Short Sale, Foreclosure and Strategic Default

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Sunday, July 31, 2011

New Short Sale Law vs Jan 2011 CCP 580e


We are going to compare the Jan 2011 ca short sale law with the July 15th 2011 
amended version of the law.  

For more info on the how the amended short sale law is going to change short sale procedures and negotiations.

First the previous (old) version of the statute: 

(a) 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.
Written consent of the holder of the first deed of trust or first
mortgage to that sale shall obligate that holder to accept the sale
proceeds as full payment and to fully discharge the remaining amount
of the indebtedness on the first deed of trust or first mortgage.
   (b) If the trustor or mortgagor commits either fraud with respect
to the sale of, or waste with respect to, the real property that
secures the first deed of trust or first mortgage, this section shall
not limit the ability of the holder of the first deed of trust or
first mortgage to seek damages and use existing rights and remedies
against the trustor or mortgagor or any third party for fraud or
waste.
   (c) This section shall not apply if the trustor or mortgagor is a
corporation or political subdivision of the state.

Now this is the new short sale law... 
CCP 580e as amended on July 15, 2011: 

580e.
(a) (1) No deficiency shall be owed or collected, and no deficiency judgment shall be requested or rendered for any deficiency upon a note secured solely by a deed of trust or mortgage for a dwelling of not more than four units, in any case in which the trustor or mortgagor sells the dwelling for a sale price less than the remaining amount of the indebtedness outstanding at the time of sale, in accordance with the written consent of the holder of the deed of trust or mortgage, provided that both of the following have occurred:

(A) Title has been voluntarily transferred to a buyer by grant deed or by other document of conveyance that has been recorded in the county where all or part of the real property is located.

(B) The proceeds of the sale have been tendered to the mortgagee, beneficiary, or the agent of the mortgagee or beneficiary, in accordance with the parties' agreement.
(2) In circumstances not described in paragraph (1), when a note is not secured solely by a deed of trust or mortgage for a dwelling of not more than four units, no judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage for a dwelling of not more than four units, if the trustor or mortgagor sells the dwelling for a sale price less than the remaining amount of the indebtedness outstanding at the time of sale, in accordance with the written consent of the holder of the deed of trust or mortgage.

Following the sale, in accordance with the holder's written consent, the voluntary transfer of title to a buyer by grant deed or by other document of conveyance recorded in the county where all or part of the real property is located, and the tender to the mortgagee, beneficiary, or the agent of the mortgagee or beneficiary of the sale proceeds, as agreed, the rights, remedies, and obligations of any holder, beneficiary, mortgagee, trustor, mortgagor, obligor, obligee, or guarantor of the note, deed of trust, or mortgage, and with respect to any other property that secures the note, shall be treated and determined as if the dwelling had been sold through foreclosure under a power of sale contained in the deed of trust or mortgage for a price equal to the sale proceeds received by the holder, in the manner contemplated by Section 580d.



(b) A holder of a note shall not require the trustor, mortgagor, or maker of the note to pay any additional compensation, aside from the proceeds of the sale, in exchange for the written consent to the sale.

(c) If the trustor or mortgagor commits either fraud with respect to the sale of, or waste with respect to, the real property that secures the deed of trust or mortgage, this section shall not limit the ability of the holder of the deed of trust or mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any third party for fraud or waste.

(d) (1) This section shall not apply if the trustor or mortgagor is a corporation, limited liability company, limited partnership, or political subdivision of the state.
(2) This section shall not apply to any deed of trust, mortgage, or other lien given to secure the payment of bonds or other evidence of indebtedness authorized, or permitted to be issued, by the Commissioner of Corporations, or that is made by a public utility subject to the Public Utilities Act (Part 1 (commencing with Section 201) of Division 1 of the Public Utilities Code). (e) Any purported waiver of subdivision (a) or (b) shall be void and against public policy.
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We suggest you compare: 
1. which lenders must release the deficiency 
2. whether the upside down homeowner my be required to contribute money to secure a short sale. 



Monday, April 11, 2011

California's Mortgage Debt forgiveness slated to expire next year... Its to time to play strategic defaults and short sales

Mortgage Forgiveness Debt Relief Extended
Mortgage Forgiveness Debt Relief Extended - Updated 04/13/10

On April 12, 2010, SB 401, the Conformity Act of 2010 was enacted. It allows taxpayers who had all or part of the loan balance on their principal residence forgiven by their lender to exclude the forgiven debt from California gross income. The new law applies to discharges of qualified principal residence indebtedness on or after January 1, 2009, and before January 1, 2013.
New law - Taxable years 2009 through 2012

California law conforms, with modifications, to federal mortgage forgiveness debt relief for discharges that occurred in tax years 2007 through December 31, 2012. The amount of qualifying indebtedness is less than the federal amount and California imposes a state-only limitation on the total amount of relief excluded from gross income. The following summarizes the differences between the federal and California provisions. Federal provision applies to discharges occurring in 2007 through 2012, and:

Limits the amount of qualified principal residence indebtedness to $2,000,000 for taxpayers who file as married filing jointly, single, head of household, or widow/widower, and to $1,000,000 for taxpayers who file as married filing separately.
Does not limit the debt relief amount; it only limits the indebtedness amount used to calculate the debt relief amount.
See the federal law Mortgage Forgiveness Debt Relief Act and Debt Cancellation for more information.

California provision applies to discharges that occurred in 2007 through 2012, and:


Tuesday, March 1, 2011

Is the the time to buy real estate now?

If Your Goal Is to Buy Low, Buy Now!
Let’s say you were going to take out a $200,000 30-year-fixed-rate mortgage in November of 2010. At that time, interest rates were 4.17% (as per Freddie Mac). Your principle and interest payment would have come to $974.54. According to the most recent report from Case Shiller house prices fell 3.9% in the 4th quarter of 2010. The most recent report from the Federal Housing Finance Agency shows a 0.8% fall in prices. Let’s use the larger percentage decrease: 3.9%.

For the sake of keeping the math simple, we will now say you can get the same house with a $192,000 mortgage (4% discount from November price). Interest rates are now 4.95% (as per Freddie Mac).

Your principle and interest payment would now be $1,067.54.

By waiting to pay less for the PRICE of the house, the COST increased $93 a month. That adds up to $1,116 a year and over $33,000 over the life of the loan.


Thursday, January 6, 2011

Selling a home in San Diego for maximum net to the Seller -- part 1

We are going to begin a series of posts on how to sell a home with equity for max net to the seller.
(note in a short sale you are not concerned about get the highest price, you are concerned about finding a solid buyer with an offer the lender will accept... for most people.... some sellers do have to consider the tax consequences..

We will be looking are
1. Pricing
2. Marketing
3. Negotiating
4. Timing
5. Quality of Representation

and a few other categories.

Today we are going to begin a series on photography.

We will be linking to a few articles good articles on the reasons for photography, techniques and equipment. 
(I have gotten the photography bug... in moderation) 

Please note there will be some bias in all these articles as obviously professional photographers have a reason to promote professional photography.  As I have a reason to promote having a lawyer on short short sale team so you have you best shot at preserving your assets and getting your short sale closed. 




Successful Combination of Photography and Real Estate
Point2 (point2.com) conducted a study monitoring listings over a 30-day period which clearly showed that properties which feature just one photo generated approximately five views and 1.37 leads, while listings displaying 21 or more images received over 77 views and close to 11 leads. Clearly, the listings that added 20+ photos generated nearly 10 times the number of leads and over 15 times the number of views.

Another study relating to the number of photos a listing posts compares photos to the number of Days on Market (DOM). The findings show that listings with more photos sold faster. This is the shake down on the photos to Days on Market (average) analysis.

- 1 photo = 70 DOM
- 6 photos = 40 DOM
- 16-19 photos = 36 DOM
- 20 photos max – 32 DOM

And listings with fewer photos sold for less. The Closed NET Price as a percentage of the Original Price also showed a direct correlation. (These findings are based on 2006 numbers and are again estimates.)

- 1 Photo = 91.2% of Original Price
- 6 or more = 95% of Original Price

According to these findings, a $600,000 home, sporting only one photo, could sell for as much as 3.8% LESS or a loss of over $22,000, just because there was only one photo accompanying the listing. More amazing is the fact that only 12% of agents posted the maximum 20 photos.


HAFA Govt Scam, so far, but could get better

Although we have closed 2 HAFA short sales, the program is torture for any anyone who cares about their time, their schedule, their sellers or their buyers. 

Now we have proof see the article below.  There have only been 661 closed HAFA short sales in the country.

My speculation is this...
The govt has been complicit with the FED and the banks... who are the shareholders in the FED.
They new if all these upside down homeowers let their properties go at once real estate prices would get so low even the found could not bail out their insolvent banker friends. 

So they created these loan mod and short sale programs to slow down the supply of real estate hitting the market. 

1. Create big funnel
2. Only let the most persistent and most organized out the other end with a loan mod or short sale. 

We know about 5% of applicants actually got real loan modifications. 
And, we know on average Realtors only close 25% of their short sales. 
Now we know that all those Realtors claiming to be HAFA short sale experts, have probably not even closed a HAFA short sale. 
 

The moral of the story is.  If you are upside down... make sure you work with someone who can prove they have the systems in place to short sale approvals on terms you find acceptable.  There are many so self proclaimed short sale and HAFA experts... just ask them to show you HAFA approvals and closings. 

Don't fall for the government or real estate industry "expert" designations.  Only work with people who document results.

And most importantly have an asset protection plan in place before you begin your loan workout.  You must have a backup plan because you plan A might not work.   


HAMP « HousingWire
The Treasury Department took action in December eliminating some rules it said have held back short sales through the Home Affordable Foreclosure Alternatives program.

HAFA was launched in April 2010 to provide an incentive to servicers and investors for pursuing short sales and deeds-in-lieu of foreclosure. The program was designed for homeowners who fell out of the Treasury's Home Affordable Modification Program and was touted as a new standard for short sales.

But both HAFA and HAMP have struggled. The Treasury has spent only $4.3 million through HAFA, inducing roughly 661 short sales since the program launched, according to the Congressional Oversight Panel, the Troubled Asset Relief Program watchdog.


Tuesday, January 4, 2011

Very few principle reductions have been offered. But this article makes lien stripping seem to easy

Richard Gaudreau: How to Get Rid of a Second Mortgage Without a Loan Modification
Trying to revive HAMP, the administration in December announced new regulations designed to push banks into offering more reductions in principal than they have in the past. Fannie Mae and Freddie Mac immediately proclaimed, however, that they remain opposed to making this option available to struggling homeowners. Protecting the interests of the banking industry over the consumer, the Federal Reserve also blocked new foreclosure regulations that would have reined in foreclosure abuses. Although the economic collapse of 2008 has caused the tide to rush in on everyone, there has been no bailout for the "little guy." Left to fend for themselves, increasing numbers of homeowners are turning to a little-known provision in the federal bankruptcy law, which permits the discharge of a second or even third mortgage in its entirety in a Chapter 13 bankruptcy. The American Bankruptcy Institute recently reported that Chapter 13 bankruptcies have risen by 9 percent in 2010 compared to last year.


How long do you have to wait to get a new loan after a Short Sale or foreclosure