Making sense of the story

*     A short sale – a transaction in which the homeowner sells the property for less than is owed on the mortgage – must be approved by the lien holder or lien holders, if there is more than one.

*     Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short-sale payment as full payment for the outstanding balance of the loan, but the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.

*     The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) sponsored the bill and urged lawmakers to pass this much-needed legislation.

*     “The signing of this bill is a victory for California homeowners who have been forced to short sell their home, only to find that the lender will pursue them after the short sale closes and demand an additional payment to subsidize the difference,” said C.A.R. President Beth L. Peerce.  “SB 458 brings closure and certainty to the short-sale process and ensures that once a lender has agreed to accept a short-sale payment on a property, all lienholders – those in first position and in junior positions – will consider the outstanding balance as paid in full, and the homeowner will not be held responsible for any additional payments on the property.”

Read the full story <http://www2.realtoractioncenter.com/site/R?i=Y7pJy-rwyTJMoTmgvOXhDA..>

Existing law prohibits a deficiency judgment by the holder of a first trust deed on a property that has sold through foreclosure. SB931 extends that protection to short-sellers of a property as well. If the holder of a first trust deed or mortgage gives written consent to a short sale, that lender is obligated to accept the sale proceeds and discharge the remaining amount owed (the deficiency). Prior to this law, lenders could pursue a homeowner even after approving a short sale for the balance of the deficiency. It still allows the holder to pursue the seller in the event they determine there was fraud or waste by the borrower and it does not apply to holders of second or subsequent notes.

The California Association of Realtors was optimistic that the Gov. would also sign our sponsored bill SB1178 that would have extended anti-deficiency protection to owners who had refi-ed their homes only to the extent that the subsequent loan was used to pay debt or costs incurred in the purchase of the home. In other words, if you refi-ed only to get a better interest rate but took no  money out, your original anti-deficiency protections would still accrue.

We all know that during the boom years, banks were quick to offer refi-s but slow to disclose that you were giving up a valuable protection by taking them up on the offer. You sacrificed your anti-deficiency protection when you refi-ed. Arnie sided with the banking lobby and declared that SB1178 would interfere with the contract between the bank and the borrower. No matter that there was no disclosure or explanation of the ramifications. CAR will be looking to again sponsor this bill in the upcoming legislative session in hopes that a new Governor will have a better grasp of the issues.

Governor Schwarzenegger holds the distinction of vetoing more real estate friendly and CA sponsored bills than any previous governor of our state. But he talked such a good line when he came to talk with us – we thought he really meant all his accolades about real estate making him the man he is today. Oh well, he turned out to be much less of a man than we all hoped. Some people light up a room when they enter, others when they leave. Don’t let the door hit ya in the bum on the way out.

HUD Press Release
HUD Mortgagee Letter 2010-23, FHA Refinance of Borrowers in Negative Equity Positions

Please note, this mailbox is for data collection purposes only and not all submissions will receive a response. You may send an e-mail detailing your experiences to HAFA@realtors.org.

NAR’s Short Sale Web Page (including the new email address)

Well, I know we’ve all had smoke blown up our nether regions repeatedly by the big banks about releasing REO’s,  loan mod’s and short sales, (to name but a few) but maybe – just maybe, we are making some progress. Our leaders are meeting, or have met, with B of A, Chase, Wells Fargo and two more, who slip my mind right now. Maybe as a result of these meetings – or maybe just because they felt like it, both B of A and Chase have recently released guidelines that Realtors® will find  helpful to comply with each banks HAFA programs.

Will they work and will the process be as easy-cheesy, lemon squeezy as they claim? Only your Realtor® will know for sure – but it’s a start.

Click here for the 10 page B of A ‘Home Affordable Foreclosure Alternative (HAFA)  Short Sale Program & Guide for Agents

Or click here for a one page synopsis of Chase Bank Home Affordable Foreclosure Alternatives (HAFA) Program.

LOS ANGELES – Attorney General Edmund G. Brown Jr. today joined the California Department of Real Estate and the State Bar of California to warn homeowners about an alarming rise in short sale fraud across California in a field “rife with scam artists”.

A short sale is an arrangement in which a homeowner sells his or her home for less than the outstanding mortgage, with the consent of the lender.

“While short sales can provide homeowners with a last-ditch alternative to foreclosure, this market is rife with scam artists,” Brown said. “Homeowners and buyers, agents, and lenders should beware of short sale negotiators who operate without licenses, use straw buyers or charge illegal fees.”

With so many homeowners now considering short sales, an entire industry of so-called short sale negotiators has emerged. These individuals solicit homeowners by promising to expedite the process and help coax lenders into taking part in the transaction.

The Department of Real Estate is investigating more than 40 complaints of short sale fraud, up from “virtually zero” cases only three months ago, a spokesman said.

In April, the Obama administration launched a new initiative called the Home Affordable Foreclosure Alternatives Program, which encourages homeowners in financial distress — especially those who have failed to complete a trial modification or qualify for a loan modification — to consider a short sale as an alternative to foreclosure.

Before working with — or paying — any short sale negotiator, homeowners should consider the following red flags:

No license
With limited exceptions, only licensed real estate agents or attorneys can engage in short sale negotiations with a homeowner’s lender.

Up-front fees
Licensed real estate agents wishing to collect up-front fees from homeowners for short sale transactions must first submit an advance fee contract to the Department of Real Estate and receive a no-objection letter.

Surcharges
With many distressed properties listed well below market value, negotiators and agents are charging potential buyers thousands of dollars in surcharges and hidden fees just to place an offer on a home. These illegal fees are frequently not disclosed and are paid outside escrow.

Straw buyers and house flipping
In this scheme, short sale negotiators misrepresent the market value of a property to a homeowner’s lender by only submitting offers on the property from an affiliated straw buyer. After the home is purchased below market value, the fraudsters immediately flip it and pocket the difference.

Short sale negotiators and agents use a number of titles including debt negotiator, debt resolution expert, loss mitigation practitioner, foreclosure rescue negotiator, short sale processor, short sale coordinator and short sale expeditor.

If you are a homeowner who has been scammed, contact Brown’s office at 1-800-952-5225 or file a complaint online at: www.ag.ca.gov/consumers/general.php.

Homeowners can also learn more about avoiding mortgage and real estate fraud by visiting the Department of Real Estate website at: http://www.dre.ca.gov/cons_alerts.html. A complaint form can be accessed online at: http://www.dre.ca.gov/frm_consumer.html.

“Short sale fraud appears to be the fraud of the moment, and it is proliferating statewide,” according to Real Estate Commissioner Jeff Davi. “Consumers, licensees and lenders must all arm themselves with the tools necessary to avoid such scams.”

Homeowners can file a complaint against a lawyer, a legal specialist or a company purporting to operate as a law firm with the State Bar by calling 1-800-843-9053 or visiting: www.calbar.ca.gov.

Homeowners can learn more about the federal government’s Home Affordable Foreclosure Alternatives Program by visiting: http://makinghomeaffordable.gov/hafa.html.

Non-profit housing counselors certified by the U.S. Department of Housing and Urban Development are also available to provide free help to homeowners. To find a counselor in your area, call 1-800-569-4287.

C.A.R. currently is supporting two stand-alone measures, AB 1779 (Niello) and SB 14 (R. Calderon and L. Correa) of the Sixth Extraordinary Session, that would fully conform to the federal rule extending “phantom” income debt forgiveness through December 31, 2012.

For many real estate professionals, short sales and foreclosures are the new “traditional” real estate transaction. Knowing how to help sellers maneuver the complexities of short sales as well as help buyers pursue short sale and foreclosure opportunities are not merely good skills to have in today’s market – they are critical. And while short sales and foreclosures are not for the faint of heart, agents with the proper tools and training can use these specialty areas to guild their business for the long term.

Designed for real estate professionals at all experience levels, the National Association of REALTORS® (NAR) Short Sales & Foreclosure Resource certification, or SFR for short, gives you a framework for understanding how to:

• Direct distressed sellers to finance, tax, and legal professionals
• Qualify sellers for short sales
• Develop a short-sale package
• Negotiate with lenders
• Tap into buyer demand
• Safeguard your commission
• Limit risk
• Protect buyers

As many agents can attest, your ability to close short sales and foreclosures depends in part on your confidence in seeing these transactions through. Begin building your confidence today with SFR!

Benefits:

• Training on both the buyer and seller side of short sale and foreclosure transactions
• Free webinars that you can download anytime, anywhere
• SFR logo and marketing materials
• Access to SFR members-only online community
• Differentiation as an SFR at www.realtor.org and www.realtor.com

How to become SFR Certified:

• Be a member in good standing of the National Association of REALTORS®
• Complete REBAC’s Short Sales and Foreclosures course, available online or in classrooms (visit www.coursecalendar.com for locations)
• Complete 3 one-hour free webinars (find links at www.realtorsfr.org)
• Submit application (download at www.realtorsfr.org)
  • Send application to SFR@realtors.org
  • $175 application fee waived through March 31, 2010

For complete information and how to add this course to your tool bag, go to:

NAR Short Sale Course

Commercial transaction are down 80% from a year ago and values have dropped 25% – 35% in some markets. This is at least partially due to significant overbuilding during the past decade. Given that commercial loans are typically in the 5-7-10 year cycles, these loans are comeing due and lenders simply aren’t extending additional credit even to loans that are performing. Commercial construction has virtually ground to a halt during the past year with only about 70 million SqFt being permitted and developed. While this may sound like a lot, compared to the billions of feet available out there, it’s a drop in the bucket.

The future of banks as we know them was also mentioned. It was posited that the recent downturn was actually more of a lending bubble rather than a housing bubble. The public was responding to the rampant availability of funds. From the EVP of Wells Fargo Mortgage, ‘Bad loans are made in the good times – it’s counter-cyclical and created this bubble.’ Banks also need to work smarter. NAR announced new regulations making short sales a priority to lenders. That system is broke all across the country – not just where you are. Partly because banks are severely overburdened right now, partly because many experienced staff have been replaced in cost reduction efforts, partly because…

There is a new incentive that may tip the scales for enhanced short sale procedures – allowing short sales or deed-in-lieu to proceed without requiring delinquency on the part of the owner. Aside from the unfortunate habit of dinging people’s credit for trying to do the right thing, it is also having a real impact on our soldiers. One member from Hawaii quoted the high percentage of foreclosures in Honolulu in and around Pearl Harbor. Soldiers posted there years ago purchased homes or condos anticipating a lengthy stay or a rising market. Now many of those same soldiers are being transferred and are having their credit wrecked at the same time all thanks to their employer (US Government) & the banks. Even returning  veterans, some wounded, returning from duty are transferred stateside and are forced into credit hell. That’s not right.

It was also pointed out that 90% of sub-prime borrowers were already homeowners - the incentive for banks was on the gamble, not the product. Banks must get back to the business of being banks – back to basics. Making fewer but higher quality loans to qualified homebuyers – without excessive and onerous over-regulation.Home buyers are also being encouraged to buy a house as a home – not as a stock certificate or an investment. Over the long term housing remains the greatest builder of wealth for the average American. The short term laughs at the long term.

t. But,” she noted,” it’ll be a slog, not a sprint.”