Principal “Curtailment” for Underwater Home Owners

If you fit this description:

  • Have low to moderate income
  • Owe more than your house is worth
  • Live in your home
  • Are delinquent, or have a hardship that puts you at risk of default
  • Have a mortgage balance of less than $729,750

Read this article….

Principal relief for stressed homeowners

A limited number of underwater homeowners in California will soon be able to get principal reductions of up to $100,000 apiece on Fannie Mae and Freddie Mac loans through the federally funded Keep Your Home California program.

The federal agency that oversees Fannie and Freddie has steadfastly refused to allow permanent principal reduction on loans they own or guarantee on the grounds it would cost taxpayers money. But in mid-September, Fannie and Freddie told servicers they could immediately begin accepting money for principal reductions from programs financed by the U.S. Treasury’s Hardest Hit Fund, including Keep Your Home California.

Fannie’s and Freddie’s willingness to accept money from Hardest Hit Funds does not signal a change of heart on the part of their regulator, the Federal Housing Finance Agency. Lest anyone get the wrong idea, Freddie says it will allow funds to be used for “principal curtailment.”

Read the rest here…

via Principal relief for stressed homeowners – SFGate.

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Why a Short Sale Blog?

After earning my CDPE (Certified Distressed Property Expert) designation I was fired up. The landscape in my profession had changed drastically over the preceding 4 years. People were hurting…lots of them.

Our homes are one of the things we tend to take for granted and if there’s one thing this recession has taught us, it’s just how central a role our homes play in our lives.

Not knowing if you can continue to stay in your home, and being worried about where else you could live if you lost it, is a tremendously stressful ordeal to go through.  Add children to the mix, and it is pure misery.

The CDPE training showed me just how many options people had.  The problem was that no one wanted to own up to their situation.  When your security is shaken to the core, the appearance of stability affords you a comfort you are reluctant to give up, even if it is only the appearance and not the reality.

So, I started this blog with some definite standards…

  • Put all this great information from my training out there
  • Be unbiased and present ALL the options (not just Short Sales)
  • Allow people to access it in privacy without having to sign up
  • Be current
  • Give links to helpful sites
  • Alert readers to potential pitfalls

The blog has helped me too.  After months of wading through the morass of a tortured real estate market this blog gave me an outlet to do something positive. Being able to make a difference, even if I don’t know the person I helped, was such a relief

Things are improving, gradually.  First with the Robo Signing settlement, then the refinement and improvement of some government programs, as well as changes in both federal and state laws that protect the homeowner and help to level the playing field between them and their lenders.

I am happy you found your way here, and it is my sincere hope that the information here helps you.

So You Missed the Deadline for Debt Relief Exemption?

When you escape a debt the IRS normally counts the amount of the debt you were forgiven as income, and taxes you accordingly.  In terms of a taxable event, this could be significant to you financially.

Example:  You owe $550,000 on your mortgage, but the current market value is $350,000.  Under an a Short Sale agreement with your lender, you sell your home for the $350,000 and the remaining $200,000 is forgiven. Enter the IRS, who view the $200,000 as taxable income!

The Mortgage Forgiveness Debt Relief Act addresses this very scenario, and has been in effect for the last 5 years for distressed home owners who short sell  their homes between 2007 and 2012. This act allows a home owner a tax exclusion for the forgiven mortgage debt. However, the measure is due to expire at the end of 2012 with a very good chance it will NOT be extended before the end of this year.

We are still 2.5 months from the end of this year–the deadline to close so that you can benefit from the current Mortgage Debt Relief Act.  Getting from listing to close in that time is a challenge  but may be doable depending on your lender.

One advantage you have right now is that the inventory of available homes for sale in Sonoma County is drastically low.  Buyers are competing aggressively for homes and that is pushing the prices up.  Depending on your lender, it may be possible still to accomplish a short sale in time so that you don’t have to hope that the bill is extended next spring.

But if you missed it, and there is a chance you may at this stage…have some hope.

It is believed that the law may be retroactively extended in spring of 2013. So, if you talk to your accountant, you may find that by going ahead with your short sale and doing an extension next year, you would be able to claim the benefit after all.  There is still a chance that it won’t be renewed, but if a Short Sale is definitely in your path, then this gives you an added chance to avoid penalty.

By extending your tax return to October 15th, 2013, if the law is extended retroactively in the first half of 2013, you may then be able to exclude the forgiven amount. Remember: consult with a tax professional before deciding.

Awesome New Site for Fannie Mae Mortgage Holders!

Fannie Mae site helps you find your way through…

Confused about what options might be available to you and if you even qualify for them?  Fannie Mae’s Know Your Options site will get you rolling in no time!

First, to be sure your mortgage is owned by Fannie Mae, start with the Loan Look Up on the very top menu line.  Once you’ve confirmed this, you have a literal plethora of assistance in sorting out what options may be open to you.

Their Option Finder makes this all easy!  You answer simple, focused questions and come out the other end with your options!  If there is something you are not sure about, you can contact them for assistance from a real person!  

Included are…

  • How to refinance with little to zero equity
  • How to modify your loan
  • Options to stay in your home
  • Options to leave your home
  • What to do if you are already in foreclosure
  • A Resource list for Mortgage Assistance & Government Programs that may apply

Another great feature are the calculators made available on the site so that you can get an estimate of your monthly payments would be on a modification or refinance.

Check it out now at www.knowyouroptoins.com!

Home Owner’s Bill of Rights

On July 11, 2012, Governor Jerry Brown signed the Home Owner’s Bill of Rights into state law.

Spurred by the loss of over 1 million California homes to foreclosure from 2008-2011, this bill will bring balance to the often capricious bank foreclosure practices experienced by distressed home owners.

The high points of this bill are…

  • Bans “dual tracking” by stopping the bank’s foreclosure process while a modification is being worked out
  • Requires a single point of contact between the borrower and the lender representative(s).  No more phone tree hell.
  • Authorizes the borrower to redress in the case of a bank’s “material” violation of this bill.
  • Requires verification of documents and fines lenders for recording and filing multiple unverified documents.
  • Obligates lenders to care for the exterior of homes they have foreclosured on.

Perhaps the most effective measure this bill brings is to say “No” to the banks’ practice of what is called “Dual Tracking”.  Dual Tracking is what happens when the banks do not pause the foreclosure process even though the home owner is currently working with the bank on a loan modification.

The Home Owner’s Bill of Rights ends the horse race between loan modification and foreclosure by requiring the bank to pause the foreclosure during the loan modification process.

There are some conditions and exemptions to the bill. First, the home must be owner occupied and the bill applies to only the fist deed of trust, which in most cases is the first mortgage.  Small lenders doing less than 175 home loans per year are exempt, as are hard money lenders. Additionally, a bankruptcy may make a homeowner ineligible for coverage under this bill.

Another important point: This bill changes how banks relate to their borrowers, but it does not obligate any lender to approve or even consider a loan modification.

There are still over 700,000 homes in California in the foreclosure pipeline and more than 3 months before this law takes effect on January 1, 2013. If you are experiencing financial distress now, and especially if you have already received a notice of default, please act immediately to do what is best for your future by educating yourself.

Emotionally it is a difficult time to make some of these decisions, but the choices you make will have a significant impact on your life in the coming years.

See the full “Home Owner’s Bill of Rights”.

5 Things To Do Immediately After Getting a Notice of Default

In California, once the notice of default has been recorded, you have approximately 120 days to save your home before it is auctioned.  Once you get the notice in the mail don’t waste any time!

Here are 5 things to do immediately….

  1. Call your lender and ask them what solutions they have.  Banks are moving away from foreclosures and new programs are coming along all the time. The best way to be sure you have the latest information is to call the lender. If you want to keep your home, begin the process under as many avenues as are available, including non-profit programs.
  2. Find out who owns your mortgage.  Even if your loan is with BofA, it could be owned by Fannie Mae or Freddie Mac (Question #9 in FAQ),   If it is, you may qualify for a government program and be able to refinance without an appraisal (HARP2), to modify your loan (HAMP), or to do short sale and get a cash incentive to help with relocation expenses. (HAFA).
  3. Get professional advice from your tax preparer and an attorney about your financial options and the effect a short sale would have on your finances.
  4. Operate on the 120 day timeline.  This is the typical timeline from Notice of Default to foreclosure and then auction.  In that 120 day period is your opportunity to a) get a loan modification consent from the bank, b) short sale your property, or c) find a way to bring your mortgage current.
  5. Contact a certified short sale Realtor, such as myself, if you want or need to sell your home. Get that ball rolling as soon as possible.
Until the Home Owner’s Bill of Rights takes effect on January 1, 2013, the banks are under no legal obligation to stop the foreclosure process, even if they have told you they would work with you on a loan modification.
 
One last thing:  That Notice of Default you got; it is public record. So, put your guard up regarding people who may try to contact you.  Some of them may be legitimate, but some may be working a scam

 

Keep Your Home California!

Keep Your Home California is a federally funded non-profit that works to help distressed home owners in low to middle income brackets.  If you are experiencing financial hardship and are behind or in danger of being behind on their mortgage payments this may help you to clear the hurdle.

They have four programs:

  1. Unemployment Mortgage Assistance  Up to $3,000 per month towards your mortgage expenses for as long as 9 months.
  2. Mortgage Reinstatement Assistance  Help to catch up on your payments so your mortgage can be reinstated.  Allows up to $25,000 to cover mortgage principal, interest, taxes, insurance and any HOA dues that are delinquent.
  3. Principal Reduction Program  For home owners who are experiencing financial hardship and have had a severe decline in their home’s value, this program offers up to $100,000 to pay down your principal balance.
  4. Transition Assistance   This gives up to $5,000 in a one time payment to provide money for rent, security deposit, and moving expenses.

The basic requirements are that you

  • Are occupying the home as your primary residence
  • Have a financial hardship
  • Your loan servicer is registered with them (See the participating lender list here.)
  • Your got your mortgage prior to January 1, 2010
  • The amount owed is less than $729,750.00
  • Your income does not exceed the maximum determined for your county  (For residents of Sonoma County the maximum income is currently $97,800.00.)

Your can find them on the web at www.KeepYourHomeCalifornia.org

And read their blog here.

What is Your Stress Style?

Like the difference between an introvert and an extrovert, we all react differently to stress.  Some of us get energized and spring into action, some adopt the head in the sand, hope it goes away position.  Don’t judge yourself, it is just the first impulse.  You can still decide to do something different.

You know that stack of unopened letters from the bank?  One of them may contain a way to get back on track and avoid a foreclosure.  Ever since the government put the banks on notice with the Robo Signing $24 billion judgement, banks have been active in offering alternatives to foreclosure.  They include interest reduction, lowering payments, short sale cash incentives and, in rare instances, principal reductions.

What you don’t know CAN hurt you.

I know it is hard, but there may be hope yet.  Wouldn’t you feel awful if your found out later that you did have a way out?  So, pull your head out of the sand and grab your letter opener and find out what options may be waiting.

Here are some examples of things that have gone out in the mail and unfortunately have been ignored by stressed out homeowners….

  • B of A selected 200,000 delinquent homeowners for a principal reduction of up to $150,000 a piece.  They sent the letters registered mail.
  • Chase is offering cash incentives of anywhere from $2,500 to $45,000 to do a short sale.  They selected 57,000 homeowners and sent the notice out in the mail.
  • In the last 6 months banks have been on the move and coming up with loan modification and short sale programs and they are mostly notifying their customers through the mail.

So go ahead…open them up.

If there is nothing in the mail, call your lender and ask what other solutions they have. New ones may have been added since the last time you spoke to them.  Good luck and call me if I can be of help.

Tip:  Ask a close friend(s) over, hand them a letter opener and make a party of it.  Whoever finds an incentive offer first, gets the door prize!