Sticking it to the bank or the community?

Recently I sent out a mailing to homeowners whose homes had recently sold at a sheriff's sale.  The intent of the mailing was to gauge interest of these homeowners in trying to save their credit by pursuing a short sale offer to negotiate with their lender before the end of the redemption period.

I received a return call from one homeowner who stated that he was 'not interested in helping out the bank' as they did nothing to help him out when he needed it.  He was also not interested in inconveniencing his family for showings over the next few months trying to sell if he didn't have to.  While I can certainly empathize with folks that have initiated conversations with their lender, trying to get help with their mortgage situation before it comes to default, I have a hard time understanding why a person would want to purposefully jeopardize their credit situation just to 'stick it to the bank'.

Foreclosures certainly do affect a bank's bottom line and will not improve the business' standing.  However, foreclosures also hurt the surrounding community the home resides in and harms them more in the long run than the foreclosure hurts the bank.  A bank has ways of dealing with the repossessions in the form of tax write offs, depreciation of the asset, etc. With foreclosures at an all time high, neighborhoods across the country are losing their stability due to an increasing number of vacant and vandalized homes.  The community pays the price with the loss of neighbors, increased vandalism and homes that are left in disrepair.  In the end, it's our neighbors and communities that suffer from a foreclosure, not the bank.

When you're trying to decide how to move forward with your mortgage stress do keep in mind that there really isn't a way to 'stick it to the bank' without hurting your community at the same time. 

What in the world is HAFA?

HAFA

Now that the tax credit has expired, are the buyers gone?

Not at all folks, not at all.


It is very true that the tax credit pushed buyers that were on the fence about purchasing a home, giving them an extra $ incentive to 'take the plunge', so to speak. These buyers knew there was $8,000 available to them if they could find ‘the one’ in time to execute a contract by the 4/30/2010 deadline. Some of those buyers worked frantically at finding their best choice during the month of April. However, the past few weeks of real estate has taught me that money isn't everything! Not only in real estate, but many other aspects of life as well.


Buyers today want to get the best house for their money. This means looking at more homes, taking longer to decide the pros & cons of their favorite(s) and/or realizing that a home purchase is not something to settle on. This has become the mentality we real estate agents are finding in most buyers today. They may have said to their agent “I’ll jump at writing an offer, so long as it’s the perfect house in the perfect location” before the tax credit expired. However, if they didn’t find that perfect house, in its perfect location then they will continue to take their time but in the end still make the purchase.


Sellers have become weary that the buyer pool has been eliminated by the expiration of the tax credit. Do not fret, I say to my sellers and all others with homes on the market currently. There are still plenty of buyers out looking at homes, who may have ‘missed the boat’ on the tax credit, yet are serious about a home purchase. There will be more buyers added to the pool each month due to their recent employment changes as well. These buyers may have just gotten a promotion, a raise or are hitting their two year history of employment over the summer. Any of those circumstances will bring new buyers each week and in turn hundreds of buyers added to the pool each month.


When deciding whether or not to pull your home off the market, because the buyer pool may have potentially shrunk, one must be sure to focus on your long term goals in addition to the short term ones. I've heard sellers say that they'll pull their home off the market and try again in a few years.  Except, no one can guarantee that the market will indeed turn two years from now.  While we enter the next ‘wave’ of foreclosures; i.e. folks that were laid off, injured or had a decrease in pay/hours, it will be tough to truly estimate what year the market will turn again. Many numbers have been thrown around by economists over the last few months, most landing in the 8-10 year range, on when home prices will show consistent value increases year over year.  The difference between two years and 8-10 is huge, when it comes to the necessity of selling your home.  Deciding whether or not now is the time to sell will significantly depend on the latest estimates of when the market truly will turn around.  


As always, keep me in mind if you would like to sit down and discuss your situation in an effort to help determine whether or not you should continue pursuing a buyer. I am happy to help counsel on your options, no matter what the outcome of the discussion is.

Who's that knocking on my door?

A door to door sales person? Fed Ex/UPS? Your neighbor? The mailman?

Maybe, just maybe, it's your mortgage company/servicer with a possibility to save your house. Wait a second, "Why would a mortgage company/servicer want to help you stay in your home?" you ask.  You probably thought banks want to foreclose??? Not at all my friends, not at all.

Banks are in the business of loaning money, not in owning homes. With all the new government programs available to homeowners today, banks are trying harder than ever to keep people in their homes. One of the ways they do this is to hire Home Retention Consultants (HRC).

An HRC works for Titanium Solutions, a company hired by your mortgage servicer that specializes in sending people (yes, live people!) out to mortgagors in trouble with the express intent of having a conversation with you about the possibilities available to stay in your home. HRC's will come to your front door to discuss these options; if there has been no response to previous attempts of communication through letters or phone calls. Your mortgage servicer will always send a letter ahead of time notifying you that the HRC will be stopping by soon, this letter may even come from Titanium Solutions themselves.

If you're not home when an HRC rings your door bell, they will either leave a letter or business card behind with local contact information of the HRC that stopped by. If you are home and don't answer for whatever reason, the HRC will still leave this letter or business card behind. The HRC will attempt contact with you over the next several days, maybe even a week, as their main goal is to have this face to face conversation with a distressed homeowner. I ask you to please, take the time to call this HRC and arrange a time for their return so that they can discuss the possibilities your mortgage lender/servicer has to offer. An opportunity to save your home is worth much more than the cost of the embarrassment of answering the door in your robe to speak to a stranger. Most of the time, they will not be able to discuss the opportunities over the phone and need to speak to you face to face (for verification purposes as they can only speak with the person on the mortgage), and thus will make multiple attempts to reach you. So, the next time your door bell rings, do not hesitate to answer the door as it could be just the solution you were hoping for to keep your home. If you do find a letter or business card on your door, feel free to call the HRC to let them know when you’ll be home next. Because of privacy laws, an HRC is not allowed to discuss anything regarding your account to anyone for any reason and thus your information is safe. If you are in the process of bankruptcy or are not interested in staying in your home, all you have to do is state this and they MUST leave you alone. Keep in mind that an HRC will never ask for money or collect mortgage payments from you. If this person does, let them know you’re not interested as this is a scam and these people do not work for Titanium Solutions or your mortgage lender/servicer.

If you have any questions about this or other foreclosure rumors/facts, do not hesitate to contact me as I’ll be happy to answer them.

Will the lender tack on the remaining balance of your short sale to the new loan of your next purchase?

I was just asked this recently and want to clarify what happens with the mortgage balance that was not paid off with a short sale.
The definition of a short sale is that where a lender approves a 'short' payoff of your mortgage as payment in full when selling.  There are a few places for the remaining balance of your loan to go and they will always be stipulated in the written approval letter from your lender/servicer. 

1. Lender writes off the balance and waives their right to pursue the deficient balance.
2. Lender writes off the balance but holds their right to pursue the deficiency from the mortgagor at a later time. 
3. Lender accepts the short sale offer, but requires a promissory note signed by the seller in an amount negotiated at the time of the offer.  This could be the remaining balance or a portion thereof.

In all cases, the lender has the right to issue a 1099 for the unpaid balance.  The amount on the 1099 will reflect what was negotiated at the time of the short sale offer.  How to proceed with this 1099 will be determined by your financial situation and ownership status of the home that was sold as a short sale.
Do not hesitate to contact me regarding this and any other short sale questions you may have.  I look forward to helping you determine if a short sale is the best option for your current and future financial needs.

Deficiency Judgments

A lot of homeowners have questioned what happens after a short sale and in particular the possibility of their lender filing a deficiency judgment against them.
While the State of Minnesota may be considered a deficiency judgment free state, it's important to understand the facts regarding this statement.


It is widely assumed that if you let the home go through foreclosure that you are free from receiving this deficiency judgment down the line since the bank was able to recover a portion of their loss through the sale of the bank owned home. This is, in part, true within Minnesota so long as the foreclosure is conducted by advertisement with a redemption period. https://www.revisor.mn.gov/statutes/?id=582.30
The negative side to this aspect is that of the second mortgage. Second mortgages are governed by different laws and those lenders can file a deficiency judgment for the entire balance of the second mortgage or even the balance of the loan that was ‘dismissed’ with the short sale acceptance.


Selling your home as a short sale does not erase the possibility of your first mortgage filing said deficiency judgment. It's important to be aware of this fact and request certain language be inputted into the short sale approval letter to protect yourself in the future.
A statement to protect the mortgagor could be as follows:
“Only upon receipt of certified funds and the final HUD-1 Settlement statement, will XYZ mortgage release its mortgage on the property and waive any deficiency against John Doe.”
Request this language in the hardship letter as well as the intro letter your realtor submits with the short sale package once an offer is received.
i.e. “Please accept this offer as payment in full and waive your right to deficiency against me/us”

Most lenders already have this language detailed in the letter. If it is not, you can negotiate this verbiage at the same time of negotiating the short sale offer of which can also be negotiated into the second mortgage's approval letter as well.

Please be sure to consult an attorney when considering your options of short sales and foreclosures to determine your best course of action considering your financial sitaution and future goals.

How does a person's home get to foreclosure?

The word foreclosure is thrown around daily, without much thought on how a person's home gets there.
So you ask, how does a property go through foreclosure?
Foreclosures in Minnesota are typically non-judicial and are commonly called 'foreclosure by advertisement'.  Here is a breakdown of this process within the state of Minnesota, keeping in mind that each state is different.

Once you become 90 days late on your mortgage, your lender/servicer can legally file that you are in default on your mortgage.  Most mortgages have a 'power of sale' clause written within them which permits the mortgagee to sell the property that secures the mortgage loan where timely payments have not been made.  The lender/servicer hires a foreclosure attorney to begin this power of sale process.  The attorney drafts a demand letter and sends via US mail to the last known address of the mortgagor(s). 
This demand letter will tell you the total amount owed (including processing and attorney fees) to bring your account current and that you have 30 days to cure the default.  At this point, you must pay the total amount owed (unless otherwise noted).  If you ignore this letter (or can not pay), the attorney then schedules the sheriff's sale and proceeds with the required 6 week public notice and 4 week private notice.
Public notice is that of publishing a notice of foreclosure sale date in a general circulatory newspaper in the county where the property resides.  Private notice is that of a letter to the occupants/owners of the property 4 weeks ahead of the sale, 8 weeks if the home is homesteaded.

The sheriff's sale is more like an auction, where the property is sold to the highest bidder (including the bank).  After the sheriff's sale, there is a statutory 6 month right of redemption period where a mortgagor can redeem the loan (by paying the entire balance in full + costs incurred during the redemption period) or negotiate a short sale with their lender.  The redemption period is 12 months if the amount due is less than 2/3 of the prinicpal balance and property exceeds 10 acres or if the property exceeds 40 acres.  One can shorten the redemption period by court order to 5 weeks if the property has been abandoned.

Once the redemption period has ended, the property immediately transfers ownership to the winner of the sheriff's sale bid (almost always the lender that foreclosed upon).  This new owner must go through the process of evicting the occupants/owners of the home, paying special attention to what type of occupants are in the home currently.  Minnesota law recently changed where the owner must now give a tenant 90 days to vacate and can not evict this tenant until the 90 days are up.

After reviewing this timeline, you can see that there is plenty of time and opportunity to try and negotiate a short sale on your home.  While it is possible to negotiate during the redemption period, there are some lenders/servicers that do not allow short payoffs during redemption.  Please check with your lender/servicer before putting your home on the market as a short sale to ensure this is possible. 

Also, it is very possible to postpone a sheriff's sale with your lender/servicer so long as you have an offer presented for review and there is enough time for the attorney to postpone said date with the sheriff (best to request 1 week ahead of time).  The longer it takes to put the home on the market, the less likely it will be possible to secure an offer in time to negotiate with your lender/servicer.  Negotiating short sales can take anywhere from 30-120 days, so the sooner you get the home on the market the better chances you will have to negotiate and close before the end of redemption.