Tag Archives: HAFA

6 months left to receive IRS tax waiver for short sales

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We are now closing in on the last 6 months before what is commonly referred to as the  Mortgage Debt Relief Act (Mortgage Debt Relief Forgiveness Act of 2007)  will expire.  It has been extended twice already, but with the political gridlock in Congress over the budget and the news that the Real Estate Market is turning around, there doesn’t seem to be the political will power to extend this any further.

For those homeowners who have tried everything and have been turned down for HARP refinances and there is no other options available to them, it is time to act before this valuable option is lost out and the homeowner is also left with a tax bill as well.  Remember, there may be additional money available for homeowners depending on their situation.  So it is very important to act now while the summer home selling season is here and there are plenty of buyers to buy homes in any and all conditions.

To qualify for this tax exemption, the property must be completely sold before the end of the 2013 calendar year.  With complex fact patterns and approval processes, it can take months to get the necessary approval to close escrow on a distressed home.   Act now and save thousands of dollars.  

If there are any questions about how to qualify

 

How Distressed Homeowners can make Money in a Seller’s Market

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Take-Your-Money

 

 

 

 

 

 

 

The market is hot right now for seller in Silicon Valley. There is a shortage of inventory and buyers are waiting for new listings to hit the market. The banks are also aware of this scenario. They have been losing money on short sales and foreclosures for several years. Now for the first time, they are seeing for the first time the ability to receive market value for their distressed inventories.

This is why some lenders are willing to pay large sums of money for distressed homeowners to sell the homes they cannot afford to keep. It’s quite simple. If the home owner is not able to afford to pay their mortgage and is on track to lose their home to foreclosure anyway, why would they not exercise the option to get paid to complete a short sale? Especially, if they are able to avoid paying taxes on potential capital gains on the debt that the lenders will forgive? These are two ways to earn money for free. The house will be lost anyway.

Obviously the story would be different, if the distressed homeowner had another way to get a loan modification or other way to keep the property. But for those for whom such options are not possible and they are facing a Trustee Sale, why would they go quietly and without a dime when so much money is available to them and all they have to do is stand up and claim it? There is no shame in claiming this money; the banks designed their programs to set aside the money for distressed homeowners and they will still make more money then if they went through the foreclosure process.

But time and time again, I see these suffering homeowners go through foreclosure rather than rightfully claim their money and do a bank-approved short sale. The money is set aside for you, the smart thing to do for yourself and your family is to claim it and use it to help you relocate. That was the intended purpose.

If you live in Silicon Valley and still do not understand about these programs and would like a no-obligation discussion about your situation, please contact me.

Who pays what to homeowners to complete Short Sales

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The big news in Real Estate is the amount of money that lenders are willing to pay homeowners to complete Short Sales.  An interesting proposition since the premise of short sales used to be that the homeowners could not benefit financially in any way.

Then HAFA came along and offered $3,000 to homeowners as “relocation incentive”  to encourage homeowners to participate in this new program.  With the success of HAFA, the top lenders also decided to push Short Sales over Foreclosures since they made more money and never had to “own” the homes and all of the headaches of selling it after the foreclosure process.  And here we are now, less than 3 years after the introduction of HAFA, with one of the big lenders offering up to $45,000 as relocation incentive to encourage homeowners in the same way.

This is obviously an important piece of information that may be a “material fact” to a homeowner who is contemplating a choice between short sale vs  foreclosure.   Unfortunately, a lot of people do not know that this much money is available or believe it to be some sort of scam.   Well, it is not a scam.  The flyer below lists phone numbers to lenders and a homeowner can call to ask about their relocation programs.

 

 

Cash Incentives Flyer

OPEN INVITATION: speak with the San Jose Short Sale Agent

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Hello Readers.

Just recently, I went to visit someone a friend attempted to refer who was in the process of losing their home, only to discover that they had moved out of their home.  It was his neighbor down the block and he was shocked at how quickly he left.

This is perhaps the most awkward situation where a friend or acquaintance attempts to introduce me to someone in distress, but is having difficulty finding the appropriate way to breach the subject to the person facing foreclosure.  While my friend was trying to figure out an appropriate way, his neighbor moved out of his home without telling anyone.  Obviously the neighbor was having serious trouble and was in a lot of emotional distress for them to move out of their home in the middle of the night.

Naturally I get financial benefits for doing short sales of homes, but I get paid for non-short sales too.  But there is nothing as addictive as being on the receiving end of genuine gratitude from a family who faced and overcame their foreclosure with their dignity intact and money to help them with the next phase of their lives. Their eyes tell the full story.  The sense of relief knowing they no longer have to avoid calls from collection agencies or the fear of someone trying to serve them with papers at their home in front of their kids.  The sigh of relief they let out when the approval letters arrive.  That experience is priceless.  It’s a drug and I am completely addicted to it.

I don’t care if you choose me to help you or not.  But if you are suffering in silence and are afraid or ashamed to ask someone about your particular situation, but need accurate information, please contact me.  I will share my knowledge and experience with you in a confidential manner with no obligation to work with me. I know the mental and emotional suffering homeowners go through when they are behind in their mortgage and receiving Notices from their lenders.  Something has to be done.  Don’t go into a denial stage and do nothing, thinking that will make the situation go away because it will not go away.  It will only get worse and leave you with less options and possibly force you into making the wrong decision.

Please talk to me or someone like me.  I want to help any way I can.  I just do not want to see another neighbor of a friend leave in the middle of the night when they have other options.

 

Steve Mun
650-605-3188

US Senate to debate extending the Mortgage Debt Forgiveness Act until 2013

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The waiver of the capital gains tax incurred from the debt forgiven by the lenders (the phantom tax that Alex mentioned)  is scheduled to expire at the end of this calendar year.   However, the US Senate is scheduled to debate the extension of this hugely popular and beneficial program for another year.

If this waiver were to be extended for another year, it would match the HAFA Short Sale Program which has already been extended until the end of calendar year 2013.

For borrowers who are losing their homes, these two programs provide financial assistance to help cushion the loss of their home and the added expenses involved in relocating to another place to live.   And sooner we can address the distressed properties that are still waiting in limbo, the more quickly we can return to a normal Real Estate market.

 

 

You cannot stop a foreclosure by buying forms from the internet

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You know the old adage:  If it sounds too good to be true, then it probably is.  

Trying to stop foreclosure action is not as easy as people are led to believe.  It certainly is not a matter of filing forms you bought from the internet and believing that to be sufficient to stop the pending foreclosure.  Stopping foreclosures involve extensive dealings with the lenders and getting them to agree to stop the foreclosure action.  It is a two party transaction; not a single party transaction.  You have to engage the lenders to get them to stop a foreclosure.

It was so complex that even homeowners who were doing loan modifications and in continual communication with them were facing dual track foreclosures, so the legislator had to step in to take action.   So to believe that you could buy a form from the internet and stop your parents from going into foreclosure is taking a huge leap of faith.

I don’t know the details of this story beyond what is written on this page, but if someone on the internet tells you to buy some forms and you can stop a lender from foreclosing on your property is one of those things that is too good to be true.

The heart breaking part of this story is that the daughter trying to help her parents ends up going to jail, plus paying restitution.   So it costs her money and jail time.  Given that these were bogus documents, we can probably speculate that the foreclosure went forward anyway.  Nothing was gained, only tremendous losses were realized.

Folks, these are desperate times, but do not tackle things that are outside your area of expertise. You can easily be participating in Mortgage Fraud if you are not careful and face felony charges like this poor woman.

Hire an experienced professional; they may actually help stop the foreclosure and may even be able to get you money to help you with the relocation.

 
The Modesto Bee _ Jail Time in Stanislaus Real Estate Fraud

Over 50 age group facing foreclosure in alarming rates

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Once considered the backbone of the real estate industry because most owned their homes outright, the over 50 age group seems to have been one of the biggest groups hurt by the recent mortgage turmoil.  The not so obvious group who was suffering in silence.

The lure of cheap money from cash out refi’s to pay off other bills or take luxury vacations or helping out financially strapped children may have led them somewhere they had no intention of going.  Unfortunately, like many others, this group got sucked into perhaps getting loans they did not need to take out during the heydays of the sub-prime mess.  Most living on fixed income, are now unable to re-finance their loans and are losing homes at an alarming rate.

The problem facing this group is that time is not on their side.  Unlike the younger segment, this segment may not have sufficient time to counter-act their negative equity situations.   There is also higher concentration of fraud aimed at this group trying to take further advantage of their dire situations.

It’s a sad situation that folks of retirement age who should be enjoying their golden years are on the verge of losing their homes to foreclosure.  However, things are not hopeless.  There are a few options to help deal with the impending foreclosure for those who are unable to pay their mortgages and are continuing to fall behind.   The thing is to act quickly and learn about various available options to see which is feasible for the particular homeowner:

1.  Contact the loan servicer to see if they can qualify for the HARP 2.0 loan modification program if their loans are Fannie Mae or Freddie Mac backed loans. To find out if your loan is a backed by one of the two institutions, please call

Fannie Mae: 1-800-7FANNIE

Freddie Mac: 1-800-FREDDIE

2.   If the lender is Bank of America or  Chase, there may be large cash incentives available for homeowners to entice them to do short sales instead of allowing the home to fall into foreclosure.

3.  Most major lenders participate in a government sponsored program called HAFA which has financial incentives to help pay the homeowners as well as any junior lien holders to complete a short sale instead of foreclosure.

There is a lot of information out there, especially online, to help homeowners deal with and avoid foreclosures.  Some in this segment may not be at ease searching for information online; in those instances, the children or grandchildren should help with research to learn about the options available to their beloved family members.  There are solutions out there without having to lose their homes and walk away with zero benefits.

 

Millions of Older Americans at Risk of Foreclosure

Why doesn’t the bank know about recent HAFA changes?

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HAFA is a voluntary program by which all major banks agreed to abide.  It is a successful program which has generated a lot of interest and one of the primary reasons which has fueled the volume of short sales to increase beyond the number of foreclosures that are being processed.

 

Considering that large institutions spend big bucks training their staff to remain compliant with changing guidelines, one would imagine two months is sufficient time to be educate the front line about the changes that affect the bottom line of the lenders and borrowers.  However, it doesn’t come as a total surprise that bank negotiators are in the dark about changes that took place two months ago in the Making Home Affordable Program’s Supplemental Directive.

 

I have a HAFA short sale that is in negotiations with one of the 5 large lenders.   In their efforts to mitigate their losses, the negotiator has on more than one occasion informed me that the payoff for the second lien would be capped at $6,000.  The supplemental directive mentioned above changed that payout from $6,000 to $8,500.

 

I have mentioned this fact to this negotiator.  He said he had not heard of this change, so I had asked him to check with his supervisor so that he can be made aware of the recent change. Today, he mentioned the $6,000 payoff again.  I reminded him about the recent changes and read him my notes during our previous conversation about checking with his supervisor.  He muttered something and said the he was still unaware of the changes in the payout.

 

I understand there is no incentive for him to check and payout $2,500 more as required by the directive, but that is $2,500 more which will go to pay down the second lien for my client. So rather than continue to ask him to check with his supervisor – which he may or may not do -  I chose to upload a copy of the directive with the appropriate paragraph highlighted so that he could have documentation to support his paying out the additional $2,500.  He was happy to learn that the document would be provided to him rather than him having to search it out on his own.

 

As agents for our clients who have fiduciary responsibilities to look out for their best interests, sometimes we have to take on the obligations of our counterparts. Some may say $2,500 is not a lot of money, but depending on how much loss the second lienholder has to write off, that amount could be the difference between an approval or no approval.  Neither the negotiator nor I may know, but there is a reason why the program decided to increase the payout by an additional $2,500; that number has some significance.

 

Because we represent the party who has the most to lose – their homes and linked financial incentives – the listing agents have to make sure that everyone is following the revised rules.  Yes, two months is far too long to be unaware of the rules, but if we do not take appropriate action and spoon feed them the correct information, then the only party to gain is the bank which gets to keep the $2,500 and feign ignorance.  And that $2,500 will have greater impact on the life of my client than a top 5 bank.

Short Sales bypass Foreclosures in volume – benefits for both lenders and borrowers

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As the article below indicates the volume of short sales has continued to rise and has now surpassed foreclosures.  This is happening because the lenders net more money in  successful short sales than foreclosures.  So obviously we know why the lenders want to push short sales.

 

However, there are financial benefits to the homeowners as well when they do short sales, compared to foreclosures.  If you are having difficulty paying your mortgage on your primary residence, there are a few ways by which financial compensation is available to induce homeowners to choose short sales.

 

The HAFA program provides three direct incentives.

* $8,500 will be made available to pay off any second mortgage holders (this was only $6,000 until March 9, 2012).

* $3,000 is made available to the homeowner directly as relocation assistance

* If lenders agree to permit a short sale, they must release the borrower from all     personal liability.

Then there is the tax incentive.  If the short sale is completed by calendar year 2012, then the IRS will “allow taxpayers to exclude income from the discharge of debt on their principal residence.”   Simply put, your taxes on the forgiven portion of the mortgage will be waived by December 31, 2012 according to the Mortgage Debt Relief Forgiveness Act.  In California, the Franchise Tax Board will follow the IRS’s lead.  Depending on the amount of the loan, and how much negative equity is involved, this could be a huge amount of money.

I have been crowing for months that the time now is the perfect occasion to do short sales.  The benefits to both the lenders and borrowers are clearly obvious and all involved parties certainly seem to have taken advantage in order for short sales to jump ahead of foreclosures in volume.  Homeowners are now planning their futures rather than simply permitting the lenders to make decisions for them.  I have always told my clients to take control of their own financial destiny by making the appropriate decisions; after all, no one will take care of your own interests like yourself.
Short Sales Bypass Foreclosures, Hinting at Hope for Housing Market

HAFA Extension and Update

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On March 9, 2012, changes were made to the MHA (Making Homes Affordable Program) otherwise referred as President Obama’s Foreclosure Assistance Program.   HAFA (Home Affordable Foreclosure Alternatives) is a subset of the above program designed specifically to handle short sales.

There were many changes to the MHA, but we will be focusing on some of the exciting changes to the HAFA portion of the program.

Some of the changes which will impact home sellers are:

 

  • Program end date to be extended out to December 31, 2013
  • $3,000 relocation assistance to owners who live at the property or tenants occupied properties.  Servicer is required to verify occupancy.
  • Secondary lien holders payout has been increased from $6,000 to $8,500
  • Credit Bureau recording will now be required as either code 13 ( paid or closed/0 balance) or 65 (paid in full/foreclosure was started), whereas there were no such guidance before

 

The most significant change, in my opinion, is the extension of the HAFA program for another full calendar year.  HAFA is a highly successful program and its use is increasing on daily basis; and the program has played a major role in giving structure and creating for the first time a national guideline for the entire short sale process.

The fact that the second lien holders will be getting an increase in the payout limit from $6,000 to $8,500 is another component which will make the bitter pill a little easier for the second lien holders.   An additional $2,500 to the second will make it easier and will permit greater numbers of short sales to close.

There used to be an occupancy requirement where the owner had to live in the property within 12 months, and only the homeowner was able to receive the $3,000 relocation incentive.  The update now permits the payment of the relocation incentive to the party which needs to vacate.  So this now means that the tenant can receive the $3,000 incentive instead of the homeowner.  For the first time, this change gives the tenant a financial incentive which was not available before.  Now tenants can earn money to cooperate in showings and work with everyone else to see the short sale close, rather than stand in the way.

For those  homeowners whose primary concerns are about  saving their credit scores, they can continue to pay their full mortgage payments to prevent late payments from showing up on their credit history.  The second component is a uniform reporting requirement to the credit bureaus.   The update makes the reporting simple by offering 2 options to insure that the reporting will be done in a timely and proper manner.

 

HAFA Updates