Local Government and Banks Discuss Short-Sales, Foreclosures and Loan Modifications
July 28, 2009 by Danilo Bogdanovic
Filed under Uncategorized
The Dulles Area Association of REALTORS® hosted a symposium yesterday with banks and REALTORS® to foster a greater understanding of the mortgage options for troubled homeowners and challenges arising from complicated real property transactions such as short sales. The event was held at George Washington University’s Ashburn campus and featured Congressman Frank Wolf and “top dogs” from HUD, the FHA, Bank of America and the Virginia Mortgage Lenders Association.
I wasn’t sure what to expect of the event because I was afraid politics and “prepared speeches” would get in the way of actually getting things accomplished (or at least discussed openly and honestly). There was a discussion/Q&A session at the end, but not much commenting came from the “top dogs”. And as far as the “advice” given, none of it was anything many of us didn’t already know.
It seems the people near the top of these organizations/companies are out of touch with what’s really going on in real life. Or maybe they do know, but don’t want to admit it or do anything about it.
For example, one agent commented how bank negotiators never return phone calls nor emails regarding the status of a short-sale in process. The response was, “Be patient. We get 180,000 phone calls per day and we don’t have the manpower to support the volume.”
So you want people to sit around for up to 6 months before you bother to get back to them? That’s your advice?! Gee, thanks. I feel much better now 
How about this…You received TARP money (aka millions of tax payer dollars) plus you’re saving thousands of dollars by working out a short-sale rather than going the foreclosure route - so hire more (competent) people!
Another example (which I have been fortunate enough NOT to experience) is that the short-sale and foreclosure departments at the same bank don’t communicate with each other. Banks have been known to foreclose on a property in the middle of a short-sale negotiation (with the same bank). It’s 2009 - there are land lines, cell phones, email, IM, text, Twitter, Skype, etc. There is no excuse for such a lack of communication between two departments within the same company.
They defended the new HVCC appraisal guidelines quite a bit even though every agent and most sellers, buyers and those trying to refinance since May 1 have a horror story (or five) to share thanks to the HVCC.
And not too much new was talked about working out a loan modification. Things such as term length increases were number one on the list of possibilities with lowering the interest rate close behind. Either way, you have to prove to the bank that you can’t afford your current (or soon to be adjusted) monthly payment due to some form of hardship.
The point is…there are lots of issues and new problems arising from foreclosures, short-sales and the new appraisal process and not much is being done about it. As a consumer, make sure you’re properly educated and be prepared for hurdles along the way. And if you’re selling your house “short” or buying a foreclosure or short-sale property, make sure you have an experienced agent who knows what they’re doing when it comes to these types of transactions (I may know of one).
Related Articles
A Seller’s Guide to the Short-Sale Process
10 Questions To Ask Before Writing an Offer on a Short-Sale
10 Things to Look Out For With Bank-Owned Property Contracts
Do You Qualify for a Loan Modification?
Negative Equity, Not Sub-Prime to Blame; New 125% Refi LTV
July 3, 2009 by Danilo Bogdanovic
Filed under News
Two interesting discussions are going on right now over at VAR buzz (Disclosure: I wrote one of the posts). The first is about the Home Affordable Refinance Program (HARP) increasing their loan-to-value (LTV) limits from 105 to 125 percent. The second is about how it’s negative equity loans, not subprimes or “liar loans” that are to blame for the foreclosure crisis.
HARP’s new 125% LTV ceiling
Regarding HARP’s new LTV ceiling… Some think that HARP is a horrible solution and that the new LTV ceiling will leave homeowners “stuck” in their home. I disagree and here’s why:
If homeowners were allowed to borrow more than what they currently owned, HARP would be horrible solution because it puts people further into debt. But HARP does not allow people to borrow 125% of their home value unless they owe that much already. It is a refinance – not a new purchase nor “cash out.”
“Upside-down” homeowners are already “stuck” in their home whether they refinance or stay in their current mortgage. Their property will still be worth $X, they will still owe $Y on their mortgage and their LTV will still be at 125% whether they refinance through HARP or not.
As Sweth (one of the commenters on the post) said, this is not the Home Affordable Modification program - that’s a different program - nor a neg am loan. This is simply a way to refinance the same amount you currently owe into a fixed rate mortgage at a potentially lower interest rate.
If homeowners were allowed to borrow more than what they currently owned, HARP would be horrible solution because it puts people further into debt. But HARP does not allow people to borrow 125% of their home value unless they owe that much already. It is a refinance – not a new purchase nor “cash out.”
Negative equity loans, not subprimes to blame
The other post is about how it’s negative equity loans, not sub-primes or “liar loans” that are to blame for the foreclosure crisis.
I can see where the author is coming from. Homeowners that took “zero down” or even “103 percent financing” (aka negative equity loans) had no financial stake in the property from the start. Many bought a house with less than $100 out of their own pocket. Heck, some even got money back! If you have no stake in something, you’re much more willing to let it go especially when you’re looking at a 10, 20, 40+ percent “loss” if you sell it.
And as property values fell, people were continuously counting how much money there were “losing” - the more they “lost”, the more willing they were to just walk away and be foreclosed on. If property values didn’t fall as much or were increasing, people would think twice before being foreclosed on because the may “make money on their home.” Primarily only those who were truly facing financial hardship would be foreclosed on because they wouldn’t be able to pay the mortgage regardless.
But this may very well be a, “Which came first, the chicken or the egg?” type of discussion.
What do you think?
A Seller’s Guide to the Short-Sale Process
June 12, 2009 by Danilo Bogdanovic
Filed under Short-Sales and Distressed Properties
Some of you may be wondering how you can go about selling your home the “short-sale” route, but aren’t sure how it works. Well, here’s what I call a “Seller’s Guide to the Short Sale Process”…
First and foremost, let’s define “short-sale” as it relates to real estate today:
A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold
If you’re not sure whether you’ll be “short” if you sell the house, hire an appraiser or ask a Realtor to do a CMA for you and deduct the balance of your mortgage(s), any line of credit(s), other lien(s) and cost of sale from the estimated market value of your property. Once you’ve done that, you’ll have a good idea of whether you’re “short” (assuming the appraisal or CMA are accurate).
Let’s assume that you’re “short” and want to move forward with a short-sale. What are the next steps.
Well, fellow Virginia Realtors and bloggers Sarah Stelmok and Jeremy Hart beat me to the punch by about 24 hours with their posts on short-sales. So, with their permission, I’m going to cite their explanation about the process to save some time.
If you are a Seller considering a Short Sale in your property, you will need to gather the following information:
- All lien holders names and contact information
- All loan numbers
- A Third Party Authorization Form - this will allow the bank to discuss your short sale with your REALTOR. It needs to be agent and loan # specific and have an indefinite end date Some banks have their own form; others will accept any form you prepare. You need to get this to the bank as soon as you hire a REALTOR.
- Listing Agreement - this should include a CMA of the property to justify your list price
- 2008 and 2009 W-2s - or the tax forms that you filed if you do not get W-2s.
Once you have all of these items, the next steps are…
1. List the property for sale– Some banks want the property listed for the amount that is owed first, and they will be willing to drop to a more realistic price after a period of time. The listing agent will need to back up their list price with a good CMA! Remember, a BPO will be called out as soon as they receive a contract.
2. Receive and ratify a contract – needs to be ratified by the seller and buyer. Some banks want one contract at a time; others want to see them as they come in. Another reason to contact the bank ASAP.
3. Send Contract to Bank - get confirmation from the loss mitigation offer at the bank and preferably written proof of receipt
4. You will also need to send – all of the paperwork including the hardship letter you gathered/prepared prior to listing your property for sale (see earlier part of this post). The bank may ask for other items not listed here. They may also send you additional forms and paperwork for you and/or your agent to sign.
5. Be persistent, but patient - Make sure you ask how long it will take for a contract to work its way through the system. You want to hear it will take 30-45 days, but they may tell you that it will take just that long for them to even look at the file as is the case with CitiMortgage. You also want to ask about the likelihood the loan will be sold. They like to sell the loans right before they give you approval, and you’ll have to start the process all over if they do.
6. Stay as current as possible - Make sure you don’t get more than 2 months behind. Some banks will allow you to get up to 9 months behind, but they are harder to negotiate and keep off the auction block. If you don’t know what their policy is, ask.
These steps will need to be done for each bank that is involved and each bank has their own process. Some banks that are in 2nd position (2nd trust/mortgage) will only start processing their short-sale after they’ve received written short-sale approval from the 1st trust. This means that the overall short-sale approval process may take twice as long with two trusts/mortgages.
If you are considering pursuing the Short Sale route to sell your home, it is important that you consult an attorney that is familiar with the process. It is also important that you use a REALTOR who is trained in the short-sale process and has experience in Short Sales.
So I hope that this helps you out (thanks again Sarah and Jeremy). If you’re in a situation where you’re about to fall behind on your mortgage and/or are considering a Short Sale, contact me to chat about it and see what options you have.
Related Articles
Short Sale (real estate) - Wikipedia
Percentage of Short-Sales Being Approved Increasing
10 Questions To Ask Before Writing an Offer on a Short-Sale
