Bank Timeline & Checklist

Bank Timeline & Checklist

The specific steps that must be taken in order to facilitate a successful short sale, will depend greatly on the Bank and/or type of lien you are working on. For example, WellsFargo will review your short sale offer differently than Bank of America will. A GSE mortgage must be serviced in a different way than would a private investor mortgage.  However, despite all these differences, the short sale review process generally take the same steps. 

1. Verification of Short Sale receipt/request.  Normally, this takes the form of the Homeowner calling in to the Lender, to relay his/her wishes for a Short Sale.
2. Lender assigns Phase 1 worker. After verifying the Homeowner's Short Sale wishes, the Lender will move/assign the file to the Short Sale department, where a worker will be assigned.
3. Verification of required Short Sale documentation. Once assigned to the file, the Phase 1 worker will review all the preliminary Short Sale documentation (Hardship Letter, Financials, etc), to make sure everything is current and that a Purchase Offer is ready to be negotiated.
4. Lender assigns Phase 2 worker. This is the worker who will review the offer, and negotiate the Short Sale terms, on behalf of the Lender & Investor.
5. Appraisal/BPO. Upon assignment to the file, the Phase 2 worker will order a valuation to be performed on the property. This is done so that the Lender & Investor have a good idea of the property's worth.
6. Offer negotiation. The valuation is returned to the Lender. The Phase 2 worker will review/respond to the Purchase Offer presented. This is the point where the Price & Terms for the Short Sale are negotiated.
7. Lender assigns Phase 3 worker. Once the Offer price & terms are negotiated, the Short Sale file is then assigned to a Phase 3 worker (closer).
8. Fees & Closing cost Negotiation. At this point in the Short Sale process, the closer (Phase 3 worker) will negotiate, on behalf of the Lender & Investor, the fees & closing costs that will be covered. Typical fees that Investors usually refuse to pay, are HOA transfer & status fees, as well as final water bills.
9. Lender Approval. If the Offer & Terms are acceptable to the Phase 3 worker, they will submit the file to upper management, for their review & sign-off.
10. Investor Approval. If the Offer & Terms are acceptable to the Lender, they will submit the file to the Investor, for their final review & sign-off.  Once the Investor agrees to the Price & Terms, they will issue an Approval Letter to close.

As previously mentioned, each loan and lien type will need to go through different steps for an Approval, and will vary greatly depending on the lien position & Investor. As such, this general "checklist" fits best with 1st mortgages, and to a lesser extent, 2nd mortgages. Since this is an oversimplified list, it is highly recommended you contact a Short Sale specialist who is familiar with your Lender & State laws.

Tigrent Learning

Tigrent Learning

Contrary to what some would have you believe, the Real Estate business is tough, especially in this market! That’s why it’s important to educate yourself properly on the ins & outs of business management, as well as learning tips & tricks to successful Real Estate Investment. There are many ways to educate yourself, from seminars to books, although the pitfalls of these resources are that they aren't specific to your situation, there’s no follow up, and it’s overly indirect & general. While books and seminars can help you decide which avenue of Real Estate best interests you, it’s still highly recommended to go one step further, and get specific training. By far, one of the best training programs out there is called “Tigrent Learning.”

In an effort to promote successful business strategy & education, “Tigrent Learning” provides advanced training courses to students of Real Estate. Their self-proclaimed goal, “…is to help people achieve their maximum income-generating potential by learning essential techniques to accumulate wealth through real estate investing, financial instruments investing, and entrepreneurship.”

            What makes “Tigrent” so great & unique? Well among other things, “Tigrent” works in collaboration with Robert Kiyosaki, of Rich Dad Poor Dad. The “Rich Dad Learn to be Rich” program focuses on Real Estate investing, with an emphasis on wealth creation. Combine this fantastic curriculum with “Tigrent’s” products and services, and you will be unstoppable. “Tigrent’s” integrated courses are taught by experienced, successful professionals. These guys not only mentor & coach their students through rigorous hands-on & practical Real Estate deals, but also provide invaluable training, resources, and materials. A lot of the mentors started out as “Tigrent” students themselves, so they can speak to the program’s success!

The vast majority of new business start-ups fail within a short period of time. Through proper planning & training though, “Tigrent Learning” gives you the best chance possible of success. How do we know? Ronda & Jorgen were inducted into the “Tigrent Learning, Rich Dad Education HALL OF FAME” in 2010.  We know because we’ve been there!!

http://www.tigrent.com/default.html

RE Broker VS Foreclosure Solutions

RE Broker VS Foreclosure Solutions

A lot of people don't realize that working with a team of experts to sell your property, instead of just a Real Estate Broker, can vastly improve your chances of a successful Short Sale. 

Can any Real Estate Agent assist you in selling your home in a Short Sale situation? YES.  The disadvantage, however, is that few Real Estate Agents know the loopholes of the Short Sale system. The fact of the matter is, most Real Estate Agents don't specialize in Short Sales, and don't want to deal with them; they are too cumbersome, labor intensive, and take too much time & patience to see it through. Therefore, it is highly recommended you work with a company that specializes in this field, and are experienced in Short Sale negotiations & Foreclosure Law, so that you can be properly represented.

While neither Foreclosure Solutions, nor any agent employed by Foreclosure Solutions is an Attorney, CPA, or Tax Professional (we are not authorized to provide legal or financial advice), we have extensive experience in dealing with the intricacies of the foreclosure process, no matter what State you live in, or what Bank you are working with. We're working in the "trenches" every single day, and deal with Banks/HOAs/attorneys every day. We're the front line, the tip of the spear, & we've seen it all!

Generally speaking, Real Estate Agents are schooled in Buying & Selling properties, not negotiating with Banks, HOAs, the Government, etc.; let alone the necessary steps that must be taken to facilitate a successful settlement. There are a lot of pieces that need to come together with a Short Sale, so it is in one's best interest to work with both a Real Estate Agent, as well as a Short Sale specialist.  Let the Agent find the Buyer, and let the Short Sale specialist negotiate with the Bank! Like the Agent, the Short Sale company will only get paid if they're successful, thereby ensuring their motivation. 

Don't let fear, uncertainty, and doubt rule your life! having a proper Team representing & working for you will lift a huge weight off your chest, and you can focus on what's important in life.

Are Short Sales in Trouble?

Are Short Sales in Trouble?

A recent article by Diana Olick, a Real Estate reporter for CNBC, seems to suggest that Short Sales may be a thing of the past, or at least dwindling back into their pre-2006 numbers.  What's her reasoning, you might ask? For Olick, it all comes down to Taxes.

As you probably already know, the U.S. Congress passed the “Mortgage Forgiveness Debt Relief Act and Debt Cancellation” in 2007, in an effort to help troubled borrowers & advocate Short Sales.  One of the main ideas behind this legislation was to make Mortgage principle reductions tax exempt. So why does this matter, and how does it connect with Short Sales?  Well, successful Short Sales often result in debt forgiveness. Debt forgiveness is, more or less, income.  Income is taxable. 

For example, let's say "Dottie" is Short Selling her home.  Her lender has agreed to the Sale, and is taking a $50,000 loss on their Mortgage.  They have agreed to waive the remaining balance due on the loan, but must report the waiver to the IRS. The IRS interprets this 50k waiver as "phantom" income, which must be taxed. So, the IRS thinks Dottie just "made" $50,000 (She borrows & uses the 50k previously, but now she doesn't owe it anymore), and so Uncle Sam needs his cut.  But, as Rep. McDermott (D-WA) notes, "Collecting federal income tax on a relief intended for struggling homeowners is not only bad policy, but is simply wrong."

The passing of the 2007 Act allowed homeowners short selling their homes, to avoid paying Taxes on any forgiven mortgage debt.  Naturally, this helped Short Sales tremendously, as it limited the financial consequences associated with such a transaction. So what's the problem?  The MFDR act is expiring at the end of this year!! 

National Association of Realtors lobbyist Jamie Gregory says, "Realtors believe if the legislation is not extended, households who are already struggling to pay their mortgages will be further burdened with tens of thousands of dollars in additional taxes that they probably can't afford to pay because the IRS would count the cancelled debt as income."

If the MFDR act is not extended, any cancelled or forgiven mortgage debt would be taxed, regardless of the occupancy status of the property.  Since capital hill is currently entrenched in politics & the presidential election, many believe that such a "necessary" extension will go un-noticed.  

But, if the MFDR act is not extended, will it slow or even kill the Short Sale industry?  Slow, probably. Kill, no. "...getting a tax bill on forgiven debt can be another punch in the gut for families who are already facing financial hardship,” says David Stevens, CEO of the Mortgage Bankers Association.  While this may be painfully true, the fact remains that a % of an amount will always be less than the amount itself.  To put it another way, would you rather pay $10.00, or pay taxes on $10.00?  A Short Sale is still better than the alternative! 

**To read the CNBC article itself, go to http://www.cnbc.com/id/49214903**

Colorado Foreclosure Timeline

FHA 101

FHA 101

As anyone familiar with Short Sales will tell you, The Investor makes all the decisions.  That’s why it’s absolutely crucial to know who the Investor is, and what type of loan is being serviced.  Investor types vary widely, from Private Investors all the way to Government Investors.  Especially in this market, Government Investors are becoming more and more common, as FDMC & FNMA buy up more delinquent loans.   Because there are so many factors that come into play when determining the applicable Investor rules, I will only discuss 1 Investor:  FHA

FHA (Federal Housing Administration, is a division of the US Department of HUD (Housing & Urban Development), and has been insuring Home loans for years.  They offer some of the best mortgage terms out there, and have many programs available to suit nearly every type of Buyer.  Most FHA loans you will run into will be 30yr fixed, although the specific type does not matter when you are negotiating the Short Sale.  What you have to remember & keep in mind, is that ALL FHA loans must be serviced the same way, by law.

So, you’ve found a Homeowner needing help with a Short Sale, and they have an FHA loan.  Now what? Well, your first priority should be to have the Homeowner contact the Lender, and verbally verify/request their wish to pursue a Short Sale.  Thankfully, FHA does not require a Purchase Offer prior to beginning the Short Sale!

Once the Lender opens the file for the Short Sale, FHA mandates an appraisal be performed, to determine the property’s value.  Next, FHA (via the lender) will issue an “Approval to Participate,” which officially enters the Homeowner into the Short Sale program.  The ATP will not only give you Short Sale Pre-Approval terms (letting you know exactly what the Bank wants to NET), but will also start the 4-month program time clock.  The 4mth clock is important to understand, because the longer the property is listed with no offer, the less NET the Bank will require. Want a copy of the Appraisal?  No Problem!  FHA requires a copy of the Appraisal be sent to the Homeowner or Listing Agent, upon request!

Seems easy enough, right?  Well, there are many other FHA guidelines & stipulations that need to be met before you can close.  Some guidelines, such as the required Listing Contract Disclosure,

“Seller may cancel this Agreement prior to the ending date of the listing period without advance notice to the Broker, and without payment of a commission or any other consideration if the property is conveyed to the mortgage insurer or the mortgage holder.  The Sale completion is subject to approval by the mortgagee.”

Is not readily caught by your worker, or verified to being met until late in the game, and can cause unnecessary delay.  Make sure you already have this disclosure in place before you begin with the Bank.

Other guidelines will relate to the prospective Buyer, and still others will relate to whether the Homeowner is even eligible for the FHA Short Sale program.  Understanding the Guideline particulars will help you save VAST amounts of time. For example, If you know that FHA will only allow 1% Concession, but the Buyer absolutely has to have 5% concession, then you can save time by getting the Offer in line prior to submittal (instead of waiting for the Bank to tell you a 5% concession is too much).

Is the Bank taking too long to respond to an Offer?  Did you know FHA requires the mortgagee (bank) to Approve or Deny the Offer within 5 Business days??  If you aren’t up to date on FHA guidelines & rules, you can unknowingly burn months of time! Banks have extremely high employee turnovers, & each worker has hundreds of other files on their desk, and their motivation to understand specific rules is low.  Their job is to turn & burn.  Your job is to make sure they are doing their job, per FHA guidelines.

FHA Guidelines are public knowledge, and are available on FHA’s website (http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2008ml.cfm).  HUD Mortgagee Letter 2008-43 will be your best friend.  Learn it, know it, and you will be unstoppable!!

Top 5 Reasons Short Sales Fail

Top 5 Reasons Short Sales Fail

1. Value Discrepancy:  The most common reason Short Sale's fail is because Lenders & their investors are uninformed or incorrectly informed about the Subject Property's value.  More specifically, this problem arises from the BPO Agent or Appraiser hired by the Bank.  Most Lenders will order a full Appraisal, however sometimes only a "Drive-By" will be performed. If the Agent gives a inflated Value to the property, the Short Sale can be stalled for months!  As most Lenders are not authorized to perform more than 1 valuation in a given amount of time, it is absolutely imperative that the valuation be performed properly & accurately the first time
2. Bank Worker:  The Loss Mitigation workers at the Banks are very busy, and sometimes have literally hundreds of other Short Sale files on their desk.  They do not have the time to waste on incomplete files, or insufficient offers. It is the Bank's job to maximize their Investor's payoff, so Workers can be very gruff and unfriendly.  Because of this and poor knowledge base (due to high worker turn-over), it is our responsibility to make their jobs as easy & streamlined as possible. The more work the Banker needs to do, the higher chance of the Short Sale failing.
3. Insufficient Time: The third most common reason Short Sales fail is because there is not enough time to facilitate. Time delay can arise from Financial/Document request, Offer review time, looming Auction date, and others.  Frequently, the looming auction date is the culprit, as the Bank needs sufficient time (~2 weeks) to set the Short Sale file up, and request the Auction postponement. Since postponements are never guaranteed, it is vital to be as responsive as possible to any Bank/Investor requests.
4. Document Delay: This is more or less self-explanatory.  Since Loss Mitigation workers have many other files, they cannot waste time on incomplete packages. Furthermore, since Banks are inundated with Short Sale request, they have very strict servicing guidelines to adhere to.  Lenders & Investors cannot keep Short Sale files open indefinitely, and because of the offer review time-frame, updated financials & documents are needed constantly.  Once a document request is made, most workers will only keep the file open for 3-5 business days, and will close the file immediately if a timely response is not received. 
5. Investor Rules: Even when everything is done by the book; the offer is good, the property isn't going to auction, all Junior Lien-holders have signed off, etc, the Short Sale can still denied! Investors have tons of guidelines and stipulations that must be met in order for them to feel happy about the Short Sale. Despite the best efforts, Investor guidelines are generally non-negotiable. For example, most Investors will have caps on how much $$ a Junior can receive, and sometimes the Junior's Investor is unable to accept such a settlement, consequently forcing a Foreclosure Auction.  It is in these minor points & guidelines where deals can be won or lost, so it is important to know who the Bank is working for!