SAN DIEGO REAL ESTATE AGENT BLOG » san diego workout programs

Key Features of the New Housing Rescue Plan

Michael Carter - San Diego Real Estate Agent — Mon, 29 Mar 2010 18:06:10 +0000

The government’s newest housing rescue effort, which was announced Friday, includes these key tenets:

· As much as $14 billion of the Troubled Asset Relief Program (TARP) will be made available to pay for writing down second liens for loans whose borrowers refinance through the Federal Housing Administration.

· Lenders that facilitate refinances through the FHA will be required to write down the principal of the first mortgage by at least 10 percent so the home owner has a loan-to-value ratio no higher than 97.75 percent.

· Lenders of second liens will be offered incentives of 10 cents to 21 cents per dollar of principal they write down in connection with an FHA refinance.

· Borrowers who lose their jobs can apply to have their mortgage payments reduced for three to six months while they search for a new job.

· Borrowers with a payment still greater than 31 percent of income after they find a job will be considered for a permanent loan modification.

· To encourage more short sales and “deed in lieu” of foreclosure transactions in which the lender settles the loan for less than is owed, the government will double assistance to borrowers to $3,000 and increase incentives to subordinate lien holders and investors to $6,000.

Source: Reuters News (03/26/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Program Will Pay Homeowners to Sell at a Loss

Michael Carter - San Diego Real Estate Agent — Tue, 09 Mar 2010 15:56:09 +0000

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Hefty tax bill may hit those who lost home

Michael Carter - San Diego Real Estate Agent — Thu, 04 Mar 2010 04:02:54 +0000

San Diegans who have lost their homes through foreclosure or short-sales thought they had emerged from the dark times and could start rebuilding their lives.

Then the state tax man came calling.

With less than six weeks before taxes are due, an estimated 16,000 former homeowners statewide will owe $15 million in extra income taxes this year and $29 million through 2012.

The tax applies to what is called the “cancellation of debt” that occurs when property owners lose their homes through foreclosure or arrange a short-sale in which they sell for less than the mortgage balance. The lender sends them a form itemizing the forgiven debt, and the amount is subject to income tax.

Congress exempted most homeowners from the extra federal tax through 2012, and the state followed suit for 2007 and 2008 but did not extend the provision last year. The state Assembly may vote tomorrow on a bill to repeal the tax, but Gov. Arnold Schwarzenegger vetoed such a bill last year over unrelated provisions.

“They’re probably stuck,” San Diego tax attorney Bob Kevane said of former homeowners facing the tax. “The biggest way around it is if you’re insolvent.”

Brad Nemeth, another tax attorney, said he doubts the tax will be eliminated.

“The state of California is seriously upside down financially, and I think the governor will probably veto it again,” Nemeth said.

H.D. Palmer, a spokesman for the Department of Finance, said Schwarzenegger remains opposed to the bill in its present form but has not announced whether he will veto it again. Other versions of the tax repeal are in the hopper and could be passed next month, legislators’ analysts said.

Failure to halt the tax could cost Jack and Phyllis Roth of Fletcher Hills as much as $20,000 in state income taxes this year — they paid $781 last year — because of the home they sold short in Flinn Springs in November. They bought it in 2004 for $545,000, invested $50,000 in improvements, and then saw its value fall by one-third before they sold it for $410,000. The result was about $190,000 in net loss that was forgiven by the Roths’ lender.

Phyllis Roth, 63, a tax preparer, said she did not realize until recently that the state would treat the short-sale differently than the Internal Revenue Service would. She estimates her state taxes at $15,000 to $20,000.

“I didn’t call anybody,” she said. “I was looking online and didn’t see anything. That’s what happens when you rely on yourself.”

The state Franchise Tax Board has received an increasing number of calls from former homeowners who are discovering the giant tax bills they face, said spokeswoman Denise Azimi. Azimi said the former homeowners can work out a payment schedule, though the state charges 4 percent interest on such stretched-out payments.

If the tax is repealed eventually, the taxpayers could seek a refund, but for now, they have to pay what is due by April 15 or face a penalty.

Not all foreclosures and short-sales are subject to the tax, experts said.

In California, most home buyers get mortgages involving a “nonrecourse” loan — meaning that if the property is foreclosed, the lender has no recourse for recovering lost money except by selling the property itself. Lenders cannot go after the owners’ assets to make up the difference, and no tax is due. These rules apply to principal residences only.

However, when owners refinance or take out a second mortgage or home equity line of credit — as happened often during the housing boom — those loans are written as recourse loans and lenders can seek repayment from the owners’ other resources. Sometimes lenders agree to waive the lost amount, but under current state law, that amount is taxable for homes sold since Jan. 1, 2009.

“It’s one of those little land mines waiting to jump up on people,” Nemeth said.

Taxes also are not due if owners declare insolvency or bankruptcy, the lawyers said. For young homeowners whose main asset was their home, it’s likely they could fall under this provision. For others, the valuation of assets becomes a factor in determining solvency.

“Sometimes if they have other real estate, we try and value the stuff realistically, so that they have as little impact as possible,” Kevane said.

For the Roths, who continue to own a previous home and have other assets, their nearly $200,000 in losses does not cancel out their other holdings. The couple said they normally operate conservatively and only bought the home, which they lived in while their son continued to live in their first house, so they could sell it at a profit and pad their retirement accounts.

“If we have to pay it, we’ll pay it,” Phyllis Roth said of the taxes. “It’s less money to retire on, but it’s not the end of the world.”

Back in Sacramento, the proposal to waive the cancellation of debt tax has passed the Senate and awaits an Assembly vote. Its fate is wrapped up in a larger bill, SB8X-32, by Sen. Lois Wolk, D-Davis, which would bring other state tax provisions into compliance with federal law.

One of those, which prompted Schwarzenegger’s veto last year, relates to “erroneous reporting” of tax liability, by which some large taxpayers seek to avoid penalties for under-reporting of income by overestimating taxes due. Federal law charges a penalty for overestimating without a reasonable explanation, and the state bill would adopt similar penalties.

Wolk, who chairs the Senate Revenue and Taxation Committee, said it was appropriate to group all tax conformance measures into one bill. But if her bill is vetoed again, she indicated she would act to get the cancellation of debt tax repealed.

“We’re certainly not going to allow homeowners to have to pay significantly more tax when they’ve had to relinquish their homes through short-sales (and foreclosures),” Wolk said.

By Roger Showley

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Foreclosure Rate Rises 17 Percent

Michael Carter - San Diego Real Estate Agent — Fri, 02 Oct 2009 14:59:42 +0000

The number of homes lost to foreclosures rose about 17 percent in the second quarter of this year despite the launch of an extensive government program aimed at helping borrowers save their home, according to government data released Wednesday.

Completed foreclosures reached 106,007 during the second quarter, compared with 90,696 during the first three months of the year, according to the report by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, which regulates banks. Their quarterly report examines 64 percent of outstanding mortgages in the country.

The increase was primarily the result of various government and industry foreclosure moratoriums, the report said.

Efforts to keep borrowers in their homes increased during that same period, including the implementation of the Making Home Affordable plan. Under that plan, lenders are paid to lower a borrower’s monthly payments. Government data has shown that since the program was launched in March, nearly 400,000 borrowers have been helped. The Obama administration aims to complete 500,000 loan modifications by November.

But even as that program ramps up, rising unemployment continues to hamper foreclosure prevention efforts. The level of foreclosure actions started during the quarter stayed steady, while the number of seriously delinquent borrowers — those who had missed at least two payments — increased 10 percent, according to the report.

The mortgage data “continued to reflect negative trends influenced by weakness in economic conditions including high unemployment and declining home prices in weak housing markets,” the report said.

The report also reflected the risks still posed by hundreds of thousands of risky home loans known as option adjustable-rate mortgages, which reset to significantly higher payments. With these “option ARMs,” also known as pick-a-pay loans, a borrower chooses how much to pay each month, often less than the interest due. But the payments on these mortgages eventually rise significantly, putting the borrower at risk of losing the home.

More than 15 percent of these types of loans were seriously delinquent during the second quarter, compared with 5.3 percent of all mortgages, according to the report, and 10 percent were in the process of foreclosure. “The risks of these loans and geographic concentration caused them to perform significantly worse than the overall portfolio,” the report said

By Renae Merle

Washington Post Staff Writer

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

High credit scorers more likely to cut losses and halt payments

Michael Carter - San Diego Real Estate Agent — Fri, 25 Sep 2009 15:02:32 +0000

WASHINGTON — Who is more likely to walk away from a house and a mortgage — a person with super-prime credit scores or someone with lower scores?

It’s probably not who you think.

New research using 24 million individual credit files has found that homeowners with high scores when they apply for a loan are 50 percent more likely to “strategically default” — abruptly and intentionally pull the plug and abandon the mortgage — compared with lower-scoring mortgage borrowers.

Experian, one of the three national credit bureaus, teamed with consulting company Oliver Wyman to identify the characteristics and debt management behavior of the growing numbers of homeowners who bail out of their mortgages with none of the expected early warning signs, such as nonpayments or late payments on other personal debts.

With foreclosures, delinquencies and loan losses at record levels, strategic defaults and walkaways are among the hottest subjects in residential real estate finance. Unlike earlier academic studies, Experian and Wyman had the ability to tap into credit files over extended periods of years to identify patterns associated with strategic defaults.

Among researchers’ findings are these eye-openers:

The number of strategic defaults is far beyond most industry estimates — 588,000 nationwide during 2008, more than double the total in 2007. They represented 18 percent of all serious delinquencies that extended for more than 60 days during the fourth quarter of last year.

In contrast with most types of mortgage delinquencies, strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. They just suddenly stop. This is in stark contrast with most financially distressed borrowers, who try to keep paying on their mortgage even after they’ve fallen behind on other accounts. They want to save their houses, not dump them.

Strategic defaults are heavily concentrated in negative-equity markets where home values zoomed during the boom and have cratered since 2006. In California last year, the total number of strategic defaults was 68 times higher than it was in 2005. In Florida it was 46 times higher. In most other parts of the country, defaults were about nine times higher in 2008 than in 2005. Loans originated across the country in the pivotal market-turn year of 2006 have produced seven times more walkaways than loans originated during 2004, when property values were still rising.

Two-thirds of strategic defaulters have only one mortgage — the one they’re walking away from on their primary homes. Individuals who have mortgages on multiple houses also have a higher likelihood of strategic default, but researchers believe that many of these walkaways are from investment properties or second homes.

Homeowners with large mortgage balances generally are more likely to pull the plug than those with lower balances. Similarly, people with credit ratings in the two highest categories measured by VantageScore — a joint scoring venture created by Experian and the two other national credit bureaus, Equifax and TransUnion — are far more likely to default strategically than people in lower score categories.

People who default strategically and lose their houses appear to understand the consequences of what they’re doing. According to Piyush Tantia, an Oliver Wyman partner and a principal researcher on the study, strategic defaulters “are clearly sophisticated,” based on the patterns of selective payments observable in their credit files. For example, they tend not to default on home equity lines until after they bail out on their main mortgages, sometimes in order to draw down more cash on the equity line.

While high scorers have lower overall default rates on all their credit activities than people with lower scores, it’s much more likely that when they stop payments on mortgages, the default is intentional and calculated.

Strategic defaulters may know that their credit scores will be severely depressed by their mortgage abandonment, Tantia said in an interview, but they appear to look at it as a business decision: “Well, I’m $200,000 in the hole on my house, and yes, I’ll damage my credit,” he said of defaulters. But they see it as the most practical solution under the circumstances, and they won’t have to deal with their negative equity albatross any further.

The Experian-Wyman study does not attempt to explore the ethical or legal aspects of mortgage walkaways. But it does suggest that lenders and loan servicers take steps to screen and identify strategic defaulters in advance and possibly avoid offering them loan modifications, since they’ll probably just re-default on them anyway.

Kenneth R. Harney

2:00 a.m. September 20, 2009

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Don’t be among victims of foreclosure-prevention scams

Michael Carter - San Diego Real Estate Agent — Wed, 09 Sep 2009 02:38:41 +0000

WASHINGTON – How’s this for a business plan to make money during the housing bust? You buy or rent lists of recent default filings from across the country – thousands of people who have been notified by lenders that if they don’t get their mortgage payments back on track, the next step will be foreclosure.

You send each homeowner a personalized letter with this urgent message: We know you’re having a tough time right now, but WE CAN SAVE YOUR HOME! It’s not too late! We know how to get through to your lender and work things out to save your house. Call this toll-free number immediately!

The letters generate hundreds of callbacks. Many panicked owners agree to pay a fee of $1,200 to $1,300 for the foreclosure prevention services in advance.

You can guess what happens next: Little or nothing in the way of help in most cases. The homeowners lose their houses to foreclosure, and the rescue company keeps sending out letters and pocketing fees.

Late last month, the Federal Trade Commission settled with a Florida-based company – United Home Savers – that allegedly operated like this, and victimized more than 3,100 homeowners nationwide.

The company and its officers denied any legal wrongdoing as part of the settlement, but have shut down the firm and agreed to a $4.1 million judgment and close monitoring by federal officials of their future business activities. However, most of the judgment was suspended because United Home Savers and its principals had only about $22,000 in their bank accounts when the FTC froze their assets under court order.

United could not be reached for comment.

The 3,100 victims, in other words, probably won’t see a dime in restitution.

“What really hurts,” says Harold Kirtz, the FTC lawyer who led the government’s case against United Home Savers, “is that a lot of these people not only lost money upfront, but they also fell further behind on their mortgages” during the weeks and months while they waited for United’s staff counselors to work things out with their lenders.

That, in turn, made foreclosure for the homeowners even more likely.

But United is just one of literally hundreds of alleged foreclosure rescue operations that have prospered in the toxic wasteland of the mortgage market bust. Reilly Dolan is familiar with many of them. He is the FTC’s assistant director for financial practices and the coordinator of “Operation Loan Lies,” a joint federal-state effort that has targeted 189 companies allegedly running mortgage-modification or foreclosure-prevention scams. The FTC alone has brought or settled 19 cases against firms of this type in the past 12 months, Dolan said in an interview. “And more are coming.”

“This is now one of the top priorities” at the FTC, according to Dolan, because the sheer breadth of mortgage foreclosure problems “has caused a lot of scams to come out of the woodwork.”

Kirtz, who is based at the FTC’s Atlanta office, said even well-educated, financially knowledgeable consumers can fall prey to loan-modification and foreclosure-prevention rip-offs because “they are in a very vulnerable state,” threatened with the loss of the roof over their heads. As a result, they don’t ask the questions they should, and they don’t look for the clear warning indicators of potential fraud. What telltale signs should tip off financially distressed homeowners?

No. 1: If the company claims to be able to guarantee success in preventing foreclosure, no matter what your financial situation or mortgage details, don’t listen further to the marketing pitch. Nobody can guarantee you’ll get a loan modification, and nobody can guarantee that your lender won’t pull the plug and foreclose.

No. 2: Although there is no federal law against collection of upfront fees for loan-modification assistance – unlike so-called “credit repair” operations, where fees are prohibited until services are completed – any company asking for $1,000 to $4,000 in advance should be checked out thoroughly by the homeowner before sending in any money.

“We can’t say all advance fees are illegal,” Kirtz said. But when the fees are for things like “processing” and “administration” costs, “in most case they’re probably bogus.”

Finally, mortgage-modification companies that claim to have special inside connections allowing them to make your payments directly to your lender – provided you send your monthly checks to the modification company, not to your regular servicer – is almost certainly intent on just one thing: Cashing as many of your checks as possible, pocketing the money, and leaving you unprotected on the conveyor belt heading for foreclosure.

By Kenneth Harney

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Learn How to Fight Back Against Your Lender and Save Your Home

Michael Carter - San Diego Real Estate Agent — Fri, 24 Apr 2009 02:38:15 +0000

Loan Modification & Loss Mitigation Strategies

A loan workout or loan modification is an agreement that is negotiated with your current lender that changes the terms of your current loan. Lenders are willing to negotiate when borrowers are facing financial difficulties and can’t obtain other financing alternatives. You must show the lender why it would be in the lender’s best interest to agree to a workout arrangement. If convinced, a lender may be willing to reduce the loan interest rate, reduce monthly payment amounts or change other loan terms.

A loan modification generally occurs where the parties to a problem loan mutually agree to workout the problem by creating new and better loan terms. The hope is that the new loan will enable to the borrower to meet their obligations.

When applying for a loan modification, make a game plan on how exactly you are going to approach them. These people are trained in minimizing loss for their company and they get paid to by getting the most amount of money out of you as possible or declare that your case is un workable and foreclose on you. That is how they mitigate loss. If you understand this, then you’ll know that you have to approach them and all conversations very carefully. Everything can and will be used against you.

Items You Will Need When Applying For a Loan Modification
Document income and expenses. Keep all correspondence (even the envelopes) Before negotiating a deal, gather all the information you need, starting with any correspondence from your lender. That includes anything that you have unopened from the lender. Don’t throw away envelopes from the servicer — postmarks sometimes can make the difference between being eligible or ineligible for relief.

Collect everything that relates to income and expenses. Find your last four pay stubs. They want to see at least one month of income. If your income is very sporadic, the support your story by showing how you’re getting paid so we can calculate an average over time. Gather at least three years worth of W2s and tax returns, plus three to six months of bank statements. Find all the mortgage paperwork and add that to the file. Pull together all bills, paid or not, from the times you were falling behind on the house payments until now. Include utilities, auto payments, credit cards, student loans, child support, medical bills. Find the winter and summer heating and cooling bills. You need to also include everything that documents why you fell behind. An employer’s notification of reduced hours or a layoff, an invoice for an auto repair or a furnace replacement, a shutoff notice from a utility.

What to Do When You Call Your Lender:

Your lender has two platoons of employees who talk with delinquent borrowers. The first is the collections department, which consists of people who try to pry money out of you and get you current on the payments. The second group consists of the loss mitigation specialists. These departments go by different names, depending on the servicer, including foreclosure prevention, loan resolution and delinquency customer service. We’ll use the most common name for the department: loss mitigation, or loss mit. It can be difficult to get through to the loss mitigation department if collection agents are discouraged from transferring calls. This is one of the benefits of having a helper, such as an attorney or a housing counselor. The first will intimidate bill collectors and the second might have contacts within the loss mit department.

The trick with any bank and getting a work out done is learning to navigate their phone system so as to increase your chances of getting a live person. Over the years Ive learned some tricks that help, sometimes you hear options that you know will lead to a person like when it says “to speak to a representative press ___” but sometimes they don’t give you these options (cricket wireless is the worst at this) so you have to think, what options WOULD get a live person. For example often anything that involves new clients signing up will get a live representative…cause they always want new business. You have to be a little savvy though, you cant just tell the sales guy you called them so you could get a warm body to answer the phone!

Once you get a live person, you want to be working your way up to a decision maker. This is sometimes harder to do for a homeowner than a 3rd party. Often with the homeowner they get stonewalled at the first level, and sadly the first tier in Loss Mitigation is really a glorified collections department. They are paid hourly employee’s who have very little if not zero motivation to go the extra mile and help you get some needed comfort and relief while resolving your problem. Often they just compound the problem by being rude and demanding, telling people things like “just pay your bills”. So its essential that you get beyond these people and to a specialist.

Sometimes to get to this point you have to put up with the hourly employee’s through a process of filling out their forms and information. Providing them with items such as pay stubs, tax returns and a whole host of financial information. Once everything is provided, then some lenders will assign the file to someone higher up in the loss mitigation department.

The MOST crucial element to this whole process is your Budget and if you have dome your due dillegence, you’ll be ready . They will ask you for a detailed list of your monthly expenses. If its too tight, you may not get approved, if you have too much extra income you are going to have an outrageous payment plan. Don’t agree to it!

The 2nd MOST important thing you can do is DO NOT SPEND YOUR HOUSE PAYMENTS. Often people stop making their payment because they are falling behind on other bills, or they cant quite make the whole house payment. Over the years more often than not, the people I met with still have an income coming in each month, they just cant meet all their obligations, so while the house is falling behind they take advantage of the fact that they aren’t paying the house payment in order to catch up on other debts. THIS IS NOT WISE AT ALL. Sock away as much of that money each month as you can. Its crucial, heres why;

If you don’t pay your mortgage for 3-4 months and your lender decides to negotiate a repaymenyt plan or a loan modification, then they will want what is called “good faith” money for you to come to the table with. Typically this is from 30-75% and sometimes 100% of what you owe in delinquent fees and attorney fees. Often I speak with homeowners who spend all their money and have nothing to work with. If that is the case, then don’t expect them to work with you or you better have a REAAAALLLY god explanation and proof as to why you have no money to bring to the table.

We all know life throws curve balls at us, its the nature of the game, you’d better just expect it, cause its coming in one form or another. Whether it be a car breaking down, an illness, injury or death. An accident in a car, you just don’t ever know and its ALWAYS a good idea to have a rainy day fund. The crazy thing about going into foreclosure is that you can actually come out of it better off than you went in sometimes.

Is it Better to Just Walk Away and Start Over?

Many homeowners are just in over their heads. Many they love their home and their family does too. But what good is it when you are so stressed out that you cannot enjoy your home. Your maxed out and you don’t have a dime to take the kids for an ice cream or the movies. That’s no way to live. This is a serious time to really sit down and see if it’s all really worth the stress and heart ache. If it’s not then maybe it’s time to just thorw in the towel and down size. Get something you can afford and enjoy. Just close the door on this time in your life and move on. Sure, it will affect you for years, but place your health and well being before making a house payment. If this is you, you’re not alone. Think about it. Is it all really worth the pain and stress? You’re already down, maybe it’s time to just move on and take that money and get a nice little place to rent and regroup.

By saving up your payment for 2-3 months or more depending on the foreclosure time line in your state, you can not only have enough to put together a really nice plan with your lender, but also have some in the bank for a rainy day or worse case scenario, a rental. Often payment plans with the bank can be pricey and very short terms, like 6 months total to repay what you fell behind on. The people iI have worked with who took my advice to save up and keep some funds in the bank, were successful most of the time at keeping their home. Because they were prepared for life’s curve balls. Even though they had fallen behind in the past, if they had an expense one month, they just pulled a little from the slush fund in the bank to help supplement their house payment that month.

The Lender Has Made You a Deal, What Now?

Respond to your lender, but don’t be rushed into making a promise that you can’t keep. Before making a deal with your lender, describe your situation to an attorney, accountant or a knowledgable mortgage person. You need to make sure that it is reasonable and not an agreemnet that will stop foreclosure for a month or two.

Many lenders are likely to offer a forbearance. Theses are only good for a short term band aid and not for the long term. Most commonly, this entails adding a set amount to each month’s payment. A forbearance plan can go as long as 36 months. But many are set to fail and are completely unreasonable for borrwers to pay back. Usually this will require palcing the delinquent amount on top of your monthly mortgage payment. If you had troub

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

San Diego Loan Limits Published

Michael Carter - San Diego Real Estate Agent — Wed, 25 Feb 2009 23:00:57 +0000

NAR has been working in Washington DC to help the Federal Government structure the American Recovery and Reinvestment Act of 2009.

As a result of its passage, today HUD published changes to FHA’s single family loan limits.

San Diego County:

$697,500           Single Family
$892,950           Two Family
$1,079,350        Three Family
$1,341,350        Four Family

The new loan limits, which are effective for any loan closed in calendar year 2009, are in effect through December 31, 2009.

It will take some time for the lenders to determine how they will structure their individual products.

Download a pdf document with the San Diego limits here: Limits

You can find the FHA loan limit for other areas at:
https://entp.hud.gov/idapp/html/hicostlook.cfm.

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

San Diego Short Sales Dying

David Marasco - San Diego Real Estate Agent — Wed, 18 Feb 2009 00:09:30 +0000

Having been in the business for nearly 4 years now we have been akin to the trends of the short sale market in San Diego. San Diego Short sales have dominated in markets such as Chula Vista, La Mesa, Spring Valley, and all over Rancho San Diego for the past few years but it wasn’t up until recently where we have seen the number of short sales decline. Perhaps this is due to the Stimulus package president Obama set up to help or perhaps we are finally reaching the absorption phase of the real estate life cycle in San Diego. Whatever it is, there is no denying that short sales in San Diego in general are seeing a steady decline in its numbers.

Dynamics of a San Diego Short Sale
I have closed short sale deals in Florida, California, Nevada, Georgia, and North Carolina and have had to deal with a variety of different law structures but there is one constant. Short sales can be a huge undertaking especially if they are not handled with care. San Diego Short sales face an even greater hurdle because the prices of houses are generally more expensive here than they are in most parts of the country.

In either case, San Diego short sales pose a different but obtainable challenge because for the most part the idea remains the same. To convince the lender to sell below the principal balance on the borrower’s loan at a reasonable market value price. This dynamic poses a large challenge in some parts of San Diego mainly due to the fact that in some areas in San Diego like Chula Vista, prices have dropped much more dramatically than say Point Loma. Coupled with the time some lenders can take to process just the paperwork that upon completion the house has already declined in value and the original buyer has either found something bigger at a cheaper price or the appraisal cannot meet the value of the offer.

San Diego Real Estate Market For Short Sales
There is no denying that a house that winds up on the San Diego (Dowtown San Diego or El Cajon) courthouse steps (foreclosure) will cost the lender thousands of more dollars than if they had sold it below market value as a short sale. Sometimes the amount of money saved could be in the hundreds of thousands depending on location of size of the house. For this reason alone, more and more lenders as well as government officials have come up with different ways to help the borrower stay in their homes. Whether it be a reduction in interest rate or modification of a loan lenders are working tirelessly to avoid foreclosures.

Until these plans go into affect for San Diego Homeowners Lenders will to continue to lose millions of dollars from foreclosures. However, we are already seeing that Short sales in San Diego have slowly but surely started to decline which is a good sign but there remains a lot of work left to do.