(from CDPE Newsletter May 2012)

In a Bulletin released April 17, 2012, Fannie Mae and Freddie Mac announced updates to their short sale timeline. These updates include new response-time requirements, which aim to shorten the timeline and improve the effectiveness and efficiency of the entire short sale process.

“When a home retention option is no longer a viable solution to delinquency, it is important to utilize liquidation options, including short sales, as a valuable foreclosure avoidance solution. Improved communication methods will enhance the effectiveness of these options,” writes Freddie Mac in the Bulletin.

The top changes for a submitted Borrower Response Packages include:

1. Servicer must acknowledge receipt of short sale package within three business days.
2. If the package is incomplete, the servicer must notify the borrower of missing information within five business days.
3. Servicer must give an evaluation decision within 30 days of receipt of package.
4. Servicer must respond to an offer for purchase of a short sale within 30 days.
5. If for any reason the servicer needs more than 30 days, it must give the borrowers weekly status updates and a decision within 70 days.

For a full list of new timeline changes and requirements, download the complete bulletin here.

With these steps, Fannie Mae and Freddie Mac join the group of lenders actively revamping short sale processes and timelines, striving for easier and more efficient short sales. Bank of America alone plans a 60-70% increase in short sales this year!

(from B of A Home Loans email received today 5/15/2012)

Short Sale Relocation Assistance Program: You could receive $2,500 to $30,000 in relocation assistance

You want to avoid foreclosure. So do we!

That’s why Bank of America is excited to announce that for a limited time, we are offering enhanced relocation assistance payments in which qualified homeowners who initiate a short sale without an offer could be eligible to receive $2,500 – $30,000* in relocation assistance and owe no more on their mortgage with the sale of their property.

Don’t miss this limited-time offer to get the help you need by having your real estate agent initiate a preapproved price short sale today.

Determining eligibility is easy:

Once the short sale is initiated, B of A will evaluate you, the homeowner, for this offer quickly to determine if you qualify for the enhanced relocation assistance.

The homeowner must participate in one of the preapproved price short sale programs, such as HAFA (Home Affordable Foreclosure Alternatives) or Bank of America’s proprietary program. Specific investor participation and eligibility criteria do apply to these programs.

Have an active preapproved price short sale? Don’t worry.

Bank of America is reviewing all current, in-process preapproved price short sale agreements to determine who is eligible for this limited-time offer.  Eligible homeowners actively participating in a preapproved price short sale program (such as HAFA or Bank of America’s proprietary program) will receive a letter if they qualify for the additional relocation assistance.  The relocation assistance will be paid at closing.

Frequently Asked Questions:

Q: How can I find out if I qualify for this limited time offer?

A: Call a Bank of America short sale specialist at 1.866.880.1232 Monday – Friday 8 a.m. – 10 p.m.; Saturday 9 a.m. – 5:30 p.m. Eastern.

Q: Do I have to do anything special when initiating or completing the short sale?

A: No. But act quickly by initiating the short sale. This is a limited-time offer that you won’t want to miss out on.

Q: If a short sale is initiated with an offer, will it qualify for this relocation assistance?

A: No. This relocation assistance is only available on preapproved price short sale programs.  Short sales initiated at the time an offer is received do not qualify for the enhanced relocation assistance funds.

Q: Will the relocation assistance funds be reported on the HUD-1?

A: Yes, funds received at closing will be documented on the HUD-1, and a 1099-MISC will be issued.

Q: Can the relocation assistance funds be used to pay off existing liens?

A: Yes, the homeowner may use funds to pay off existing liens or to help with relocation expenses.

Q: Is the relocation assistance added to any other incentives, such as the HAFA or Bank of America proprietary program incentives?

A: The homeowner incentive will be inclusive of the $3,000 HAFA incentive.  For example, if the homeowner is eligible for a $5,000 homeowner incentive, $3,000 will be from the HAFA incentive, and $2,000 will be from the homeowner incentive.

Q: Is the enhanced relocation assistance available for other programs?

A: Currently, the enhanced relocation assistance is only available to short sale programs initiated without an offer. However, as we gauge the success we may extend this incentive to other programs.

Questions?

Homeowners and agents may call 1.866.880.1232 to speak to a Bank of America short sale specialist about this exciting limited-time preapproved price short sale program offering.

*The relocation assistance payment is calculated based on the appraised value of the homeowner’s property. The total amount will be no less than $2,500, but no more than $30,000. The payment will be delivered at the time of closing if the homeowner complies with all terms and conditions of the Short Sale Agreement, which includes but are not limited to the following: a full walk-through appraisal must be completed and the homeowner must satisfy all junior liens and provide clear title for the property (the relocation assistance payment can be used to clear those liens). The short sale must close by September 26, 2013.  If the homeowner does not comply with all terms and conditions of the Short Sale Agreement, they will not receive the relocation assistance payment. The amount of any deficiency and relocation assistance will be reported to the Internal Revenue Service (IRS) on the appropriate 1099 Form or Forms. We suggest that the homeowner contact the IRS or their tax preparer to determine if they have any tax liability.

Perhaps you have heard about it.

On the news, a reporter tells a story about how the housing crisis has caused some homeowners to simply walk away from their homes. It sounds crazy, but many people are being led to believe that walking away from their home is a good (or even the best!) option.

It is called Strategic Default. For distressed homeowners who believe that they have no good choices left, the idea of walking away free of consequence may sound like a relief. The reality, however, is that choosing strategic default has serious repercussions on your credit.

THERE ARE BETTER OPTIONS AVAILABLE!

As a real estate professional who has earned the Certified Distressed Property Expert (CDPE) designation, my mission is to provide financially-challenged homeowners with options to escape from unmanageable mortgages without running away.

Facing your problems head-on is always the best solution. Let me help.

Beginning June 15, Fannie Mae and Freddie Mac will require mortgage servicers to make decisions on short sales under new guidelines, specifically:

• to acknowledge the documentation was received within three business days;
• to notify the borrower within five days if more paperwork is needed;
• to review and respond to a borrower within 30 days of receiving all documentation for short sale properties (the servicer can take up to 60 days on a decision if negotiations with mortgage insurers or other stakeholders linger); and
• to provide weekly status updates to the borrower if a short sale decision lingers past the 30 days.

The new Federal Housing Finance Agency (FHFA) guidelines are designed to assist the most inventory-constrained markets in the United States with inventory levels by moving properties through the short sale process more efficiently.

If you or someone you know is considering a short sale, contact me at (916) 370-1803 or keisha.mathews@century21.com for a private consultation.

No one will deny that the market over the past five years has been a real roller coaster ride. No one will deny that either they, or someone they know, has been personally affected by the backlash. But many homeowners in distress are in denial about what is to come and may become additional victims as a result of hanging on to false hope.

If you have been denied a loan mod due to the inability to pay and are on the fence about whether to sell your home in a short sale or just “walk away” via foreclosure, here is what you need to know and take into account as you consider.

REASON ONE:
SB 458 (No Deficiency Law – California Residents Only) - This state law, modified in 2011 to include investment properties and second homes, states that once a lender approves a short sale, they cannot pursue you for the difference (deficiency). It’s that simple.

How to assess this as a homeowner in distress? If you foreclose, the second is wiped out, but the first (the larger of the two amounts) can come after you for the difference and penalties, interest, and attorney fees. Typically to resolve this, people are forced into bankruptcy. The cost of filing bankruptcy alone, for someone already experiencing financial difficulty is not practical. If you don’t qualify for Chapter 7 and are compelled to file chapter 13, most people fall out of the repayment agreement and are right back where they started, still overwhelmed with huge debt.

By choosing to sell your home in a short sale, once the lender agrees to the lower sale price, they cannot come after you for the difference. If you have two or more lien holders and they agree as well, they too are wiped out after the short sale.

REASON TWO:
Mortgage Debt Forgiveness with the IRS – If your lender allows your short sale, normally there are tax implications. For example, if you purchased a home in 2004 for $350,000, sold it in a short sale for $125,000 (what it was worth – market value) in 2011, your lender would send you a 1099-C for the difference, $225,000, and the IRS would view that as income earned for the year and swiftly ask you to pay taxes on it.

As a result of Mortgage Forgiveness Debt Relief Act of 2007 (HR. 3648) enacted by then U.S. President George W. Bush, if you are a homeowner whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Read “Ten Facts About Mortgage Debt Forgiveness” directly from the IRS website.

This act expires on December 31, 2012. It is likely that President Obama will extend this act. President Obama released his budget proposal for 2013 on Monday, February 13th, and is calling for an extension of this Act through January 1, 2015 (see link, and chart on page 218, Under Tax Proposals, Tax Cuts: Extend exclusion from income for cancellation of certain home mortgage debt). However, we won’t know until after the election, in November, assuming he is re-elected, one month before the act expires.

Keep this in mind – It takes on average, six months to complete a short sale; and you can’t file bankruptcy on taxes.

How to assess this as a homeowner in distress? Just do the math. You would be taking a huge risk placing all bets on Obama being re-elected, keeping his proposed budget promise, and getting the bipartisan support needed in order to pass it. Likely to happen, but still very risky.

Rather than being placed in a position wher you need to make a decision under pressure, listing the home sooner will give you the peace of mind and time that you need to make better decisions for you and your family, such as finding a place to live and starting on your plan to recover sooner and buy again!

REASON THREE:
Low Inventory and The Law of Supply & Demand - Tried making an offer on a property within Sacramento County and the surrounding areas lately? If you have, chances are, you have experienced a multiple offer situation and got bumped out or looked over for the next highest and best offer.

Due to extremely low housing prices, record low interest rates, and rising rents, currently, there are more buyers than there are sellers. This is the recipe to real estate investment success – an investor’s dream.

Some areas are even noticing an increase in property values as a result of this growing trend. Pockets of more stable neighborhoods with little to no new development and once booming neighborhoods where the developers were throwing in granite counters, cherry wood cabinets, and professionally manicured backyards are flying off the MLS inventory lists faster than Wendy’s having your order ready at the next window.

Almost any home can sell in this market. Investors in this climate tend to be very savvy, know what they want, and have the money to back it up. Your chances increase if your home is in an area of high desirability, near move-in ready, showable, and priced right.

How to assess this as a homeowner in distress? If you were wondering if your home will sell, wonder no more. There are plenty of websites with info on how to prepare your home to sell. Enlisting the help of an experienced real estate professional, someone closing deals actively on a monthly basis, will help you tremendously. Be open to your agents recommendations with the understanding that your goal is to get from under the debt as quickly as possible and with dignity.

Also, because this is a short sale, don’t have expectations from your real estate professional of a traditional sale. For many agents who specialize in short sales, they have processes in place and a team of individuals to help them move your property swiftly through the short sale process, swiftly to escrow, and swiftly to closing. It may not be a warm and fuzzy experience. It may look more like “please get me all of these items by noon tomorrow”, and you need to comply. Remember, your goal is to get it sold, get rid of the debt, and recover sooner.

REASON FOUR:
Federal Settlement of Foreclosure Misconduct  - On February 9th, 2012 the United States Justice Department released the details of a $25 billion dollar settlement they reached with 5 major banks:

• Ally/GMAC
• Bank of America
• Citi
• JPMorgan Chase
• Wells Fargo

The settlement occurred because the banks were accused of widespread use of “Robo-signing”.

Robo-signing is a practice employed by banks to automate the processing and approval of foreclosure proceedings against homeowners. In many cases, the banks were discovered to have processed thousands of foreclosures in a single day, all signed by one person.

The settlement presents a unique opportunity for homeowners who are in danger of losing their home. The reality is, the banks would rather explore other options than foreclosure and this settlement gives them both the motivation as well as the funding to explore them.

How to assess this as a homeowner in distress? Under the settlement, lenders are now more inclined to allow your short sale and offer additional incentives to help you avoid foreclosure.

Also remember, there is never a fee to you for the short sale. It is assumed, if you can prove hardship, that you have no funds to contribute to the sale. Your lender will make the decision as to how the proceeds of the sale will be distributed.

“Short Sale Lenders shall collectively agree to reduce their respective loan balances by an amount sufficient to permit the proceeds from the sale of the Property to pay the existing balances on loans secured by the Property, real property taxes, brokerage commissions, closing costs, and other monetary obligations the Agreement requires Seller to pay at Close Of Escrow (including, but not limited to, escrow charges, title charges, documentary transfer taxes, prorations, retrofit costs, Homeowners Association Fees and Repairs) without requiring Seller to place any funds into escrow or have any continuing obligation to Short Sale Lenders.” (from Winform Doc SSA – Short Sale Addendum).

For a more borrower/seller specific assessment of your personal situation, please consult with either a real estate attorney (I personally recommend the BPE Law Group, tell them The Short Sale Lady, Keisha Mathews, recommended you), a CPA, or contact me directly for a free consultation, (916) 370-1803, or at keisha.mathews@century21.com via email.

This article courtesy of Feed the Pig. Copyright 2011 American Institute of Certified Public Accountants.

There’s less than a month until the 2011 tax return deadline, April 17. Last week, in Tax Q&A: Part 1, we covered a few basic tax questions. This week, we continue with questions and answers from the American Institute of CPAs to help make sure you pay no more taxes than you should.

How do I know if I can take special tax breaks? Many taxpayers don’t think about the special tax provisions that may apply to them and often pay more tax than they need to pay as a result. The special provisions include the earned income tax credit, the child tax credit, the American opportunity credit and the adoption credit. Check with your local CPA or the official IRS website to see if you qualify.

What are some deductions I might be able to take? Your 2011 tax return could be your last chance to claim credits for energy-efficient home improvements or other provisions that are set to expire at the end of this year unless Congress extends them.  Expiring provisions include deductions for tuition and fees, educator expenses, mortgage insurance premiums and the option to include your state and local sales taxes paid as an itemized deduction.  Review some tax savings strategies on the AICPA’s 360 Degrees of Taxes website.

Can I deduct my health insurance premiums if I am self-employed? It depends. If you’re self-employed, you may be able to deduct 100 percent of health and long-term medical costs for yourself, your spouse and your dependents. This deduction is taken as an adjustment to income and it can be taken only if the self-employed person or spouse is not covered by an employer health insurance plan.

Visit www.feedthepig.org for more money-saving tips.

FREE Foreclosure Help – Sac Convention Ctr: Tues, 3/20/12 • 1 to 8 p.m. http://ping.fm/EdkVT

A few tips I like to give in this day of renting are:

1. Research the property address to ensure the homeowner is not in any eminent foreclosure danger. You can’t guarantee the homeowner won’t go into default, but if the tax record shows they are behind on their mortgage, or purchased the home with a loan between 2005-2008, that’s certainly a red flag.

2. Check sites such as Craig’s List to see what the “going rates” are so that you know you are looking in an area affordable for you, and you have an idea of what true rent should be– giving you a tool for negotiating.

3. Make sure everything is in writing – If it isn’t written down, it never happened. All of the terms of the lease must be in writing for your protection, your deposit, first and last, walk thru, release of deposit at the end of the lease, etc. Get it all in writing!

4. Maintenance and repairs – Get this in writing as well, showing how your landlord will deal with repairs and what repairs they will/will not make.

A book I love to refer to tenants and tenants to be is California Tenants – A Guide To Residential Tenants’ & Landlords’ Rights & Responsibilities (http://www.dca.ca.gov/publications/landlordbook/catenant.pdf)

Q: What’s the typical process when buying a short sale? How long does it take?  What are some pitfalls?

A: The typical process is the following:

1. Short Sale package sent to the lender/ Acknowledge receipt (one week)
2. BPO ordered (two weeks)
3. Negotiator assigned (one to two weeks)
4. Valuations/Assessment of the offer and short sale documentation (30 to 45 days)
5. Offer counter/denied/approved (one to two weeks)
6. Sent to investor for approval (if approved) (two to four weeks)

The order that the BPO is completed and the negotiator assigned may differ. Some lenders are trying to do as much work up front as possible. Such as completing a BPO (this is often done every three months automatically with some banks and is kept on file), or assigning a file to a specialist who can expedite the transaction.

The timeframes of each above are general timeframes but, because they are in the hand of an individual, can sometimes be faster or take longer. But in gauging transactions with the above timeline, for the most part, I am seeing files close accordingly.

Some of the pitfalls are:
1. Government programs – The Government implemented programs under Making Home Affordable (HAFA, HAMP, HARP, etc), initially intended to assist the market but created huge learning curves in the implementation of the programs. This had previously created many hangups and snags over the past few years. However, more recently, there has been a significant downturn in short sale lender snags and instead an increase in buyer fall-out due to the buyer’s lender or loan.

2. The Buyer’s lender – Tightening lender guidelines have been a cause of major short sale fallout over the past year.

3. Upcoming election – Because many of the candidates will want to be seen as if they are actively doing something for the people, we may actually see false movement (“the market is recovering” type of talk) that may have a backlash after the election is over.

For the most part, making an offer on a short sale can be a great experience if all parties are well-informed and expectations are set up front. The banks are definitely approving more short sales faster, showing that their processes are streamlining and staff turnover has been minimized. Also, many certifications (CDPE, HAFA, etc) are doing more to make certification more affordable and to educate more agents on both sides (buyer and seller). This is very important.

Short sales are here to stay, for a while anyway. We can’t fear them, we must instead embrace them, and if we go in with a mindset of “there is a solution for everything”, we can succeed in the world of short sales.

SACRAMENTO – Attorney General Kamala D. Harris today announced the California Homeowner Bill of Rights designed to protect homeowners from unfair practices by banks and mortgage companies and to help consumers and communities cope with the state’s urgent mortgage and foreclosure crisis.
Joined by Senate President pro Tem Darrell Steinberg and Assembly Speaker John A. Pérez, Attorney General Harris announced her sponsorship of six bills designed to guarantee: – Basic standards of fairness in the mortgage process, including an end to dual-track foreclosures – Transparency in the mortgage process, including a single point of contact for homeowners – Community tools to prevent blight after banks foreclose upon homes – Tenant protections after foreclosures – Enhanced law enforcement to defend homeowner rights – paid for by fees imposed on banks – A special grand jury to investigate financial and foreclosure crime.

“California communities and families are being devastated by the mortgage and foreclosure crisis. We must ensure the deceptive practices that caused it never happen again,” said Attorney General Harris. “The California Homeowner Bill of Rights will provide basic fairness and transparency for homeowners, and improve the mortgage process for everyone.”

The legislation builds on the California commitment announced by Attorney General Harris earlier this month, which is expected to result in $18 billion of benefits for California homeowners. That agreement included reforms for mortgages owned by the five banks that were signing parties. The California Homeowner Bill of Rights will strengthen those protections, make them permanent, and apply them to all mortgages in the state.

“When I secured the California commitment, I made clear it was only one of many steps I am taking to comprehensively address the mortgage and foreclosure crisis,” Attorney General Harris continued. “I want to thank Senate President pro Tem Steinberg, Assembly Speaker Pérez and all the other lawmakers who are supporting this urgent package of legislation for homeowners.”

“I want to congratulate the Attorney General on the victory she won on behalf of the people of California,” said Speaker John A. Pérez. “Our state has suffered greatly as the result of bad actors in the banking and financial industries, and this settlement holds them accountable as we continue the difficult work of recovering the housing market and stemming the tide of foreclosures, evictions and auctions.”

“Millions of Californians have already lost their homes to foreclosure and the mortgage crisis is far from over,” said Senate President pro Tem Darrell Steinberg. “This landmark settlement negotiated by Attorney General Harris helps thousands of Californians but thousands more need the same help. We need to put these protections into law so that more people can save their homes.”

CALIFORNIA HOMEOWNER BILL OF RIGHTS LEGISLATIVE PACKAGE

If passed, the following bills would:
ASSEMBLY BILL 1602 / SENATE BILL 1470- THE FORECLOSURE REDUCTION ACT OF 2012
Authors: Assemblymen Mike Eng and Mike Feuer; Senators Mark Leno, Fran Pavley, and Senate President pro Tem Darrell Steinberg -Require creditors to provide documentation to a borrower that establishes the creditor’s right to foreclose on real property prior to recording a notice of default. -Require creditors to provide documentary evidence of ownership, the chain of title to real property, and the right to foreclose, at the time of the filing of a notice of default.  -Prohibit creditors from recording a notice of default when a timely-filed application for a loan modification or other loss mitigation measure is pending. -Prohibit creditors from recording a notice of sale when a timely-filed application for a loan modification or other loss mitigation measure is pending. -Prohibit creditors from recording a notice of sale while a borrower is in compliance with the terms of a trial loan modification or after another loss mitigation measure has been approved. -Require creditors to disclose why an application for a loan modification or other loss mitigation measure has been denied. -Require that notices of foreclosure sales be personally served, including notices of foreclosure sale postponement. -Provide homeowners with a private right of action in instances in which the requirements set forth in the legislation are not followed

ASSEMBLY BILL 2425 / SENATE BILL 1471 – DUE PROCESS REFORM LEGISLATION
Authors: Assemblywoman Holly Mitchell; Senators Mark DeSaulnier and Fran Pavley -Require creditors to provide a single point of contact to borrowers in the foreclosure process who will be responsible for providing accurate account and other information related to the foreclosure process and loss mitigation efforts. -Require creditors to provide a dedicated electronic mail address, facsimile number and mailing address for borrowers to submit information requested as part of a loan modification, short sale or other loss mitigation option. -Authorize borrowers to challenge the unlawful commencement of a foreclosure process in court. -Impose a $10,000 civil penalty on the recordation or filing of “robosigned” documents, defined as documents that contain information that was not verified for accuracy by the person or persons signing or swearing to the accuracy of the document or statement.  -Require that certain documents be recorded in a county recorder’s office.

ASSEMBLY BILL 2314 / SENATE BILL 1472 – BLIGHT PREVENTION LEGISLATION
Authors: Assemblywoman Wilmer Carter; Senator Fran Pavley -Prevent blight enforcement actions from being taken against new purchasers of blighted property for 60 days, provided that repairs are being made to the property. -Require banks that release liens on foreclosed property to inform local code enforcement agencies of the release so that demolition of blighted property can proceed. -Increase fines against owners of blighted property from $1,000 per day to $5,000 per day, and allow the imposition of the costs of a receivership over blighted property to be imposed directly against the owner of blighted property.

ASSEMBLY BILL 2610/ SENATE BILL 1473 – TENANT PROTECTION LEGISLATION
Authors: Assemblywoman Nancy Skinner; Senator Loni Hancock -Require purchasers of foreclosed homes to honor the terms of existing leases and give tenants at least 90 days notice before commencing eviction proceedings.

ASSEMBLY BILL 1950 – ENHANCEMENT OF ATTORNEY GENERAL ENFORCEMENT
Author: Assemblyman Mike Davis -Impose a new $25 fee to be paid by servicers upon the recording of a notice of default. The fee would be deposited into a real estate fraud prosecution trust fund that would support the Attorney General’s efforts to deter, investigate and prosecute real estate fraud crimes, including the work of the Mortgage Fraud Strike Force. -Extend the statute of limitations from one year to four years from the date of discovery for violations of law commonly occurring in connection with foreclosure-related scams, including acting as a real-estate agent without a license and charging up-front fees for loan modification services.

SENATE BILL 1474 / ASSEMBLY BILL 1763 – ATTORNEY GENERAL SPECIAL GRAND JURY
Authors: Assemblyman Mike Davis; Senator Loni Hancock -Authorize the Attorney General to impanel a special grand jury for the purposes of investigating and indicting multi-jurisdictional financial crimes against the state.