Today, Fannie Mae announced how it would deal with strategic defaulters: they will be punished by being unable to qualify for a loan for up to 7 years through Fannie Mae and the latter will reserve the right to take legal action to recoup the losses in states that permit deficiency judgments (not the case in California).  The line has been drawn in the sand.

Strategic defaulters, or those borrowers who have the financial ability to pay their mortgages but who choose not to and walk away because the value of their homes are underwater, are becoming a big problem for banks as the stigma is becoming less and less meaningful and the distressed properties market is ever increasing.   One study puts strategic default at 1/3 of all defaults which eventually lead to foreclosures.

Fannie Mae is addressing a big problem for itself and trying to force strategic defaulters to think twice before walking away from their mortgage obligations.  It’s a perfectly understandable move on its part as it is trying to do potential future damage control.   This reason is also why it has agreed to participate in the HAFA program guideline to encourage negotiated and approved short sales rather than have homeowners simply walk away. Fannie Mae and Freddie Mac have figured out it is better to work with the distressed borrowers and, for those who qualify, work out an agreed short sale resolution rather than have the property foreclose, as the loss to them will be significantly greater in the end. They are simply engaging in good business practices by mitigating their loss.

Steve Mun | Keller Williams Realty | (650) 605-3188 10280 Park Green Ln, #839, Cupertino, CA Live the truly luxurious lifestyle in the heart of Cupertino, centrally located to everything. 4BR/3+1BA Townhouse offered at $960,000 Year Built 2006 Sq Footage 2,058 Bedrooms 4 Bathrooms 3 full, 1 partial Floors 3 Parking 2 Car garage Lot Size 2,176 sqft HOA/Maint $226 per month DESCRIPTION Luxury end-unit townhome located on the interior side of the complex, away from the street exudes impeccable style and flair. Everything screams quality: Sub Zero/Wolf appliances; Kohler chef sink and faucet; Venetian Gold granite countertops; tumbled travertine backsplash and floors; exquisite dining area with hand rubbed hardwood floors; Thomasville lights; 13 ft. ceiling; cabinets in shaker beech with chocolate finish; upgraded carpets; family room and living room with pre-wired speakers; main entrance with intercom that is pre-wired for video camera. Lose yourself in pure luxury. see additional photos below PROPERTY FEATURES - Central A/C - Central heat - Fireplace - High/Vaulted ceiling - Walk-in closet - Hardwood floor - Tile floor - Family room - Living room - Dining room - Refrigerator - Stove/Oven - Microwave - Granite countertop - Stainless steel appliances - Laundry area – inside - Balcony, Deck, or Patio COMMUNITY FEATURES - Guest parking OTHER SPECIAL FEATURES - Truly top of the line luxury ADDITIONAL PHOTOS Main Entrance Communal Area Park Family Room First Floor Suite First Floor Suite Bathroo Bedroom 2 Bedroom 3 Bathroom 2 Laundry Room Master Suite Master Suite Master Suite Bathroom Living Room Living Room Kitchen/Dining Room Kitchen/Dining Room Kitchen/Dining Room Contact info: Steve Mun Keller Williams Realty DRE#:01358433 (650) 605-3188 For sale by agent/broker Equal Opportunity Housing Posted: Jun 16, 2010, 7:12am PDT

]]> http://www.sanjoseshortsaleagent.com/2010/06/16/short-sale-properties-can-be-luxurious-and-beautiful-and-in-the-best-school-districts/feed/ 0 http://www.sanjoseshortsaleagent.com/2010/06/09/bank-of-americas-new-stance-on-short-sales/ http://www.sanjoseshortsaleagent.com/2010/06/09/bank-of-americas-new-stance-on-short-sales/#comments Wed, 09 Jun 2010 22:58:18 +0000 admin http://www.sanjoseshortsaleagent.com/?p=772 The announcement of HAFA in April was supposed to change the way we do our business for those of us who do a lot of short sales.  Not because it was supposed to revolutionize the way short sales were done, but because it was going to be the Federal Government stepping in and trying to standardize the process of how to complete a short sale.  In the lawless world of short sales, that was like a cool breeze on a hot sticky day: very much welcomed.

Many naysayers poo poo’ed the program, saying it was never going to fly and that lenders would not abide by the terms because it was not in their favor.  But you know, there always will be naysayers whose job it is to simply criticize any new idea that comes along which challenges the status quo.

Yes, there are still glitches in the system and many employees of banks do not understand or have not been trained in HAFA and we get to deal with a high percentage of them who are not helpful.  However, an announcement made last night will resonate and have long term impact on the dynamics of the distressed properties marketplace, in my opinion.

Matt Vernon, the executive in charge of short sales and REOs at Bank of America (BofA) announced that institution will now focus on short sales to liquidate their assets before they get into foreclosure.  “We’re going to do everything possible to liquidate property prior to foreclosure,” Vernon said. “REO will still be available, but we will do everything we can to do short sales.”   This is wonderful news for consumers as their underwater properties can be disposed of without having to be forced into foreclosure and devastating their credits.  This is also good for banks because industry surveys have shown that nets proceeds to banks are significantly higher when short sales are utilized as compared to REOs.  BofA is of course is still in the business of making money and has chosen a profitable method, but this method also benefits the homeowners as well. And with all of the loan modifications applications out there, and the unfortunate reality is that a large percentage of those loan modifications will default and end up on the foreclosure circuit.

Mr. Vernon has spoken previously and have been pushing for the notion of short sales taking a more prominent role at BofA. BofA was suffering  from backlash on their Loan Origination business as a consequence of them developing a notorious reputation in the short community as being difficult to work with.  This move will be followed by other banks in my opinion, like airlines follow and match fares when one major player comes out and takes a stand.

HAFA may not have lived up to the expectation people had about its efficacy in making  short sales easier to handle or process, but what it has done is provided an environment where a big player like BofA can come out and concentrate on short sales as a major tool to unload their real estate portfolio.  This move on the part of BofA has now pushed short sales out of the niche market and pushed it into the mainstream, making it easier for consumers to get short sale approval, and hopefully quicker too. Now here is truly a win-win solution for all involved parties.

It seems consumers heard and contacted their local politicians.   Now it needs to pass the State Assembly.   This bill would truly address an inequity which needed to be addressed. People should not lose their homes and still be indebted to banks just because of their desire to lower their monthly payments by re-financing their mortgages.

For those of you who have been following HAFA, one thing that bothered most people was the fact that the large GSEs Fannie Mae and Freddie Mac were not participating in the HAFA program.  Well, as of June 1, that is no longer the case.  Both Fannie and Freddie have announced they will implement their own version of HAFA starting August 1, 2010. Like the private sector’s  HAFA program, the program will end on December 31, 2012.

However, some of the major differences offered by the new Fannie Mae and Freddie Mac HAFA programs include, but are not limited to:

- Both institutions will pay the servicer a $2,200 incentive fee for successful short sales
- Both institutions will pay the servicer a $1,500 incentive fee for all successful DILs
- The Deed for Lease (D4L) is available for borrowers who request and are approved to remain in the property following a successful DIL

The specific details on these programs are listed in their websites.  eFannieMae.com andFreddie Mac Bulletin.

What does this latest move mean?  It simply means that with the two large Government Sponsored Enterprises (GSE) now on board with HAFA, the short sale process and its effect on how the process will be handled in the future is now complete.  The days of lenders dragging their feet and making up their own rules on how short sales will be processed and approved is over now (theoretically, at least).  Everyone will have the same process by which to abide.

C.A.R. issues consumer alert on refinanced mortgages
C.A.R. issued a consumer alert yesterday warning borrowers of the liability associated with refinanced mortgages.  To help protect consumers, C.A.R. is sponsoring Senate Bill 1178 by State Sen. Ellen Corbett (D-San Leandro) to extend anti-deficiency protections to homeowners who have refinanced “purchase money” loans and now are facing foreclosure. The Senate may vote on the bill as early as next week.

Currently, if a homeowner defaults on a mortgage used to purchase their home, the homeowner’s liability on the mortgage is limited to the property itself.  While this law has helped protect borrowers since its inception in the 1930s, it does not extend the protection for purchase money mortgages to loans that refinance the original purchase debt—even in cases where the loan was refinanced to achieve a lower interest rate.

The above is an alert issued by C.A.R.  (California Association of Realtors)

Most of the clients who come to me to discuss short sales  do a lot of research online and come with the knowledge that California is a Non-Recourse State.  This means the lenders cannot come after the homeowners beyond the property itself (for any deficiency)  if the original intent  the mortgage was to purchase the property, as mentioned above.

What most borrowers  do not realize is that the moment they re-finance to take advantage of lower interest rates, the intent of the money changes to their detriment. Whether the borrower took advantage of a lower interest rate, or cashed out to pay down credit card bills, or to use as down payment on a second property, or to start a business, the nature of the money changes and the protection disappears.   Most loan brokers who were pushing re-finances during the past few years did not inform their clients of the elimination of  this important legal protection.  To be fair, most loan brokers or real estates agents probably were not even aware of such consequences.   But the fact remains,  that for many borrowers, if they were aware of such protection disappearing, perhaps they would not have been so quick to refinance.

SB 1178 is designed to extend that protection once again.   This truly is something that all of us consumers must rally behind, it is simply the right thing to do.   A homeowner should not lose this important legal protection because they want the opportunity at qualifying for lower monthly payments when times are tough.   But guess who is fighting against this measure: the Banks and their lobbyists.

Contact your local State Senator and make sure your voice is heard.   Take back your legal protection.

One of the biggest benefits of a HAFA approved short sale is the cash contribution component to the homeowners for their moving expenses.  This was commonly called Cash for Keys in the REO world, and now it is available to the short sale world as well.