Seattle Short Sale Blog engendered with the knowledge that short sales were the best possible exit strategy for homeowner’s who are struggling due to the down economy. Back in 2008 when the blog first started, it was a novel concept to most people and it received its share of criticism as it began familiarizing itself to the housing market. Much of the criticisms were in fact correct yet even if flawed, it still stood to be the best option for the majority of homeowners. Now, it is rare for homeowners not to know what a short sale is as it has become the most popular choice for struggling homeowners. The nation began understanding the value of short sales and took into consideration these criticisms and all parties including banks, governments, realtors, and homeowners, have worked to hammer out these flaws making the decision for homeowners to short sell their homes an easy one. Short sales have now officially surpassed foreclosures and continue on the rise.

Recent data from Lender Processing Services have shown that short sales accounted for 23.9 percent of home purchases in January compared to 19.7 percent for sales of foreclosed homes. Just a year earlier, 24.9 percent involved foreclosures and 16.3 percent involved short sales.

If you still do not know what a short sale is, it is an option for homeowners 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. For a more comprehensive explanation on short sales, please read our previous series on The Anatomy of Short Sales

It boggles my mind when people say that a foreclosure is the “easy way out.” What does that even mean? Just because you walk away from your home does not mean you have escaped the bad situation. In fact, allowing a foreclosure would only exacerbate the situation and leave you with severely damaged credit status in terms of your reputation to future lenders, a high chance for lenders to pursue and sue you for deficiency, and ravage your chances of being able to purchase another home for a very long time. Yes, you may be able to walk away but the sting will follow you for several years to come.

A short sale may take longer but it would be the better choice to make as you are essentially working out a deal with your lender so you can walk away from your home with minimal damages. Short sales are now more streamlined than ever before as banks have vastly improved their short sale departments. As an example, please read our previous article on Bank of America’s progress in short sales.

One very important factor that must be considered is the agent you choose to work with to handle your short sale transaction. Although banks have improved their side of handling the short sale, it is just as important if not more to have an expert short sale agent handling your file. A large reason why Seattle short sale blog was created was because numerous homeowners were experiencing short sale horror stories due to the inadequacies of their agent. Although many agents may be more familiar with the short sale process, it is important for you to find the BEST agent who have years of experience in short sales, hundreds of successfully closed liens, and are fully licensed (Mortgage loan originators license). In Washington state, we have found the best short sale team who are currently negotiating hundreds of liens and have a stellar track record of closings. Through our blog, we can get you connected with them for a free consultation. Input your info here and they will contact you within 24-48 hrs.

Peter

Per my last blog post and others, it is evident that banks and government sponsored entities such as Fannie Mae and Freddie Mac are finally tackling the issue of prolonged short sales. Effective June 15^{th 2012}, Fannie and Freddie will be undergoing changes that aim to speed up their short sale transactions. Many realtors and other experts commend these changes while others remain skeptical of how realistic these changes are. Nevertheless, it is unquestionable that these are productive steps toward improving their short sales.

The first question is, is your loan owned or securitized by Freddie Mac or Fannie Mae? Click on the links to find out before reading this article.

If you’re loan does involve either GSE’S, the changes in the federal policies are as follows:

• Servicers must review and respond to requests for short sales within 30 calendar days of receiving a short sale offer and a complete borrower response package.
• In the case a servicer is unable to provide a decision within the 30 days, they must notify the borrower a status update as to why the file is pending. Subsequently, they must provide weekly updates on the file.
• The final decision must be made within 60 calendar days.

If the above changes are executed as planned, it could be a significant benefit for those whose loans are backed by either Freddie or Fannie. However, critics are skeptical of these changes as they’ve been let down before by these optimistic promises such as the attempt by the Treasury department in 2010 to accelerate the short sale process via incentives to borrowers, servicers, and investors. Unfortunately, the changes were to no avail.

For the upcoming changes, the critics find it unrealistic for servicers to be able to reform their staffing practices enough to meet the compressed timelines according to Erik Berry, broker of Erik Berry associates & associates in Sacramento.  Others are concerned with the ability to resolve second mortgages and tax lien issues within the 60 day timeline. Above all these concerns, the biggest one is the absence of penalties for missing these deadlines. Freddie and Fannie state that they will track the performances of these servicers but of course, we still hope that penalties will be set in the near future once these changes are in place.

If the changes set for June 15^th are streamlined with no complications, we can foresee strong advancements towards aiding struggling homeowners. Experts such as Suzanne Yost, president of the Silicon Valley Association of Realtors praise these changes. She says, “Short sale transactions are more complicated than regular transactions and they have taken so much time that many prospective buyers have walked away from short sales,” said Yost. “The FHFA’s move to streamline the short sale process is a critical step toward a full housing market recovery.”

If your loan is backed by Freddie Mac or Fannie Mae, contact our local experts in Washington state for more information! If you connect with us here, we will provide a free consultation for you with one of our agents within 24-48 hours. Hope this helps

Peter

In the past, Bank of America had a terrible reputation when it came to short sales. They lost documents, failed to respond to inquiries on updates, abruptly closed files and many agents simply refused to work short sales involving BofA. However, they are now leading in short sale closings. What brought about this dominance in the short sale arena? For those whose mortgages are held by Bank of America, pursuing a short sale may be a wise choice.

Short sales approvals in January 2012:

• North Carolina Based Bank – 5,276 approvals
• JPMorgan Chase – 2,976 approvals
• Wells Fargo – 2,788 approvals
• Bank Of America – 10,477 completed short sales

Although formally infamous for how they handled their short sales, compared to other banking institutions, Bank of America is now superior in their number of short sale closings. There are several factors that contributed to this change in pace. To name a few benchmarks:

• One of Bank of America’s greatest deficiencies has become one of their greatest improvements: organization. Thus, Equator was introduced. Acknowledging their severe lack in organization which is pivotal when it comes to short sales, they began using an online platform which proved to be extremely beneficial to their short sale transactions.

• They also came out with various programs such as the Bank of America’s cooperative short sale program. Rather than negotiating the terms after offers come in once the home is listed, this program streamlines the short sale process by working with the realtor and the homeowner prior to marketing the home and coming up with an agreement that would include the terms of the approval and the listing price. Once the offer is submitted, the Bank will respond within 10 days.

• Bank of America executed a short sale pilot program providing monetary incentives for those who qualified. Understanding that foreclosures are detrimental to the bank as well, they endorsed short selling the home which could leave the homeowner with up to $20,000 or a minimum payout of $5000.

• The most recent change from Bank of America (April 14^{th 2012}) aimed to make their short sales even more streamlined by improving their short sale management technology, Equator. Their goal is to reduce the timeframe for a short sale decision to three weeks.

The significant changes include:

• The amount of documents needed to initiate the short sale have been reduced to 5 documents including a third party authorization form which basically makes it so unlicensed members such as assistants and title companies are not able to speak with servicers at Bank of America.
• If the buyer walks away from the short sale, the agents have 5 days to submit a backup offer as opposed to the previous 14 day timeframe.

There you have it. Bank of America made vast improvements for their short sales. If you have a mortgage with Bank of America and have an expert agent, you may take advantage of these improvements and greatly minimize your short sale duration and your chances of becoming another short sale horror story. If you are in Washington, contact our short sale experts today here and they will get in contact with you within 24-48hrs. Hope this helps!

Peter

If you have a mortgage with Wachovia Bank (including Goldenwest Financial, World savings) then you are a strong candidate for a short sale. What are the advantages of having a portfolio loan with Wachovia Bank? Faster and more streamlined short sale processes.

*If you did not acquire a mortgage via a portfolio loan, this information may not pertain to you although it may be of interest when purchasing another home.

What is a portfolio loan? A portfolio loan is a loan held as an investment by a bank or a savings & loan, and not sold on the secondary market to investors.

The main advantage of having a mortgage with Wachovia Bank is, they are a portfolio lender which means they made their own loans and make in house decisions whether to approve or deny a short sale. Banks such as Wells Fargo, Bank of America, and others most often have to submit the short sale file to their investors for approval (at times they are the investor in which case they can delegate a decision as well) which has proven in many instances especially without a negotiator to be slow, complicated, and packed with miscommunication leading to a finale of rejection. Through this, they generally require a lot of effort and a plethora of documents for closing.

Wachovia however handles their short sales very well. Their requirements can be limited as:

• The buyer’s and seller’s signed purchase offer.
• The buyer’s preapproval letter.
• The seller’s listing agreement.

Receiving a short sale approval average around 32 days which is a rare feat in the short sale world.

If you have a mortgage with Wachovia Bank, contact our local experts if you are pursuing or would like more information on short sales. Submit your information here and we will get in touch with you within 24-48 hours.

Hope this helps

Peter

If you have heard anything about short sales, you probably have heard that short sales take a long time to close. The typical timeline for a short sale is about 30 to 90 days to close. However, there have been numerous cases of short sales taking more than 2 years. This could result from a number of different reasons and is avoidable. The question is, is a short sale successful if it closes quickly?

The length of time it will take to close a short sale is contingent upon a homeowner’s specific situation. Factors that are out of the homeowner and agents control which affect the duration would include whether you have a 2^nd mortgage or not (or even 3^rd or 4^th) and your lender/bank/servicer.  Factors that are under the homeowner’s control would be choosing the right agent(s).

You must pick the right agent(s) to work with to achieve optimal results on your short sale. We have seen and heard many stories of prolonged short sales mainly due to inadequate agents and/or the absence of a 3^rd party negotiator. Why is choosing the right agent and having a negotiator important for a short sale to close? I highly recommend reading our previous articles about finding the right agent:

How to Find the BEST Short Sale Agent in Your Area

What is the KEY factor for a good Short Sale Agent?

10 Things to Ask a Real Estate Agent.

To summarize, if agents are lazy, unorganized, inexperienced, have weak marketing skills, and have issues with proper communication, you can count on your short sale being at best delayed if not already rejected and foreclosed on. A great agent and a negotiator will undoubtedly expedite your short sale as they specialize in communications, short sale marketing, negotiations, and organization (using the right short sale technology).

Now the point of this article is not endorsing that closing quickly equates to a successful short sale. On the contrary, we have had an influx of emails from homeowner’s who had executed their short sale but walked away from their home with terrible situations subsequent to closing. I would read my article are you inadvertently hiring the wrong short sale agent which gives an example of a bad agent who only closed 4 out of 60-80 properties that he worked on. One of our team members recently received an email from a negotiations company who claimed that they are there to get the job done and get deals closed. They deemed themselves not a Nordstrom’s of the short sale world but more a “Costco.”

Negotiators like these do exist. They focus more on getting the deal closed quickly rather than obtaining a successful short sale. I consider our partnered agents to be the Nordstrom’s of short sales as they have rejected many approvals if they were not completely satisfied with the terms on the approval letter. They have negotiated hundreds of liens and they aim to leave homeowner’s with the best possible terms rather than trying to simply close as soon as possible.

If you wish to connect with our local agents in Washington State, submit your info here and you will be contacted with 24-48 hours.

Hope this helps

Peter

Being in a severe recession, almost everyone in our nation has had a reduction of income. Many who have incurred this reduction find that their monthly income is less than their monthly expenses thus forcing them to take from their savings and/or borrow money from family members or creditors in order to compensate interim hoping that the circumstances of the U.S. economy will improve. Homeowner’s are now under much stress knowing that they won’t be able to afford all of their expenses but are wondering where they should put their money.

*Resources from DSnews.com by Esther Cho

What are other homeowner’s doing? It has been known for the majority of homeowners to prioritize paying their credit cards above their mortgage payments but according to reports from TransUnion, consumers surprisingly have been more apt to pay their car payments rather than their mortgage. In a sample of approximately 4 million consumers in each quarter of 2011, 39.1% were delinquent on their mortgage(s) while current on their auto loans and credit cards. Ezra Becker, who is the VP of research and consulting in TransUnion’s financial services, says that, “A few reasons why auto loans have become the preferred payment to make include the need for an auto to get to work or look for employment, and the fact that an auto loan is not a revolving loan – the impact of repossession is greater than the loss of a credit card.” Becker also added that consumers may have equity in their cars after several years of payments, which is not the case with homes right now.

So why do we feel more obligated towards paying off our vehicles rather than our homes? One big reason is the housing market was so volatile in the past that many are reluctant to put in more money into something that they might end up losing anyway! People purchased homes to build equity even though it cost more each month. However, if equity isn’t built but rather the home goes underwater creating negative equity where you end up owing the bank after years of hard working payments, would anyone be ecstatic to continue these payments? At least vehicle payments have left you with some equity without a large loss of value due to the economy.

So out of your expenses, which one should you prioritize over the others? How do you determine this? First off, it is important that your expenses are reduced to the 4 walls Dave Ramsey states: food, utilities, transportation, and shelter. Anything outside of this budget, unless absolutely necessary, should not exist in these difficult times. Shelter is a necessary expense but it is a large expense and it can and should be downsized in order to adjust to our national financial situation. If you are barely making it from paycheck to paycheck and still have a home that is out of your budget, it would be your wisest decision to move into a more affordable place asap.

If you are struggling to pay off bills and other payments, ask yourself these questions:

What could you do with a couple months’ worth of mortgage payments?
Should you sacrifice meals and other daily necessities to pay your mortgage even if that mortgage is not right for you?
Is it smart to spend money on money that has clearly no return on investment?

The answer: Get the facts and trust your instincts.

I highly suggest, at the very least, that you find out more about short selling your home. If you are delinquent on your payments (although not a requirement for a short sale) and are struggling financially, you may be eligible for a short sale where you can sell your home for less than what is owed with little to no remaining debt. We have local experts in Washington State that can inform you more about the process of short sales. Submit your info here and I will have our experts contact you within 24-48 hours.

Hope this helps

Peter

Americans are still in a struggle to survive this tough economic situation on our hands. Many are either unemployed or underemployed and have bills and payments that exceed what they can comfortably afford. Various debts such as credit cards with high interest rates induce a sense of desperation in which they may ask themselves, should I pull money from my retirement funds to pay my mortgage and other bills? This decision, if mixed with emotion, will most likely end up unfavorable for you in the long run. It must be a sober and wise decision.

Again the question is, Should I take from my nest egg to save the nest? Let’s consider a couple of factors:

• Penalties for prematurely withdrawing from Retirement funds:

Assuming that you haven’t reached 59 ½ years of age, the penalty for withdrawing from your 401k (a common retirement vehicle) is 10% additional tax and other taxes and penalties (interest). You must also consider the compounding interest lost on the money you withdrew from. This could add up to a substantial amount.

On September 22^th of 2011, the Home Act bill was proposed to the congressional committee. This bill would allow the taxpayer to withdraw funds (50K lifetime cap or one-half of the present value of one’s 401(k) account) from a qualified retirement plan penalty free (but not tax free) to make mortgage payments toward their primary residence. This act was in response to the growing number of individuals who were struggling to continue with mortgage payments and survive during this season of being in a recession. Unfortunately, the bill never made it past the congressional committee and is not likely to reach the House or the senate as a whole.

• Risk of putting money into a sinking home.

Why put money into a home that might lose more value? Although the housing sector’s recovery is looking more optimistic with the decreasing unemployment rates (8.3% current/ 8.0% projected for latter half of this year/6.9% projected 2014) and investors decreasing the supply as they are rapidly purchasing these cream of the crop deals, as we have learned over many years, there are no guarantees with the housing market. There is still an influx of short sale and foreclosed properties increasing the bank’s shadow inventory thus slowing the home price recovery. If your home does not increase in value or even decreases, you are basically putting money into another’s pocket at uncompetitive interest rates!

In conclusion, it is in most cases not wise to dip into your retirement funds to pay your mortgage. As emotions get involved, you may lean toward the quick fix but it won’t be the long term remedy. Dave Ramsey exclaims that, “Short of avoiding bankruptcy, never, ever, ever dip into your 401(k). Just pretend like that money doesn’t even exist until you are 65.” It will hurt later, guaranteed.

One of the best remedies to adjust to the current economic recession is a short sale. Lowering your monthly payments by temporarily downgrading will give you a solid start for your future. The economy will rebound! And those who make the right moves now will reap the rewards in the future. Short sell your home before pulling from your retirement funds.

If you would like more information on short sales, contact our team of agents in Washington State. Our local agents have been extremely successful and have hundreds of closings under their belt. If you submit a consultation request here, we will have our director of the short sales department contact you within 24-48 via phone and email.

Hope this helps

Peter

What do you think? Should a homeowner dip into their 401k or other retirement account(s) to save their home? Feel free to comment below.

The Obama Administration recently announced significant updates to the Home Affordable Foreclosure Alternatives program which was created in 2009 by the government to provide financial incentives for servicers and borrowers when in pursuit of a short sale or a DIL (deed in lieu) of foreclosure. These updates will provide more assistance to homeowners and will be in effect June 1, 2012.

For more information on HAFA, please read my previous post: HAFA Possible or Impossible.

According to the Making Home Affordable report from Treasury.gov, there have been 30,538 completed HAFA short sales and 843 Deed-in-Lieu transactions. Although this is under par from what we hoped it would bring, as stated before in my previous HAFA post, more modifications to the program make the option seem more viable. Fortunately, the recent changes address key issues, mainly, the compensation to the 2^nd lienholders. Here are the new changes for the Home Affordable Foreclosures Alternative:  *Info from ShortSaleGuide

• The deadline for HAFA has been extended. A borrower now has until December 31, 2013 to submit a Short Sale Agreement or a written request for a consideration for a Short Sale Agreement to be eligible for HAFA.
• There are no longer any occupancy requirements for HAFA eligibility. (Before the update the property had to be occupied as the borrower’s primary residence at some point within the prior 12 months).
• 2nd liens can now get up to $8,500. (It was $6,000).
• Servicers can now accept a full payment, if the borrower requests to make a full contractual payment in order to stay current on the loan.

*A caveat for those whose loans are owned or guaranteed by Fannie Mae or Freddie Mac is that this supplemental directive does not apply.

One point to note is, the homeowner may stay current on the loan while executing a short sale thus allowing the homeowner’s credit to have minimal damages after closing the sale. This will benefit the homeowner’s chances of acquiring another loan for their next home purchase.

For those who qualify, the HAFA program is an excellent program as it leaves homeowner’s with no possibility of a deficiency judgment and/or promissory note. The government also gives $3000 of relocation assistance once the short sale has closed. With these new improvements from the Obama administration, the HAFA program may be advantageous to those who qualify for the program. If you would like more information on HAFA short sales or would like to speak with our local experts, contact us here or feel free to email me at Peter@seattleshortsaleblog.com with additional questions.

Hope this helps

Peter

Dave Ramsey is one of the most popular finance experts having helped millions of people become financially free and stable. Dave wrote an article regarding 3 options for overcoming an underwater mortgage and it is directed to those who are pursuing a strategic default. He exclaims you should pay your mortgage at all costs and keep your integrity. He says not to let banks foreclose on your home. “They don’t know it, but they are wrecking their future.” – Dave Ramsey
For those who are truly struggling to pay their mortgage payments, Dave endorses you sell your home in a short sale before a foreclosure.

Even though it is tempting to simply walk away from your home, the consequences will stick with you for many years to come. A foreclosure may be the easier route but it is certainly not the better one in most cases.

Dave endorses 3 options for those with underwater mortgages:

• Wait it out – Dave says not to fall into the myth that America will never recover. Although there is still an influx of short sales and foreclosures increasing our market’s supply thus decreasing demand and prices, Dave believes the market will rebound especially with the many investors rapidly purchasing these cream of the crop deals.
• Increase your income – If you are underemployed, “some part time work may be all you need to cover your house payments.” Dave says, cut your budget to four walls: food, utilities, transportation, and shelter. Remember, this is an interim arrangement until the economy recovers and/or job status improves.
• Short sale – One of the key factors that differentiates a short sale from a foreclosure is the ability to negotiate the deficiency using your home as leverage. Dave says, get the bank to agree to short sale without recourse. To be able to accomplish this, you will need an expert real estate agent and negotiator.

I believe Dave’s point to homeowners in this article is to ultimately avoid foreclosure at all costs. It is not only about the negative ding on your credit score. It is the way it will look to future lenders and creditors when trying to acquire another loan. As I have said in my previous article, if you do not show your future lenders that you tried to work hard to work with your bank whether it is trying to keep the home at all costs or conduct a short sale, lenders will view your previous situation negatively and it will affect their decision to give you another loan.

If you believe that a short sale would be in your best interest, contact our short sale experts as I have found them to be the best based off sheer volume and success rate in Washington state. Submit your information here and one of our experts will contact you via email and/or phone within 24-48 hrs

Peter

Banks Disposition
Economists have recently found three changes:

• The average credit score required to obtain a mortgage loan is 700. These standards are similar to last year’s standards.
• Banks are now lending amounts up to 3.5 times more than the borrower’s earnings.
• Banks are loosening their loan-to-value ratio. A loan-to-value (LTV) ratio expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. For instance, if a borrower borrows $130,000 to purchase a house worth $150,000, the LTV ratio is $130,000/$150,000 or 87%.(LTV). Banks are now lending at 82% LTV which is an increase from a low 74% LTV in mid-2010.

Fannie Mae 2011 Waiting Guidelines are as follows: *info from homeownershipuniversity.com

• Bankruptcy – You may apply for a Conventional, Fannie Mae loan after your bankruptcy has been discharged for FOUR (4) years.
• Foreclosure – You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
• Short Sale / Deed in Lieu of Foreclosure - UPDATED 12/16/11  
  TWO (2) Years up to Maximum 80% Loan to Value | 20% Down Payment
  FOUR (4) Years up to Maximum 90% Loan to Value | 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.
  SEVEN (7) Years above 90% Loan to Value | with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.
• Credit must be re-established with a minimum 660 credit score.

Points to consider Now

You must be prepared to explain your short sale circumstances to the bank(s). If you’re story involves walking away from your property because there is no equity (aka strategic default), the banks are most likely to view that negatively. However, if you show a legitimate hardship such as a job loss, income reduction, and other circumstances leading to the inability to pay, then this will alleviate the negative view of your recent short sale. It would be optimal if you had no other late payments besides the late mortgage payments. You must be prepared to answer honestly what happened and show that you put much effort into working with your bank to resolve the difficult situation.

A bank’s decision to lend is always a judgment call so it is important for you to give them confidence in you that the loan will be a safe decision for the bank.

After a short sale, a ding on your FICO score is imminent. You may be concerned about the minimum requirements needed to acquire another loan especially if you are delinquent on payments prior to pursuing your short sale. The damage can be remedied via a legitimate credit repair company who are able to legally dispute negative items off your credit report. We’ve found that Lexington Law has been the best company to work with to reestablish your credit status and strongly believe it is 101% worth the investment for any and every homeowner.
If you haven’t begun your short sale, contact our expert agents by submitting your info here and you will be contacted within 24-48 hours for a free consultation.

Peter