Debra Allen

Consumer Message 

Homeowners are Urged to – Sell Short, Refinance, or modify there current mortgage. Please Try Not to Lose Your Home and contact your Trusted real estate advisor. If you or someone you know is facing Pre-foreclosure & needs assistance reviewing and understanding all the option available, I can help. Call or email me to set up a free consultation to see what options you may have.

Patience, Persistence, Knowledge, Experience, Creativity and a smile on your face

 Follow the link below with a workbook put out by Terry Goddard our Arizona Attorney General. This handout is a tool to educate homeowners about the foreclosure process. If you have questions about foreclosures, mortgage delinquency, knowing their options, scams and rebuilding after foreclosure, this workbook is a great tool.

http://www.azag.gov/consumer/foreclosure/documents/StateTaskForceWorkbook.pdf

      Beware of Foreclosure Rescue Scams – Help Is Free!

Scam artists often target homeowners who are struggling to meet their mortgage commitment or anxious to sell their homes. Recognize and avoid common scams.     

• Assistance from a HUD-approved housing counselor is FREE.
• Beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a delinquent loan.
• Beware of people who pressure you to sign papers immediately, or who try to convince you that they can “save” your home if you sign or transfer over the deed to your house.
• Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.

• Never make a mortgage payment to anyone other than your mortgage company without their approval.

Report Lending Discrimination to HUD
If you believe you have experienced discrimination based on race, gender, national origin, or another reason, contact HUD’s Office of Fair Housing and Equal Opportunity at 1-800-669-9777.

Need urgent help? Contact the Homeowner’s HOPE™ Hotline: (888) 995-HOPE

About Making Home Affordable

The Obama Administration has introduced a comprehensive Financial Stability Plan to address the key problems at the heart of the current crisis and get our economy back on track. A critical piece of that effort is Making Home Affordable, a plan to stabilize our housing market and help up to 7 to 9 million Americans reduce their monthly mortgage payments to more affordable levels.

The Home Affordable Refinance Program gives up to 4 to 5 million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance into more affordable monthly payments. The Home Affordable Modification Program commits $75 billion to keep up to 3 to 4 million Americans in their homes by preventing avoidable foreclosures.

Our consumer website, www.MakingHomeAffordable.gov, provides homeowners with detailed information about these programs along with self-assessment tools and calculators to empower borrowers with the resources they need to determine whether they might be eligible for a modification or a refinance under the Administration’s program. Through this website, borrowers can also connect with free counseling resources to help with outstanding questions; locate homeowner events in their communities; find a handy checklist of key documents and materials to have ready when making that important call to their servicer as well as FAQs from borrowers in similar circumstances; and much more.

We hope that you will find this website informative and useful as we all work together to solve our nation’s housing crisis and put our country on the path to a lasting economic recovery.

I appreciate the opportunity to be of service. Give me a call 480-797-4080. I will be delighted to assist you further. 

Foreclosure Prevention:

As you REALTOR® and trusted Advisor, I have listed below some basic instructions to help you communicate with your mortgage company. The sooner you call your mortgage company, the more options that will be available to you.

Before calling your mortgage company, familiarize yourself with these various options. 

Repayment Plan                                                Forbearance

Loan Modification                                            Pre-Foreclosure

Deed-in-Lieu of Foreclosure                             Foreclosure

Repayment Plan – Past due amounts are divided and added onto the regular monthly payments for an extended amount of time to bring the loan current.  Plans may be from 6 to 24 months in duration.

Forbearance - A period of suspended or reduced payments that prevents delinquent reporting of the loan to the credit bureaus, and prevents late charges and fees accumulation, and referral to a Foreclosure attorney, as long as the contract is being honored by the homeowner.

Loan Modification – Loan is brought to a current status by adjusting one or more of three terms of the mortgage i.e. reducing the interest rate, extending the term of the loan. Example:  Increasing principal balance by adding the past due amount (interest, taxes and insurance) to the existing principal balance or extending the term of the mortgage to 30 – 40 amortization.

Pre-Foreclosure Sale – An approved sale of the property to an unrelated third-party for less than is owed on the mortgage preventing a Foreclosure on the borrower’s credit report

Deed-in-Lieu of Foreclosure – This procedure allows the homeowner to transfer your property voluntarily to their lender or Mortgage Company and the debt or deficiency is often forgiven.

Foreclosure – Pre-foreclosure Process – approximately a 90 day process. 

Negotiating With the Mortgage Company

·        Contact your mortgage company regarding hardship with supporting documentation

·        Prepare a budget

·        Have bank statements & pay stubs ready

·        Suggest a remedy

·        Communicate with the mortgage company regularly

Five Things A Homeowner Should Never Do If They

Fall Behind On Their Mortgage

1. Absolutely do not ever deed your property to a third party without absolute confirmation your loan has been paid off.

If the homeowner deeds their property to a third party, that party then controls the property. The new owner can rent the property (and keep the rent), attempt to sell the property to make a profit, move into the property or use the property in other ways.

What the new owner might not do is make your mortgage payments.

Just because the homeowner no longer own the property does not mean they are no longer responsible for the mortgage loan obligations. The lender made the loan to them. And until it is paid off they will be primarily responsible for the mortgage obligation.

If the homeowner gives up control of the property and the new owner does not pay on the loan, the damage to their credit could be catastrophic.

2. Do not sell the home at a huge discount. Unless the actual foreclosure sale is less than 45 days away, the homeowner has time to explore options. Advise them to take a day or two and make a few phone calls. As a general rule, if someone is pushing you hard to get you to sell your property to them, it’s probably because the deal they are proposing is very favorable – to them.

If the homeowner has equity in their home, it belongs to them. They should be encouraged to talk with a Realtor to see if they can get their equity back to them.

3. Do not authorize a prospective buyer to deal directly with the Mortgage Company.

The buyer has one goal and one goal only, and that is to negotiate a low, probably very low price direct with the lender. The buyer will ask the lender to accept a discounted payoff.

The negotiations could go on over an extended period of time, and if the transaction does not work out the buyer may elect not to buy the property. It could leave the homeowner with very little time to resolve the situation and avoid foreclosure. Further, the homeowner has no control over the information that goes to their lender or the accuracy thereof. It is entirely possible that the buyer could handle the negotiation and presentation of information in a way that makes it very difficult for the homeowner to resolve their loan situation later.

Explain to the homeowner:  Using a Realtor professional is the homeowner’s best bet, surly before signing a contract.  It costs them nothing – the lender pays the fees. Someone should be looking out for the homeowner.

4. Do Not Pay Upfront Fees to anyone! Homeowners do not need to pay professional service or consulting fees to get the help they need to resolve their delinquent loan. 

5. Don’t do nothing a surprising number of people just accept what they see as the inevitable, and let foreclosure run its course. Don’t let it happen – the damage to the homeowner’s credit will follow them for years to come.

Basic Contents of a Short Sale Package

Declining home prices are great for buyers, but for highly leveraged sellers who bought in the last few years , falling home values can mean they owe more on their mortgages than the home’s current appraised value. Other sellers may find themselves unable to meet higher loan payments as adjustable-rate mortgages and other “creative” loans re-balance to a higher monthly payment.  If you’re a sellers who is in one of these difficult situations, you may have to scramble to get help to sell your home. One increasingly widespread option is a so-called short sale.

Every day, more people slip into the foreclosure whirlpool and spiral downward toward the day they may have to leave their home. What should you do if you are on the verge of getting a foreclosure notice?

The following is a basic outline of what your Lender needs to start the Short Sale process. These items are required in a Short Sale package:

• Cover Letter         
• Authorization to Release Information
• Sellers Hardship Letter 1 Page signed and dated
• Seller’s Financial information – most banks have a form for this however I use a standard form initially with all sellers.
• Supporting Financial Information:
  • 2 years w2’s
  • 2 months pay stubs
  • 2 months bank statements

Supporting Hardship info – for example HOA liens, medical statements, disability statements

• Repair Estimate for the property – if you can develop a relationship with a contractor for this it adds credibility
• Comps for the property
• Contract
• Net Sheet / HUD 1
• Additional information that may be asked for:
  • The first mortgage holder may ask for a payoff amount from the 2^nd
  • The second mortgage holder may ask for a payoff amount from the 1^st
  • Initial Title Report

Cover Letter

The cover letter should be clear and concise giving the needed information to the bank. The information that I include is an overview of the homeowner’s situation, what they owe on the property, what it is really worth and mention the amount of the needed repairs.  I also state what my offer to the bank is a good offer.  I conclude my cover letter with all of my contact information and state that I hope we can work together to resolve this issue for the homeowner.

Authorization to Release Information

I have a standard Authorization form that I use and in most cases this works fine.  There are a few banks that require their own form for this. 

Seller’s Hardship Letter 

I typically ask my sellers to make this at least a page long.  The goal of this letter is to simply have the homeowner explain their situation to the bank.  This will include key items such as job loss, divorce, health issues, medical issues, etc.  If the seller is considering bankruptcy you can have them include that, however it typically doesn’t scare the bank into acting faster. 

Seller’s Financial Information 

The bank really wants to know what is the inflow and outflow that the seller has each month and what other expenses and assets do they have.  I have two standard forms that I have my seller’s fill out, personal information and financial information. I also have a standard authorization form that the Seller fills out  in order for me to speak to their Lender. 

In most cases these forms will work, however there are times that the bank will request that the homeowner complete the standard forms that they issue.  

Supporting Financial Information 

These items are typically the same required by a borrower when applying for a loan:

•    Last 2 years W2’s 1040
•    most current 2 months pay stubs
•    most current 2 months bank statements
•    Financial worksheet

I always tell my sellers that in order for the bank to evaluate considering taking less than what is owed on their property they need provide the same type of information they did when they applied for a loan, however they are now showing they can’t do this financially at this time.

Supporting Hardship Info 

In order to paint the full picture to the bank of the homeowner’s situation it can help to provide additional documents showing the hardship.  This can include medical bills, accident reports, layoff notice, etc. Please be very detailed .

Repair Estimate For The Property 

Providing the bank with a detailed repair estimate from a reputable contractor will assist greatly in getting your short sale accepted.  The bank doesn’t want to own property and especially not property that needs a complete overhaul.  Showing this by presenting what needs to be done and the cost is very helpful.

Comps For The Property 

You definitely want to do your homework and provide the bank with at least 3 to 5 comps of properties in the area that have sold in the last 6 months.  In doing this you want to try to get as close to the subject property that you can and ensure that you provide the lowest comps that you can.  I have found that it is also helpful to be able to show the number of days on market and any and all down payment assistance or seller concessions given in the sale.    

Net Sheet/ HUD 1

Banks want to see how much money they are going to net with your offer.  Providing a Net Sheet / HUD 1 prepaired by your Title Company with your offer will provide the bank with the numbers they need to see – what will we get ! I provide this during our process.

Additional Information

Typically if a bank requires additional information they will let you know what it is.  The most common that I have seen so far is the request for the payoff amounts from the other lien or mortgage holders on the property.

If you are working with a homeowner with an FHA or a VA loan then you will have to include additional forms with your short sale package. Contact your Lender for more details.

A BREAK FOR VETERANS! Lenders will have to wait nine months, instead of 90 days, before beginning foreclosure proceedings on homes owned by someone returning from the military. Lenders must also wait a year before raising interest rates on a mortgage held by someone returning from military service.

These provisions expire on Dec. 31, 2010. 

Short Sale - 

Short Sale is when the lender agrees to accept less than what is owed for full payoff of the loan. Typically, Lenders will only consider Short Sales from their borrowers who need to sell their home because they can no longer afford to keep the payments current and are experiencing financial hardship. Many lenders will postpone or delay the Foreclosure Sale and give you some time to sell your house, if you initiate the Short Sale process with them as far in advance of the Trustee Sale Date as possible.

There are Tax Implications or Penalties you need to know about on the deficiency that the lender will take on the loan, depending on your situation and state you reside in.

Please seek Legal advice form your CPA and Real Estate Attorney.

Deed in Lieu of Foreclosure - 

In a deed in lieu of foreclosure, the lender agrees to release the debtor from any liability on the loan itself. This agreement is usually reached only when the debtor transfers his or her property to the name of the lender.

I looked at the Wells Fargo investor guidelines regarding short sale and it is viewed as a foreclosure due to the fact that the original note obligation was not fulfilled. If the person is going to obtain future conventional financing – at least 4-years must have elapsed since the foreclosure and they must show that they have re-established good credit (no lates). On FHA loans the time frame is 3 years, but regardless of the type of loan, they must show that they have re-established themselves credit wise. 

See blow the Published Article in SEVRAR Magazine “How to start a Short Sale”find it on Page 30 

http://www.sevrar.com/pdfs/magazine/2007SEVRARmag07_07web.pdf

Click below to see where I was referenced in one of NAR’s Online Articles:

http://www.realtor.org/rmoprint.nsf/pages/Feat1200706

Click below to see my most recent Success Story in Realtor Magazine 

http://www.realtor.org/rmosales_and_marketing/articles/2008/0812_successstory_international

Need assistance in Short Sales? Call today and set up a free consultation. Your Short Sale Resource Specialist Debra Allen has a  98% success rate YTD.

I appreciate the opportunity to be of service. Give me a call 480-797-4080 or email me Debra@DebraAllen.com. I will be delighted to assist you further.

The content of this article is owned by Author Debra Allen/ Copywriten 2009-2011

Debra Allen, REALTOR®

Your Trusted Advisor and Realtor for Life