Prestige Real Estate Services

Hey Sara! The reality these days is that the rules are changing every day. It is extremely important for investors to stay on top of the news and know what the real impact of the headlines is. There was some really big news in the short sale world recently, so I wanted to take this chance to explain its impact and how I am dealing with it in my business.

Bank of America, which also now owns Countrywide, quietly added a clause to its short sale agreements recently that obligates homeowners to pay back the deficiency owed as a result of the short sale. In many cases, homeowners we deal with are only agreeing to short sales when the deficiency portion is waived by the lender. Because of this, we have stopped taking on deals that have Countrywide loans. Bank of America's new policy is expected to begin scuttling many short sales now in process with Bank of America or Countrywide because a lot investors like us now find it to be a complete waste to bother spending the time negotiating a deal knowing that they're most likely going to slap a provision on there that makes it difficult for us to get a short sale approved that is acceptable to the homeowner.

Now, Bank of America is probably just doing what it deems necessary to protect its investors from further losses. It's also trying to curb granting short sales to people who have resources available to continue paying unwanted mortgages.

It is short-sighted though, because it's going to have a number of extremely negative impacts:

1. More short sales that have been in process (sometimes for several months) will fail just short of the closing table.

2. More homeowners will be forced into bankruptcy in order to avoid deficiency payments when the property is finally foreclosed.

3. More homeowners will ultimately be forced into foreclosure.

4. Bank of America and its subsidiaries will be left with more inventory on the books for a longer period of time. The increasing numbers of REOs will end up lowering the value in many markets that are already suffering. It's likely that Bank of America will revise the policy again once it becomes clear to them that it's not making their investors more money. Unfortunately, the people who get caught in the middle are the homeowners who put their faith in the short sale process and may end up getting the short end of the stick.

To help these homeowners out, short sale investors should have their negotiators touch base with the loss mitigation specialists assigned to these cases and have them confirm that the deficiency is being waived. Have them send a copy of the current short sale agreement language and discuss any changes with homeowners.

If it appears that a deficiency clause is going to sink the short sale, the best bet is to come right out with it and tell the bank that if there is a deficiency clause, you will not do the deal, and they will lose out on your offer. Some people are having success with this approach. Lender short sale rules ebb and flow depending on the market and the lender's bottom line in any given quarter. Right now, we aren't bothering to do any deals with Countrywide but that may change as their policies change. I will try to keep you on top of the changes as they happen!

Per the Department of Corporations at http://www.corp.ca.gov/FSD/faq/CFPAConsumer.asp#1

I have attached the Frequently Asked Questions for review according to the Department of Corporations regarding the California Foreclosure Prevention Act.

1. What is the California Foreclosure Prevention Act (CFPA)?

Governor Arnold Schwarzenegger signed the CFPA into law on February 20, 2009. The CFPA was proposed by the Governor to help address the problem of increasing foreclosures in California during the current economic downturn.

2. What does the CFPA do?

The CFPA extends the foreclosure process by 90 days unless a lender or mortgage loan servicer obtains an exemption from the 90 day stay. The lender or mortgage loan servicer applies for the exemption with a state department. If the lender or mortgage servicer demonstrates to the state department that it has a comprehensive loan modification program offered to borrowers, and designed to keep them in their homes, the lender or mortgage loan servicer is exempt from the 90 day delay of foreclosure. The law is designed to encourage more loan modifications that keep borrowers in their homes.

3. What borrowers are eligible for the additional 90 days in the foreclosure process?

The CFPA does not operate on the basis of borrower eligibility. Instead, the CFPA is directed at the mortgage loan servicers. In general, a borrower is eligible for an additional 90 days in the foreclosure process if:

• The borrower's lender/servicer has not obtained an order of exemption from the state;
• The borrower obtained the loan between January 1, 2003 and January 1, 2008;
• The loan in default is the first mortgage or deed of trust on the property;
• The borrower occupies the property as his or her principal residence;
• The borrower has not surrendered the property to the mortgage loan servicer;
• The borrower has not contracted with a business advising people who have decided to leave their homes regarding how to extend the foreclosure process, and
• The borrower has not filed for bankruptcy.

4. If the borrower and loan qualify for a loan modification, what type of modification will the borrower receive?

The CFPA does not dictate every type of modification program, but does provide a general framework for types of modifications to be used. In general, when modifying a loan, a mortgage loan servicer must seek to reduce monthly payment in an effort to make the modified payments affordable for a borrower. Typically, affordability is met if the lender/servicer's program targets a housing-related debt-to-income ration of 38% for borrowers.

While a sustainable loan modification may be different for different borrowers, the potential ways a loan may be modified include any of the following:

• An interest rate reduction, as needed, for a fixed term of at least 5 years.
• An extension of amortization period for the loan term, for up to 40 years from the original date of the loan.
• Deferral of some portion of the principal amount of the unpaid principal balance until maturity of the loan.
• Reduction of principal.

5. Must a mortgage loan servicer with a comprehensive loan modification program modify every loan?

Not every loan is subject to modification. Not every home can be saved from foreclosure. The law is designed, however, to prevent unnecessary foreclosures for those borrowers who need help, and whose loans can be modified.

6. What if a mortgage loan servicer delays acting on a loan modification request and causes a borrower's home to go to sale?

The CFPA rules provide that a mortgage loan servicer may not harm a borrower by failing to act on a request for a loan modification.

7. If a borrower received a Notice of Default before June 15, 2009, is the borrower entitled to the additional 90 days?

If the borrower has received a Notice of Default but not received a Notice of Sale prior to the operative date of the law (June 15, 2009), the borrower is entitled to the additional 90 days in the foreclosure process if a servicer has not established that it has implemented a comprehensive loan modification program and received an order of exemption from the Commissioner. However, if the servicer subsequently establishes a program and applies for an exemption, the Civil Code provides that a servicer is immediately exempt from the requirement that it provide a borrower an additional 90 days in the foreclosure process, and therefore a borrower will no longer be entitled to the additional 90 days.

8. If a servicer does not receive an order of exemption until a time AFTER the borrower was issued a Notice of Default, is the borrower entitled to an additional 90 days in the foreclosure process?

No. The Civil Code provides that the servicer is exempt from the requirement that it provide an additional 90 days in the foreclosure process upon the receipt of a temporary (or final) order, and therefore a borrower would no longer receive the additional 90 days

9. If a borrower has received a Notice of Sale, may the borrower also be entitled to the additional 90 days?

The additional 90 days is only applicable to the time period after the filing of the Notice of Default. If the law became operative after a borrower has received a Notice of Sale, the borrower is not entitled to an additional 90 days in the foreclosure process.

10. If a mortgage loan servicer fails to seek an exemption on the operative date of the law, does the borrower automatically receive the additional 90 days in the foreclosure process?

A mortgage loan servicer may apply for the exemption at any time, and upon receiving a temporary order of exemption (upon filing the application), the statute provides that the servicer is exempt from the requirement that the servicer provide an additional 90 days in the foreclosure process. Consequently, a borrower will no longer have an additional 90 days in the foreclosure process upon the mortgage loan servicer receiving an exemption.

11. Where are the legal provisions of the CFPA found?

On February 20, 2009, the Governor, signed ABX2 7 and SBX2 7, which established the California Foreclosure Prevention Act in the Civil Code. On June 1, 2009, Subchapter 14 was added to Chapter 3, Title 10 of the California Code of Regulations (CCR). These emergency regulations clarify the application of Sections 2923.52 and 2923.53 of the Civil Code.

The law and rules are available on our website or can be found at www.leginfo.ca.gov or www.oal.ca.gov.

12. What is the operative date of the CFPA?

Beginning June 15, 2009 all mortgage loan servicers who have not applied for an exemption are required to wait an additional 90 day period before filing the Notice of Sale when foreclosing on a residential mortgage loan meeting the criteria established in Civil Code Section 2923.52(a). However, a mortgage loan servicer may obtain an exemption from the 90 day requirement at any time by implementing a comprehensive loan modification program and obtaining an exemption.

13. Who is subject to the CFPA?

All entities that service residential mortgage loans on properties located in California are subject to the CFPA. This includes companies licensed by the Department of Corporations, Department of Financial Institutions, the Department of Real Estate and any other entity that services loans on properties located in California, such as national banks.

14. How can a borrower determine whether his or her mortgage loan servicer has obtained an exemption under the CFPA?

A list of mortgage loan servicers that have obtained an exemption under the CFPA will be posted on the Department of Corporations website at www.corp.ca.gov after June 15, 2009.

15. How can someone assert violatons or lack of compliance with CFPA?

The public may contact the Department of Corporations at 1-866-ASK-CORP to report complaints about compliance with the CFPA, and the department can assist the public in determining which state department is responsible for a particular lender or mortgage loan servicer.

16. Where can the public obtain additional information?

The public may contact the Department of Corporations at 1-866-ASK-CORP

Through our marketing efforts, I get many people that ask me how Prestige is different than most short sale companies. I have broken down a quick outline on why we are San Diego's REAL Short Sale Experts!

We are a short sale negotiation company that works directly with both homeowners and Agents. I believe we have a niche in the market that makes us extremely successful.

1. Legal: Even though the market changes by the day, we have put an extreme amount of upfront work with the legal aspect of the entire short sale transaction. We are not in the business to tread in treacherous waters and want to make sure that we represent ourselves, the homeowner, Agent, Lender, buyers...everyone in the transaction with the most fiduciary responsibility.

2: System: Our system is extremely streamlined from initial documentation to closings. Our systems allow Realtors to submit short sales with the utmost ease, while homeowners can understand the complex process within a simple conversation.

3. Technology: We have an all automated online system that allows the homeowner and Agents to login and check the status of their short sale during the entire process.

4. Exit Strategies: We bring more than the one way of marketing the property (MLS) We have a database of buyers looking to purchase within the market. But MOST IMPORTANTLY we have the ability to close on the transaction as an investor.

5. We realize the highest and best use for every short sale is NOT always to negotiate the deal while listing it at the same time. There are two parts of the transaction. 1. Negotiating to obtain and approval and 2. Getting the property sold! We allow Agents to do what they do best...Sell Real Estate.

5. A team that just wont take NO for answer! We are just passionate .....and VERY Good in what we do!

I could go on and on. But I have had an extremely LONG day and this was the last thing on my task list to get done before the weekend. I apologize for the delay in getting back to your questions.

Have a great weekend! Anyone, feel free to contact me if you would like to learn more about our services and /or have any questions on what we do!

As people look into pre-foreclosure options, many people ask if they are a good candidate for a short sale. I have provided some basic guidlines that may qualify you as a good short sale candidate. Ultimately, the final approval of the short sale will come from the investor / lender. You may fall into all of these categories, but the lender will still deny a short sale.

• You have very little to negative equity in the home
• You have a financial hardship that has caused you not to be able to make your mortgage payment
• You owe more on your home than it's worth
• The Mortgage is in or Near Default Status
• If comparable homes in your area and specific zip code have sold for less than your mortgage balance

An important thing to know about a short sale is that it should be handled by a real professional who knows how to work these deals. It increases your chance of obtaining a short sale approval from your lender.

I know a few people have been asking for the nuts and bolts of the new CFPA. I have taken snippets from a couple different resources and have included them below for your convenience. Hope this helps!

The California Foreclosure Prevention Act was enacted by the state Legislature, and signed by Governor Arnold Schwarzenegger on February 20, 2009 and put into effect today, June 15th, 2009.

The Act, which amends the California Civil Code as it relates to residential mortgage loans,states it's goal of allowing "additional time for borrowers to work out loan modifications while providing an exemption for mortgage loan servicers that have implemented a comprehensive loan modification program."

New Civil Code Section 2923.52 will add 90 days to the existing 3-month statutory waiting period between the recording of the notice of default and the giving of the notice of sale. Loans that are covered by the new legislation must meet four conditions:

(1) the loan must have been recorded during the January 1, 2003-January 1, 2008 (inclusive) period, and must be secured by residential real property
(2) the loan must be a first mortgage or deed of trust
(3) the borrower must have occupied the property as his/her principal residence at the time the loan became delinquent
(4) a notice of default must have been recorded against the property.


There is also an applied-for exception to the 90-day moratorium at new Civil Code Section 2923.53. Servicers may apply for an exemption order issued by the relevant "commissioner." The "commissioner" means the Commissioner of Corporations, the Commissioner of Financial Institutions, or the Real Estate Commissioner, as applicable. The law effectively provides that national banks, federal savings banks, and their respective operating subsidiaries will submit applications for exemption to the Commissioner of Corporations.

What does a comprehensive modification program entail???

To be "comprehensive," the loan modification program must have four key features:

First, it must be intended to keep borrowers in their homes when the anticipated recovery under the loan modification "exceeds" the anticipated recovery through foreclosure on a "net present value basis."

Second, the program "targets" a housing-related debt-to¬gross-income ratio of 38% or less on an aggregate basis (i.e., based on all of the servicer's loans under the program; this ratio need not be achieved for each individual loan).

Third, the program includes "some combination" of the following: (a) reducing the interest rate for at least five years; (b) extending the amortization period up to 40 years from the original date; (c) deferral of some unpaid principal until loan maturity; (d) reducing the principal; (e) compliance with a federally mandated loan modification program (note - the federal program must be mandated, not optional); and (f) "other factors" that the commissioner determines are appropriate.

Fourth, the program seeks to achieve "long-term sustainability" (which is not a defined term) for the borrower. For the target 38% ratio, the borrower's housing-related debts include loan principal, interest, property taxes, certain housing-related insurance, and homeowner association fees.

I obtained this information from the CA DRE website as well as Morrison / Foerester Legal Website.

http://www.jdsupra.com/post/documentViewer.aspx?fid=f677dfdf-7680-42bc-841f-2af16d3ec8df


Hope this helps answer some questions. There are still some unanswered questions that remain to be answered....

Please let me know if you have further questions and I will forward the research I have done on the CFPA.

Thanks!

Sara Ard
Prestige Real Estate Services
Sara@Prestige-RES.com
619-365-9328