You must report an abandoned or acquired secured asset
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Possible Riskes of Banks reporting the entire loan amount of an abondoned property on:
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Non-Government & income producing Loans
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Reduce your deficiency risk and sell your home before you abandon
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Discounts for: For Sale By Owners & Investors!
FORECLOSURE DEFENSE BASICS: UNDERSTANDING THE HOME AFFORDABLE FORECLOSURE ALTERNATIVES PROGRAM (HAFA), SHORT SALES, DEED IN LIEU OF FORECLOSURE AND DEFICIENCY JUDGMENTS
So many homeowners are fighting for reasonable loan modifications that will save their homes from foreclosure. Other people are seeking refuge in a bankruptcy Court (Chapter 13 Bankruptcy, and Chapter 7 Bankruptcy). Still others are seeking a Deed-lieu-of-foreclosure strategy, while other homeowners who are completely upside down on their properties are either walking away, or seeking to short sale their property. This is the current state of affairs in the United States, and banks (who have been generously bailed out) are picking and choosing who gets what. It seems like if you want the bank to perform any loss mitigation for Arizona of California homeowners, you have to basically incentivize them to do something (e. HAMP – Making Home Affordable).
This new loss mitigation program is called HAFA – Home Affordable Foreclosure Alternatives Program. HAFA supplements HAMP. Servicers implementing HAMP must also comply with the HAFA directives and consider people for short sales and deed in lieu of foreclosure.
What is a short sale? A short sale is a transaction whereby a lender agrees to accept less as a payoff than is owed by the homeowner/borrower by allowing the property securing the debt to be sold for less than the lender is owed. In some cases the lender will forgive the outstanding debt owed and in other cases the lender may want an agreement from the borrower to pay the deficient loan balance.
What is a deed-in-lieu? This is basically where a homeowner/borrower hands over the deed to the property (with marketable title) to the lender who agrees to accept the deed, thereby eliminating the need to pursue a foreclosure sale. Sometimes a lender will require short sale efforts before they would accept the deed in lieu of foreclosure.
Why would a lender agree to a short sale or deed in lieu of foreclosure? It costs less for a lender to do a short sale or accept a deed in lieu than it does to pursue a foreclosure. So where it makes financial sense, the lenders will entertain these loss mitigation measures.
SHORT SALES: TOP 10 MYTHS DEBUNKED!
2012 is the year of the short sale. Don’t make the mistake of believing these myths:
Myth #1: The homeowner must fall behind on mortgage payments in order to qualify for a short sale.
Debunked: Years ago this may have been true, but not in 2012.
- A financial hardship must exist, such as the ARM (Adjustable Rate Mortgage) increasing in monthly payments.
- Loss of job or income.
- Health or medical issues.
- Extraordinary loss in home value (which may be considered a hardship).
Note: Nobody should advise a homeowner to miss a mortgage payment.
Myth #2: Banks would rather foreclose on a property than approve a short sale.
Debunked: Many still believe this myth to be true, but more accurately, banks would prefer not to foreclose on a property due to the $50-70k it may cost the bank per transaction. Banks lose less money on a short sale than on a foreclosure. Note: In California, some lenders may pay owners as much as $25,000 to opt for a short sale. SoCal Superior Properties knows which banks can and will negotiate.
Myth #3: Homeowners must be pre-approved by their lender to be eligible for a short sale.
Debunked: Absolutely not true. By and large, most lenders will consider short sale offers. However, each lender may have unique and specific processes to follow, from listing the home to the acceptance of a short sale. Bypassing any part of this process may result the sale not closing, so be sure to follow each lenders’ processes closely.
Myth #4: Short sales never close.
Debunked: Obviously not true. In some areas of the U.S., nearly 50% of all closings are considered to be “distressed” properties, meaning REOs and short sales.
Myth #5: Short sales take months (and months) to close.
Debunked: The short sale processes must be learned. Once mastered, it may not be uncommon to close a short sale in 30 days. However, certain idiosyncrasies may slow the process and each lender presents their own unique set of specific challenges. No two short sale transactions are identical. Myth #6: Damage to the homeowner’s credit standing is comparable in a short sale and a foreclosure.
Debunked: In many cases, credit repercussions and deficiency protections are more damaging with a foreclosure. Short sale transactions can often lead to faster financial recovery for the homeowner and should be carefully considered.
Note: If the homeowner missed no mortgage payments, they may be eligible to finance the purchase of a home immediately following a short sale transaction.
Myth #7: Following a short sale, the homeowner will be ineligible to purchase another property for the next 5-7 years.
Debunked: Not true. Using conventional lending guidelines, some consumers may obtain a Fannie Mae backed mortgage a short 24 months after the close of their short sale.
Myth #8: After a short sale transaction, the homeowner will receive a 1099 and be forced to declare the loss as income.
Debunked: The owner may indeed receive a 1099, but due to the 2007 Mortgage Forgiveness Debt Relief Act, among other considerations, the homeowner may not owe any taxes on their transaction.*
Note: This Act is due to expire at the end of 2012.
Myth #9: The lender will sue the homeowner after the close of a short sale (or foreclosure, or deed in lieu of foreclosure) for the deficiency.
Debunked: California has certain anti-deficiency protections in place for short sales and foreclosures, depending on the circumstances.*
Myth #10: As an agent, I don’t need additional training to learn all of the ins and outs of the short sale process. And if I wait long enough, the market will recover so I may not need to deal with short sales at all.
Debunked: How long are you willing to wait? Based on the most recent housing reports, home values are still falling. Hopefully, 2012 will see the bottom of the housing market but price recovery may continue to take some time.
PLEASE READ: This article is not legal advice and not to be construed as a substitution for legal advice. If you have specific legal questions, please contact a bankruptcy lawyer or real estate lawyer or foreclosure lawyer as your case may require.
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