Tag Archives: Loan Mod

Foreclosure – What You Need To Know

After just closing another short sale transaction in Anaheim a few things came to mind. There are things that we often don’t say enough as real estate experts that are well versed in foreclosure prevention.

Did you know that many lenders are giving sellers thousands of dollars $$$ in relocation assistance at the close of escrow in a short sale transaction?

We have helped many clients successfully navigate away from foreclosure and have provided many options including loan modification, deed in lieu of foreclosure and short sale. Don’t face foreclosure alone! We are here to help and there is NO obligation.

Even if you’re not in foreclosure and are just having trouble making ends meat, reach us today to ask any of your real estate, lending or foreclosure questions.

Dustin and Leah Wise
The Wise Team at Keller Williams Realty
714-875-3667 call/text
Dustin@TheWiseTeamOC.com
BRE # 01520106

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Evictions on Hold for the Holidays

Freddie Mac and Fannie Mae announced a holiday moratorium on all foreclosed single-family homes that the mortgage giants own or guarantee, suspending all evictions between Dec 18 and Jan 3. Processing of the evictions will continue during this period, but families living in foreclosed homes will be able to stay in their homes.

“At this time of year we want to bring some relief to families who confronted financial difficulties and went through foreclosures,” says Chris Bowden, senior vice president of REO at Freddie Mac. “We also want to remind home owners going into the New Year facing financial challenges to reach out for help as soon as they can by calling their mortgage servicer.”

Freddie Mac and Fannie Mae are also issuing a holiday moratorium on foreclosed 2-4 unit properties.

While the mortgage giants will be putting evictions on a two-week holiday hold, they will continue to proceed on other pre- or post-foreclosure activities.

HOMEOWNERS: Foreclosure is not something a homeowner should face alone! We are homeowner advocates and are here to help. There is never any obligation and we have many years of experience with lending, loan modifications and foreclosure prevention. Don’t risk something so important as your house! Our services are FREE…..We’ve helped so many clients and have never charged a dime.

Reach us today for help:

Dustin and Leah Wise

The Wise Team at Keller Williams Realty

(714)875-3667 call/text

Dustin@TheWiseTeamOC.com

Source = RealtorMag

5 Mythbusters for Underwater Homeowners

Home values are going up, and many struggling homeowners are gaining equity in their property. But nearly 14 million U.S. homeowners remain underwater – with mortgages worth more than their homes.  

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More than 27 percent of U.S. homeowners with a mortgage, and nearly 20 percent in Orange County, had negative equity in their homes at the end of 2012, according to a report by Zillow.com.

Many homeowners face foreclosure or are having a difficult time making their payments and are considering options such as a short sale, filing for bankruptcy protection or just handing the bank the house keys and walking away from their debt.

The choices can be confusing.

“There is so much misinformation out there,” said Doug Bickham, a real estate lawyer in Lake Forest. “The law is constantly evolving and even Realtors don’t understand all the fine distinctions in the law.”

The Register asked Bickham, managing attorney at Rasmussen Law Firm, and Bob Hunt, broker at Keller Williams OC Coastal Realty and a longtime member of the California Association of Realtors’ board of directors, to explain the most common misconceptions held by underwater homeowners, or those trying to help them.

Here’s what they said.

Myth: The new California Homeowner Bill of Rights keeps a lender from foreclosing on a home regardless of whether the borrower is pursuing a loan modification or a short sale.

Reality: The Homeowner Bill of Rights, which went into effect in California on Jan. 1, is supposed to restrict lenders from “dual tracking” – that is, repossessing a home while a homeowner is awaiting a decision on a home loan modification application

But a short sale is a different situation, Hunt said. By the time the law kicks in on a short sale, it may be too late.

When a borrower sends in a complete loan modification application, the foreclosure process should instantly stop. If the lender rejects the application, the borrower has a 30-day period to appeal the decision. The home cannot be foreclosed during that time, either.

In a short sale, however, the foreclosure process is halted only after all the lien holders on a home agree to the short sale and the prospective buyer gets financing. All of that can take months. The bottom line: “A foreclosure could easily occur during the attempt to bring about a short sale,” Hunt said.

That means someone facing foreclosure and considering a short sale should act sooner rather than later.

Myth: A “deed-in-lieu” of foreclosure – in which the lender agrees to take back the keys and lets you walk away – is better than spending the time trying to do a short sale, especially because with a deed-in-lieu, you now potentially can get a few months of free rent.

Reality: Mortgage giants Fannie Mae and Freddie Mac recently came out with new guidelines for a deed-in-lieu of foreclosure. Now homeowners with hardships can turn over the house keys and erase their debt – even if they are still current on their payments. Some struggling borrowers who relinquish their homes can live in them for up to three months without having to make mortgage payments.

But even with the new rules, lenders rarely do deed-in-lieu transactions in California, Bickham said.

A primary reason is that California allows non-judicial foreclosures, meaning the property is foreclosed through a trustee’s sale rather than the relatively lengthy judicial foreclosure process required in other states.

In addition, he said, lenders only approve deed-in-lieu transactions if there is a single loan on the property or multiple loans with the same lender, which also greatly limits their usefulness.

“In the vast majority of cases, it’s usually not the most advantageous foreclosure-prevention option for a homeowner, assuming a lender will even agree to a deed-in-lieu,” Bickham said.

It’s better to do a short sale, he said, especially if there is more than one loan.

That’s because striking a deal with a first, purchase-money lien holder does not automatically get the homeowner off the hook when it comes to second or other junior loans.

By contrast, in a short sale, all lenders must sign off, and California law requires them to forgive any remaining balances after the sale. “They (homeowners) are going to get the legal protections on all of the loans, not just one of the loans,” Bickham said. And, because short sales can typically take three to four months, homeowners will also get a few months of free rent, as well.

Also, in a deed-in-lieu agreement, a lender can require additional cash contributions be made by the homeowner, which are illegal in a short sale.

Myth: A bankruptcy prevents a foreclosure.

Reality: “People always seem to think a bankruptcy is going to solve all their house-debt problems,” Bickham said.

However, a Chapter 7 bankruptcy – the most typical bankruptcy protection filed by individuals – will at best delay, but not prevent, a foreclosure. Banks will typically just wait out the bankruptcy case, then immediately proceed with the foreclosure upon discharge. Or, occasionally, the banks will petition the court to release the property even during the bankruptcy if it has no equity so they can proceed with foreclosure, Bickham said. If the home has enough equity, it will be sold as part of the bankruptcy case, with the proceeds going to creditors.

What a bankruptcy will do is convert all “recourse” loans – where a borrower has personal responsibility for repayment – into “non-recourse” loans, where lenders cannot sue a borrower to get repayment, Bickham said. That’s because a Chapter 7 bankruptcy will discharge the borrower’s personal responsibility for the debt even though it will not release the liens on the property for the loans.

So while the bankruptcy does not eliminate secured home loans and a homeowner can still be foreclosed on, all home loans, including second mortgages and home equity lines of credit, will become non-recourse, and lenders cannot sue the homeowners for any balance owed.

Myth: Doing a short sale will require money from homeowners.

Reality: “There’s literally zero out-of-pocket costs to the homeowner to do a short sale and, in fact, they can often get cash back to help with moving expenses,” Bickham said. “In a short sale, essentially, the seller’s lenders step into the shoes of the seller. Most of the closing costs on the seller’s side are picked up by the seller’s lenders.”

That includes agent commissions, escrow fees, title insurance fees, taxes and even homeowner association transfer fees. They’ll only cover so much, though, and the buyer will have to assume the rest. Many programs are available now where lenders will actually give cash back to homeowners who agree to a short sale, as well.

Short sale buyers should be prepared to kick in an additional 3 percent above the price of the home to cover any costs that the seller’s lender declines to pay, Bickham said. But buyers can typically purchase a short sale property for 5 to 10 percent below full fair market value even with the additional costs, he said.

Myth: A foreclosure absolves a homeowner of delinquent homeowner association dues.

Reality: “People often think that if a property is foreclosed or it was given back to the lender as a deed-in-lieu, the homeowner will be absolved of all back dues they owe the association. But HOA dues are actually a homeowner’s personal obligation,” Bickham said. “Even after a bank forecloses on a home, the HOA can still sue the homeowner to collect on any unpaid back dues.”

In a short sale, however, the delinquent HOA dues will often be fully paid off or settled as part of the short sale negotiations, he said, since all lien holders, including the HOA, must agree to release their liens for the short sale to successfully close.

Source = Orange County Register

Loan Mods: Re-Default Rate Over 50% on Subprime Loans

In the recent past it often appeared that lenders were granting loan modifications as a temporary fix or a bandage on a gaping wound. This article confirms my fears. Whether it’s a lack of diligent processing or a failed system the fact remains that the number of homeowners that are “re-defaulting” after a loan modification is staggering!

As robo-signing reviews reach completion, servicers are beginning to work through some of their foreclosure backlogs, according to a third-quarter report from Moody’s Investors Service. 

Moody’s reports that as servicers work through the bulk of their delinquencies, modifications are on the decline. Servicers are now turning to loss mitigation alternatives, including short sales and deeds in lieu, Moody’s says.

Moody’s calculated a decline in “total cure and cash flowing,” measuring successful loss mitigation efforts in the third quarter. The decline “resulted from servicers having worked through significant portions of their eligible 60-plus delinquencies,” according to Moody’s.

Citi, GMAC, and Chase experienced the greatest decreases in cures.

Among subprime loans, Ocwen posted the highest cure rate – 44 percent. The high cure rate at Ocwen is linked to high numbers of modifications relative to its peers.

Moody’s notes that the high cure rate includes “a significant number of re-modifications,” which occur when an initial modification fails.

Ocwen saw re-defaults among 54.5 percent of its subprime modifications, the highest rate among its peers.

Ocwen was followed by Bank of America with a 50.5 percent re-default rate on modifications of subprime loans.

BofA also posted the highest rate of re-defaults of ALT-Aloans (42.3 percent) and the second-highest re-default rate for jumbo loans (35 percent).

Consistent with its high re-default rate, Ocwen ranked highest for re-modifications of subprime loans. Ocwen’s re-modification rate for the third quarter was 24.8 percent. The second-highest re-modification rate was seen at Wells – 6.8 percent.

The high re-default and re-modification rates at Ocwen “calls into question Ocwen’s process in evaluating borrowers for a modification,” Moody’s states.

However, Moody’s also concedes, “not all of the first modifications were necessarily completed by Ocwen due to servicing acquisitions prior to the analysis period.”

Moody’s also reports foreclosure sale to REO liquidation timelines are little changed from the second to third quarter. However, Moody’s forecasts longer timelines throughout the year.

Source = DS News

Ocwen and B of A alone saw Loan Modification Re-defaults over 50% of the time on sub-prime loans! Maybe the answer isn’t loan mod at all. These statistics obviously show that loan modifications are failing at high levels. I absolutely understand the want to save a home from foreclosure and the emotional ties that come with the thought of letting go and moving on.

The question that must be asked in this case is would it not be better for you and your family to short sale now, get out from under the tremendous burden and anguish caused from mortgage delinquency and being upside down by TENS if not HUNDREDS of $1,000’s,  rent a home and rebuild over the next few years with the possibility of buying a bigger home for less? It’s a question that faces many.

If the answer is yes or even maybe please feel free to reach out to us for a free consultation where we discuss in detail your whole situation and offer advice on the best course of action (even if it’s NOT short sale). Even if you’re in the middle of a loan mod and feel stuck we can help get answers. No obligation, just information.

Contact:

Dustin@TheWiseTeamOC.com or call (714)698-9473