It was a pleasant, beautiful sunny day today as the San Jose Short Sale Agent drove around previewing some homes while listening to some oldies on the radio.   It turned into a much nicer day when my client who was closing on his short sale today, invited me to lunch after he picked up his check for the $3000 relocation assistance check from his HAFA short sale.  He was so excited that the nightmare was ending, that he wanted to celebrate with me.

It a little over two months ago when he contacted me, feeling he was at the end of his ropes.  Chase had just informed him they were denying his request for a loan modification after dragging it out for months and the prospect of staying in his home was now up in the air.  But he had made up his mind.  He realized, despite his emotional attachment, he could no longer afford to keep the home.  He had to give it up and move on with his life and make a new life for him and his family.

In a little over two months, that same lender – Chase – was willing to allow him to sell his home for a loss, forgive him the deficiency, but on top of that gave him a check for $3,000 to help with the relocation to his new rental.   As we were discussing over  dim sum lunch, he was so happy and grateful that he is able to move forward without the burden of his mortgage, he seemed like a different man.  He was saying he could not sleep even last night, because he was concerned that something could go wrong and we would not be able record the deed and close escrow today.  He was going to sleep well tonight!   My client is now a friend and an evangelist on my behalf.

We were discussing why more people who are in similar situation as himself would not choose his route if they were unable to get loan modifications or otherwise afford to keep their homes.  We came to the conclusion it is probably due to lack of information.  If distressed homeowners knew that their income tax exemptions and the benefits of financial incentives from HAFA were ending soon, they would probably take decisive action as to prevent missing out on those valuable benefits.  He would tell his friends whom he knows are having difficulty paying their mortgages to take action.

Dear reader, if you or someone you know, are in a similar situation where you have come to the conclusion that you cannot afford to keep your home, but you cannot sell your home either because of the debt you owe to the banks, please take action soon and before this year is up.  Naturally, if you reside in the greaterSilicon Valley, I would love to help you so you can move forward with a new chapter in your life.

However, I am not saying you have to come to me necessarily; I respectfully and sincerely urge you to talk to someone who is an expert in the field of Short Sale  and get help soon before the two programs expire.   I think I would not be doing my job and my personal quest to help as many people fight foreclosures if I were not educating people about programs that are available; yet many people are not taking advantage due to lack of information.

Please talk to someone.  Indecision means you are making a decision to allow foreclosure to happen to you.

There is enough information floating out there for everyone to know that foreclosure can be devastating with many negative repercussions in our lives.  Most who are in this situation will have to endure numerous adversities:

1. Having your foreclosure show up on public records for 10 years
2. Having to declare your foreclosures on all future loan applications
3. Deficiency claim exposure to the lenders for their loss
4. Dramatic decrease in your credit score
5. Being unable to qualify for a new home purchase for a minimum of 5 years

Besides these misfortunes, there is now another very troubling consequence which is especially onerous in these difficult times when people are looking for jobs.  In California where the unemployment rate is still above 11%, people seeking jobs need any advantage they can muster up to gain an edge over other job seekers.  If they had to endure foreclosures, it seems now the cards are further stacked against them.  It’s bad enough that a person would have lost their home to foreclosure, now that unfortunate circumstance may prevent them from getting a job.  Here is another reason to choose Short Sales over Foreclosure for homeowner who are having trouble paying their mortgages.

We’ve been told by our researchers at CDPE for a couple of years now that employers were using foreclosure records to eliminate candidates, but the attached video and article puts some hard data behind the warning.   According to the video, it seems 60% of employers are now pulling credit reports on all employment candidates and using the information in their screening and hiring decisions.

Can Bad Credit Keep You From Getting a Job_ – CBS News
In California, Governor Brown just recently signed AB 22 which prohibits employers from using credit reports in their decisions to hire employees, with some exceptions as mentioned in the video.   It states:

“New Labor Code section 1024.5 limits when private and public sector employers, except for financial institutions, lawfully can use consumer credit reports in connection with hiring and personnel decisions. Specifically, employers are permitted to use consumer credit reports only if the individual is applying for or works (or will work) in the following positions:

• a managerial position (as the term elsewhere is defined by California law);
• a position in the State Department of Justice;
• a sworn peace officer or law enforcement position;
• a position for which the employer is required by law to consider credit history information;
• a position that affords regular access to bank or credit card account information, Social Security numbers, or dates of birth, provided, however, that the access to this information does not merely involve routine solicitation and processing of credit card applications in a retail establishment;
• a position where the individual is or will be a named signatory on the bank or credit card account of the employer and/or authorized to transfer money or authorized to enter into financial contracts on the employer’s behalf;
• a position that affords access to confidential or proprietary information; or
• a position that affords regular access during the workday to the employer’s, a customer’s or a client’s cash totaling at least $10,000.”

It  seems there are a lot of  jobs that fall into these exception categories, as any type of customer service or  financial institution jobs or law enforcement jobs or any managerial positions  would seem to fall within the scope.  During these difficult economic times, interviewing prospects would probably would want to eliminate  any obstacle which would prevent them from getting on the short lists of candidates being considered for positions.  Having a foreclosure show up on your credit report and the employer questioning your integrity or reliability would certainly not be helpful in getting on that short list.

Sometimes, rather than reading about something, it is much easier to absorb the information by watching a video. Fortunately, the CDPE organization has published some videos which are short and to the point. Since they have made the effort to produce these little gems, I feel it is only right that I share them with my readers. Enjoy.

This first one answers the question: what is a short sale?

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.

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

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As discussed briefly in the previous post , HAFA is the new Federal Government’s Program designed to complement the loan modification Program (HAMP), to help those borrowers who cannot qualify for said loan modification efforts.   Below is a bit more detail in a FAQ format.

What does HAFA stand for?
Also known as the “April Program”, HAFA stands or Home Affordable Foreclosure Alternatives. It’s a brand-new government program starting on April 5, 2010 that will streamline and incentivize alternatives to foreclosure. Under HAFA, participating banks must work with you to help you avoid foreclosure.

What are the “Alternatives” in HAFA?
HAFA provides two alternatives that will allow you to avoid foreclosure:

• Short Sale – If you owe more on your home than it is now worth, a short sale will help you sell your home and save yourself from financial ruin. According to HAFA, a real estate agent must be involved in this process. Agents with the CDPE designation are specially trained to help you with a short sale.
• Deed-In-Lieu – This is where the bank accepts the deed of your home instead of (“in-lieu of”) foreclosure. You do not get to keep your home, but your mortgage debt is forgiven.

HAFA also provides up to $3,000 in Borrower Relocation Assistance to help you transition beyond a short sale or deed-in-lieu of foreclosure.

Why should I consider a HAFA short sale?
HAFA sets distinct guidelines and incentives for banks and lending companies so that you will know whether or not you can complete a short sale. One of the common myths about short sales is that they take forever to complete. HAFA makes sure that short sales happen more quickly by streamlining the short sale process.

How is HAFA different from a short sale?
The main issue with traditional short sales was that they took too long, and it was difficult to keep buyers interested in the process. HAFA is a program designed to speed up the short sale process and even gives banks incentives for each short sale they do. Also, after completing a HAFA short sale, you may be given up to $3,000 in Borrower Relocation Assistance to help you transition. During a non-HAFA short sale, there is no government incentive for banks to help you.

Do I have to hire a real estate professional for a HAFA short sale?
Yes, but it doesn’t cost you anything. HAFA pays the real estate professional’s fees. It is a requirement of a HAFA short sale that you work with a real estate professional to help you through the process. CDPE-designated agents understand this process, and are located throughout the country. Find a CDPE in your area today to help you get started.

How do I get started?
Your first step should be to contact an educated real estate professional in your area. An agent can walk you through the HAFA process, determine your eligibility, and provide you with the best solutions available for your particular circumstances.

How do I qualify?
Most homeowners facing financial hardship can qualify for HAFA. If you applied for a HAMP Trial Period Plan but did not qualify, or were unable to complete the Trial Period Plan, you are definitely eligible for HAFA. If you are unsure about your situation, contact a CDPE in your area immediately.

What’s in it for me?
HAFA is the only program that gives you cash for avoiding foreclosure through a short sale or deed-in-lieu of foreclosure. If you complete a short sale or deed-in-lieu, then up to $3,000 in Borrower Relocation Assistance may be available to aid in your transition. This program seeks to ensure that no one will be left high-and-dry if they cannot afford their home. The biggest gain of HAFA, however, is that it helps you get your life back if you feel like there are no other solutions when faced with foreclosure.

How long does the process take?
HAFA speeds up the short sale process by putting in place distinct timelines that the banks—and you—must follow. Each step of the process has a defined amount of days in which it must happen. This keeps everyone on track. The longest possible time allowed in the HAFA short sale process is four months.

What is the April Program?
HAFA is commonly referred to as the April Program.

HAFA Scams
There are many people out there trying to scam homeowners by requesting up-front fees for HAFA short sales. This is fraud. A CDPE-designated agent will never ask you for money. MakingHomeAffordable.gov(MHA) provides the following guidelines:

• Beware of anyone who asks you to pay a fee in exchange for counseling service or modification of a delinquent loan.
• Scam artists often target homeowners who are struggling to meet their mortgage commitment or anxious to sell their homes.
• 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 paperwork or transfer over the deed to your house.
• Never make a mortgage payment to anyone other than your mortgage company without their approval.
• 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.

Who is Eligible for HAFA?

Most homeowners in facing financial hardship are eligible. As a rule, if a homeowner is eligible for HAMP but cannot pay the mortgage, then he or she is eligible for an assisted short sale through HAFA. However, loans owned or guaranteed through Fannie Mae or Freddie Mac do not qualify. Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days if the borrower has one or more of the following criteria :

• Does not qualify for a HAMP Trial Period Plan
• Does not successfully complete a HAMP Trial Period Plan
• Is delinquent on a HAMP modification by missing at least two consecutive payments
• Requests a short sale or deed-in-lieu

For a loan to qualify, it must meet the following criteria:

• The property is the borrower’s principal residence
• The mortgage loan is a first lien mortgage originated on or before January 1, 2009
• The mortgage is delinquent or default is reasonably foreseeable
• The current unpaid principal balance is equal to or less than $729,750
• The borrower’s total monthly mortgage payment (as defined in Supplemental Directive 09-01) exceeds 31 percent of the borrower’s gross income
• The mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac

Part 3 of 3  Which Banks are supporting HAFA?

Wachovia is one of the smarter lenders which understands that, generally, a short sale is a money saving opportunity for them  when compared to when the homeowner is forced into foreclosure or bankruptcy.  They also understand that one of the biggest reasons why typical short sales only close at 23% rate (Campbell Communications Survey, February 2009) is that the process takes too long and even if there is a good offer in hand, the long delay often causes the buyers to back out or simply lose interest and move on to another property.

Wachovia has committed to reaching out to successful short sale agents in a given area and working with them to expedite the process so good buyers don’t walk away from a deal because of the long delay associated with short sales.   Remember, Wachovia isn’t necessarily doing this completely out of sense of compassion, they are doing this because their acturaries have detertmined  expedited short sales will net them more money.  They are setting the new standard in efficiency: 45 days or less is their goal to close escrow from receiving the offer.

If you have attempted a loan modification with Wachovia but were not successful, or have received a Notice of Default or simply do not have other options or solutions, please feel free to contact me.  I can give you a no-obligation consultation as to whether a Wachovia Expedited Short Sale may be an option available to you and your family.

Here are some fantastic data from the CDPE organization which closely tracks national industry numbers.

As of Q2 2009, here are some numbers for you to digest

Type of  Mortgage            In Foreclosure                      In Default (30+ Days late) Total

All Mortgages                               4.3%                                                      8.86%                                                             13.16%

Sub Prime Mortgages               15.05%                                                25.35%                                                           40.40%

Prime                                                 3.00%                                                  6.41%                                                                 9.41%

It’s not surprising to see that sub-prime loans represents over 40% of distressed properties out there.  As of the end of Q2  2009, however, distress in prime mortgages (or the Mercedes of mortgages) represent roughly 1/4 of the volume of sub-primes mortgages. This may surprise some people, as we have been repeatedly told by the media, that sub-prime market is what brought our economy down.   However, with National Unemployment at 9.4% (as of July 09 when these stats were released) , it is no longer those who gambled on high risk mortgages, but the regular people who were doing the responsible things, who are being forced into default.

I believe the sector of mortgages to look out for in the coming months is the prime market.  I argue they will rise dramatically in numbers, relative to sub-prime mortgages.

Additional statistic I want to point out are marked in red above.  4,760,000 represents the total volume of home sales NAR predicted for 2009.  9,550,000 represents the total distressed properties in the nation as of Q2.  This means if these distressed properties have to be sold to get homeowners out of their situation (either as a short sale or foreclosure), it will take over two years to  unload the current inventory of distressed properties!

Some food for thought………

Blog entry
Here is an interesting perspective from a fellow CDPE and a friend, Sidney Jimenez,  as to why it is becoming harder to negotiate with junior lien holders (2nd loans) in a short sale.  More and more, the junior lien holders are demanding a lump sum contribution or some sort of promissory note (which they presumably will sell later to a collection agency) rather than simply take what the senior lien holder (first loan) dictates.    Naturally, the hardship at hand will ultimately dictate whether the seller will have the wherewithal to make such payments or live up to the promissory note, but there is a trend developing here.