Short Sale, Foreclosure and Strategic Default

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Saturday, June 16, 2007

Florida - Practicing law without a license



What is the unlicensed practice of law?

The unlicensed practice of law, in its simplest terms, is when someone who is not licensed or otherwise authorized to practice law in Florida practices law. In determining whether the giving advice and counsel and the performance of services in legal matters constitute the practice of law, it is safe to follow the rule that if giving such advice and performance of services affect important rights of a person under the law, and if the reasonable protection of the rights and property of those advised and served requires that the persons giving such advice possess legal skill and knowledge of the law greater than that possessed by the average citizen, then the giving of such advice and performance of services by one for another constitutes the practice of law.

California - Practicing Law without a license

Threat Level -- Wired Blogs

Above the second link from google when you query "practicing law without a license".

Here is case law that was cited in the blog article:

From the 9th Circuit Court of Appeals.

" The software did, indeed, go far beyond providing clerical services. It determined where (particularly, in which schedule) to place information provided by the debtor, selected exemptions for the debtor and supplied relevant legal citations. Providing such personalized guidance has been held to constitute the practice of law.

(...)

(The) system touted its offering of legal advice and projected an aura of expertise concerning bankruptcy petitions; and, in that context, it offered personalized -- albeit automated -- counsel. ... We find that because this was the conduct of a non-attorney, it constituted the unauthorized practice of law."

What constitutes practicing law without a license.

Legal Ethics: What constitutes as practicing law without a license.

For my own sake I wanted to read what constitutes practicing law without a license. When I queried "practicing law without a license" The above link was Google's first organic return. I quote the most important part below.

A legal ethicist an M.A. and a J.D. stated: "It is my opinion as an ethicist who is well versed in legal ethics nationally that even preparing some documentation would constitute practicing law if you provide analsysis (sic) in how to answer or fill in the form.

Realtor Org - Helping Realtors practice law?

I read this in an article from Realtor.org.

Question

What financial or credit liabilities will a seller have as a result of a short sale?

"Many lenders ask sellers to sign a promissory note for all or part of the difference between the proceeds of the short sale and the debt obligation as a condition to a short sale. In such cases, the note gives lenders the right to sue a seller and attach other assets if the note is not paid when due.

It’s particularly important to understand this distinction if you work in states such as California that have a nonrecourse mortgage, says Churchill. In such states, the lender cannot pursue a deficiency judgment against a seller for any deficiencies after a property is foreclosed. Because of this distinction, sellers who are already in default on a mortgage and do not have the resources to pay off a separate promissory note after a short sale might be better off letting the lender foreclose, he says. If you are working in a state in which mortgage loans are nonrecourse, be sure and alert your seller-clients to this distinction."


Technically, in specific situations Churchill's advice could be sound and he brings up an important consideration. However, the article seems to neglect myraid exceptions to the rule which could be important; depending on the facts. A California attorney would have to consider whether the loan is a refinance or a purchase money loan, whether a sold out junior is involved. A California attorney then might weigh the possibility of a judicial foreclosure. Just by writing the above I almost feel compelled to include a disclaimer such as - All situations are different, laws vary in each jurisdiction. Before making any decisions you may wish to consult with an attorney licensed to practice in your state.

The above is just small concern. Mr. Churchill says he is an attorney so I suspect his advice was excerpted from his full material.

However, this brings up a major issue. Should Realtors be trained to advise their "clients" on the subjects of accepting foreclosures and signing promissory notes? Should Realtors or loss mitigation "specialists" be trained to request homeowners sign releases which are used to represent to the bank that the Realtor or "Specialist" represents the homeowner.

Should banks even honor those releases? Frankly, I see this whole area of law becoming full employment for Plaintiff's attorneys.

I have said before we all know Realtors practice law. Some Realtors do it very well. But, we are now in a down market. Mistakes no longer get covered up by higher resale values. Unhappy former homeowners and plaintiff's attorneys will be out looking for pockets of money.

After the last real estate downturn in California one of my first trials saw the wife of a Real Estate agent suing my client, a mortgage broker, for conspiring with an appraiser to inflate the worth of a property. My client the mortgage broker had already been sued a few times. He represented he had no assets left. The plaintiff was looking for a "fraud" judgment so she could make a claim against the state fund for victims of fraud. I am sure we all know what being sued for fraud does to a man looking to keep his license.

I am a Realtor and an Attorney. There is no substitute for smart, informed Realtors. In these illiquid markets, Realtors are a necessary and essential part of the pricing and marketing of short sale properties. I humbly suggest we protect the public and allow lawyers to practice law and Realtors to price market and sell Real Estate.

Short Sale instead of foreclosure?

Over the last six months there has been a change in the attitudes of the Lenders. They have become significantly more open to short sales.

Country wide had hired 60 people into its loss mitigation department.

Before you agree to doing a short sale make sure you are doing it for the right reasons. I know many Realtors are suggesting that a short sale saves your credit. Currently the benefit may be negligible and soon it may be wiped out. The fico score people are currently considering making a short sale as damaging to your credit as a foreclosure. There are many reasons to consider a short sale. But a short sale should probably not be your opening Gambit with the bank.

Given the right circumstances there are better offers which may also help you with the IRS loan cancellation bill. The Realtor in me sees a short sale as the way to earn the most money. But, the lawyer in me knows that a short sale is one of a host of options which should be considered.

Another thing to consider in markets like San Diego, Bradenton and Sarasota is that home can be on the market for a long time without so much as getting a showing.

My experience shows the great homes in great locations can be sold without too much price cutting but that homes on less than ideal lots or in less than ideal condition become very price sensitive.

Short sale and foreclosure misinformation

There is a great deal of misinformation about short sales and foreclosures on the net. I see the same potentially negligent information on websites from Florida real estate agents, Arizona real estate agents and California real estate agents.

I suspect the information comes from the same trainers. I frequently see these agents hold themselves out as "certified specialists" trained by a top real estate trainer or loss mitigation specialist.

Lets review the misinformation which I have seen come up in geographically limited searches like short sale florida, short sales san diego, short sales california, short sale bradenton and short sale sarasota.

Misleading statements:

1. There must be a hardship such as a lost job or a health concern for a bank to consider a short sale.

Response: Absolutely wrong. I have a bank considering a short sale right now. I reserved the right to submit appropriately limited financials later if necessary. I expressed my concern to the loss mitigator that this is a business transaction. While being cordial and circumspect, I let the bank know that in a falling market sentiment about hardship may be an inappropriate consideration. (for clients with assets.) Hint: the right statement in the beginning of the negotiation may minimize or eliminate any potential deficiency judgment or debt forgiveness tax claim by the IRS. (Contact me me if you would like to know why.)

2. Short sales cost the homeowner nothing.

Response: Not really, short sales do cost the homeowner his/her credit rating and the homeowner may lose use of the property which he or she could have had for a few extra months. Overall this statement does not seem that harmful.

3. Save your credit with a short sale.

Response: Right now dubious, soon to be incorrect.

4. You have to have a buyer before you can approach the bank with a short sale.

Response: Wrong, this is contrary to one of our proprietary strategies designed to get a property sold and avoid or minimize loan forgiveness.

5. A homeowner can authorize this Realtor to negotiate with the bank because she is certified specialist.

Response: This borders if not crosses the line of practicing law without a license. Actually as I think about it - it must be practicing law without a license. I welcome contrary opinions. I would love to hear from others on this issue.

6. To accomplish the short sale you should give the bank the financial information they request.

Response: Wrong, dangerous, practicing law without a license and very harmful to clients with assets. This has been discussed in a few places on this blog.

7. Then I see Realtors advising homeowners on bankruptcy options. Lawyers are afraid to give advice on the net. We always have disclaimers. Yet we see Realtors telling homeowners not to file for bankruptcy while letting the Realtor conduct short sale negotiations. Can you imagine how much these Realtors' Brokers are going to pay out to people who could have filed bankruptcy but did not because Realtors provided faulty legal advice and foreclosure services. Think about how many people a plaintiff's firm could get in a class action a year from now.

8. I have heard and read Realtors say a short sale is either going to lead to a deficiency judgment or a taxable event as loan forgiveness.
Response: Maybe not. I think you would have to be a educated as a lawyer and trained as a Realtor to understand why. If you spend time to thinking about Fair market value and what statements you might make to the bank to get the clock ticking, you might significantly minimize or eliminate a homeowners liability to the bank and the IRS. For now I do not feel comfortable publishing my thoughts on this subject because it is only my legal opinion, I have not yet negotiated with the IRS on this issue.

I offer to help the first person who contacts me with a large loan forgiveness tax bill from the IRS - for free - or at a very discounted rate.

Friday, June 15, 2007

SignOnSanDiego.com > News > Business -- Harvard: Housing slump to continue into 2008

SignOnSanDiego.com > News > Business -- Harvard: Housing slump to continue into 2008

Harvard Study said housing slump likely to continue into 2008. Study cites the subprime adjustible rate mortgages.

The article cited a professor from the university of San Diego as well.

Foreclosure and Short Sale Solutions

If you are Florida or California homeowner and your home is upside down, it seems you are now very fortunate. Swimming around you is now a thriving industry of foreclosure consultants, short sale specialists, Realtors, loan brokers and former "loss mitigation specialists" ready to dive in and help. Interestingly, attorneys do not yet seem to be making a big push into the recently expanding area of work. (I will discuss the reasons for this in a later blog.)

Lets review the players -

Loan Broker Mortgage Lender - What you may find interesting is that when you work with a loan broker most of you solutions will involve refinancing or taking out new loans. You may get this really nice large second mortgage with a interest rate well below market for six months. Or, you may work with one of the few brokers who can negotiate a short payoff with your bank and set you up with a new lender. (This may be a great option for some people, but, you do have to watch out for the loan forgiveness bill from the IRS.)

Realtor - When you work with a Realtor most of your solutions will usually involve listing and selling your home, to get you get out from under the debt. One of the pitches from many Realtors is that a short sale will save your credit. This is a dubious claim and it may be false. Again, watch out for loan forgiveness. You may need an accountant or a lawyer to negotiate with the IRS.

Foreclosure or short sale consultant - When you work with the foreclosure consultants most solutions involve paying 1000-2000 dollars or more upfront, and then letting the "specialist" negotiate with your bank. While this may be practicing law without a license it is certainly representation without a full quiver. Unfortunately a specialists ability to leverage a homeowners position is severely limited by the "specialist" lack of legal authority. There is no sincere option for filing a 13 and forcing the bank take a court ordered payment schedule. Again, watch out for the 1099 and the tax bill from the IRS.

Investor or scam artist posing as "Consultant" - You may even run into the "consultant who wants to help you by buying your home." He may even offer to let you sign over your deed so he can help you.


Except for the charlatans all of these "consultants" may be suggesting real solutions, which may be a great fit for the right situation. All those solutions should be in your tool box. There are also some solutions that only a lawyer may suggest.

We urge every upside down homeowner to speak with with someone from each vocation and consider each of these options before choosing a solution.

Of course ideally you might find all the solutions in one stop. Our group at upsidedownrealestate.com is set up so that you can work with loan brokers, Realtors and or Lawyers depending on your needs. And if you choose one of our solutions you have our lawyers on retainer to work with the IRS for up to 4 hours resolving loan forgiveness matter if you get a tax bill.

Some of our solutions require no up front fees and we always inform you of the fees before we do any work.

3 Easy Steps

1. Give us a call (941) 356-4653 or (760) 415-5873.

2. Discuss your options for free.

3. Get started on your solution.

We are located in San Diego and the Sarasota - Bradenton area of Florida. If your property is located in other areas we will be happy to work with you, but we will have to interview local Realtors to see if they can produce the data we need for some of the proprietary features in our short sale package.

Arm resets

Interest rates on 30 year fixed jumped from 6.21 to 6.74 during the last month. Which means payments went from 1,839 to 1,944 dollars a month on a $300,000.00 loan.

Looking at it another way a borrower who can only afford 1839 a month can no longer afford a $300,000 house. He can only afford a 283,000 home.

According to south florida's Sun Sentinel.

Those higher rates are going to make it difficult for troubled homeowners to refinance in here in the Sarasota and Bradenton Florida area. I would not expect the rate of short sales or foreclosures to go down.

Subprime Loans Pressure Florida Real Estate

The Sun Sentinel said 11.61 percent of all subprime loans are past due and 2.15 percent of subprime loans entered foreclosure during the last three months of the year. 6.29 percent are "seriously" delinquent. (Loan past are 90 days past due.)

Additionally the fed is ready to crack down on stated income loans or so called "Liar Loans"

Thursday, June 14, 2007

Foreclosures skyrocket Ca and FL lead

California and Florida led the way with foreclosure activity in May
Five months in a row California has lead the list most foreclosure filings of any state, with 39,659 in May.

Florida was second in foreclosure activity with 21,704 foreclosure filings. Activity in Florida increased 52% from April 2007 and up 144% from May 2006, One in every 336 households — fourth highest among all the states.

Affordable housing is starting to show up in the Sarasota and Bradenton markets which is part of the reason sales have increased there. Affordable housing might not be too far off in parts of San Diego. Although, areas of Carlsbad are still seemingly strong.

Our observation is that homes located near good schools in Carlsbad still seem to have a bid under them.

source of the statistics is realitytrac

voiceofsandiego.org: News... A Gray May for Home Sales

25% fewer homes sold in May in San Diego than last year. And forelosures on the rise in may.



voiceofsandiego.org: News... A Gray May for Home Sales

DailyBulletin.com - Housing sales plunge in May

Real Estate Sales in California including San Diego have been falling. You can see some stats in the article cited below. However, prices in some areas have not dropped much. Especially if you consider how significant the price drops have been in parts of florida, like Sarasota and Bradenton.

Having lived in both places, I would have to say that there are some significant differences. A higher ratio of people need to live in San Diego than in Sarasota or Bradenton. Many of the people coming to south west florida have to figure out what they are going to do to earn a living. They are not being pulled here by jobs. So, there is a lower "need" housing.

That being said if you wish to move to florida and you have school age kids, your choices are more limited. When it comes to schools Sarasota and Bradenton have some very good ones by florida and San Diego standards. (imho).

I suspect that plenty of people wish to live in both places but more peoople had to live in San Diego because of Jobs. Therefore, San Diego has not yet sold off that hard.

However, a significant increase in interest rates could make these arm resets much more significant. If adjustable rate mortgages increase significantly watch out.




DailyBulletin.com - Housing sales plunge in May

Rate of home foreclosures hits record in 1st quarter - Yahoo! News

The Mortgage Bankers Association said the rate of loans becoming delinquent in the first quarter just set a record.

The record seems to be caused by the activity in 7 states.

A case of the "lost their jobs" and lost their "minds".

Ohio Michigan and Indiana, as well as California, Florida, Nevada and Arizona contributed to the record rate.

I think we can surmise that the problems in the midwest relate to the auto industry and the case in CA, FL AZ and NV have to do with virtually unchecked speculation. You wonder how all these speculators got loans to control so many properties.

Living in the Bradenton Sarasota area, I know school teachers and accountants who each controlled at least 4 properties which averaged over a million dollars each.

Wednesday, June 13, 2007

More short sale traps for realtors and homeowners

Mark Sumpter is very good at marketing. I frequently run across his stuff every time I look for information for this blog.

He is selling courses to people wishing to profit as investors from short sales. His marketing piece is the state of the art from a year ago. Hes got the personal story, the pitch, the appeal to greed, the testimonals and the risk reversal promise.

He also provides a wealth of questionable practices:


1. He says Short sales can be very profitable for investors. (Note to homeowners many short sale "advisers" are investors trying to get leads to distressed properties)

2. He (and other trainers) state investors must get the deed to the property from the homeowners prior to contacting the bank. Why? Because, if they don't get the deed an investor may lose time, effort and money setting the deal up and then seeing the homeowner back out. Mr. Sumpter explains you only have to lose 30,000 dollars once before you make sure you get the deed. On another site I saw them speak of putting the deeds into land trusts before commencing negotiations with the bank.

Note to homeowners speak with and attorney before you do anything with your deed. Now I understand why there are warnings from Hud about the scams out there.

3. Next Mr. Sumpter advises investors not to tell the banks they are investors. He advises that you call the bank and state you represent the buyer or the homeowner. He warns sometimes the bank may ask if you are a real estate attorney. Mr. Sumpter just says repeat what you just said.

Note - to everyone who reads this blog. When someone repeats what they just said in response to your question (make an internal memo this person has not respect for my situation- he is most likely a crook using a script.) repeat your question and keep repeating your question till you get an answer.

4. Mr. Sumpter also says the lender is going to ask for a hardship letter and information about the homeowners finances, including: bank statments, pay stubs, income statements, and so on. "Be prepared to send everything they ask for because if you don't it will not be accepted".

If the banks rejects the short sale, a smart lawyer may find you responsible for a host of damages. You are practicing law without a license and you may also be preventing all future short sales from happening. Other damages in Florida and California will have to do with the intersection of anti deficiency laws, foreclosure, bankruptcy and homestead protections.

Warning to Realtors short sale consultants

Potential liablity for Realtors? Given the inherent conflict of interest—a Realtor makes a commission on a short sale and doesn’t in a foreclosure—the real estate professional should proceed cautiously when counselling a seller. A short sale that leads to a tax liability and possibly to further financial hardship or bankruptcy could easily backfire on the party who profited most from the transaction. If the resulting credit scores also render the buyer unable to purchase another home or cause increased costs for auto loans or credit cards, it is easy to imagine the borrower taking a dive and hoping for a red card.

LendingClarity.com » Blog Archive » Short Sales vs. Foreclosures….Your Credit Will Suck Either Way

LendingClarity.com » Blog Archive » Short Sales vs. Foreclosures….Your Credit Will Suck Either Way

LendingClarity.com » Blog Archive » Short Sales vs. Foreclosures….Your Credit Will Suck Either Way


More dangers for Realtors who counsel sellers about the benefits of short sales.

Credit bureaus may give short sales and deeds in lieu of foreclosure the same damaging score they currently give to foreclosures.

Benefits of a short sale

Some of the benefits of a short sale. This is not an exclusive list and some of these benefits have to be negotiated.

You may be able to negotiate:

1. Occupying the home until the new owner closes.
2. Not paying on the mortgage until the new owner closes.
3. I hear many "consultants saying foreclosure is worse than a short sale for your credit. Even if that is true now, that may be changing.
4. Avoiding a deficiency action.
5. You may be able to minimize the deficiency which may have a large impact on your IRS bill for loan forgiveness.
6. With the help of an attorney you may even be able to minimize or eliminate loan forgiveness.
7. A short sale or short payoff may help you avoid bankruptcy.

Short sale information for people in California and Florida.

Foreclosures up 90% in May

U.S. home foreclosures in May jumped 90% from a year earlier, reflecting a poor spring
housing market and foreshadowing even higher levels later in 2007, real estate data firm RealtyTrac said on Tuesday.

The May foreclosures -- a sum of default notices, auction sale notices and bank repossessions -- totaled 176,137, up 19% from April, the firm said in its May 2007 U.S. Foreclosure Market Report.

The number of filings in May was the largest amount since RealtyTrac started tracking foreclosure activity in January 2005.

"After a barely perceptible dip in April, foreclosure activity roared back with a vengeance in May," James Saccacio, chief executive officer of RealtyTrac, said in a statement.

"Such strong activity in the midst of the typical spring buying season could foreshadow even higher foreclosure levels later in the year," said Saccacio. "Certainly not every community nationwide is seeing an increase in foreclosures, but foreclosed properties are becoming more commonplace and adding to the downward pressure on home prices in many areas."

RealtyTrac said there was a national foreclosure rate of one foreclosure filing for every 656 U.S. households during May.

Defaults in Subprime

The default rates in the subprime segment of the U.S. mortgage market, which caters to borrowers with poor credit histories, have jumped in recent months as the housing industry
has slowed and prices have fallen.

More than two dozen lenders in the subprime mortgage sector have collapsed as rising defaults drove them out of business during a downturn in the housing market.

Market observers are keeping a watchful eye on the subprime crisis because it has triggered broader concerns that the fallout may spread to mainstream lenders and damage the
economy.

Nevada, once one of the hottest real estate markets and a favorite among investors, led the nation in May with one foreclosure filing for every 166 households, which was the nation's highest for the fifth month in a row and nearly four times the national average.

Nevada's foreclosure activity, at 5,235 foreclosure filings during the month, rose 40 percent from April and was nearly five times the number reported in May of 2006.

Colorado came in second with one foreclosure filing for every 290 households, which was 2.3 times the national average. Colorado's foreclosure activity, at 6,231 foreclosure filings in May, rose 9 percent from the previous month and was an increase of more than 50 percent from May 2006

The state's foreclosure total was the eighth highest among the states.

Other States Hit

California, the largest state, reported foreclosure activity increasing by 30% from the previous month and more than 350% from May 2006, which boosted the state's foreclosure rate to the third highest in the country.

California documented one foreclosure filing for every 308 households, which as more than twice the the national average.

Florida, Ohio, Arizona, Georgia, Michigan, Indiana and Connecticut were some of the other states with foreclosures rates ranking among the nation's 10 highest in May.

The cities with the nation's top three metropolitan foreclosure rates were all located in California, and three other California cities also documented foreclosure rates among
the top 10.

A 49% increase in foreclosure activity ensured that Stockton, Cali., would register the nation's highest metropolitan foreclosure rate at one filing for every 88 households, which was nearly 7.5 times the national a average.

Merced, Cali., documented the second highest metro foreclosure rate, one foreclosure filing for every 100 households, followed by Modesto, Cali., with one foreclosure filing for every 118 households. Other California metros in the top 10 were Riverside-San Bernardino at No. 5,
Vallejo-Fairfield at No. 6, and Sacramento at No. 7.

Las Vegas at No. 4, Denver at No. 7, Detroit and No. 8, and Miami at No. 10 were other top 10 cities.


http://www.cnbc.com/id/19193611

Tuesday, June 12, 2007

California Realtors - 14% sales drop

Business Briefs: June 11, 2007 : Business News : Redding Record Searchlight


The California Association of Realtors projects a 14 percent decline in single-family home sales this year and a 1.8 percent increase in the median price of a home.

Most at risk for foreclosure

Who's most at risk for foreclosure? - Buying a House - MSN Real Estate

according to this source 33% of the arms from 2004-2006 which started out with a rate of less than 4 percent will lose their homes will be foreclosed upon.

The prediction assumes that property values remain flat with December 2006 levels. Since property values have fallen in San Diego and the Sarasota Bradenton area we may expect even more people to lose their homes to foreclosure. (according to the author of the study)

Each 1% drop in house prices translates in an increase of roughtly 70,000 foreclosures.

Short sale and foreclosure scams

Seven Foreclosure Scams To Watch Out For - Forbes.com
a run down of foreclosure scams

equity skimming
equity stripping
phony counseling agencies
lender scams
phony loan transactions
loan flipping
Internet phone scams


Bottom line.

If you live in San Diego California or the Sarasota Bradenton area of florida -
You may need a lawyer - you may need a Realtor you may need both. I can not think of any circumstances where it would be advisable to pay a short sale consultant or foreclosure consultant instead of hiring an experienced lawyer.

You can get a lot of legal work for the consultants fee and the rest of the work in a pre-foreclosure can be done by a Realtor in exchange for the listing.

Monday, June 11, 2007

Most Resilient U.S. Real Estate Markets - Yahoo! Real Estate

do not know if i believe them but this author says the bottom is in in in places like Seattle and Charlotte and is just about in the Tampa. Market.

Also claims San Diego is may be O.K. if it can whether the correction.

The author astutely points out the inventory overhang is a critical factor.

My research and experience show that the old real estate saw is correct.

under 9 mos give a take a month or so you have a sellers market. Over 9-10 mos you have a balance market and over 10 months of inventory you have a buyers market. As you get higher inventory you get declining prices.

Sure so this in the Sarasota Bradenton market.

We went from two months inventory to 10 mos inventory in about 2-3 mos. When the market brook we saw housing pouring onto the market. Which was sure sign of investor supply.


Most Resilient U.S. Real Estate Markets - Yahoo! Real Estate

pre-forclosure options - selling your home

After reviewing all your options you may determine there is no reason for you to "save" your home.

There are a host of legal issues to consider such as whether there may have been predatory lending. Once you run through the legal checklist some of the options you may consider will be

1. deed in lieu of foreclosure or jingle mail
2. selling to an investor
3. If you have time, you can sell to the public by yourself or with a Realtor
4. If you are upside down (you will net less than you owe)you may negotiate a short sale with the lender. Most short sale advisers incorrectly indicate that you must have a buyer before you begin a short sale negotiation. (This may be because the adviser is actually trying to buy your home via a short sale.)
5. You can allow the foreclosure to happen (although this usually not the best option.)

Some of the Risks:
1. Deficiency judgment (if not part of the negotiation process.)
2. Tax bill from the IRS for debt relief (may put you in a higher tax bracket.
3. Scams
4. Credit

Pre foreclosure - keeping your home

Wish to keep your home?
Here is part of our checklist

Potential Legal Outs or leverage

1. Predatory Lending
2. Non compliant documents
3. Faulty closing
4. Overcharging on the loan

Standard ways to prevent foreclosure

1. Pay off the entire loan
2. Pay the reinstatement amount
3. Mortgage Modification or Negotiate a new repayment plan
4. Refinance the loan with your lender or a new lender
5. Special Forbearance
6. Partial Claim against FHA insurance fund
7. Combination of the above
8. Short payoff and refinance with a lender for a new lower amount
(you usually need a very smart bank or a solid legal position for this)
9. Repayment plan forced on the bank though chapter 13 workout plan.

some of the Risks
1. Deficiency suits for the short fall between loan and the amount collected. (this may be subject to negotiation if applicable.)
2. IRS bill which could change your tax bracket for the loan forgiveness
3. Giving the bank financial information about the location and size of your assets.
4. Speaking with an adviser who can not protect your conversations from discovery by third parties.
5. Watch out for scams.

Sunday, June 10, 2007

San Jose Mercury News - `Short sales' can bail out underwater borrowers

short sale article in california.

Explains that is critical that the listing agent can take a leadership position with a bank during a short sale negotiation.

Which is true. But I think leadership involves more than waiting for an offer to get submitted and then starting the process. A listing agent combined with an attorney can take real leadership role with the bank.

There are reasons to get these negotiations done quickly with a bank. There are ways to frame the negotiation so that the homeowner does not get stuck with an every increasing potential IRS bill for debt forgiveness.

In my opinion for many homeowners it may be negligent to wait to a buyer comes forward negotiate a short sale and tell the homeowner well the bank is not going to seek a deficiency judgment but you will get loan forgiveness bill and there is nothing you can do about it because it is a taxable event.

I suggest that homeowners contact attorneys familiar with this area of the law as well as real estate agents.

If the real estate market is falling - every day waiting for a buyer could be increasing the likelyhood of a larger IRS bill.

Just imagine how the owner will feel when she gets a 1099 for $100,000 and finds that her tax bracket is also higher.








San Jose Mercury News - `Short sales' can bail out underwater borrowers

risk of foreclosure

an article explaining why a short sale might be better than foreclosure - this article is not from california or florida.


Beloit Daily News

Avoid foreclosure's black eye by going with a 'short sale'

here the article makes a distinction between a short sale and an upside down sale. This seems to expand on the concept of what upside down is technically, but it does agree with the lose definition I recently gave.

Of course the definitions do not really matter to the homeowner.

The important questions are - do they have to come up with cash to close, do they have to worry about being sued by the bank for a deficiency or do they have to worry about a higher tax bill from the IRS.


PoughkeepsieJournal.com - Avoid foreclosure's black eye by going with a 'short sale'