Ask anyone who does a lot of short sales about what is becoming a troubling trend in the industry and my guess is a majority of them will bring up the fact that the junior lien holder (or the second mortgage) is refusing to cooperate and demanding unreasonable amounts of money for them to agree to a short sale; or some of them even asking for illegal kickbacks in the form of payments made without being disclosed on the HUD1.

What does all of this mean?  Well, the junior liens have been receiving pennies out of the dollar, sometimes getting paid $3,000 on a loan with a balance of $100,000.  Yes, the loss is huge, but the junior lien holder has very little alternative, as a foreclosure means their loan is wiped out.  Hence, the senior loans have been successful in pressuring the juniors to take the lesser of the two evils, pennies or nothing.

Many junior lien holders are not taking this lying down now.  They have figured out they can combat the pressure from the senior liens by refusing to agree to the short sale. They are holding out until they can negotiate better terms.  They are simply saying to the senior lien holders: “if we don’t get a better offer, we won’t let the short sale happen; you will be forced to into foreclosure and your net will be much lower in a foreclosure sale than a short sale.”  They are simply playing a game of chicken.  Remember, if there are two loans in a short sale, both of the lien holders have to agree to permit the sale to proceed.

Or the other tactic is, some junior liens are demanding that the sellers pay them a settlement fee outside of escrow so that it will not show up on the HUD1.  A HUD1 discloses to all parties who is getting paid what.  By making a payment outside of the HUD1, the junior lien holder is getting paid without the senior lien holder finding out.  This is illegal, by the way; mortgage fraud, a Federal Offense from what I am told.

We all understand what the junior lien holder is trying to accomplish, but the problem is that in their game of chicken, the majority of the parties are suffering. We have one party who wants the property; the other party who wants to sell and move on with their lives and get out from under the banks; the senior lien holder who is also taking a huge loss, but because the junior lien holder, who knows they can get nothing if they force the transaction into foreclosure is hell-bent on forcing a foreclosure because they want to get a little bit more: even by illegal means.  They pressure the sellers to such an extent, the sellers are sometimes choosing to accept foreclosure rather than to give into what is being demanded.   Remember, the collective goal right now for the country is to reduce foreclosures, not to encourage it.

Because this problem is becoming more common and have reached critical mass, Barney Frank, the Chairman of the House Financial Services Committee has sent out a petition to the largest banks to voluntarily take action to permit second lien write downs; or else.

The same banks who are junior lien holders are also senior lien holders on other loans, so in the grand scheme of things, they will benefit if they prevent foreclosures.  So what are these guys  doing?  They are hurting their own bottom line and taking everyone else down with them; it makes no sense.

http://www.mercurynews.com/breaking-news/ci_14524392

Unfortunately we set a 30 year record in January 2010: more people are out of jobs than they have in 30 years up  from 12.3% in December 2009, but there seems to be an upswing  as 32,500 people gained employment in the same month.  A mixed message.

Regardless of how we interpret the data, one thing is very clear: there is a direct correlation to reduction in home buying behavior and unemployment. Regardless of what people may say about homes being more affordable now than ever before, if there is no sense of security in employment front, there will be no home purchases!

So what does this mean?  All this effort in providing tax credit incentives is great, but unless and until there is a concerted effort by the State and  Federal Governments to tackle the issue of unemployment and more importantly, to improve this number, there will be no increase in home purchasing activity.

In fact, as long as more people are losing jobs, they will start or continue to fall behind in making their mortgage payments, which will increase  the activities in the distressed properties market, which will result in home prices falling, which then will continue this drag on the economy as industries related to real estate continue to suffer and lay off more employees.  Truly a vicious circle.  Right now, 1 out of 6 home owners is behind in their mortgage payments.

So we all should pressure our politicians in D.C. to stop playing politics and get at the job for which they were elected: improve the economy by creating more jobs.  Everything else is secondary.

Now they can move on with their lives and leave behind the difficult phase of their lives.   Feels good to be a part of the solution.

If you have been following me, you know that one of my pet peeves is the fraud that is perpetrated against desperate homeowners who are in dire straits by crooks out there to make a quick buck.    But the scams seem to be continuing.  Even with all the media stories about these fraudsters taking advantage of desperate homeowners, they seem to continue to find victims.

Here is a report which should shed some light onto and hopefully steer some homeowners away from some of the scams that are being used out there today.

As a San Jose Shot Sale Agent, I have evangelized about the benefits and importance of short sales in comparison to foreclosures.  However, the volume of short sales relative to the rest of the distressed properties has catapulted into number one position according to Campbell Surveys.   This will come as no surprise to buyers who are in the market right now in Silicon Valley as First Time Homebuyers are snapping them up like hot cakes.

Unfortunately, until we resolve California’s double digit unemployment rate, we will continue to have a steady flow of  short sales for possibly years to come.

Now I’ve heard everything.  Can you imagine a lender accidentally foreclosing on your home and throwing all of your belongings out on the streets?  Imagine how embarrassing and shocking that would be for you if you paid for your home in cash and owed nothing on it.   Imagine further that you informed the bank’s agent and said agent repeatedly informed the bank that they had the wrong house.  The bank foreclosed on the property it did not own anyway.

Well  it sounds unbelieveable, but leave it to Bank of America to foreclose on a house it did not hold a note on.

http://www.tampabay.com/news/business/realestate/bank-of-america-forecloses-on-house-that-couple-had-paid-cash-for/1072632

Walking Away Is NOT The Answer

You may have heard that a “strategic default” can be an appropriate and even beneficial reaction to an upside-down mortgage or impending foreclosure. While this idea is widespread, the truth is that default is never an easy road to choose, and rarely ever strategic.

Unfortunately, the ramifications of a “strategic default” are rarely explained, leaving many homeowners stranded on an island of misinformation. To assist you, I’ve prepared a free report outlining the myths and misrepresentations of strategic defaults.

Fill out your information below for this free report. Don’t hesitate. Get the facts today!

I know what I am about to say will be controversial and some Realtors will not be happy with me pointing  this out, but it is something I feel passionate about and feel is an issues which should be raised and addressed.

I noticed just recently that some Realtors I know were advertising themselves as “Experts” in Short Sales.  Nothing wrong with those claims on their face; they appear mature and experienced and seem to have certain certifications which would lead a person to believe they were very good at this specialized practice. Again, nothing wrong with the claims on their face…..until you know the back stories.  This one particular agent has never bought or sold a single property all of last year. Yet, they advertise themselves as a Short Sale Expert who can stop your home from going into foreclosure…… Another had closed one transaction all of last year, yet they also profess to label themselves a short sale expert.  What is wrong with these pictures?

My purpose of this post is not to disparage these particular Realtors.  That is not my right.  But it does raise a question about their professional integrity when they make questionable claims during these difficult time in hopes of gaining clients and how they simultaneously tarnish the image and reputation of their fellow colleagues.

Everyone knows the last couple of years have not been easy for many Realtors.  Loans were difficult to obtain and people simply stopped selling or buying homes for a good full year or more.  Many of us faced difficulties making a living. Many Realtors have left the business and others are hanging on in the hopes of making it through another year.  Again, nothing wrong with Realtors working hard to survive another year.

But let’s look at this through the glasses of the homeowner who is facing foreclosure.  Of course a homeowner wants to find qualified Realtors who can help them fight one of the most devastating situations they will encounter during their lives.   When dealing with people facing foreclosure, Realtors must handle these sellers with kid gloves because there is so much emotional pain association with the process. It is not simply another transaction or a paycheck for these homeowners.  You cannot simply take the house off market and put it back on when market dynamics change.  If the Realtor messes up, the homeowner is foreclosed and their credit history is ruined.  It is a matter of deep family pride and the very real possibility of people becoming homeless if the supposed “expert” Realtor doesn’t know what they are doing. Remember, a Realtor has a fiduciary duty of “utmost care, integrity, honesty and loyalty in dealings with the Seller” (Disclosure Regarding Real Estate Agency Relationship). Are these two Realtors living up to their agency responsibilities when they embellish their supposed “expertise” with one having sold only one property and the other selling none for an entire year?

I do not claim to be the best in this niche market, but over the years, a combination of specialized, continual education and actual, hands on experience selling and negotiating with banks to stop foreclosures has given me the “technical know how” to be able to stop foreclosures through short sales in a majority of cases I take on each year.  Let me point out from my own experience, that the education alone was not sufficient to give me that “know how”; the education had to be combined with the practical experience to make the experience complete.  Theoretical study simply was not enough.   A salesperson who reads books about selling cannot claim to be an expert salesperson unless they have actually sold many products.

Let me make it clear that I am not trying to make myself look good by stepping on others to rise over them when they are encountering a difficult year.  However, this is my chosen profession, and I do not want the reputation of the entire profession denigrated because someone is desperately trying to reel in an unsuspecting client.  That charade cannot last will be exposed quickly, only to the detriment of the unsuspecting homeowner who wanted to believe.

Because of the stress homeowners face when facing foreclosure, they often find themselves to be more gullible and less guarded than they typically may be otherwise.  People in distress hear what they hope to hear or want to hear.  Due diligence is required when hiring someone to help you with your short sale.

You have the right as a consumer to know exactly who you are hiring to provide you with a service.  1.  Ask for past client references.  If they are truly good at what they do, then they must have some happy clients.  2.  Ask for performance data. If they are “experts” they must have successfully sold something recently.   If they cannot provide these two types of information for you, then a red flag has been raised.

It does not matter whom you choose to help you stop your foreclosure, but it would make sense to go with someone who has both the educational and the practical experience to back up their claim of their expert status.   We are not now sitting in a bar telling embellished  fish stories where the exaggeration has little or no consequence; a little exaggeration about what someone can do may mean the difference between saving and losing a family home.   Yes, a little exaggeration can hurt people.

As the adage goes: A little knowledge is a dangerous thing.   And learning about short sales without actually having the benefit of practical experience can be a dangerous thing.

“What is your plan?” When I ask this question, the typical response is something in the order of:  “What plan?  I didn’t know you needed one.”

I ask this question of my buyers who want to get that “deal” and I also ask that of my sellers who want to sell quickly with no hassle and get top dollars.   I use the analogy that a real estate related plan is like having a well platted map before going on a long trip (the analogy still works in this day of the GPS).  You may eventually get there, but if you have a well organized plan or a map, you can save tremendous amounts of time, money and heartache and give yourself the opportunity to enjoy the trip rather than wasting time sweating the details on the fly.  In Real Estate, you don’t get that deal or you don’t get that multiple offer scenario by accident; there is always lots of work done beforehand.

Most of us would not consider taking our family to Disneyland or Legoland or wherever our destination is, without having some sort of itinerary.   Yet, in these difficult times, when it is now so common for homeowners to be struggling to make their mortgage payments and who are facing the very real possibility of foreclosures, homeowners try to “wing it” and approach this very long and arduous trip without any sort of planning or assistance.  Almost hoping that foreclosure can be avoided by accident or hoping to talk to someone who will understand and sympathize with their plight and make things stop.  Unfortunately, that rarely happens.

Foreclosure is a process driven activity, which means activities are laid out in sequential order.  In order to successfully fight a foreclosure, you must understand the process and have a plan to fight the lender and stop the sequence so the final step – foreclosure – is not achieved.

Fighting foreclosure is not something I can write about in a few paragraphs in this blog; as you can imagine, it is much more complex and the situations and hardships differ from homeowner to homeowner.  However, I do have a report here which will explain simply and provide information so that the distressed home owner can take action to stop the foreclosure process and learn about the foreclosure prevention options that are available to them.  Some sort of action must take place; inaction will not stop, but in most cases will accelerate the foreclosure process.

There has been quite a bit about mortgage modifications in the news lately as we are discovering that the conversion rates for loan modification are dismal and those homeowners who have gotten modifications are re-defaulting at astonishing rates. The unfortunate aspect to these stories is that many distressed homeowners peg high hopes on “Obama’s Loan Modification” or “Home Affordable Modification Program” HAMP, yet only to have their hopes destroyed upon learning about the actual facts relating to this hopeful program.  A lot of this is due to incomplete or simply wrong information floating about out there in cyberspace on the various fora or websites.   And when you add emotional and mental stress on top of  the misinformation, it can become a recipe for huge disappointment

We are simply living  in unprecedented times where 14% of all mortgages are delinquent and some sub-categories are approaching 50% delinquency rates.

I am including here a report called The Truth about Mortgage Modification which has information which should help dispel some misinformation and point people in the right direction if they require help.