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.

If you follow this blog, you know one thing I really hate are frauds against people facing distress.  Nothing worse, in my opinon, than taking advantage of people who are desperate because they are about to lose their homes.  It’s targeting one of the most vulnerable segment of society in order to make a few bucks.  Those fraudsters are the worst scum in my opinion.

I found a blog by a Realtor named Monique Bryher in Southern California who writes about various California Real Estate Frauds, it is called Califorinia Real Estate Fraud Report.  I found it to be an excellent place to learn about the fraud of the day, if you will.  I wanted to take a moment to talk about it because it is well orgranized by topic and because you can also receive a weekly report about the fraud du jour.

The best way to avoid being victimized is to be educated about scams.

http://www.californiarealestatefraudreport.com/

Check it out.

Yes, sometimes it takes a few months, and the waiting is difficult; but when the end result is the perfect case scenario, everyone comes out happy.

In this particular case, the seller gets the short sale approved, but more importantly, she gets the approval plus the waiver of the deficiency claim and with no contribution in the form of cash or promissory note. The perfect scenario for the seller.   She gets to sell this place and start a new chapter of her life without the constant fear of the underwater mortgage and the fear of foreclosure and its impact on her future looming over her.   A young person gets another chance at her life.

Bank of America Approval

As the San Jose short sale specialist, I get emails from anonymous people who find me on the net here in Silicon Valley.  They want to know if they can do short sale.  They give me a few lines.  ”I’m upside down…….”  ”I don’t know if I really have a hardship…….”  ”I borrowed  $xxxx but owe  $xxxxx…….”  ”Can I do a short sale?”  Really, that is the extent of the email.

Maybe it is because we have been raised in the instant gratification mode for too long, but these emails I get all want an answer now, or yesterday because they are in a tight situation and are worried.  They don’t want to talk to me or for me to ask questions.   I truly understand the pressure and stress people in this situation suffer from because I talk about it with so many of my clients, but there is a protocol and procedure to how theses things work.

When I write back that I need to sit down and talk in person so that I can get a better determination of what is at the heart of their inability to pay and what is truly at issue, they get mad.   They question my ulterior motive and question why I am trying to dig personal information out of them and refuse to answer their question and help them out.    I try to explain that is not what I am doing; I  need to understand their situation so that I can create a narrative for the lenders to understand and for them to want to approve the short sale, if they qualify. If you can’t/won’t take a few minutes out of your day to explain to me why you cannot pay, then I cannot successfully plead your case to your lender.    The more you share with me, the better I can create that narrative on your behalf.   Each short sale approval is different because each person’s financial situation and their hardship is different; there is no universal solution, despite what some may claim.

People who have read  some things here and there on the Internet seem to believe that getting a short sale approval is their right.  I hate to tell you, but you have to qualify for a short sale; it is a privilege and not a right.

Listen, I really do understand the stress and the sleepless nights you are going through from the fear of losing your home and the sense of shame that comes with such experiences.    I am committed to helping everyone I can, fight foreclosure. I am willing to commit time out of my day to sit and talk with you.  I will tell you if I think you do not qualify.  But you have to show me the same level of commitment; afterall, it is your home that is at risk, not mine.   Sit down and talk to me, or talk to someone else, but take the time to discuss your case with some specificity if you want a customized strategy to fight foreclosure.   We need to find out things like whether you are on a path to dual track foreclosure if you were working on a loan modification, we need to know if a Trustee Sale is right around the corner and you don’t even know.

It is because people are in desperate situations and want to simply hear what they want to hear without  having to share “personal” information, that they often fall prey to people who want to take advantage by making guarantees or incredible solutions.

Folks, take a few minutes out of your busy schedule to learn if someone can really help you fight foreclosure.  Believe me, it will be worthwhile.

Common sense would dictate that if the bank is working on a loan modification with you, then it should at least hold off on the foreclosure proceedings until the matter has been fully resolved. Borrowers often get lulled into a false sense of security, thinking foreclosure efforts are put on hold, when they are not.   Once the loan modification has been denied, then there is no time for other available alternatives, such has short sales.    If someone is about to lose their home, then they should be given every opportunity to remedy the situation.

Hopefully this courageous effort will go through.

http://mobile.latimes.com/p.p?m=b&a=rp&id=208114&postId=208114&postUserId=7&sessionToken=

California Bill Ending ‘Dual Track’ Foreclosures Faces Key Vote

Bank of America was the biggest villian in the short sale world only  a year ago.   Anyone doing short sales in 2009 would tell you horror stories of how difficult the process was and long it took to get a Bank of America short sales approved.  From personal experience, I can tell you it was a long and unwelcome experience.   I dreaded dealing with the Loss Mitigation of Bank of America and that was a feeling shared by many San Jose Short Sale Specialists and experts.

Then in early part of 2010, with the announcement of HAFA by the Federal Government and its switch to the Equator system, Bank of America , made a dramatic change to change their image regarding short sales. There was a concerted effort to change their reputation and to be seen in a better light regarding short sales, apparently because their loan origination business was being impacted negatively by their horrible short sale reputation.

Within a few months of this announcement, their reputation had indeed changed for the better in a dramatic manner.  Their big push had indeed paid big dividends.

Fast forward  to 2011.   Kim Dawson, Senior Short Sale Executive at Bank of America, recently sat in on a CDPE webinar to talk about their successes in the short sale arena.   She didn’t have a lot of specific data, but pointed out some surprising numbers.

In January of 2007,  Bank of America had only closed 7 short sales throughout the nation.  At the end of 2010,  they had completed  93,000 short sales in the nation (see the graph below).   A huge and monumental accomplishment  by any measurement.   They were able to accomplish this because of the efficiency of the Equator System and by tripling their staffing in the loss mitigation department.

As of now, Bank of America, is  my favorite lender for working short sale.   In my opinion, they have completely succeeded in what they tried to accomplish is a very short time and should be commended on their efforts.

Beginning on January 1, 2011, in California, if you were approved for a short sale, the first lien holder must automatically waive its deficiency claim that most likely would have resulted from the sale of the property for less than what was owed on the original loan.  This is thanks to the passage of Senate Bill 931 (SB 931) which was passed in September of 2010.

Prior to the passage of the aforementioned bill, most experienced agents handling short sales, spent all their energy trying to accomplish two very important goals: 1)  to get the lenders to release the note with a short pay off of the “mortgage” or sell the house for less than what is owed; and 2)  and more importantly, to get the lenders to waive any resulting deficiency claim arising from the short payoff  of said note.

Most sellers, and even some realtors, did not understand the significance of getting the second component waived in writing and had ridiculous situations where the sellers were approved for and completed the short sale, but ended up still owing the lenders the full amount of the deficiency after having sold the house.  Essentially, they would have sold the house and gained absolutely no benefit.

Imagine this scenario.   The sellers borrowed $500,000 to buy the house.  They were approved to complete a short sale for $300,000, but because the deficiency claim wasn’t negotiated away, the sellers end up still owing the lenders $200,000 (the amount of the short payoff) for their deficiency claim.   Imagine the surprise the sellers faced when the lenders contacted them demanding payments of $200,000 they lost on the transaction.   Trust me, this happened more often than people would like to believe.

Now all we have to do now is negotiate away the deficiency claims for second lenders.

As I am not permitted to give any legal advice, I wanted to share a thorough article written by a brilliant lawyer and a blogger by the name of Ron Ballard, who writes a blog called  California Short Sale Lawyer.  He goes into detail about SB 931, its origin and impact.  It was quite fascinating reading and I wanted to share it.

California Short Sale Anti-deficiency Law – Will Other States Follow

Posted by Ron Ballard

What starts in California often spreads east across the country. Will that be the case for California’s new short sale anti-deficiency law?

On August 19, 2010, the California Legislature approved Senate Bill 931 (SB 931) which added Section 580e to the Code of Civil Procedure (CCP §580e). It expands existing anti-deficiency laws regarding loans secured by dwellings of one to four units to short sales, but only to the first lien holder. It was not passed as “urgency legislation” or with a delayed effectiveness, so it will take effect on January 1, 2011.

In part, the new law provides that: “No judgment shall be rendered for any deficiency under a note secured by a first deed of trust or first mortgage for a dwelling of not more than four units, in any case in which the trustor or mortgagor sells the dwelling for less than the remaining amount of the indebtedness due at the time of sale with the written consent of the holder of the first deed of trust or first mortgage.”

Existing Law

This complements two other anti-deficiency or nonrecourse provisions of CCP §580.

Under CCP §580b, California law provides that “no deficiency judgment shall lie in any event” after a sale of dwelling for not more than four families in connection with a loan “which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser.” Californians loosely refer to this as saying that a purchase money loan for a personal residence is nonrecourse. It applies to purchase money junior liens as well.

Under CCP §580d, California law provides that “no judgment shall be rendered for any deficiency” upon a note secured by real property “in any case” in which the property has been sold “under power of sale contained in the mortgage or deed of trust.” This generally is referred to as California’s anti-deficiency statute. Notice that it is not limited to dwelling units for not more than four families. This applies to all private, non-judicial foreclosures. It is rare to see a judicial foreclosure in California for residential property. Judicial foreclosures are used almost exclusively for commercial properties.

New Law

The new law follows the verbiage of §580d that “no judgment shall be rendered for any deficiency.” The full verbiage of the new law is provided at the end of this article. It contains several important limitations:

1.  It applies only to the first mortgage or deed of trust.

2.  It applies only to dwellings up to four units, but does not need to be owner-occupied nor purchase money.

3.  It does NOT apply “if the trustor or mortgagor” commits either fraud with respect to the sale of, or waste with respect to, the real property. In these cases, “the holder of the deed of trust or mortgage” may still “seek damages and use existing rights and remedies against the trustor or mortgagor or any third party for fraud or waste.”

4.  It also does not apply “if the trustor or mortgagor is a corporation or political subdivision of the state.” (I will only discuss private borrowers.)

Practical Effects

The most important difference in the new law is that it expands anti-deficiency law from purchase money loans to short sales involving all first trust deed loans. Previously, a homeowner with a cash-out refinance would be subject to potential deficiency liability on a short sale unless the short sale processor was effective enough to obtain a statement in the short payoff approval letter that the payoff constitutes a full discharge of the indebtedness.

The Obama Administration’s “Home Affordable Foreclosure Alternatives” (HAFA) program has a similar provision. However, HAFA comes with many other unattractive and undesirable features. This author’s brief review of articles by real estate agents and brokers indicate that HAFA has not caught on to any great degree. Hence, California’s new law provides a key benefit without the drawbacks of HAFA.

A short term effect may be that homeowners try to delay short sales until 2011. Alternately, short sale processors can use the law to argue for release of liability before 2011 when a foreclosure sale cannot occur in 2010 because it has not been commenced or proceeded far enough.

The law has no effect on a cash-out second loans or HELOC’s. (Some HELOC loans were creatively used as purchase money. Although they typically state they are recourse loans, it is this author’s opinion that they fall within the nonrecourse provisions of CCP §580b because they were used “in fact” for the purchase of the property.)

The law does not apply when there was fraud “with respect to the sale.” The most common cases likely occur when the borrower claims a false hardship or otherwise lies about their financial conditions. This is sometimes referred to improperly as a “strategic default.” A strategic default, or more accurately an intentional default, is done with disclosure that it is a financial decision to breach the loan terms, not as a result of hardship. When a hardship is misrepresented to the lender and the lender justifiably relies upon that misrepresentation, then fraud ordinarily occurred.

The new law also does not apply when the trustor commits waste with respect to the property. Too often short sale properties are “trashed.” The owners neglect maintenance and might remove appliances, etc., or even commit intentional damage. In those cases, the “holder” of the deed of trust can “seek damages.” However, that appears to be limited to damages for waste because it doesn’t say that the deficiency risk remains in effect.

For the full article, click here.

Start off your New Year differently by crafting a plan to avoid foreclosure.

There are steps to avoid foreclosure and even get paid up to $3,000. See if you can qualify.