Frank Godfrey - Realtor, e-PRO, ALC

The Wave Starts in California.

We must properly negotiate our short sales and be upfront with the consumer on possible future implications.

This is a Good read.

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Years after Loan Default, Homeowners May Still Owe By Jim Wasserman

Print Article Print Article RISMEDIA, March 23, 2010—(MCT)

Homeowners defaulting on mortgages today may be surprised to learn years from now that they still owe thousands of dollars—and a collection agency is coming after them to get it.

That’s because lenders have been quietly selling second mortgages and home equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies, which in some states have years to make a claim. If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even garnish their wages, said Scott CoBen, a Sacramento bankruptcy attorney.

“The only relief a consumer will have is entering into a debt negotiating plan or filing for bankruptcy,” said Sylvia Alayon, a vice president with the New York-based Consumer Mortgage Audit Center. The firm provides mortgage analysis to lenders, advocacy groups and attorneys.

The phenomenon suggests an ominous, looming echo of today’s real estate meltdown. As debt collectors surely seek at least partial repayment of millions of dollars in unpaid home loans, some say renewed financial stresses on tens of thousands of local consumers could dampen economic recovery.

“I think there will be a lot of unhappy people when it hits,” said CoBen. “We saw this in the ’90s. This is not really new. Just when you think you’re back on your feet, you’re making money and the economy’s good, they hit you with this.”

Alayon said most people are so stressed out and exhausted by trying to save their homes today that they are unaware they could face another hit later. And many who are losing homes don’t get the advice necessary to prevent future fallout, say nonprofit loan counselors.

“You’ve got tens of thousands of people in California who have this hanging over their heads who don’t even know it,” said Scott Thompson, principal at for-profit Mortgage Resolution Services in Carmichael, Calif. He fears a new wave of bankruptcies might flatten people just starting to recover from losing their homes.

“So many of these are people with 750 or 800 credit scores who made a bad decision,” said Thompson. “Or they’re people who suffered income cuts. These are people, in terms of the economy, whom we need to participate.”

But an entire industry is gearing up to buy their debt at deep discounts and collect what they can, Alayon said. “It’s a big business and investors are coming out of the woodwork. It’s a very lucrative business,” she said. Real estate insiders and financial players know it as “scratch and dent.”

Regionally, no one knows for sure how much unpaid debt is on the line. CoBen said people who used their borrowings for a traditional loan on a house in which they lived generally have little to worry about. But borrowers may be vulnerable in years ahead—generally, those who defaulted not only on their first mortgage but also on a home equity loan or second mortgage.

In California, banks can’t collect from borrowers for primary, so-called “first-lien,” loans that go unpaid. When a house is foreclosed or sold through a short sale, the lender of the first loan gets the house back or the proceeds from another buyer.

But banks also made thousands of “second-lien” loans, including those used to finance 20% down payments during the housing boom. A separate category of “seconds” includes home equity loans and home equity lines of credit. Nationally, about 3.4% of those loans are currently delinquent, according to Foresight.

Owners are generally, but not always, on the hook for the second loans left over from a foreclosure or short sale. Most investor mortgages, too, leave the borrower liable for potential unpaid debt. In many short sales, experienced real estate agents or attorneys can negotiate away debt obligations for the second-lien loan. But many inexperienced borrowers don’t know that, and sign final-hour agreements giving lenders the right to pursue them later.

“Seek advice,” counseled Doug Robinson, spokesman for national nonprofit mortgage counselor NeighborWorks America. He said nonprofit counselors can help. “Often when you work with a real estate agent, they’re not really equipped to handle the repercussions. They’re set up to make the sale,” he said.

Government forces are already moving to limit potential damage to millions now struggling with home loans. A new Obama administration short sale program aims to prevent banks that hold second-lien loans from pursuing collections from homeowners after the short sale. It goes into effect April 5, 2010 and works this way: Sellers will receive notice that their servicer has steered part of the sales proceeds to secondary lien holders “in exchange for release and full satisfaction of their liens.” This release would apply only to short sales done through the administration’s Home Affordable Foreclosure Alternatives program.

In California, Democratic state Sen. Ellen Corbett recently introduced SB 1178, which would expand California’s protections for some people who refinance and take on a second mortgage.

People who refinance, but use the funds to improve their homes or to stay in their homes with a better interest rate, would be protected. Lenders could not seek court judgments to collect from these borrowers in the event of foreclosure or short sales.

“If you refinance a property and aren’t using the money for personal reasons, you shouldn’t lose your personal protections,” said California Association of Realtors lobbyist Alex Creel. He said the idea has been around for years but has become more urgent as thousands lose income and fall into mortgage trouble. The bill would apply to all foreclosures or short sales that occur after it becomes law. It doesn’t matter when the loan was made, Creel said. SB 1178 is still in the early stages of consideration. It must clear both houses of the Legislature and be signed by Gov. Arnold Schwarzenegger by Sept. 30 in order to take effect.

(c) 2010, The Sacramento Bee (Sacramento, Calif.). Distributed by McClatchy-Tribune Information Services.

Challenge Your Property Tax Assessment

If your property tax assessment is higher than it should be, there is something you can do about it. It might not be easy, however, as financially strapped local governments are in no hurry to reduce revenues.

The procedure will vary by jurisdiction and it is critical to understand the system. Below, I have listed the websites for Maryland, DC and Virginia (Arlington, Fairfax, and Alexandria) for detailed information on the process for challenging property tax assessments in that particular area.

You may want to seek the assistance of a tax professional, appraiser, attorney, or real estate agent to help you out.

DC: http://otr.cfo.dc.gov/otr/cwp/view,a,1330,q,594359.asp

MD: http://www.ptaab.state.md.us/faqs.htm

ARL, VA: http://www.arlingtonva.us/departments/RealEstate/RealEstateAssessmentsTaxYearInfo.aspx

FAIRFAX VA: http://www.fairfaxcounty.gov/dta/realestate_faq.htm#5

ALEX, VA: http://www3.alexandriava.gov/contactus/mailto.php?id=401

Maryland Foreclosure Laws

Maryland Foreclosure is both Judicial and Non-Judicial.

Maryland foreclosure law states that the person authorized to make a sale (trustee or sheriff) in an action to foreclose a mortgage or deed of trust shall give written notice of the action to the record owner of the property to be sold.

The written notice shall be sent no later than 2 days after the action to foreclose is docketed:

The notice shall state that an action to foreclose the mortgage or deed of trust may be or has been docketed and that a foreclosure sale of the property will be held.

30 days before the day on which a foreclosure sale of the property is actually held; and the date on which an action to foreclose the mortgage or deed of trust is filed.

In addition to any notice, the person authorized to make a sale in an action to foreclose a mortgage or deed of trust shall give written notice of the proposed sale to the record owner of the property to be sold.

The notice shall state the time, place, and terms of the sale and shall be sent not earlier than 30 days and not later than 10 days before the date of sale.

The person authorized to make a sale in an action to foreclose a mortgage or deed of trust shall give written notice of any proposed foreclosure sale to the holder of any subordinate mortgage, deed of trust, or other subordinate interest, including a judgment.

Each request for notice of sale shall:

Be recorded in a separate docket or book which shall be indexed under the name of the holder of the superior mortgage or deed of trust and under the book and page numbers where the superior mortgage or deed of trust is recorded; Identify the property in which the subordinate interest is held; State the name and address of the holder of the subordinate interest; and Identify the superior mortgage or deed of trust by stating:The names of the original parties to the superior mortgage or deed of trust; the date the superior mortgage or deed of trust was recorded; and the office, docket or book, and page where the superior mortgage or deed of trust is recorded.

Maryland Foreclosure Notice of Sale

Maryland foreclosure law states that a notice of sale must be published in a newspaper of general circulation in the county where the property resides at least once a week for three (3) successive weeks, with the first publication to be not less than fifteen (15) days prior to sale and the last publication to be not more than one week prior to sale. The trustee also sends a notice of the sale to the last known address of the mortgagor, and the owner of the title of the property. The notice of sale must be sent by certified and by registered mail, not more than thirty (30) days and not less than ten (10) days before the date of the sale.

The sale must be conducted by the person authorized to make the sale (trustee or sheriff) and may take place immediately outside the courthouse entrance, on the property itself or the location advertised in the notice of sale, if different. The terms of the sale vary by process.

After Maryland Foreclosure

Sale After the sale, the trustee sends a report to the court. Upon filing the report, it is published in the newspaper stating the foreclosure sale will be ratified 30 days from the date of notice.

Foreclosure University

I read this article in the Baltimore Sun this morning which they reported from the Chicago Tribune and thought it would be good to share with my neighborhood.

By Mary Ellen Podmolik Tribune reporter September 20, 2009 writes:

Housing: Short sales spread across real estate market, leaving frustration in their wake Offers may roll in, but banks often slow to respond, prompting buyers to walk away

A few years ago, few people in the housing market had ever heard of a short sale. Mention the term today and people, whether they are homeowners or real estate agents, just roll their eyes.

The practice, which involves selling a property for less than the amount owed on the mortgage, has grown in popularity as an exit strategy for financially strapped homeowners because it doesn't ding a credit report as deeply as a foreclosure. But because the transactions have to be approved by first and second lien holders, they are languishing. Some real estate agents try to steer clear of them entirely and even specify in their listings that a property is not a short sale.

The Obama administration is aware of the frustrations. In mid-May, Treasury Secretary Tim Geithner announced plans to streamline the process by offering financial incentives to mortgage servicers and investors that accept short sales, much in the same way that they are rewarded for refinancing or modifying troubled mortgages.

Four months later, homeowners, real estate agents and lenders are still waiting for specific details of how the plan would work. A Treasury Department spokeswoman said an update on the program is expected in a few weeks. Meanwhile, homeowners like Dallas O'Day are in limbo.

O'Day, a Chicago attorney, and his family relocated from California in June 2004 and bought a Mediterranean - style home in Chicago's Beverly neighborhood for $395,000. They rewired the house, stripped and refinished the wood floors and the woodwork and did other work to restore its charm.

Last year, personal circumstances prompted them to list the home for sale just as the housing industry's meltdown was picking up steam. With no takers and no longer even expecting to break even on his investment, O'Day relisted the 2,700-square-foot home in January as a short sale.

Four months and three price reductions brought the house down to $384,900, at which point a potential buyer made an offer in late May. O'Day accepted it and submitted the paperwork to the lenders holding first and second mortgages on the home.

He has yet to receive a response. Meanwhile, the family has moved into a North Side apartment, the refrigerator has broken in the home and there's evidence of mold in the basement.

"The only thing we keep hearing is they keep wanting current payroll stubs, bank statements and taxes," said O'Day's real estate agent, Pam Decker at Prudential Biros Real Estate in Evergreen Park.

"What has astonished me is that in the presence of one of the softest housing markets I can remember, we're hitting up on four months and they've just had a person assigned to look at it, that they would move at such a glacial pace," O'Day said. "My expectation is I'll be renting until whatever blemish is gone. I've just accepted the fact that at some point it'll be foreclosed upon because I just don't think the banks will pull it together. I feel like I've done everything I can do."

During the second quarter, 14 percent of all home sales were short sales and they were made primarily to first-time buyers who may have more flexibility to deal with the long wait times, according to a survey by Campbell Communications. The sales volume could be much greater. Two out of three short sales never close.

"In general, you have to have three offers for every completed short sale," said survey designer Thomas Popik. "The first offer, the buyer walks before they get a yes or no. On the second offer they walk a good part of the time. The third offer is the charm because it's been in process long enough at the lender that [the lender] knows they want to do this.

"Home buyers are now putting in half a dozen verbal offers, hoping that on one of them the lender will say yes. What this is doing is bogging down the approval [process] at the mortgage servicers. It's just gotten to the point that everyone has started engaging in unproductive behavior. It's a vicious cycle."

The process of getting a short sale approved involves a packet of documents that includes bank statements, tax returns, letters explaining any other sources of income and a hardship letter explaining why a short sale is being sought.

After the packet is submitted to a mortgage servicer, it has to be entered into the system, a person has to be assigned to it, and an appraisal has to be ordered for the property. On average, it took loan servicers 9 1/2 weeks to respond to a short sale offer, Campbell's survey found.

"You've got to stay on top of these banks," said James Orrico, a real estate agent at Professional Residential Brokerage LLC in Oak Brook. "I call on my files every day. If you don't stay on top of them, you'll lose it."

But not every real estate agent is willing to deal with the process. Online realty company Redfin doesn't show or write offers on short sale properties "because of the slim chance that you'll get the home," according to its Web site.

A number of factors are contributing to the delay. Lenders say their top priority is keeping people in their homes, and their own and the government's loan modification programs are taking the bulk of their resources.

"The modification [program] was just like an atom bomb that dropped on [servicers]," said Matt McCabe of National Short Sale Center, a company that acts as a negotiator between borrowers and mortgage lenders. "They had a really hard time reacting to that increased demand."

Wells Fargo Home Mortgage, which services more than 8 million mortgages, said it has cut the average 60-day response time on short sale offers to 30 to 45 days.

"We're not satisfied with that number," said Tamara Swain, senior vice president of real estate owned and short sales at the lender. "The current goal is 15 to 20 days. This has been a big learning process of a function that wasn't very prominent a couple years ago."

Also delaying the process is that if a home can't be saved, servicers are keen on trying to recover as much as possible for what could be multiple investors and that requires a fair amount of due diligence.

"The challenge is buyers always want to pay as little as possible and sellers want to receive as much as possible," said Tom Kelly, a spokesman for JPMorgan Chase, which services 10.3 million mortgages. "The bank is the server in the middle."

From a prospective buyer's standpoint, purchasing a short sale property can be preferable to a foreclosure because if the borrower stills owns the home, he or she is likely to take better care of it.

However, with so many distressed properties for sale, and other homes selling conventionally at drastically reduced prices, there's a wealth of inventory available allowing buyers to get a quick yea or nay to their offer. Some buyers make offers on multiple short sales or write the offers so they can walk away if a lender doesn't respond within a certain time frame.

Xia Zhao and her family thought they'd found their next home when they walked into a Jefferson Park townhouse that was listed as a short sale. It was large and near her son's school. However, they walked away from the offer after a month because they still hadn't received a response and were worried they wouldn't be moved in by the time school started.

Instead the family bought a new town home with a price that was cut by the developer in the city's Old Irving neighborhood.

"I guess we're not people with extreme patience," Zhao said. "What if you wait for a couple months and this goes away? You have to start all over again."

"Most people really aren't in a situation where they can deal with the uncertainty," said Zhao's real estate agent, Eric Rojas at Prudential Rubloff. "Even when you explain that it's not accepted until the bank accepts it and you build these safeguards into the contract, people are dropping out, left and right. These sales would get done, but people just can't wait."

Chicagoan Marie Cabrera, a real estate agent at Baird & Warner, is hoping she has found a purchaser with some patience.

After being unable to sell her own condo in the luxury Palmolive Building, Cabrera decided she didn't want to simply wait for her lender to foreclosure on it. Earlier this month she listed it as a short sale, priced at $1.15 million. Within a week, she had a cash offer of $1 million that she sent to her lender.

"I have no idea whether the bank will take it," Cabrera said. "I have an offer that's solid and they're willing to wait."

Frank G's Comments: I personally have closed successfully 90% of the short Sales I have taken and with the right team I will be on my way to closing my 10th short sale this year.

Your first step to succesful Short Sales is hiring a good attorney to handle most of the negotiations with the bank and make sure he is aware of the new laws in the state.

Your job as a Realtor is to find the Short sales and close them.

To learn if you are a good Short Sale candidate, contact my team today.

The only short sale The Godfrey Realty Group can not do is the one I am not working on.

Come One Come All - A Flea Market/Car Wash for a Cause in Upper Marlboro Prince George's County

It’s time to clean out your closets, clear out the garage, and find those long forgotten new or gently worn items stored in the basement. Businesses are also welcome to showcase your products and services. Bring it all to the Keller Williams Preferred Properties 1st Annual KW CARES & KWPP SHARES FLEA MARKET AND CAR WASH.

Public Vendor Tables are available for a $25.00 donation. Everyone welcome to participate.

Table donations will go to KW CARES, a tax exempt 501©(3)public charity created to support Keller Williams Realty associates and their families in times of extreme hardship as a result of a sudden emergency. Hardship is defined as a difficult circumstance that a person or family cannot handle without outside help. All other donations will go towards our KWPP SHARES to stay in our community to support KWPP Scholarships for Books & Dictionary Program. Dictionaries will be donated to the Prince George's County Public Schools Third Grade Classes. Additionally, funds will be used to support our KWPP family. Since these funds are not going to a 501©(3), the money collected for KWPP SHARES is currently not tax deductible.

KW CARES and KWPP SHARES is the heart of the Keller Williams Realty culture in action – finding and serving the higher purpose of business through charitable giving in the communities where our agents live and work.

Date: Saturday, September 26, 2009

Where: Keller Williams Preferred Properties(Parking Lot)

9701 Apollo Drive, Suite 102 Upper Marlboro, Maryland 20774

Time: 9:00am - 3:00pm