Federal aid has offered various programs via Making Home Affordable (MHA) to help American citizens all across our nation who are struggling through the recession. Although it has been helpful, foreclosures are still increasing leaving many in difficult situations. Acknowledging this widespread dilemma, several state governments have implemented a “Foreclosure Mediation” program that allows homeowners to speak directly with their lender to formulate an agreement on the issue of their delinquent mortgage payments. Is this a remedy option worth pursuing? Studies in Washington State have shown improvement in halted foreclosures.

This bill that the Washington State Legislature passed is called the Foreclosure Fairness Act of 2011. Seeing the staggering statistics of foreclosures in Washington which was over 132,000 foreclosed homes between 2009 and 2012, Washington decided to aid its citizens by funding HUD counselors to help distressed homeowners all throughout Washington. Through the HUD counselor or an attorney, the homeowner is able to request a foreclosure mediation where they are able to speak directly with their lender, with a mediator’s assistance (HUD counselor or attorney), to reach a “fair, voluntary, and negotiated agreement.”

Who qualifies for this program?

*For Washington Residence

Homeowners are covered if they are in owner-occupied properties and have either: (1) received a Notice of Default on or before the effective date of the Act and their house has not yet been sold at foreclosure sale; or (2) after the effective date, have not yet received the Notice of Trustee’s Sale. Any lender or servicer who did 250 or more foreclosure sales in Washington during the previous year is covered. The Act is effective on July 22, 201 1. The Department of Commerce will administer the Mediation Program.

Benefits to the Mediation Program

The main benefit of this program is reaching a consensus between the homeowner and the lender. The possible outcome may grant the homeowner:

• A loan modification which will reduce the interest rate and extend the mortgage period.
• An agreement to conduct a Short Sale which is selling the property for less than what the homeowner owes.
• A Deed-in-Lieu of foreclosure which is a voluntary transference of the deed to the mortgage company that has the homeowner’s loan.
• Cash for keys program which may provide monetary incentives for homeowners to vacate the home.

The other important benefit of this mediation program is if the lender agrees to participate, the homeowner is able to obtain an extra 45-60 days after the 15 days for the meeting to be approved and scheduled once requested. This act gives homeowners more time to figure out what the best move is to make when in danger of foreclosure.

How do I utilize the foreclosure mediation program?

The cost of using the mediation program is $200. If the homeowner qualifies, it can be obtained by speaking with a HUD approved counselor or an attorney who will send a request for mediation to the lender.

Will the foreclosure mediation program ACTUALLY be beneficial for me?

Click here to see if your state is participating in the foreclosure mediation program.

This mediation program has the potential to be beneficial. Lenders typically try to forgo the foreclosure process and are willing to work out a solution with homeowners. However, the results have been variable from state to state. Some states such as Florida have brought dismal results bringing only 4% of the referrals to the program ending in an agreement. The State of Washington have had better results having halted over 600 foreclosures in just 3 months after the program started in July.

If anything, the real incentive to use this program is the delay of the foreclosure process. It gives the homeowner more time to plan and make an informative decision for their home rather than being foreclosed on and evicted which could be emotionally and financially detrimental.

If you are in a position where you received a notice of default or are already in foreclosure, this may be an extremely helpful tool for you. I suggest you call a HUD counselor in your area immediately, even if you aren’t in default but struggling to keep up with your mortgage payments. If you live in Washington, I highly suggest you contact our short sale specialists to learn more about the process and consult with our certified distressed property experts as a short sale is in most cases, the best option for homeowners. Submit your information here and I will have our experts contact you within 24-48 hours.

Hope this helps

Peter

By now, we’ve reached a consensus that a short sale is the best alternative to a foreclosure and that lenders/servicers are giving more approvals than ever before as it is deemed to be, in most cases, the better financial decision for them as well. Short sale approvals are now issued frequently. However, I have been receiving multiple inquiries regarding post short sale deficiency situations. Their stories are similar in that they all are having unexpected negative consequences after short selling their home. Just because you’re granted an approval letter and are able to close the short sale, does not mean you are necessarily off the hook!

As I have stated before in my previous article on approval letters, deficiency release/terms are defined in the approval letters issued by the lender(s). This letter or letters from your 1^st position lienholder or any subordinate lienholders must be investigated by YOU as the homeowner. Although your agent may be trustworthy, do not simply rely on your realtor or any other party working on your behalf to tell you that everything will be okay after the short sale. Homeowners who are struggling with deficiency judgments after their short sale have come to me saying their agents (realtors, title company, etc) told them that lenders usually won’t pursue for the full amount after closing the short sale. Now they are unfortunately dealing with a judgment of the full amount with minimal leverage as they already sold their home.

You don’t want to take the risk of being liable for deficiency after your short sale so it is absolutely pivotal that you make sure you acknowledge the deficiency verbiage yourself from the lenders before signing the approval letter. If you sign it, you are responsible for it.

What happens if I sign and close without the proper deficiency terms?

Negotiating the deficiency should be done during the short sale. Without the home to use as leverage, negotiating with lenders is more like a plea than a deal. If you are in a situation where you’ve closed your short sale and are facing a judgment or believe you will be soon, we have certified debt settlement experts available that may be able to obtain a reduction of the remaining amount owed but let me be clear in that all will not qualify for this service. Email me at Peter@seattleshortsaleblog.com and I will connect you to our experts.

It is crucial that the homeowner and agents working on behalf of the homeowner know exactly what the deficiency terms are and the expectations are clear prior to signing and closing the sale. Our negotiators have rejected numerous approval letters because they did not agree with the offer in regards to the deficiency. They are extremely vigilant of what the deficiency terms are in closing. Their first priority is to negotiate aggressively to get a full deficiency release but if the situation doesn’t permit, they make sure they receive a reduced promissory note that is communicated very clearly with the homeowner so there are no unexpected outcomes after the sale. This is why our team of expert negotiators have been extremely successful in closing their deals and homeowner’s are never left anxious of any adverse effects of the short sale.

Lastly, as stated in my previous post regarding approval letters, carefully read all the terms and be sure the deficiency verbiage exists. If it does not exist, that is not a good sign. I highly suggest you do not sign the approval letter until you are fully aware of the terms & agreements written on the letter.

Find a negotiator in your area. Our top team of negotiators are only available for Washington residents but if you do not have a negotiator in your area working on your file, find one as soon as possible. It is much easier for realtors to close short sales these days but if it is not in good terms, you may and probably will find yourself in a position you do not want to be in.

Hope this helps

Peter

Will there be a rebound in the housing market for 2012? Many are becoming more optimistic about this year’s housing situation as homes have reached unprecedented lows in interest rates and prices thus increasing demand. Concurrently, rent prices are rising and more people are apt to buy which will decrease the excess of supply in our market (many of which are short sales and REO properties) and ultimately, bring the prices back up. What does this mean for current homeowner’s who are struggling with their mortgage(s) and considering a short sale?

As evidenced from past experiences, the fluctuation in the housing market is so variable that even experts are unable to guarantee which direction it will go. There are expectations of stabilization or possibly a slight shift in the direction of prices in the latter half of 2012. Even then, the expected prices are definitely not 2004 prices but more at the 2008 price levels.

The rebound is largely contingent on various factors such as the strength of employment, builder activity, investor activity, and other changes in the general economy. Experts opposing the optimistic predictions of the housing market say, “Distressed properties have the lowest prices for any category of home sold. To a large extent, that’s why we’ve seen continuous home prices drop over the past three years and why those drops are likely to go on.” – Guy Cecala of Insider Mortgage Finance. An influx of short sales and foreclosures entering the market is not going to slow down soon. Even in the case that these great deals fly off the market and prices halt its decline with a slight rise, should a homeowner stay in their homes or short sell right away?

The important question is, are you able to amply afford your mortgage payments in the upcoming years? If you are struggling with payments, then this year would be the most opportune time for a short sale. Suppose the homeowner stays in the home while barely making it by with the mortgage payments. He/she doesn’t only stay at risk of defaulting and foreclosure but the home will likely build little to no equity, if not stay underwater. If the home falls into foreclosure or the homeowner decides to pursue a short sale later, the homeowner may be liable for income tax from the sale of the home which is currently forgiven via the Mortgage Forgiveness Debt Relief Act set to expire December 31, 2012.

A more reasonable option would be to short sell your current home, negotiate the deficiency owed to lender(s), stay within the mortgage forgiveness debt relief act timeline, and purchase another home that makes sense for your financial situation at the lowered interest rate the market offers. It is a good time to buy but for how long will it last? If the housing market slowly rebounds in the next few years, then promptly short selling would give the homeowner enough time to reestablish their financial situation, rebuild credit, and purchase another home within 2 years (typical after a short sale) that is within their means and at a superb price/rate. It may be delayed gratification but keeping up with the Joneses now will only precede an exacerbated financial situation on your hands.

If you would like more information on short sales or would like to speak to one of our Certified Distressed Property Experts, submit your information here and write a brief description of your home situation.
Hope this helps

Peter

Stop trying to simply increase your income to solve your financial problems. Rather, focus your efforts more on stabilizing your financial situation with the income you are already receiving. We recommend Dave Ramsey’s Babysteps program as we have found Dave Ramsey has been one of the best financial advisors having helped millions of individuals achieve financial freedom. He helps individuals get out of the system of perpetual debt, learn how to budget, save, invest, build wealth, give, and much more.

When should I purchase another home?

We do not recommend purchasing another home until you are financially ready. During this financial rebuilding, there will be the temptation where right after you save enough money for the down payment, you’ll want to buy another home immediately. Although you may enjoy the purchase of the new home momentarily, you will be right back where you were and possibly worse depending on the situation. Make sure you get financial wisdom prior to purchasing your next home and make it a goal to get a 15-year fixed mortgage or do a 100% cash down on your next home.

What is your goal? If it is to purchase another beautiful home, then there needs to be planning or expect to rent for life. Now that you have freed yourself from the costs of homeownership, use that money to work on eliminating your debt, building your assets and savings, and living in a beautiful home financially free. If you haven’t done a short sale yet but are struggling with your mortgage payments, we highly recommend you talk to HUD approved counselors and find out all the options for your home. If short sales are a viable choice for you, submit your information in the short sale tab above and we will provide you with a free consultation with one of our experts.

Hope this helps

Peter

If you pursue a short sale or any other route of letting go of your home, you will inevitably have a ding on your credit score. Although the amount varies depending on which route you take or whether you are late on your mortgage payments in a short sale, having a ding on your credit score will make it difficult for you to utilize your credit especially when purchasing another home. What are mortgage companies looking for in your credit? How quickly can you purchase another home after a short sale? We will review these questions and a solution.

What are mortgage companies looking for in your credit?

As you may have already guessed, the dramatic changes to the housing market due to the subprime mortgage crisis have made lenders and investors much more stringent on their lending practices. The three areas lenders look at when considering financing your mortgage are credit score, income, and your overall ability to repay the mortgage. Large agency investors such as Fannie Mae changed their minimum credit score requirement from 580 to 620. Anything under 620 is considered high risk. Your local bank may require a credit score of up to 660 or higher which shows you how important credit scores are in your ability to obtain another mortgage.

How quickly can you purchase another home after a short sale?

Based on the numerous cases we have seen, homeowner’s are able to purchase another home much quicker in a short sale than after a foreclosure. As far as the time it will take to purchase another home, really depends on each specific situation. Our team has personally seen homeowners purchase another home within the first year if they’ve made all of their payments.  Multiple clients have bought their home within 2 years and more clients inside three years all without missing payments.  If you miss payments (per rumor), it is understood that Freddie and Fannie won’t finance you for 2 years before you are able to start shopping again.  Whether or not they finance will depend on how many missed payments and how good/bad your credit is.  The timeline in which you are able to purchase another home greatly depends on you and your proactive decisions from this point on.

How can I rebuild my credit after a short sale?

Seattleshortsaleblog have been endorsing Lexington law credit repair for some time now. It has proven to be the best credit repair company having removed 1,297,226 negative items from credit reports in 2010 including short sales, foreclosures, and bankruptcies. This company helps individuals rebuild their credit score to good standing which will expedite the process of being able to purchase another home. I suggest all homeowners whether they are thinking about a short sale, currently executing a short sale, or have finished a short sale, to call and get consultation regarding their credit.

Next Post 1/13/12 Friday

Peter

You’ve finally made it through one of the biggest hurdles of your life. You are probably renting or staying with a friend or a relative. You have a ding on your credit score from the short sale and you may be worrying about tax implications from short selling your home. What should you do from here?

After you have finally completed your short sale, it’s time now to set yourself up for a healthy financial future. There are steps that Seattleshortsaleblog highly recommends for those who have completed their short sale and want to rebuild their financial situation and move toward their financial future and a new home.

Part 1 “I’ve completed my short sale. Won’t my short sale be taxable?”

Normally, yes. However, in response to the housing crisis we faced in the last 5 years and are still in, the government produced laws that allow homeowners to exclude discharged debt on their principal residence. This act is called: Mortgage Forgiveness Debt Relief Act of 2007.
How do you utilize this Debt relief act?
In January of the year following the mortgage termination, you will receive a 1099c. Be vigilant for any misinformation on the 1099-C and be especially attentive to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7. Attach IRS Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness) to your tax return to exclude the debt from taxation.

The Mortgage Forgiveness Debt Relief Act has a Deadline!
The Mortgage Forgiveness Debt Relief Act is set to expire at the end of this year (12/31/12). We are hoping that this act will be extended as short sales and foreclosures are expected to remain at high levels through this year. I have recently called the IRS who notified me of some rumors that there may be an extension to this act. However, the risk is not to be taken lightly. If the act expires and you sell your home after January 1^st 2013, as of now, you will have to pay a substantial amount of taxes after the sale of your home.

If you haven’t began your short sale yet and are still deciding whether you should go through with it or not, be proactive and plan fast because the longer you wait, the worse your situation may become. If you are located in Washington, contact our certified distressed property experts today for more information on options for your home situation. Short sales take approximately 3 to 9 months or more to close. This year would be a prime time to start the process and close the short sale to avoid being taxed on income from the debt forgiven (they deem the debt amount forgiven as income) from your lender.

Next Post 1/11/12 Wednesday

Peter

What is a short sale? A short sale is an alternative to foreclosure where homeowners have the option to “short sell” when their properties are worth less than what they owe to their bank(s). For example, your house is worth $500,000 but you owe your bank(s) $550,000 in loans, home equity lines of credit, etc. If you qualify for a short sale, you may be able to sell your property for less than what is owed, avoid foreclosure and walk away from the property with little to no remaining debt.

Short sales are hardly a new topic these days. The deepening recession has forced many homeowners to re-strategize their finances for the betterment of their future. The majority of homeowner’s are understanding that the best decision for them to adapt to our current economic conditions is to let go of the property, save, and purchase another home once our economy and/or their financial status turns around. Fortunately, lenders are now approving short sales more often as in many cases, a foreclosure has proven to be detrimental not only to the homeowner’s but to lenders as well.

In the next several posts, we will explore the anatomy of a Short sale. I will add tips and advice to each part so that when you are executing a short sale on your home, you will be equipped with the proper guidance for a successful sale.

Next Post: 12/21/11 Wednesday

Peter

Although lenders are now more prone to giving approvals, short sales are still a challenging transaction to execute. Throughout years of trial and error exposed by other realtors, I’ve found there are 5 main reasons why a short sale would fail. In contrast, by observing the continuous success of my team of agents, I am adamant that an expert negotiator is crucial for a short sale to succeed.

Do not be another horror story. The sole purpose of this site is to educate homeowners so they can avoid becoming another horror story. I have been studying short sales and saw much success from our team of agents but am hearing and finding more and more stories of failed short sales across the nation.

Here are the 5 main reasons why a Short Sale would fail:

• Buyer’s walking. Inability to maintain a buyer while negotiating with lenders for agreeable terms.
• Incomplete Short sale packages from sellers. Banks have stringent rules on all documents being satisfactorily submitted. Organization is a must for your agent.
• 1^st and 2^nd (or 3^rd) lienholder’s not agreeing to terms. All parties must be satisfied before the lenders issue approval letters.
• Inaccurate Brokers Price Opinions. If the lenders expect high compensation for the property, you will lose or will be unable to find buyers.
• Bad negotiators on banks side. Every expert short sale agent has dealt with incompetent servicers who work for the bank. They are underpaid employees that don’t have the motivation or the experience to properly execute a short sale file.

These factors are typically bound to exist in the majority of short sales. Many of these problems engendered in the earlier years when short sales were becoming popular in the US. However, all these variables can effectively be alleviated by having a professional negotiator working your short sale.  The use of professional negotiators are now in high demand as they specifically work to eradicate those problems in the short sale that make many of them fail. Our team of negotiators specialize in dealing with these problems which has brought our deals a stellar rate of success in Washington State.

Find yourself an expert negotiator in your area and do not pursue a short sale without one. Our negotiators are top in the nation but are only able to work in Washington State due to the DFI and DOL laws set in 2010-2011. A good negotiator should also be free to you and your agent. Find one in your area.

Hope this helps

Peter

A Short sale is an option where a homeowner is able to “short sell” when their property is worth less than what they owe to their bank(s). In short selling, the homeowner may walk away with a reduced promissory note of the remaining balance owed or the amount completely waived. Plain and simple, this is a good deal. However, it cannot be obtained by everyone.

Those who would like to walk away from their property must be able to show hardship as required by lenders. Lenders will ask you to send what is known as a “Hardship Letter” (part of the short sale packet) which should explain your difficult circumstances thus allowing the lender to approve the short sale to proceed.

Sample Hardship Letter *This is just an example. Our team has specific guidelines and strategies that cannot be disclosed here.

“We will be unable to make our payments on our house, and we are now facing foreclosure. Our inability to keep with the monthly payments is the result of insufficient income to make these payments.

In spite of our current financial difficulties, I expect that it will get worse. We are not in a position to continue making our mortgage payments. This was not at all what we intended but we have come to the conclusion that this is our only option.

Your help and consideration in this matter are very much appreciated.

Signature & Printed Name“

Hardships that lenders accept are widely variable from a loss of job to marital separation.

What is your hardship? Let us know what your hardship is in the comments box under the short sale tab and we can advise you on whether it suffices for a short sale and whether a short sale would be right for your circumstances.

Hope this helps friends

Peter

Credit implications after a short sale or a foreclosure have been an important topic for many who want to maintain their good credit. The only way to prevent damages to your credit is by staying current on your mortgage(s) payments, selling your home via conventional sale, and paying the difference of what you owe to your lender. Otherwise, whichever direction you go, your credit will be negatively affected.

Today’s post is an explanation of how much impact your credit score will have in a short sale versus a foreclosure and a plausible solution to this problem.

*Please refer to these pictures from the Fair Isaac Corporation for the following information.

Credit impact in a Short sale vs. Foreclosure

As you’ve probably noticed, the difference in credit score reduction between a short sale and a foreclosure is no different contrary to popular myths. However, the verbiage used in reporting your short sale or foreclosure is different. In the case of foreclosure, it will be stated as a “Foreclosure” on your credit report which may be disadvantageous when looking for a job or another mortgage.
In a short sale, your sale will be reported as “settled as agreed” “settlement in full” “Account legally paid in full for less than full balance” or something along the lines of that verbiage. A mortgage company’s decision to allow another loan may be affected by the outcome of your current home.

Also, one important factor all homeowners must know is you do not need to be late on payments in order to conduct a short sale. Hence in this case, a short sale would have a significantly less ding on your credit score as you will have no late payments.

Seattleshortsaleblog’s solution

As you can see in the table above, the higher your current FICO score is, the greater the ding will be after a short sale or foreclosure. Question is, would you rather pay a large sum of cash or take the ding on your credit score? Many experts (seattleshortsaleblog included), would endorse cash every time. Why? Because damage to your credit can be repaired overtime whereas cash does not come by as easily.

Here is the best solution we’ve found. Rather than trying to save your credit by doing a conventional sale and paying out cash, we at seattleshortsaleblog highly recommend an accredited credit repair company that can expedite the rebound of your credit score. Simply call Lexington Law consultants at 888-586-6113 to see whether they can help your credit situation. The consultation is free! Hope this helps friends and I hope you had a Happy Thanksgiving weekend.

Peter