Home Sweet Home, Insider-Tips on Minnesota real estate.

government aid programs fall flat

One in 10 homeowners with a mortgage face foreclosure as government aid programs fall flat

By ALAN ZIBEL , Associated Press

One in 10 American households with a mortgage was at risk of foreclosure this summer as the government's efforts to help have had little impact stemming the housing crisis.

About 9.9 percent of homeowners had missed at least one mortgage payment as of June 30, the Mortgage Bankers Association said Thursday.

That number, which is adjusted for seasonal factors, was down slightly from a record-high of more than 10 percent as of April 30.

In a worrisome sign, the number of homeowners starting to have problems with their mortgages rose after trending downward last ..... read the complete artcile published in the Star Tribune

COMMON MISCONCEPTIONS ABOUT FORECLOSURES & SHORT-SALES

With so many new agents coming into their first short sales, the following info could be helpful.  Most of you already know these things, but take a run through this with your afternoon cup of coffee and there may be an item or two that raises a brow even with even the most experienced short sale listing agents.

 

1.    If a property is foreclosed upon, borrower is released of all debt.

Borrower is only released of the  debt if lender forecloses via advertisement.  If lender forecloses via litigation, then borrower is still responsible for the debt.  If there is a second or third mortgage, borrower is still responsible for those even after end of redemption period.

 

2.    After the sheriff sale, the second mortgage is gone.

The second mortgage still has a lien on the property after the sheriff sale.  The 2^nd mortgage lien only goes away at the end of the redemption period.  Therefore, if seller is redeeming from sheriff on foreclosing mortgage in a short sale, any other mortgage holder is entitled to the proceeds and must be negotiated for release of lien via short sale.

 

3.    If a borrower has filed bankruptcy, the second mortgage “goes away”.

Even if the debt on all mortgages on the property were included in the bankruptcy, it is only the borrower’s obligation under the note that is forgiven.  The lender(s) still hold their lien on the property and must be negotiated and/or settled to obtain a release of that lien in order for sale to go through.

 

4.    If a short sale is approved and closed, seller doesn’t owe anything to the lender(s).

It depends on the terms and verbiage in the approval letter.  The letter must state release of lien AND satisfaction of debt (or similar verbiage) or seller is still responsible for the deficiency balance.

 

5.    If a short sale approval includes seller signing a promissory note, the seller can just “bankrupt” it later.

Seller may not be eligible for bankruptcy.  And even if they are, they may not be able to bankrupt new note as they signed it with intention of never paying.  New note may prohibit bankruptcy or may not be able to be included in bankruptcy.  Seller should discuss with bankruptcy attorney before ever signing a new promissory note with that intent.

 

6.    A seller can buy a new house while credit is still good and then just short sale the old house.

In order to obtain a mortgage on the new house, seller had to prove they can afford both house payments.  They cannot now claim they can’t afford payment on the old house, therefore, in most cases, no hardship and short sale may likely be denied or approved with terms at high cost to seller.

 

7.    It’s good to submit any short sale offer to lender to “get the ball rolling.”

Short sale negotiations are buyer specific.  In most cases, when bad offer is rejected and new offer is submitted, the whole process starts over from the beginning. 

 

8.    A bad offer is better than no offer.

A bad offer still takes time to negotiate out.  When bad offer is being worked on, showings diminish.  When bad offer is rejected or countered at terms buyer won’t accept, your seller is now a couple of months closer to foreclosure and time has been wasted.

 

9.    All short sale offers must be submitted to lender.

All offers must be submitted to the seller.  Seller can reject any offer their agent feels will not be approved by lender, therefore, it is not submitted to the lender for the reasons above.

 

10.    Deposit of earnest money isn’t important.

Get earnest money deposited as it shows buyer’s sincere intent to follow through with purchase.  But most importantly, buyer and their agent will have to provide you with cancellation to get earnest money back, therefore, you and seller will know immediately if buyer has “walked.”

 

11.    A seller will have to pay income taxes if a 1099 is issued after short sale.

It is common through tax law and/or seller insolvency that seller will not have to pay taxes on the income stated on the 1099.  It is case by case and seller needs to consult tax professional.

 

12.    A seller won’t get a 1099 if property goes through foreclosure.

Seller may receive a 1099 on lender’s loss via foreclosure.  Same rules apply as in #11.

 

13.    Bank of America is the worst lender to deal with in short sales.

Love the new Bank of America in short sales!  They are easy to work with and time is down to about eight weeks plus investor.    US Bank is the most difficult!

 

14.    A realtor should refer out their short sale listings if they lack experience.

Don’t give away a part of your network.  Get all the short sale education you can, it’s here to stay for years.  Let your broker and Markve and Zweifel Attorneys help you.  After completion of a successful short sale, you will have a referral source for life!! 

 

Wendy Haisley

Markve & Zweifel, Attorneys at Law, PLLC

11106 86th Avenue North

Maple Grove, MN  55369

Phone:  763-450-1624

Fax:  763-420-7234

Email:  wendy@mzlaw.us

 

"Solving the foreclosure crisis....one homeowner at a time"

 

Home repossessions surged in July. No peak until 2011

The number of U.S. homes lost to foreclosure surged in July, another sign lenders are moving quicker to take back properties from homeowners behind in payments.

Lenders repossessed 92,858 properties last month, up 9 percent from June and an increase of 6 percent from July 2009, foreclosure listing firm RealtyTrac Inc. said Thursday.

Banks have stepped up . . .

read the full article By ALEX VEIGA , Associated Press published in the Star Tribune

Realted article can be read  . . . No peak until 2011 published in Wall Street Journal's MarketWatch

If you're waiting for relief on the foreclosure front, keep waiting. RealtyTrac says foreclosure notices rose 4% last month, the 17th straight month filings have exceeded 300,000. And RealtyTrac's Rick Sharga tells MarketWatch News Break that foreclosures may not peak until 2011. Listen to News Break and find out what states are still suffering. You may be surprised.

Related story Foreclosures Continue to Mount In Minnesota by By JIM BUCHTA, Star Tribune

Despite a raft of attempts to stem the tide of foreclosures that have displaced families and battered the housing market, the crisis continues to get worse in Minnesota. There were 13,093 foreclosure sales in the state during the first six months of the year, up 17 percent from the same period last year, according to data released this week by several housing-related groups.

Buy and Bail'

Real estate professionals call it “buy and bail,” acquiring a new house before the buyer’s credit rating is ruined by walking away from the old one because it’s “underwater,” or worth less than the mortgage. It’s an attempt to escape payments on a home whose value may never recover while securing a new property, often at a lower price with a more affordable loan.

The practice, which constitutes fraud if borrowers lie on loan applications . . .

Read the full article by Kathleen M. Howley published in Bloomberg News

Related article . . . .

Walk away from your mortgage? Insurer may follow you.

Private mortgage insurers can -- and do -- file deficiency judgments

Private mortgage insurers have the right to file deficiency judgments. And they do where it is legal and the situation warrants.

read the full artilce by By Lew Sichelman published in MarketWatch

Foreclosures continue to hurt housing market

Two new reports paint a challenging picture of the housing market during the coming year, with ongoing foreclosures likely to continue to weigh on the market.

The research firm RealtyTrac said Thursday that foreclosure activity during the first half of the year increased in three-quarters of the nation's metro areas, with Las Vegas posting the highest foreclosure rate.

Read more by JIM BUCHTA published in the Star Tribune

Avoid Foreclosure Rescue Scams

With foreclosure rescue scams widespread as more homeowners fall behind on mortgage payments, be smart if you seek help.

Foreclosure rescue scams run rampant

Homeowners facing foreclosure are prime targets for scam artists. The U.S. Federal Trade Commission identified 71 companies running suspicious foreclosure rescue ads, and the Better Business Bureau counts foreclosure rescue rip-offs among its top 10 scams. Understanding how these scams work can help you avoid becoming a victim.

Read the full article how to Avoid Foreclosure Rescue Scams

How Foreclosure Affects Your Credit Score

Foreclosures—and how you handle them—may have long-term credit score implications.

The way you approach mortgage delinquency and possible foreclosure can have an effect on your credit score. Prudent handling of the problem can limit, although not eliminate, the damages.

Payment history makes up the largest portion—35%—of your FICO score. And the higher your credit score, the harder you will be hit by a foreclosure, or by whatever alternate route you take because becoming delinquent on your debts had not been a regular occurrence. That is, if you’ve been good until now, one late payment has a disproportionate effect.

For complete article go to HouseLogic.com

5 Steps to Owning a Home Again After Foreclosure

It won’t be easy to obtain a mortgage after foreclosure. But with enough time, discipline, and desire, you can own your own home again. Here’s what you need to do:

1. Stick with a job after foreclosure.
2. Rebuild your nest egg after foreclosure
3. Raise your credit score after foreclosure
4. Reduce your waiting time for a mortgage after foreclosure
5. Be honest about your foreclosure

For the complete article go to HouseLogic.com

Short Sale Discounts Vary Widely from State to State

Short sale discounts from regular retail home prices are varying widely from market to market in the US, according to RealtyTrac, an online foreclosure marketplace.

by JON PRIOR

According to the report, there were 88,000 pre-foreclosure sales, often short sales, in Q110, for an average discount from retail home prices of 14.7%. By comparison, REO discounts in the US averaged 34%.

But while some are seeing large short sale deals above the 14.7%, others are not. Many of the short sales are often sold 5-to-10% off the fair market value.

To read more and gain valuable insight into short-sales go to HousingWire.com

Fannie Mae Increases Penalties for Borrowers Who Walk Away

NEW YORK - Government-sponsored mortgage purchaser Fannie Mae is trying to encourage distressed homeowners to find alternatives to foreclosure by banning those who walk away from getting new loans for seven years.

Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy announced Wednesday.

"Walking away from a mortgage is bad  . . .

Read the complete article by EILEEN AJ CONNELLY , Associated Press and published in the StarTribune