Somewhat buried in the Attorneys General Foreclosure Settlement announced February 9th is a part on simplifying the short sale process. Some of the requirements are already used by some lenders, but standardization and disclosure of the procedures is a new concept.
The "rule" which is found by fishing around www.nationalforeclosuresettlement.com, says:
Banks/servicers shall make information publicly available on short sale requirements.
Banks/servicers shall develop a short sale process that allows homeowners to obtain a short sale evaluation before putting the home on the market.
Banks/servicers shall confirm in writing that a request for short sale has been received.
The confirmation of receipt shall include information on the banks’/servicers’ short sale process. The bank shall send the homeowner written notice of any missing documents.
Banks/servicers must give notice of any missing documents within 30 days.
This could be good news to those that process short sale applications for underwater sellers and for real estate agents. The knowledge beforehand of valuation requirements can save a lot of time and wasted submittal of undervalued contracts.
Stay tuned for more information!
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Copyright 2012 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
Reported yesterday in online editions of the press and hitting the newstands today is the settlement of $25,000,000,000 - that's $25 Billion - to the states and homeowners that were "abused" by lenders and that are underwater on their home values. The payments are to be made to the States within a few days of the Federal Judge approving the settlement and to affected homeowners and borrowers over the next three years.
Is it time to get excited?
If you are a State (I don't know of anyone personally being a State), a check will be cut to your treasury with the total in paid to the States of $5 billion. Florida is getting $350 million, for example. That leaves $20 billion for borrowers. If you are a former borrower (as in your home was lost to foreclosure) you may be entitled to up to $2,000. If you are still in trouble, the opportunity to refinancing, modification with principal reduction, or other adjustments is supposed to be enhanced. But don't expect any relief soon.
The Administrator will handle the logistics.
Over the next 60 or less days, a national administrator is to be appointed and the Administrator will monitor compliance and interpret what the settlement is to accomplish. The Administrator along with the state attorneys general and the loan servicers will identify homeowners eligible for the immediate cash payments, and for principal reductions and refinancings. If you are eligible, you will be notified by your lender. This is to be accomplished over the next 3 years, with a percentage of the estimated number of those eligible to be helped each year.
Florida borrowers are expected to receive about $309 million in refinancing of underwater loans.
Is this really a settlement?
The question is whether the banks really did anything they were not already going to do. The answer may be that the payment to the States is the only plum in the settlement. The other $20 billion in "relief" is really the same or smaller dollar amount that the lenders were expecting to lose on the problem loans anyway. Under the settlement there is a structured way to administer how those loses will be handled, with government oversight to relieve the lenders of themselves screwing up, since now they can blame the Administrator and the settlement interpretation they were only complying with.
WHO MAY BE ELIGIBLE?
The full settlement can be found at www.nationalforeclousresettlement.com where the summary of WHO MAY BE ELIGIBLE can be found and states:
Because of the complexity of the mortgage market and this agreement, which will be performed over a three-year period, borrowers will not immediately know if they are eligible for relief. Borrowers from states who did not sign the settlement will not be eligible for any of the relief directly to homeowners. Borrowers from Oklahoma will not be eligible for any of the relief directly to homeowners because Oklahoma elected not to join the settlement.
The settlement provides assistance for:
State attorneys general anticipate the settlement’s requirement for principal reduction will show other lenders that principal reduction is one effective tool in combating foreclosure and that it will not lead to widespread defaults by borrowers who really can afford to pay.
TIMELINE
Copyright 2012 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 begin_of_the_skype_highlighting 561 689 6660 end_of_the_skype_highlighting RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
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In a briefing by Credit Suisse this week, the financial giant’s opinion was that reducing principal balances of underwater mortgages is a risky idea that has not been shown to keep underwater borrowers from later defaults. In my practice as a Florida real estate lawyer, that opinion flies in the face of borrower sentiment. The guiding force in the Credit Suisse statement seems to be the “moral hazard” argument, coupled with statistics about the failure of principal reductions helping homeowners.
As reported by Bloomberg News, Dale Westhoff on behalf of Credit Suisse said that of the 11 million “underwater” homeowners, about 6.5 million have never missed a payment and 2 million more are making on-time payments after delinquency. He said that widespread principal reductions may drive defaults much, much higher as borrowers seek the aid. But he also said that such wholesale principal reductions have never been done before and the associated risk is unknown. Furthering that argument, he said that if principal reductions are offered, it may create the concept that the lenders are guaranteeing the value of homes.
Others don’t share the same view. I for one find that 50% of those that seek my assistance have decided that without a meaningful principal reduction, they are merely overpaying rent and having a debt obligation as well. This sentiment was predicted as far back as 2001. [See my article A HOME WITHOUT EQUITY IS JUST A RENTAL WITH DEBT].
While Fannie Mae and Freddie Mac maintain a no principal reduction policy, New York Federal Reserve Bank President William Dudley said this month that without a significant turnaround in home prices and employment, a substantial portion of deeply underwater home loans (as in Florida) will ultimately default absent a realignment of principal to market value. This concurs with the findings I make in my office everyday by speaking with troubled borrowers.
Will the argument that principal reductions will bring out a flood of applications for similar aid hold true – I think the estimates of that flood are probably understated! - At least here in Florida.
The problem has been quantified by specialists as needing to avoid 8 to 10 million more distressed property sales through the application of principal reductions. Although some programs for “short refinancing” are in effect, with 125% caps that is not enough in the hardest hit states – where the market value drops are far greater and the bulk of the problem loans exist.
From the macro viewpoint, short sale guru (as in billion dollar bets that the mortgage bonds would fail) Greg Lippmann wonders what the big deal is – since investors write down their portfolios anyway and have been doing business like this for years.
It seems to me that writing down the loan at the borrower level will have the added benefit of lowering losses on the loan underlying the mortgage bonds, therefore stabilizing that market. Without the help to the first tier borrower – the homeowner – the homeowners’ later default simply makes the foundation upon which the bonds are created subject to disintegration. If we don’t see principal reductions then this is going to be a very slow recovery. If we do see principal reductions we are liable to experience “non-qualified” borrower revolt and a new era of lending and doing business a very different way.
In the meantime, principal reductions remain the elusive holy grail of those seeking loan modification relief.
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Copyright 2012 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
The clock is ticking until the expiration of the 2007 Mortgage Debt Forgiveness Act expires on the last day of December this year. Previously set to expire earlier, Congress extended the expiration date to end in effective January 1, 2013. Will it be extended again? Is it necessary?
The extension should be extended again – but that is up to Congress. The effect of the Act is to allow the income that is created when a mortgage is reduced in principal to be exempted from ordinary income. That saves significant amounts of money for the borrower.
As an example, if a mortgage obligation is reduced because of any number of examples exist – such as (1) a deed in lieu of foreclosure where the difference between the value of the home and the larger amount of the mortgage is forgiven; or (2) the house is sold in a short sale, where the lender agrees to accept an amount less than the amount that is owed to it by the borrower, forgiving that difference; or (3) a mortgage that is greater than the value of the home is reduced in the amount of principal (that's an elusive event!), with that amount being “forgiven”. In each of these examples the “forgiven” amount of the debt is ordinary income, just like salary or wages, and you normally have to include that in your tax return and pay income tax upon all of your income. Under the rules of the 2007 Mortgage Debt Forgiveness Act, by filing a form with your tax return the “forgiven” income included in your gross income then got removed from gross income, resulting in no tax on the “forgiven” income. The income or the report of the income is commonly called the 1099C income. The “C” stands for cancelled debt.
So let's make it simple. If the short seller (or DIL seller) is in the 25% tax bracket and has $100,000 of debt forgiven by the lender, the seller has to pay income tax of $25,000. With the Act still in effect, that tax is zero.
A detailed explanation of the Act - including who is eligible - is provided in my previous articles on ActiveRain: MORTGAGE RELIEF ACT - CHRISTMAS PRESENT TO PRIMARY HOMEOWNERS; Mortgage Forgiveness Debt Relief Act of 2007- Another Look; FORM RELEASED BY IRS FOR DEBT RELIEF ACT FILING; SHORT SELLER STILL MUST DECLARE INCOME ON SALE!
The Act should be extended because from the discussions associated with the reasons for the creation of the Act in the first place, no one understood (or admitted they knew) the duration of the foreclosure issue, nor the extent of the recession and financial distress of the population. Adding huge tax liability to already distressed homeowners would only encourage more bankruptcy filings (a bankruptcy can eliminate the forgiven debt aspect of a short sale or other disposition of a loan where there is otherwise forgiveness and thus income, because by judicially eliminating the personal obligation on the promissory note, there can be no forgiveness by the creditor, but timing is important).
On the other hand, many parts of the county are not as critically hit as Nevada, California and Florida and extending the Act’s expiration may not be as critical to those other states. This is a “wait and see” until it happens.
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Copyright 2012 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
Here it is! The 2012 version of the much despised short sale addendum from Freddie Mac! As reported in several preceding articles, thanks to the American Land Title Association and others, the "sting" of being liable for any other party's misdeeds in a short sale transaction has been more or less alleviated.
Strangely, it is still called an addendum, not an affidavit, and refers to an affidavit, which in fact is the addendum. Go figure......
The new form has a new paragraph 14 along with other subtle changes, but the end effect is that it is clear that you know what you know and what you don't know won't come back to haunt you. There is a provisio - turning a deaf ear or a blind eye to information you would have otherwise known is false or fraudulent will not be an excuse - that is still negilence on the part of the signor.
Interestingly, this form has grown in just 6 months from 12 paragraphs to 14 paragraphs, one paragraph at a time. Will we see 15 paragraphs anytime soon?
Here is the new form and it can be compared to the previous form by going to my previous article: Freddie Mac Short Sale Addendum - Item #13 - I DON'T THINK SO!!
Copyright 2012 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
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Richard Zaretsky is a Florida Bar Board Certified Real Estate Attorney practicing in West Palm Beach for over 33 years, and President of Automated Land Title Company for 27 years.
Richard Zaretsky has been practicing law for over 35 years.
If you have a particular problem or question regarding a listing, a buyer or a seller - or even a contract - please don't hesitate to call me. If you are a homeowner with difficultly paying your mortgage, in a foreclosure or considering foreclosure alternatives, you absolutely should contact me! Perhaps I can be of some assistance or at least give you some friendly advice.
Brokers - why waste your time doing the paper work, negotiating with the bank and qualifying a short sale? You should be doing what you do best - selling! We have a special program to assist brokers and sellers in the short sale procedure. Stay away from the unauthorized practice of law! Call me for information. Want to Buy a Foreclosure - we can assist buyer and broker in the process and help prevent legal headaches in the future.
We can help with a short sale nationwide - so call and find out!
"We do not represent a client unless a written retainer agreement is signed by the client and us and the agreed retainer fee is received. Any discussion on this Blog is not legal advice and you should not act upon it without the advice of your attorney."
"The Hiring of an attorney should not be undertaken without a review of the credentials of the attorney - further infomation about Richard P. Zaretsky is available from this office and on the company website www.florida-counsel.com".
We are specialists in the Short Sale and Foreclosure process. Foreclosure and Bankruptcy should be considered absolutely last resorts to any borrower's mortgage problems!!!! Modification, Short Sale or Deed in Lieu and other "outside the box" solutions can avoid a homeowner in trouble from making a big mistake. Don't chop off the toe if you only need to cut the toenail!!!!
Agents and Brokers cannot provide legal advice - a short sale is almost nothing BUT legal advice, and having a special "designation" as a short sale expert only puts you in a thinner situation on providing that "expert advice" to your clients on "what does the approval letter mean to me" and "what are my other options and how can they affect me".
We provide Real Estate representation and advice for Buyers and Seller and Realtors regarding commercial and residential real estate. We also provide Business consulting and corporate representation for businesses including buying and selling of businesses and companies. We accept representation for litigation matters relating to real estate, including foreclosure, ejectment, and commercial eviction.
Caution: We provide frank counsel and "tell it like it is". We do not want our clients to waste their time nor ours on matters where we do not believe we can achieve our client's goals and expectations.
Recently, we successfully litigated a real estate breach of contract case against Mobil Land Development Corp and received a jury verdict having a value in excess of $20 million.
Our title company, Automated Land Title Company, has operated in the same location serving all of Florida for over 20 years. Here is a good link to explain the closing process for home closings.
BOARD CERTIFIED IN REAL ESTATE LAW BY THE FLORIDA BAR
RICHARD P. ZARETSKY - Biographical Sketch
Richard Zaretsky settled in West Palm Beach, Florida in 1975 after obtaining his law degree cum laude from Delaware Law School of Widener University. He is a graduate of Syracuse University, earning his BA in Economics. First working as an Assistant Attorney General for the State of Florida, he opened a private practice of law in 1978, and continues his practice today in the same West Palm Beach location. Although Mr. Zaretsky started his practice with the general practice of law, he strove to specialize in real estate matters. The result is that Mr. Zaretsky was Board Certified in Real Property Law in 1995 by the Florida Bar, and now practices in the areas of real estate law (both transactional and litigation) and commercial transactions. He is principal in the law firm of Richard P. Zaretsky, P.A., whose attorneys provide legal services in real estate and business transactions, state and federal taxation, estate planning and administration, family law, immigration, and civil litigation. Mr. Zaretsky is AV rated by Martindale-Hubbell, their highest rating for attorneys.
Mr. Zaretsky and his wife, Esther, have three children. Esther is a litigation and immigration attorney practicing in West Palm Beach.
For two decades Mr. Zaretsky has operated Automated Land Title Company, a Florida title insurance agency and real estate settlement company serving the entire state. Its office is located adjacent to his law offices in the Forum office complex. Automated Land Title Company handles transactions for acquisition, refinance and construction of homes, land and commercial properties.
In 2003, drawing on 28 years of experience representing financiers, Mr. Zaretsky and his oldest son, Max, created Zemaso Management Company, a private "bridge loan" lender. The company has offices in West Palm Beach.
Presently, Mr. Zaretsky's community involvement includes:
• Chairman of WPB-TV, West Palm Beach Government Television Channel Citizen Advisory Board.
• Serving on the Board of Directors of WXEL television and radio, the local PBS and NPR television and radio affiliate. He is also a lay leader representative to APTS, a Washington lobbying group representing the Public Television industry.
• Mr. Zaretsky is a Board of Director and former First Vice-President of The President Country Club, and serves on the By-Laws and Long Range Planning committees.
• Founder and President of the Community Broadcast Foundation of Palm Beach and the Treasure Coast, which is a public foundation charity that has successfully contracted to obtain ownership along with WNET of New York, of the WXEL radio and television public broadcasting stations and is awaiting FCC approval.
• Palm Beach, Florida Rotary Member.
Richard is a great source of terrific information
Richard, This is an awesome article. There is so much incorrect information out there about promissory notes and "deeds in lieu of" that it's great to get the real scoop. Have you thought about writing a book? - Bryan in Florida
You've created THE SHORT SALE WIKI! I'll be back to keep reading. Thanks for taking the time and sharing. Great info!
A great read on Short Sales - Michael E in Washinton
It's like I was back in Real Estate School again. I will save this article for future referance. - Wayne in Oregon
You are what blogging is all about.!!!!
Fabulous compendium.
Richard, you're always a wealth of fabulous information. I so appreciate the time that you take to share your abundant knowledge. Lynda in Florida
It's also a good explanation of why agents should not negotiate short sales and leave the consulting on behalf of the client to an attorney. Tina in Virginia
from Lisa in New Jersey - Richard, this is the most thorough and detailed Active Rain post I have ever read - great job!
fron Lisa in Northern Virginia - Thank you Richard for taking the time to share your knowledge with us. The technicalities are all the more reason to encourage clients retain legal expertise as they embark on the short sale process.
from Alan in California - Richard, this is by far the best material I have ever read on short sales, your post and your comments.
from Lisa in California - An excellent well written post that really gets to the heart of short sale transactions. Thanks for getting the information out to the AR community.
from Rick in Illinois - Richard, I am a private shortsale consultant for a small law firm in Chicago, IL. I perform shortsales for the law firm and their shortsale clients only. I Just want to say that by far your blog and your information has really impressed me. I appreciate the post about IRS form 982- Discharge of Indebtedness, and I especially like the post about the discounted deficiency judgements sold at about 5 or 10 cents on the dollar.
Richard, this is by far the best material I have ever read on short sales, your post and your comments. As a mortgage loan officer, I often talk with people who are upside down and only can recommend that they talk with a lawyer of a CPA with experience in short sales. I now have a much better sense in how I must approach them. These are trying times. There are so many people that need help. AJ
Should I have known this information two months ago, I would have been able to provide a better and firmer counter responce to a bank loss mitigator from GMAC that told me if I didn't accept her $11,800 net offer, on a $96,000 loan, she would get more money than what we were offering from a private investor at a discounted rate.
Well now, after I did some basic math I realized we were offering her $2,200.00 more on the shortsale for the 2nd note payoff than then the $9,600.00 GMAC would potentially receive at 10 cents on the dollar from an investor. Now, I can actually calculate and anticipate their responce on this specifically, thanks to your story.
Negotiating is an art not a science, but we definetely have to have key knowledge and information, be methodical and have some stradegy to negotiate with leverage on behalf of our clients. I look forward to the rest of your blog education.
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http://activerain.com/blogsview/237714/Foreclosure-Homes-Short-Sales
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Very informative post, thank you for sharing and the extra effort.
03/11/2008 12:56 PM by Matthew Heavener
Richard, Your posts are always enlightening. As a Realtor serving many short sale customers I appreciate your information and insights.
03/07/2008 05:45 AM by Bradenton Florida Real Estate - Dan Forbes REALTOR®
Thank for your invaluable insight Richard. I always learn something from your blogs.
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03/07/2008 10:10 AM by Klarque Garrison, "Mr. Short Sale"
That was a great breakdown. Thank you.
01/12/2008 09:52 PM by Mike Pahua
great job, very informative, we have got to get together soon. Call me.. Sharkey
01/12/2008 09:19 PM by Brian Sharkey South Florida Realtor
Awesome post Richard. Thanks so much.
01/01/2008 08:11 PM by LaNita Cates
Richard, Great Clear Cut Advice.
11/12/2007 05:51 AM by Matthew J Blum - MyFavoriteMortgage.net
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