, you left but you can’t marry anybody else until you get the divorce)
  6. Possible liability should someone be injured or killed on the property while you are still the title holder and the party responsible for insurance (even though you have not paid it)
  7. Possible tax liability for the shortage, once that has been determined
  8. I could mention a few more but you get the picture


While there is the compulsion to walk away from this really, really difficult situation you need to weigh the pros and cons carefully...then ask yourself...what is the worst thing that can happen?

Can you live with that, whatever that is? If you can, then move forward knowing that you considered the options and made an informed decision. Best of luck, whatever you decide.

"Remember, knowledge can be empowering!"

Mildred

March 23, 2009

Myth #8

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

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

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

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

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

June 11, 2009

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.)

February 18, 2009

Fast Fact #7 & #8

Fact #7. The consumer can end up with a deficiency judgment AFTER a deed-in-lieu

Fact #8. You have access to all the rules and regulations on government and government backed loans so you can know EXACTLY what the lender can and CANNOT DO.


© Copyright 2007, 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!)

October 14, 2009

WORD: Without Recourse

And the WORD for Today is...

Without Recourse - a financial term which means the lender cannot look to the borrower personally to fulfill the obligation. A mortgage or deed of trust securing a note without recourse allows the lender to receive payment only from the security (the property) if there is a default. In essence, without recourse then also means the lender cannot go after the borrower for a deficiency judgment if the sale of the property does not cover the full indebtedness.

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 atwww.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.)

February 10, 2009

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.)

June 29, 2009

Loan Modification Specialist (LMS) Certification Offered in Florida

Dates: July 27, 28, 29, 2009
Times
: 8:30-4:30 every day

Location: Perdido Bay Golf Resort
1 Doug Ford Drive
Pensacola, FL 32507

Sponsor: Home Ownership Matters Training Institute

Trainer: Mildred Wilkins, (FIS) Foreclosure Intervention Specialist

Former Fannie Mae Broker-Specialist

Get the training you need from someone who has:
1. Learned property valuation from Fannie Mae

2. Sold real estate/processed many successful short sales

3. Lost a home to foreclosure/I can teach you about deficiency judgment

4. Learn from a professional; TO BECOME MORE PROFESSIONAL

Registration: Early bird registration ends 4/25, so HURRY and register TODAY, seats are VERY LIMITED: ONLY TEN AVAILABLE! (Yes, ONLY 10)

Lodging: The Cottages at Perdido Bay (http://www.perdidocottages.com) (Lodging NOT included in the price of the certification)


Course Description:

This Loan Modification Specialist (LMS) certification program is comprehensive, rigorous 3 day training designed to prepare attendees to successfully facilitate loan modifications. Professional development is necessary to be competitive in this emerging field. This certification has been designed and is taught by a former Fannie Mae Broker-Specialist who has specialized in foreclosure intervention training since 2002.

Wilkins created the (FIS) Foreclosure Intervention Specialist certification program for REALTORS, the first such certification for real estate professionals in the nation in 2005. (FIS) for Housing Counselors was added in 2006. The (LMS) certification will set apart those who have taken substantive hands-on training and are truly prepared to call themselves ‘specialists’.

Let the (LMS) certification move you closer to transitioning into a whole new career. There is pent up demand for this service, a limited number of qualified providers and even less training available for those in the private sector who currently own or plan to open a for-profit business.

(LMS) certification. Your answer. Today. Register. NOW!!!!

Why offer certification?

HOM Training Institute is the training arm of Home Ownership Matters, LLC. Providing quality education to real estate professionals such as REALTORS, attorneys and housing counselors has been the focus of the institute for several years, with the goal of training professionals to be competent in the fight against foreclosure. The dramatic increase in the sheer number of modifications which are being utilized, along with the fact that most individuals or organizations which offer them have little to no training in the field has created a need for practical, comprehensive training in this area. HOM Training Institute is responding to that need with the (LMS) certification training. The consumer is the person who ultimately benefits from this program.

Is this training right for you?

This is a fast-paced, but comprehensive, look at the many details which need to be considered if you have concretely decided, OR you are contemplating opening, a business which specializes in providing loan modification services. You will not be taught how to create a database of consumers who have already received foreclosure notices from public records and do direct mailing to them to get business. You will, instead, be taught how to set up a professional office where you meet with clients who have been referred to you from sources such as local counseling agencies, your local foreclosure hotline, reputable non-profit organizations and others in the community who are looking for competent, professional loan modification service providers to meet the growing need as the housing crisis deepens. While there is a significant move across the country to provide training to housing counselors within non-profits who help low to moderate income borrowers, there is no corresponding training to meet that same need for middle to upper income borrowers who are simultaneously struggling.

What to expect:

As attendees, you will:
1.
Receive clarity on the legal process of foreclosure (state specific) and the applications for a potential loan modification

2. Cover the components of the mortgage documents which specifically impact the possibility of workouts

3. Learn the elements necessary for a successful modification and the practical strategies for implementing such a workout

4. Receive instructions on how to successfully (LEGALLY) block foreclosure long enough to complete the modification process

5. Gain a thorough understanding of the inner workings of the Loss Mitigation shop and how to work effectively with them

6. Leave this training with a clear picture of the ethical and legal constraints which should (and must) govern your business in order to avoid lawsuits

(LMS) Loan Modification Specialist
Certification Training

Day 1: Practical and Professional Strategies
Session I
: Understanding the Foreclosure Process

This session will cover the basic process for foreclosure, beginning with default and culminating in the particulars of the foreclosure process. Both judicial and non-judicial foreclosure will be discussed, since they are vastly different. It is impossible to help someone effectively with a modification without understanding the bigger picture of what the foreclosure process is for your state and where the consumer is in that process. The class will cover the differences between foreclosure with a note and foreclosure under a deed of trust. Additionally, such things as redemption rights will be covered with a general focus on what they are and the intention under the law (and the way they are abused by foreclosure intervention scam artists). Each attendee will have an opportunity to get clarity on the ‘specific law’ for your state in a timeframe tailored for this purpose.

Lunch—The Perdido Grill

Session II: Loan Modification—An Intervention Solution Whose Time Has Come

This session will provide clarity on the details of what exactly constitutes a modification, the components of a good, sustainable one and how to structure such a workout. Just as important, this session will cover the risk factors which can undermine a mod and cause the consumer to re-default. Learning to more accurately analyze the short term capacity of the borrower and the long term feasibility of the workout proposal, prior to an agreement being reached, are the keys to long term sustainability. Success should be measured not by whether or not you got someone to say yes, but by whether or not the workout is ‘working’. If the answer is no after a month, then it would fail the test of a workout. It was, in fact, just a band-aid. This training is designed to train you how to offer long-term, sustainable proposals for modification and get them accepted.

***********************************************************

Individual appointments for state law coverage

(filled on a 1st come, best choice basis)

Appt 1—5 until 6 p.m.

Appt 2—6 until 7 p.m.

Appt 3—7:15 until 8:15 p.m.


Day 2: First Thing’s First for a Successful Modification
Session III: “Buying TIME” – When the Money is Running Out

The focus of this session is worth the cost of the training, even if you failed to attend any other sessions. Time—or the lack thereof, is a major stumbling block to any successful workout—including a modification. This session will cover a highly successful strategy which combines strategic and legal restraints that will give you several extra months and a very strong negotiating position. When time is on my side—and I have your undivided attention—then we can work something out. Using the power of an under-utilized federal law will give you the time you NEED to get the attention REQUIRED for a successful workout. A team of foreclosure attorneys have put together a comprehensive list of all the possible ‘audit items’ you might use to challenge the servicing on a loan or the validity of the loan itself. This TOOL will be the focus of this session. Let’s say, “It gets a servicer’s attention.”

Lunch—The Perdido Grill

Session IV: Behind the Scenes of a Loan Servicer’s Shop

As a former Fannie Mae Broker-Specialist the trainer was introduced to the inner workings of the disposition department of the largest insurer of properties in the United States. That introduction to the mindset behind the scenes, as well as subsequent Fannie Mae training on servicing, has been invaluable in teaching students in other classes what to expect from the servicer’s shop. Once you understand the mindset, you are better prepared to GIVE THEM WHAT THEY WANT—to get what you need. It’s a basic negotiating concept—the trick is knowing what the other party wants (which is seldom what they ACTUALLY tell you they want) and then being able to provide it. A successful modification agreement—in truth, an agreement between two parties for anything—hinges on a meeting of the minds with whether or not the needs of both parties are being addressed. Crafting a modification which has the potential to be both accepted and sustainable for the consumer is possible when you understand what the servicer shop truly wants.

**********************************************************

Individual appointments for state law coverage

(filled on a 1st come, best choice basis)

Appt 1—5 until 6 p.m.

Appt 2—6 until 7 p.m.

Appt 3—7:15 until 8:15 p.m.

Day 3: Practical and Professional Strategies
Session V: Modification Stripped Down

We’ll cover the basics of modification during this session. How to determine what recommendation to make and what supporting documentation should be supplied in order to validate that recommendation. Would a combination of components work better for this borrower? Is the medication a permanent ‘fix’ to the borrower’s financial situation or must you consider some additional long term strategy? Does the modification agreement provide protection from onerous terms? Is your client protected with a provision for timely recording of the modification to avoid repercussions during a subsequent transfer to a new servicer? If you don’t already know how to do all of the above mentioned things, then sign up today so you can learn how to structure a modification which will provide immediate relief and long term sustainability for your client. Remember: “If it ain’t on the paper, it don’t exist.” Feel free to repeat that quote by HOM founder Mildred Wilkins.

Lunch—The Perdido Grill

Session VI: Ethical and Legal Constraints

This final session is, perhaps, the most important session. It will focus on the need for clearly understanding how critical it is not only that you operate a modification business in an ethical manner, but that you also avoid even the appearance of borderline behavior. A number of states have already enacted legislation which covers businesses and individuals who are “foreclosure intervention counselors”. Offering a modification for a fee would definitely put you in that category. Not only are you obligated to abide by Federal privacy laws and fair housing laws, but there is an assortment of other laws which are geared to protect consumers from unscrupulous providers of service. There is, and will continue to be, aggressive investigation and prosecution of organizations and individuals who seek to take advantage of consumers during this trying time. HOM is basically a consumer advocacy agency and is, therefore, strongly supportive of legal action against any modification service provider who uses their knowledge and influence to take advantage of a consumer who has trusted you to help them at this difficult time. HOM will not endorse nor condone any illegal or unscrupulous behavior as it relates to foreclosure intervention, including loan modifications. Attendees of all training sessions offered by the Institute will clearly recognize that behavior above board, at all times, is continually advocated and expected of HOM graduates. Completion of a HOM Institute training should not be used as a cover for unscrupulous behavior. Be forewarned that the reputation of the company will be fiercely and publicly defended if a graduate seeks to use the integrity of the company in order to validate themselves.

**Dinner option available: Class vote required!

REGISTER TODAY, it may be the only way you are able to reserve your spot! Remember, there are only TEN spots open for this training!

Other training dates: May 25-27 and June 8-10

Airports:

Pensacola; 17 Miles Away
Mobile; 55 Miles Away
Okaloosa Regional; 53 Miles Away
Ft.Walton Beach; 48 Miles Away

April 1, 2009

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.)