San Jose Short Sale Agent: Silicon Valley Foreclosure Prevention Specialists

Excellent news for unemployed homeowners who may be carrying Freddie Mac mortgages.   Starting February 1, 2012, if you make prior arrangements with Freddie Mac through their servicers, there may be up to 12 months of forbearance.

Details below

Freddie Mac Now Permits Up to 12 Months Forbearance to Unemployed Borrowers – Jan 6, 2012

With the start of the New Year, inevitably people start thinking about paying taxes and the IRS.

Here is something to ponder if you are one of the millions of American Homeowners who is behind in their mortgage payments.  Starting in 2013, whether a homeowner gets foreclosed on or completes a short sale, they will be required to pay both Federal and State Income Taxes.  Yes, even after they lose their home, they will be left with a tax bill for the value of the debt which was forgiven or charged off.   And as calculated in the article below, this could mean possibly tens of thousands of dollars for the homeowner.

According to the Mortgage Debt Relief Act of 2007, up until December 31, 2012, the IRS and Franchise Tax Board (for California Homeowners) will “generally allow taxpayers to exclude income from the discharge of debt on their principal residence.”  The Franchise Tax Board has agreed to mirror the IRS on this matter.   And given the status of the Federal Debt Ceiling and current political climate, I would bet against the law being extended.

http://www.sacbee.com/2012/01/09/4172841/you-may-owe-federal-income-taxes.html
You May Owe Federal Income Taxes in 2013 if You Have a Short Sale, Foreclosure
 

Besides the expiration of the Income Tax exemption, there is another financial incentive which will expire at the end of calendar year 2012.    The HAFA (Home Affordable Foreclosure Alternative) Program, which may assist qualified Homeowners receive moving expenses and additional funds to pay off a second mortgage will expire on the same date.

Given that the foreclosure and short sale procedures are prone to extended time to completion, homeowners in distress contemplating short sales must do some serious thinking this year.

How do you know someone has the technical, marketing and negotiational know-how to successfully help homeowners fight the devastation of foreclosures? Practice and experience are the keys to success; everything else is secondary or simple marketing gimmicks.

An expert does not merely engage in puffery regarding receiving nice titles and designations, they also bring about actual experience in favorable methodologies like short sales to help negotiate settlements to successful closings for clients. Real life experiences along with the incidental designations and certifications to bring about a complete skill-set which is actually beneficial to the homeowners. Some happy clients will even write up reviews about your service.

Unfortunately, practitioners in distressed real estate markets have been falling into two categories lately. There is one camp where the practitioner actually learns and take classes and builds experiences for the benefits of their clients. They do everything, like how real estate used to be. I fall into this category. When clients hire me, they know who will serve them from beginning to end; they know exactly who is representing their interests.

Then there is the new trend: practitioners take the short cut and hire a “third party short sale servicer or negotiator” to help them negotiate and settle with the lenders. Often times, the clients have no idea that someone else they never met or agreed to, is handling the most important aspect of the short sale transaction. I don’t know about you, but if I hired someone to do a job for me, then I expect that person to complete the entire job, not hire out someone they can hire for the least amount of money to do the hard part. I believe in quality control and I cannot control the quality of a person who takes on dozens of other agents’ workload. How much of their heart will they put into one of those files? Probably no more than the counterpart negotiator who is overloaded with files of homeowners at the banks. That is why I do not use; nor hire my skills out to lesser experienced agents for money.

With my clients, they know exactly who is doing everything from the marketing to final negotiating to sitting with them at the signing table at the closing. I guess I share the same philosophy as Steve Jobs at Apple: vertical integration of both hardware and software to control quality and end user experience. I control the full experience that the client has with my service: both the marketing to sell the house and the negotiations with lenders to have them release the liens and deficiency claims for less than what is owed. Conceptually, you can have two approaches: the Apple approach or the Microsoft approach. I just happen to believe in the Apple approach as being more efficient and effective. If you believe in the Mircrosoft approach your selection if fine, as long as you were informed others would be doing the negotiations.

So back to the question about how do you know someone has the necessary practice and experience? Ask for proof of successful closing to demonstrate their experience.

I am mad as hell as I write this entry.  Once again, dual track foreclosure has proven to be alive and well and being practiced by one of the large banks in Silicon Valley.

What is dual track foreclosure?  Simply put, it is when the lender agrees to work with homeowners on a loan modification request, but also continues its foreclosure effort  simultaneously.  If the homeowners are being given the chance to work on a loan modification, why not stop the foreclosure effort until the resolution of the modification request?   The problem is that by permitting the homeowners to work on a loan modification, it gives them the false impression that the foreclosure action has halted during the loan modification process.   Those homeowners whose loan modifications are rejected are discovering that their homes are being foreclosed soon thereafter, often not giving them enough time to prepare to deal with the loan modification, let alone the foreclosure.     In even worse scenarios, the homeowners are being foreclosed on while they are anxiously awaiting answers to the loan modifications.  Homeowners are given false hopes of saving their homes through a loan modification, but while they are working through the process, their homes get unceremoniously snatched away without warning.    

Legislative efforts were made earlier in the year in California to try to stop this deceptive practice by the lenders, but it never passed.   The lobbying efforts of the lending institution were sufficient to get the bill killed in the California Senate.  The despicable practice is still not illegal and being widely practiced.

Being the San Jose Short Sale Agent, I received a call from a prospect today who was referred to me by a recent client for whom I completed a successful short sale.  He wanted me to help him because he spoke with someone at Wells Fargo who kindly informed him that they denied his loan modification and by the way, they are going to foreclose and sell his home (court house auction) next week.   Here is an example of a dual track foreclosure at work.

This homeowner had trouble making his mortgage payments because his wife had lost her job.  They went from a two income family for which they qualified their loan to a single income family.  They had been working with Wells Fargo since April of this year to get qualified for a loan modification.   After months of providing documentation, they were told a few days ago that their loan modification was being rejected.  And also, by the way, the foreclosure auction (Notice of Trustee Sale) had been scheduled for next week.  When the homeowner asked if he could get a 30 days extension to hire a Realtor to do a short sale, they rejected that request as well.

I would love to help this homeowner, but the problem is, with less than a week to go before the auction date, I cannot stop this trustee sale from taking place.  Even if I had a viable offer in hand, most lenders and Wells Fargo, specifically, will not stop the sale if the sale is scheduled to take place in less than 7 days.    Had the homeowner called me a week or two ago, I could have worked some magic, but now with less than a week to go before the sale date, he is out of options.   Had he not relied solely on the bank to and taken other steps, we could have prepared him for a HAFA short sale and probably gotten him $6,000 to pay off the second lien and another $3,000 in relocation expenses.  Instead, he will get nothing for months and months of waiting.

Some of you skeptical readers out there may be wondering if I may be exaggerating how often dual track foreclosures may be occurring in the real world?  More often than  you would like to believe and sometimes with confusing results.

Family Fights to Keep Home After Accidental Sale – Local News – Sacra Men To, CA – Msnbc
For homeowners out there who are  working on loan modifications, do not put all of your hopes into that one basket.  The chances of homeowners getting successful permanent loan modifications are small to begin with, most receive a temporary modification or are summarily rejected like the person who called me today.   So protect yourself and  consider multiple options, do not make the mistake of believing that the lender will have your best interest at heart.

The word is getting around.  JP Morgan Chase and other large lenders are actively encouraging homeowners who are in distress and not able to make their mortgage payments by offering them incentives of up to $25,000 if they are successful in short selling their homes.  So far this has only been information from third parties and other sources whose clients were solicited by mail.   Today, I learned that one of my colleagues had a client reach out to him because Chase had wanted the borrower to do a Short Sale with a CDPE designated agent if they wanted to receive $25,000.   Silicon Valley Homeowners, if you receive this type of letter, you need to contact a CDPE designated short sale specialist like myself.

I need to point out that not everyone is automatically extended this offer.  You must be the recipient of a letter specifically offering you the money.     But one thing is certain: this is no joke, this is happening because the lenders like Chase have figured out that they can still make more money by permitting short sales to be completed than go into foreclosure.   Banks never do anything unless they can make money as the end result.

A recent study says 6.38 Million homeowners are at least 30 days behind on their mortgage payments.   Get the report which identifies 10 ways to alleviate the stresses of an un-affordable mortgage.

At-the-End-of-Your-Rope-Flyer

Contact me via email or go to the Get FREE REPORT tab above.

I got a chance to watch a couple of agents go at it with each other in a real estate forum trying to answer a question about doing short sales.   It was interesting, to say the least.  Besides the two main agents who proclaimed themselves the “experts” and hijacked the conversation, there were a few others who chimed in and made some comments.  But the question was never specifically answered.

The question posed was whether a lender will approve a short sale if the borrower had assets. He didn’t provide a lot of detail but wanted to either do a short sale or let his home go into foreclosure and he specifically asked not to get into a debate about the ethics in not paying his mortgage.

The argument or “discussion” in the forum quickly evolved into a big debate about the ethics of what people considered to be strategic default.  One expert proclaimed it was morally and ethically wrong to engage in strategic default and the lenders would not go for it. The other expert proclaimed morality and ethics had nothing to do with his decision and it was more about money.

As a San Jose Short Sale Agent, I tend to agree with the latter expert.  When you are dealing with short sales with lenders, the department you deal with is called Loss Mitigation.  Let me say it again:  Loss Mitigation.  Their job description is patently obvious: it is to mitigate or lessen the loss for the lenders.

Yes, there obviously are moral and ethical implications of not paying your mortgage when you have the financial ability to do so.   I firmly believe you should pay when you can and live up to your contractual obligations.  However, the question posed specifically asked not to judge the ethical implications but sought opinion as to whether a lender would agree to a short sale when the borrower stopped paying and was headed towards foreclosure.

There is no definite yes or no answer in these matters as the answer lies in the details.  It has a lot to do with how much assets the borrower has or does not have.  However, if the lender is faced between foreclosure and short sale, from my experience, the loss mitigation department chooses short sales over foreclosures.   At the end of the day, the primary decision will be about which method loses less money for the lenders, then, other factors like ethics and mortality can be entertained.

Why do you think big lenders like Chase and Wells Fargo are offering people up to $35,000 to do a short sale without even verifying their financial information?   HAFA recently amended its rules to state that servicers are no longer required to verify any financial information, but only to collect signed hardship letters.  Do these actions by large lenders and servicers sound like they are overly concerned about the ethical or moral issues surrounding foreclosures?

I can’t speak for other States, but in California, the recent changes in the law means if the lenders agree to permit a short sale, then the issues about deficiencies become null and void.  Once a short sale has been approved, the seller can walk away clean without looking over their shoulders.  Yet, another procedure that make completing a short sale more effective and efficient and preferable to foreclosure.  It’s all about money; if the institutions can make more money foreclosing, they will certainly choose that method, but everything recently is geared towards choosing short sales.  Yes, the lenders hate strategic defaulters, but they hate losing money even more.

So back to the question about would a lender approve a short sale if the borrower has assets?  It would depend on how much assets the borrower had and whether foreclosure would yield more money for the lender or a short sale.

It is this San Jose Short Sale Agent’s opinion that  HAFA and the new California anti deficiency law make the time ideal now for homeowners who cannot make their mortgage payments solve their problem without having to worry about extended obligations to the lenders after the sale.  If a homeowner has made the difficult decision that letting go of the home is the best solution available for their current situation, here are the top 3 reasons or benefits* available to them.

1.  HAFA allows the proceeds of the sale to be used to pay off all of the parties including commissions to the realtors and a $3000 relocation fee to the homeowners and possibly $6000 to pay off a second mortgage.  So there is potentially no out of pocket costs to the homeowner to market and sell the home.   A big burden off the minds of those who are not familiar with the process.

2.  One of the tactics the second lien holders tried to use to extract extra money from the homeowners was approving the short sale but refusing to release the homeowner of the deficiency obligation.   Unless you had an astute Realtor who was aware of this trick and refused to go forth without first obtaining a waiver of the deficiency, homeowners were often stuck owing money to the lenders after they sold off the house.   NO MORE.  The new law says once you permit a short sale approval, the lenders cannot try to retain their deficiency claims.

3.  Finally, until the end of 2012, Mortgage Debt Relief Act,  relieves the homeowners of the capital gains tax obligations of their mortgage debt being forgiven.  Homeowners were often blind-sided by the notion of the forgiven debt being considered capital gains and having to pay taxes on it.   Well, until the end of 2012, this potentially huge tax obligation is waived.   This could be tens of thousands of dollars.  This is huge.

For those who have made up their mind that they need to get out from under their mortgage obligations, the situation is now ideal.  All of the potential hurdles that lay in front of them have now been pushed down.  The only thing that may be problematic is if the homeowner is in a state of shock or denial and unable to take action, and forcing the lenders to take action for them.
These are general overviews, for specific details, please contact us.

Please always deal with people who have actual experience and have data to prove they have successfully completed and closed multiple short sales.  Do your own research, be a smart consumer.  There is much at risk if a short sale goes awry.

*These are my opinions.  I am not an attorney or a tax professional, so please confirm with them first before making your decision.

Woo Hoo!  SB 458 is now the law in California!  This means the second mortgage holder must relieve a homeowner of any deficiency claim if they approve a short sale.  SB 931 made the same type of deficiency waiver mandatory for first mortgage holders, but the second mortgages were exempt.  This led the seconds to put a stranglehold on many homeowners, making unreasonable demands on distressed homeowners. NO MORE.  Short Sales mean paid in full.

As a San Jose Short Sale Agent, I believe this announcement is one of the most significant in the Short Sale process because it permits homeowners to simply walk away after the sale.  I spent many many hours negotiating with seconds to permit the homeowners to walk away without paying anything or paying as little as possible. The passage of this new law eliminates that whole unpleasant process.

Kudos to Governor Brown for having the compassion to help distressed homeowners.  Finally, some protection for the homeowners and not  just for the large banks.  We must allow short sales to process quicker and more efficiently, rather than drag on because of the seconds want to squeeze more blood out of homeowners who already suffered from negative equity and are losing their homes.  This new law makes it easier California homeowners to do a short sale now and avoid foreclosure because that little sticky issue with the deficiency claim is preserved after a foreclosure sale.   Now the reason for doing a short sale over a foreclosure becomes infinitely more clear.

CALIFORNIA ASSOCIATION OF REALTORS® applauds Gov. Brown on signing SB 458 into law

LOS ANGELES (July 15) – The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) applauds Gov. Jerry Brown on signing SB 458 (Corbett) into law. SB 458 extends the protections of SB 931 (2010), to ensure that any lender that agrees to a short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans.

Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.

“The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference,” said C.A.R. President Beth L. Peerce. “SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders – those in first position and in junior positions – will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property.”

SB 458 contains an urgency clause making it effective upon signing.

Ask a San Jose Short Sale Agent like myself what the biggest potential headache in trying to get a short sale completed is, and I will bet the single most repeated response is the impatient buyer walking out in the middle of a transaction.   There is nothing as troublesome as working for weeks and months to convince a lender that the perfect buyer will close escrow and stop the foreclosure process, only to have that heroic buyer say they are moving on to another property or they are just tired of the waiting and want to take a break.

We listing agents try to overcome this havoc by having back-up buyers in place, however, the short sale apporval system was designed so that if the original buyer backs out, even if you had a back-up buyer in place, you would have to re-start the entire process.  Most of the time, you will be assigned to a different negotiator and the whole process which could have taken months, start over from zero.  And even if you had a willing back-up buyer who was extrememly excited, once they had been in back-up position for several weeks or months, they also lose interest or go out and buy something else.

The problem is the system, that triggers a “re-boot” if you will, when the buyer walked away.  The underlying hardship which caused the property to become distressed did not change; the verification of the financial condition did not change; the market condition did not change; the only thing that changed is the buyer and sometimes you can get the a buyer willing to pay the same amount.   So why have the whole process repeat? There is no rational purpose in starting from zero when a lot of the other procedures would have progressed.

Well, today Bank of America announced something which breaks from this ridiculous tradition and permits a back-up buyer to slide right in without having to start the whole process over.   Kudos to Bank of America. They are definitely going in the right direction and are living up to their declaration more than a year ago on their stance on short sales and whom they consider to be the clients in the process.  They are focusing on making the process go smoother, not just follow the trend.

As Bank of America is utilizing Equator to accomplish this, hopefully the other lenders and servicers who use the same system will follow suit and also do the rational thing.
BofA Announcement