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

Community Service Announcement: Modification Warnings

Community Service Announcement: Modification Warnings

There is a lot of positive which can be said of getting your loan modified and the mortgage payment changed to one which is more affordable. But you would be wise to consider some new twists which may mean it is not as great a bargain as you thought.

Temporary or Permanent Change

Back in the olden days—just a few months ago—loan modifications were made by lenders for distressed borrowers who had demonstrated the ability to resume payments and sustain them as permanent changes to the existing mortgage. The modification was processed as a PERMANENT change in the loan terms so the borrower could rest assured that the new loan was, in fact, one which could work for them. Many of the new modifications are only TEMPORARY. The trial period may be as short as 3 months or as long as six months. This is being used as a new test period to see whether or not you are able to sustain the payment. The problem is that there is no ironclad guarantee that the ‘modified’ loan payment will remain in place after that introductory period.

Life Happens

What happens if your loan is transferred to another servicer during your trial period? Worse yet, suppose your financial institution is sold or otherwise acquired by someone else? In either case, you would be holding an unenforceable, short-term agreement with a party different than the one you actually have to deal with concerning payments. You would be wise to consult with an attorney about the terms of ANY modification being proposed by your lender or to have an attorney to help you with structuring a modification which is practical given your current situation and the value of the property.

Temptation Could be too Strong …

Under the current administration’s plan to encourage lenders to modify as many loans as possible, lenders/servicers are being paid a fee to process those modifications. Substantial fees. They are paid based on whether or not they get the modification completed. They are paid whether it is an agreement which works for you or not. They are paid whether or not you have received what is called “net tangible benefit” (did it do you any good?).

We would hate to think that a bank might process modifications in order to receive payment even when they were aware that the payment amount was not sustainable for the borrower, but remember these are the same institutions which processed loans for some folks who clearly were not in a position to make those payments either. I’m just saying....

Has the modification been recorded?

One might argue that there is no point in recording a short term agreement and you could see their point. But maybe the reason for processing short term or temporary modifications was to avoid recording them in the first place. If there is NO RECORD officially—as in your local city’s Recorder’s Office—of the newly created Modified loan then the only record which exists is the OLD, unaffordable loan. IF your loan is transferred or sold, then the OLD loan is the current loan which is the ONLY loan that exists. Surely you can see where I am going with this.

Recommendation: If your loan has been modified and you want to keep that payment then it MUST be recorded.

HINT: Insist that your modification agreement contain a provision for the loan to be recorded promptly after agreement is finalized by your and your lender/servicer. Otherwise, you could be in for some heartburn.


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.)

Press Release: HOM Announces Loan Modification Specialist (LMS) Certification in Las Vegas

NEWS RELEASE

FOR IMMEDIATE RELEASE – January 15, 2010

Contact: Mildred Wilkins at 1 (866) 507-5105 mildredwilkins@HomeOwnershipMatters.com

Home Ownership Matters Training Institute

Offers Loan Modification Specialist Certification in Las Vegas

Indianapolis, IN, January 15, 2010—National speaker and foreclosure intervention trainer Mildred Wilkins is pleased to announce that the (LMS), Loan Modification Specialist certification program for real estate professionals seeking to help borrowers modify their home mortgage loan will be offered in Las Vegas, Nevada March 11-13, 2010. The program has previously been offered only in Florida. Nevada has the dubious honor of being one of the hardest hit states with borrowers losing their homes to foreclosure. Many are seeking the help they need to avoid it.

With a number of loan modification businesses already in operation in the state, it makes sense to offer high quality training to those looking to provide consumers with an option when they face the challenge of trying to cope with the overwhelming task of preparing to deal with the lender’s shop. Professional training coupled with certification from a nationally recognized trainer and former Fannie Mae Broker-Specialist could give you the edge you need in the development of your business.

As the national news continues to report; the Administrations’ modification program implemented last spring has failed woefully in reaching even a fraction of the borrowers who qualify for help. There are some clear cut reasons why that is true, and those reasons will be discussed with clarity during this course.

Wilkins has been a foreclosure prevention trainer for several years, and has offered a 5 day training (FIS) Foreclosure Intervention Specialist certification for REALTORS® since 2005. The (LMS) certification program was developed in 2009 to meet the need for professionals who understand the process and are familiar with the ‘bank game’ to specifically focus on ONLY loan modification business development. Consumers deserve skilled representation to have at least a fighting chance at getting a modification when one is warranted. The program is designed for experienced professionals, whether attorneys, loan officers or real estate agents who already understand the mortgage process and are familiar with typical closing documents. (LMS) training will provide attendees with the tools to provide a high level of professional service while avoiding many of the pitfalls in this rapidly expanding arena.

The housing crisis has increased dramatically creating a need for a new field of knowledge—a new type of expert. Foreclosure is frequently avoidable but unfortunately consumers have limited opportunities to learn what options are available. Nor is there a way for consumers to identify professionals who have the ability to help them rather than perpetuate yet another injustice. (LMS) addresses that need by empowering real estate professionals to be prepared to handle borrowers in default with increased knowledge and the tools to be effective in working with lender shops to effect a successful modification or other retention option.

Ms. Wilkins sold foreclosed properties for Fannie Mae’s disposition department out of Dallas, Texas for 2 ½ years. She has received loss mitigation training from NeighborWorks America, Fannie Mae and HUD and Legal Services. Since founding HOM in 2002, she has been quoted in the New York Times, BusinessWeek and the Huffington Post. She has appeared on MSNBC and NPR. In addition, foreclosure related articles she has written have been published in BAS and REALTOR® magazines around the country.

Wilkins has taught for Graduate REALTOR Institute (GRI). She is also a member of the faculty of NeighborWorks America as a trainer in Foreclosure Intervention. She is regularly a speaker or trainer at numerous state/regional conferences on foreclosure intervention, predatory lending, loss mitigation and/or mortgage fraud. She is widely recognized as a leading expert on these subjects. HOM has been certified as a continuing education provider for real estate professionals in Colorado, Nebraska, Kansas, Ohio, Indiana, Kentucky, Tennessee, Oklahoma, Iowa and Alabama. Wilkins is an approved instructor for attorneys in Indiana and Ohio.

Today’s challenges require more expanded knowledge than ever before. Get the edge you need! Register today!

www.HomeOwnershipMatters.com for registration/information.

Email: MildredWilkins@HomeOwnershipMatters.com

Myth: Modification vs Refinance

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

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

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

A modification:

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

Under the terms of a modification:

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

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

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

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

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

Call your lender today. Best of luck.

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

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

FAST FACTS: Avoid Modification Relapse

It is critical that you follow up to be sure that the new “modified” mortgage which you have been successful in negotiating is duly recorded. A modified mortgage is intended to be a permanent change in the terms of your loan, but it is important that you not only negotiate for terms which are sustainable, but that you also take care that the agreement includes a provision for the lender to record the new mortgage in a timely fashion. Failure to do so could lead to a disastrous situation in the future when your loan is transferred to a new servicer. Your new servicer could refuse to acknowledge and/or abide by the terms of the “modification” and instead treat it as a temporary agreement between you and the servicer who completed the paperwork. Essentially they can say, "we must abide by the terms of the original note." There has been no subsequent mortgage recorded.

Avoid mortgage modification relapse by either:

1. requiring the lender to record the modification within a short timeframe after the agreement;
2. utilizing the services of an attorney or other professional who accepts responsibility for guaranteeing that the modified loan will be recorded
   

In either case, you must check YOURSELF to be sure that the mortgage has been reported to your local recorder’s office in a timely fashion (you could get transferred to another servicer any minute).

Don’t allow your lender to take advantage of you, AGAIN, by agreeing to a modification and then transferring you to another servicer who is legally obligated to follow the terms of the original instead of your modified loan.

Forewarned is forarmed—but only if you do what you need to do.
We’re trying to look out for you--help us out, DO YOUR PART.

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.)

Reflections on the Home Affordable Loan Modification Program

The Obama Administration announced the H A M P program with great fanfare on March 4, 2009. It was a bold step to address the foreclosure problem which was clearly swirling out of control. $75 Billion committed to reducing loan payments. Projected to help more than 4 million homeowners.

It Began With a Premise

Foreclosures in the country were occurring at break neck speed and something had to be done. The plan was conceived based on the premise that homeowners would pay their mortgages—IF they could. Despite being upside-down, borrowers are committed to retaining their home. Warren Buffet has been quoted as saying “Commentary on the current housing crises often ignores the crucial fact that most foreclosures do not occur because a house is worth less than it’s mortgage (upside down). Rather, foreclosure takes place because borrowers can’t pay the monthly payment they agreed to pay.” It is a premise with which I agree and an honorable premise on which to craft a resolution.

A Look At the Program

H A M P or Home Affordable Loan Modification Program was launched with the specific and ambitious goal of making sure that millions of Americans would have the opportunity to remain in their homes even though market dynamics and other factors beyond their control meant the value of the property had declined AND they were struggling with payments but they wanted to keep their home. The goals were clear, the mandate receiving strong support. It seemed a good thing—for all the right reasons.

Reduction in Payment

To address the ‘ability to pay’ the H A M P plan provided guidelines for getting those payments under control. Conservative banking guidelines for many years had shown that mortgage payments at no more than 31% of a borrower’s income usually prove to be sustainable so that OLD underwriting guideline was used as a benchmark for what should be the new goal to help us get out of this mess.

To accomplish this, lenders and their servicing partners were provided with guidelines to make this happen:

a. First, Reduce the payment amount so that it was no more than 31% of the borrower’s monthly income

b. Reduce the interest rate to as low as 2% as a way to get the payment down farther

c. Extend the term of the loan—up to 40 years—further reducing the monthly payment

d. If the payment amount was still more than 31% of the borrower’s monthly income, THEN funds from the H A M P fund would be used to pay whatever was needed to get the payment down to 31% of monthly income

Adjusting the principle balance was not an option addressed by this plan even though it was a logical step (in the opinion of this writer) and had been the objective of the ‘cram down’ component of the bankruptcy reform legislation defeated late in 2008.

Criteria for Participation

H A M P was created as an option for owner-occupied properties with outstanding balances of $729,750 or less. The homeowner was required to demonstrate a hardship caused by a factor or factors beyond their control. It applied to loans originated prior to January 1, 2009. Modified payments were set up for 3 months, as a test to see if the borrower could afford the new payment.

If they made that threshold, then the loan modification became permanent (for 5 years, so let’s say, semi-permanent).

Investors or speculators were exempted from participations. So if you had bought into the hype that building a piece of America was the way to financial security, you were on your own. Consequently, it was expected by a number of observers that the number of foreclosures in this segment would rise dramatically, and RISE they have.

Incentives

In order to facilitate this voluntary program, the H A M P initiative provided for financial inducement to all parties to participate. Servicers (and/or the lenders whom they represented) were to receive $1,000 for each completed modification. The plan called for an additional $1,000 for each year the modification remained in place with a cap after 3 years. The borrower could get $1,000 off their principal balance for each year, up to five years.

“Net Present Value” Test

In order to determine which loans should be modified, lenders/servicers were to conduct a ‘net present value’ test. The test was supposed to compare the expected cash flow which would be generated under the program (with a modified, performing loan) as compared with the expected cash flow if the loan were not modified (and continued non-performing if the borrower were already in default). Let’s see, some $ paid, versus $0 paid. Not a hard test really. Seems like a no-brainer to me.

Good intentions for a worthy cause. So how did it go wrong. Why have consumers across the country been yelling fowl by the hundreds of thousands? Why has the Administration acknowledged that the program has not reached nearly the scope that they projected? We’ll provide those assessments in tomorrow’s blog. Don’t miss it.

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.)

Fast Fact: Modification of Loans

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

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

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

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

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

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

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

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

WORD: Loan Modification

And the WORD for Today is...

Loan Modification – is a loss mitigation tool which involves a permanent change in one or more of the terms of the loans, which results in a loan payment the consumer is able to afford. It might accurately be called an ‘in-house refinance’ meaning that the consumer’s current lender (NOT A NEW LENDER) would be the entity to provide such a modification. A loan modification is a permanent change in one or more of the loan factors, which might include term, interest rate or loan type. If the loan is an FHA loan, it must first be purchased out of the Ginnie Mae pool and then re-pooled after it has been modified.

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: Adjustable Rate Reset

Q. We re-financed our home 2 years ago so the payment would be more affordable. At the time we did not understand exactly what an adjustable rate mortgage meant. The broker told us the rate might go up later but that was not likely to happen since the rates were so low and that if they did we could always re-finance again so we would not have to worry about it. Our adjustable rate mortgage is scheduled to reset within the next few months. We feel sure the house is worth less than we owe so re-financing again is not likely to work for us. What happens at that time with the present mortgage holder?

A: Adjustable rate mortgages are set for certain periods of time and then the rate changes. Your rate will adjust based on the terms in the mortgage you signed at the inception of the loan.

Your present note holder or servicer is required to make the adjustments in strict adherence to the terms in your original documents. The frequency of the change as well as changes to the interest rate and caps should all adhere to the terms set forth in your note. You might pull out the original document and check to verify that they have, in fact, followed the guidelines there. If a mistake has been made you should bring it to the lender’s attention as soon as possible.

In the event the change in your interest rate will create a hardship in your ability to continue making scheduled payments, then consider the possibility of requesting a modification to the terms of the loan. There is a possibility that you might qualify for a reduction in the rate, or perhaps be able to have the loan converted to a fixed rate in order to keep from falling into default.

You should expect the lender to take a close look at your finances and have you to complete numerous forms and provide information on your finances to document your current situation and project your ability to maintain the payments with a new, adjusted rate. It is not a given that you will be able to get the rate changed, but it is certainly worth looking into.

Most lenders will at least consider a modification if you can demonstrate funds sufficient to make a reduced payment but cannot keep payments current at the higher interest rate. Check with the loss mitigation department of your financial institution if you are currently in default. Otherwise, you may talk to someone in customer service, but the reality is that seldom will you be offered any help unless you have already missed a mortgage payment.

I didn’t tell you to miss a payment; I said “seldom will they help you unless you have already missed a payment." Point of clarity: Loss mitigation is the correct department for someone who is already in default on their loan and customer service helps folks, or answers questions, when you are still current. The new stimulus package has a provision for banks to consider a modification “if default is likely”. We’ll have to wait and see whether banks actually do that.


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.)

Assessing HAMP a year later

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

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

Why Has HAMP failed?

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

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

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

Non-Profit Push Back

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

Program Lacked Basic Understanding of the Bank World

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

Motivation Insufficient

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

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

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

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

Modification Myth

MYTH—It is a widespread myth that borrowers who are in default have no money and therefore no way to pay for help with addressing their default situation. The argument is frequently the logic for non-profits who insist that it is somehow immoral for a borrower to be asked to contribute to the service which they need. While I support non-profits, I have never bought into this false thinking. I believe that most folks appreciate more what they have contributed to and think that non-profits could offer more services to more people if they adopted a sliding scale which allowed clients to pay according to income level with a provision for totally FREE service in situations which clearly warranted such.

REALITY—many borrowers do have money—SOME money. No matter what circumstance caused the default, many borrowers not only have some money but are both willing and anxious to find someone whom they feel can help them with their mortgage mess and are both able and expect to pay for that service. This is especially true of middle to upper income borrowers who are used to paying for any service they get and are more likely to be suspicious of service offered for FREE. As an example, the borrower in a $500,000 house who has been laid off is likely to have resources to make the mortgage payment for a while before savings, retirement and/or other accounts are depleted. This individual is looking for an attorney or similar professional with knowledge of the foreclosure process, possible impact on his taxes, etc to help with the tough decisions which have to be made. Additionally, this same borrower, while highly competent at his/her job is acutely aware that they are unprepared to negotiate for themselves in this arena. To my point, I recently personally coached a highly skilled attorney through the loan modification process and the mandatory meeting with the Lender shop which has been instituted by law in the state of Indiana. The attorney was able to do what I told her to do but she did not know WHAT to do or WHY certain things were important because this is not her area of expertise. She needed professional coaching to deal with the bank world. She is one of several consumers whom I have personally coached through the process and helped them to be able to represent themselves since I am not in a position to do so.

SOLUTION—Trained, competent foreclosure intervention counselors—who work for a fee, to represent those who cannot get representation at HUD approved or other such agencies. There is room in the market place for both. There are consumers at both ends of the spectrum who need appropriate, professional help. Recently I was asked by an upper income borrower what exactly I do other than the training for REALTORS. I explained that I am a consumer advocate and try to reach borrowers for whom I can provide FREE workshops or materials to in order to help make a difference in their situation. His question then was ”Why are you discriminating against people who have money?” The question caught me off guard and caused me pause. The truth is that I come from a background of poverty and I have a commitment to make as much of a difference as I can for those who are struggling. Does that mean I should not share my knowledge with those who can afford to pay for it?

It struck me as a novel concept. It resulted in a paradigm shift.

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: Miscommunication—Papers Served

Q. I have not made my mortgage payments for the past six months but the lender had said they would try to do a modification and make the payments lower so I could afford them since I am back at work. Today I received a notice with the word “summons” on it indicating that the lender has filed for foreclosure. It says I have 20 days to respond. I have no idea what to do. Who do I respond to? What do I tell them? Do I need an attorney to do this? Please give me some answers—FAST.

A. First, calm down and let’s take this one step at a time. You do not need an attorney to handle this. (Yes, an attorney can do it but one is NOT necessary.) The “summons” is a notification from the court that the lender has filed legal action against you because you are defaulted on the loan. How much time you have to respond will be determined by your local state foreclosure laws and the terms of your mortgage note or deed of trust. Take a few minutes to check your state statues to be sure you respond within required timeframe or you lose any rights you would have had.

Second, you need to provide an “answer”. An answer will notify all interested parties that you do not plan to lose your home to foreclosure.

An answer will give you time—a valuable commodity--

• time to verify that the plaintiff is the ‘real party of interest’ (if not, this is GREAT news for you)
• time to get your disability claim finalized and start to receive payments
• time to work out a modification, short sale or other option
• time to complete a reverse mortgage and get current
• time to get back to work and resume payments

It is important that you provide an answer to all interested parties: the party who sent the summons/notice (usually the clerk of the courts), the attorney representing the plaintiff as well as the lender themselves. I suggest all copies be sent with return receipt requested and that they require a signature. It is crucial that you keep this information so you can prove (if need be) that you provided the answer within the legal time frame.

An “answer” can be crucial to buying you the time necessary to save your home. However, there is little point in using this option if you have already determined that you simply cannot afford the home.

Do some research on-line or go for it. I am confident you can do it.

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

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

WORD: Still Mortgages...

The WORDS for Today:

Mortgage Fraud-The intended victim is the LENDER. The transaction involves a group of scam artists. The usual players are: a real estate sales person, a mortgage broker, an appraiser, and a title company closer. A buyer is a necessary component of the scam. Sometimes they will be a part of the scam team and sometimes they will not be aware that they are, in fact, breaking the law. This team operates by:
a. Purchasing a low-income property, usually for cash
b. Secure a grossly inflated appraisal to support a new loan
c. Close the transaction with a buyer (typically called a “straw buyer” by law enforcement)
d. Profit from the difference between the lowest cost of the property, perhaps $15-20K and the new loan which will always be substantially HIGHER than the actual value of the dwelling may be as high as $90K-300K depending on the proximity to more expensive housing an the boldness of the players

Mortgage Modification- The borrower may be able to refinance the debt and/or extend the term of the mortgage loan. This may help them to catch up by reducing the monthly payments to a more affordable level. Borrowers may qualify if they have recovered from a financial problem and can afford the new payment amount.

Mortgage Warehousing-means a mortgage company holds a loan, which would ordinarily be sold. Most often the reason to “warehouse” the loans for a period is in anticipation of selling them later at a lower discount. These mortgages will be used as the security with a bank to borrow new money to loan.

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

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

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

...From the Desk of..."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.)

So, you think you want to become an REO Broker?

Get ‘Em Listed and Roll in the Dough…

It happens every time I teach a class (and I just had an (FIS) class in Charleston last week). Several of my students will get all fired up about becoming a listing agent handling REO’s as the fast track to real estate success. Even though the class is (and is advertised as such) designed to help REALTORS learn how to be successful with options to AVERT foreclosures, someone always attends for the SPECIFIC purpose of meeting me and having me tell them the short cut to becoming a Fannie Mae broker or a representative for some other REO account. Aside from the fact that that is not the purpose of the training, there will always be someone who is persistent in trying to move conversation in that direction.

This article is for you—you know who you are.

Ah-h-h, the Cushy Life of an REO listing agent

I’ve been there, done that, got the T-shirt AND the award. I received the 1st Rising Star Award as Rookie Broker of Year for the United States from Fannie Mae in 2000. They were right on target with their assessment; my star has been rising, (also drifting, getting lost and other mundane contortions) ever since. Oh, but I digress.

The truth is that my Fannie Mae experience was, overall, a really good one. I received excellent training at the Disposition Center in Dallas, and great support from my initial salesperson, Shirley Mastenbrook. I learned how to effectively price property based on a precise analysis of market data and I sold a heck of a lot of Fannie Mae homes. My sales volume and income both increased dramatically. However, my life, as I knew it, completely disappeared. It’s emotionally devastating to process a forceful eviction. To be the person who stands there and officially authorizes someone to be thrown out of their home. Being property manager extraordinaire is an emotionally draining and time-consuming gig.

It’s a New Day

The REO market is booming and in some areas there are more REO’s available than traditional listings. Loss mitigation efforts, including modification and short sale attempts, have slowed the number of completed foreclosures even though the number is still unbelievably high. However, the amount of ‘shadow’ inventory (REO’s being held by guarantors and NOT being placed on the market) is estimated to be a significant amount and must eventually be placed on the open market.

Market dynamics are rapidly evolving. A new mixture of guidelines for disposition changing in response to market conditions and/or government regulations, recommendations or directives and REO owners all serve to make today’s REO broker’s job a very challenging one. The practicalities of good business decisions shaping what will or can be during the time period the REO is under the control of the guarantor or lender is fluid. When you own or manage a few properties you can be almost casual about how you dispose of them. When you own thousands upon thousands, stacked on top of each other, you have to utilize a more systematic, inventive approach in reducing those expenses which revert to you and become vigilant in avoiding any expenses you can. Utilization of a strong contract, with strict adherence to its dictates can mean survival or failure to survive. Whether expenses are moved to listing agents, buyer’s agents or buyers is immaterial; what is important is that anything which can be shifted to someone else, be shifted. The list is growing—now even eviction costs have been added to the list of costs which can be shifted to someone else.

Flies in the Ointment

Nothing messes up a good plan faster than messy details. It should not cause you concern if the dollar amount tied to a detail is a small number, with only two place holders, like $99.00. It gets serious when the numbers are BIG numbers, with 3 or more placeholders, say $475.00 for instance.

Likewise, phrases such as “shall maintain the premises” are not a big deal, unless the premises include a pool or some other high maintenance component. Assuming the responsibility to maintain can keep a person awake at night better than a crying baby. Didn’t they explain that ‘handle utilities’ meant that ‘deposits when required’ would come from your checking account? I suggest you re-check your account balance to be sure you can AFFORD to be an REO listing broker. It’s good business, if you can get it—provided you are sure you understand what you are signing up for.

Re-imbursement is on the Way

**Insignificant detail—To be delivered by deranged carrier pigeon who will be dispatched later this year.

I am not throwing snipes at Fannie Mae. They did an excellent job of processing reimbursements and doing so in a timely fashion based on the criteria they had set for their agents. However, things could be dicey IF you forgot to submit invoices on time. REO sellers are SERIOUS about their deadlines. You miss it; you eat it!!! No equivocating. You agreed and said you understood, this is a business, not a game for newbies who want to play at REO sales. Suck it up, write the check and remember to check due dates more carefully in the future. If you want to depress me, e-mail me and ask about the $15,000.00 I had to shell out after missing a few deadlines—it doesn’t take long for carpet and paint to run into some serious money. BIG numbers, with five place holders—like $15,000.00.

REO’s can be LEASED

Awesome plan! Announced by Freddie Mac in January of ‘09 and Fannie Mae in November of ‘09. This is the deal. Both organizations were (and remain) concerned with the increasingly large inventory of foreclosed properties as well as the public perception that they are not doing all they can to help alleviate the problem. Both have begun lease-back programs so that either the former owner of the property or a tenant placed there by the owner can lease the home back—AFTER foreclosure.

In a nutshell, the Freddie plan is a month-to-month lease, at current market rent. The property will be on the market during that timeframe and the new BUYER assumes responsibility for the eviction process and related costs to get the occupant out of their new home.

The Fannie Mae plan is essentially the same, except that it allows for a one year lease period. If you are the REO broker for either of these guarantors you have the honor of explaining the particulars and the implications to a buyer’s agent. What appears to be a win-win for Fannie or Freddie and the occupant can become a nightmare for the agents involved and a potential purchaser. The magnitude of unintended consequences is enough to make my hair go straight (and I have a very short, curly Afro). I suggest you take a crash course in landlord-tenant law in your state. Additionally, please check to be sure your E&O Insurance premiums are current.

Would I do it again?

The truth is, I might be tempted because of the guaranteed revenue stream. The reality, however, is the same as the prospect of teaching middle school kids: someone has to do it but I am not that hard up yet. Having sold REO’s for 2 ½ years, very successfully, I can see how dramatically the terrain has changed. Today’s REALTOR has a lot more risk, many more potential ‘bosses’, and fewer clear guidelines in an arena which mimics the wild, wild west pretty closely. Training by the companies who select agents is almost non-existent. The entire process is further complicated by the fact that you are stepping into situations like the landlord scenario I mentioned in the paragraph above.

For agents who decide this is still the route you wish to pursue, I’d like to share some thoughts on making an informed decision.

The Five Star Conference, complete with training institute, offers just what you need—but the entire cost for that training will be at your own expense. The timing of the annual event may not coincide with when you want to get started and there are numerous other challenges to concern yourself with as well. Learn how to perform a professional BPO (www.fanniemaebpo.com) so that you are really good at determining property value PRIOR to the listing. Additionally, it might be beneficial for you to read the actual contract used by the guarantor you think you want to represent. I am suggesting that you read both the listing agency contract (which you and your broker will need to sign) and the contract which you will provide to buyers/buyer’s agents. You can learn a lot about the firm you will be working for by studying the documents which will bind you to them.

REO sellers do not all require the same level of service

It is important that you pre-determine what type of REO listing agent you want to be: an agent who only lists properties (such as HUD homes) without an obligation to handle utilities, etc – or does property management to a degree (Fannie Mae or Freddie Mac) or offers an even broader range of services such as rehab, keeping utilities in your name and a full menu of other services. Then only seek or accept listings from an REO seller whose needs mesh with those services which you are willing to perform.

I would caution you to avoid seeing the REO business as something you will just ‘tack on’ to the rest of your business. Most REO sellers are very demanding. Their volume is growing faster than mushrooms and a huge quantity of ‘shadow’ inventory is just waiting to be released. It would be wise to see this as a major part of your business and to make a decision based on whether you were prepared or willing to shift and become primarily an REO seller’s agent if this is the path you chose. If you do well, the volume will definitely follow. If you do poorly because you cannot handle unexpected volume, they will drop you like a hot potato and never speak to you again. They take “failure to perform” very seriously.

I would encourage you to talk to some agents who have listed REO’s within the past 18 months. Sit down with them over dinner (your treat) and ask for an honest analysis of those things which they see as problematic.

Your final question to them should be: “What is the worst thing that could happen?” Consider their answer. If you can live with the worst thing that could happen, then go for it.

Best of luck in the REO world.

Happy to be a “Former Fannie Mae Broker”

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.)