Options for Property Owners struggling with their mortgage

Owners of distressed or “up-side-down” properties are face with many choices on both a financial and emotional level. For the struggling homeowner it is important to understand that when they are in a “distressed” position any of the following could have negative credit / tax consequences.

1) Loan Modification: This is where the homeowner and the lender come to an agreement. A modification can involve reducing the interest rate, deferring payments on the loan, an extension of time to pay back the mortgage, reduction in balance, or a combination of all of these possibilities.
Note: According to the Treasury Department, only 9% of home owners eligible for mortgage modifications have actually had their payments reduced, Only 1 in 50 have had any debt reduced, 78% see their debt increase as a result of late charges / attorney fees / missed payments, 63% of modified loans end up back in default within 1year. So while this option can sound really great, most banks and lenders are not actually helping the majority of people who apply for a loan modification.

2) Foreclosure: Foreclosure is a legal process through which the mortgage holder gains title to the property form a homeowner show has stopped paying their mortgage. After certain time periods, the lenders can foreclosure with or without the consent of the property owner.

3) A deed in lieu: Also known as cash for keys. A deed in lieu can happen when the homeowner offers to “give back” the property to the lender before the foreclosure date. The lender gets the property back without having to go through the entire foreclosure process and agrees to accept title to the property from the homeowner. In exchange they forgive the loan, and can give the homeowner a small amount of money to walk away. The deed in lieu must be agreed to by the lender and the homeowner.

4) Bankruptcy: A legal action generally filed by a homeowner to have debt (s) discharged. An “automatic stay” happens once someone files bankruptcy, “staying” all actions against the person. While petitioning for bankruptcy can cause delays in the foreclosure process. It does not necessarily prevent a foreclosure from eventually occurring.

5) Short Sale: Many people consider this the best option because the lender agrees to let a homeowner sell the property at today’s market values as opposed to what is owed on the mortgage.



What options have you tried / seen work best?



To your success,

Oliver Graf

Real Estate Expert
Follow me on Twitter: Twitter.com/OliverGraf360

Sentate Bill 94 - Does it hurt the chances for getting Loan Modificaion Help?

Sentate Bill 94 - Does it hurt the chances for getting Loan Modificaion Help?

The California Assembly recently passed Senate Bill 94, a bill that aims to protect homeowners from loan modification scammers. However, does it end up having the unintended consequence of eliminating a homeowner’s ability to retain an attorney to help them save their home from foreclosure.

The bill, which included an “urgency clause” and was set to start immediately. SB 94 prevents companies, individuals, and even attorneys… from getting up front fees or any other form of compensation until after the Loan Modification has been completed.

Supporters of the bill say that the state is currently over run with scam artists who take advantage of homeowners desperate to save their homes from foreclosure by charging exorbitant up front fees and then failing to deliver anything of value in return. In their opinion, by making it illegal to charge up front fees, they will be protecting consumers from being scammed.

While there’s no doubt that there have been unscrupulous companies that have taken advantage of homeowners in distress, the number of these “con artists” is unclear. It was time for something to be done, but does SB94 fix or worsen the problem?

Supporters, state that homeowners will still be able to hire attorneys, but that the attorneys will now have to wait until after services have been rendered before being paid for their services. They say that attorneys, just like real estate agents and mortgage brokers, will now only be able to receive compensation after services have been rendered.

People who oppose the bill on the other hand say, “Getting a lender or servicer to agree to a loan modification takes months, sometimes six or nine months. If I worked on behalf of homeowners for six or nine months and then didn’t get paid by a number of them, it wouldn’t be very long before I’d have to close my doors. No lawyer is going to do that kind of work without any security and anyone who thinks they will, simply isn’t familiar with what’s involved. Real estate agents get paid through escrow, where is our security”

Take a look in the future…
California’s ALT-A and Option ARM mortgages are just beginning to re-set, one third of these types of mortgages are still set to adjust in the next 24 months! This will cause homeowners payments to rise, and with almost half of the mortgages in California already underwater, these homeowners will be unable to refinance and foreclosures will increase as a result.


For more information take a look at SB94: http://info.sen.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_94_cfa_20090327_152419_sen_comm.html

Does SB 94 end up reducing the number of legitimate firms available for homeowners to turn to? Will SB 94 actually stop con artists from taking advantage of homeowners in distress? Or will it end up only stopping reputable lawyers from helping homeowners?



To your success,

Oliver Graf
Real Estate Expert
Follow me on Twitter: Twitter.com/OliverGraf360



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Obama Announces Big $$ Incentives on Short Sales for Lenders and Homeowners

With around 43,000 notices of default last month in California alone, now more that ever the industry is in need of a Foreclosure Alternative Program.

I am so happy to see that the Obama administration has recognized the need to streamline the short sale and deeds-in-lieu process, and has provided viable options to homeowners who have fallen behind on their mortgages or owe more than their homes would sell for in today’s market.

The Obama administration announced the new details under its Foreclosure Alternatives Program (FAP) enabling lenders and borrowers to pursue Short Sales and Deeds-in-lieu of foreclosure in cases where the does not qualify for a Loan Modification. The program requires that before proceeding with a foreclosure, lenders must determine if a short sale is appropriate, if that is not successful, a deed-in-lieu of foreclosure.

They are even providing incentives for homeowners and lenders!

Borrowers (Homeowners). Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program but don’t qualify for a modification or do not successfully complete the three month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate.

Incentives. Incentives include: (1) $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; (2) $1,500 for borrowers/homeowners to help with relocation expenses; and (3) up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).

Standardized Documents. The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.

Property Valuation by Appraisal or BPO. Servicers will independently establish both property value and minimum net return to the bank, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs)

Timeline. In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. Property must be listed with a licensed real estate professional and no foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.

Commissions. The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.

No Borrower Fees. Servicers may not charge fees to borrowers/homeowners for participating in the FAP. Contact Short Sale Pros for 100% Free Short Sale Help

Program Expiration. Starts May 14th 2009 and is in effect through 2012.



For the full report take a look at
http://www.treas.gov/press/releases/docs/05142009FactSheet-MakingHomesAffordable.pdf



How do you think the Foreclosure Alternatives Program will help the thousands of struggling homeowners? Do you think this is the best way to fix the problem?




Contact me anytime,


Oliver Graf
Real Estate Expert
Follow me on Twitter: Twitter.com/OliverGraf360



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Mortgage Forgiveness Debt Relief Act - Provides Tax Releif for Homeowner in Short Sale

Mortgage Forgiveness Debt Relief Act - Provides Tax Releif for Homeowner in Short Sale

Big Help for Struggling Homeowners:

What is the Mortgage Forgiveness Debt Relief Act of 2007?

The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007. It applies to qualified debt forgiven in 2007, 2008 or 2009. Generally, the Act allows exclusion of income realized as a result of a loan modification, short sale, or foreclosure on your primary home.

What does that mean?

Generally, debt that is canceled by a lender must be added as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain canceled debt from income(Short Sales and Loan Modifications).

Does the Mortgage Forgiveness Debt Relief Act of 2007 apply to all forgiven or canceled debts?

No, the Act applies only to forgiven or canceled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes.

If the forgiven debt is excluded from income, do I have to report it on my tax return?

Yes. The amount of debt forgiven must be reported on Form 982 and the Form 982 must be attached to your tax return.

How do I know or find out how much was forgiven?

Your lender should send a Form 1099-C, Cancellation of Debt, by January 31, 2008. The amount of debt forgiven or canceled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982. Contact and Accountant for Additional info, Tax and Accounting group: Lou DelVechio 760 439 2433.

Can I exclude debt forgiven on my second home, credit card or car loans?

Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion.

If part of the forgiven debt doesn't qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?

Yes. The forgiven debt may qualify under the "insolvency" exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent. A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. Contact an Accountant for additional info, Tax and Accounting group: Lou DelVechio 760 439 2433.

Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?

There is no dollar limit if the principal balance of the loan was less than $2 million ($1 million if married filing separately for the tax year) at the time the loan was forgiven.


How beneficial do you think this new Act will be?

See the IRS update here: http://www.irs.gov/irs/article/0,,id=179073,00.html


For any additional questions contact:

Oliver Graf
Real Estate Expert


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How will Obama's Bailout affect Modifications and Short Sales?

New Obama Bailout, Modifications and SHORT SALES... How will this affect us?

There is a lot of buzz going on today with this Bailout and what is going to do for everyone. These questions and answers were posted at a White House Forum to inform the public of Obama’s new plan.

Lets get Started:

• I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.

There is not many Homeowners that are as low 105% . .its more like 150%!

The cold hard truth is that most homeowners are tens of thousands of dollars upside down on property value.

• I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.

This wasn’t a surprise. . but it gives you notice that if you are thinking of moving out of your home before you find an option to settle your mortgage. .you will not be eligible if you are already living somewhere else.

This is also a big concern because a majority of Americans that are under water right now are Investors. Meaning they own more that a few properties which are all going to need a loan modification.

• How do I know if I am eligible?

Complete eligibility details have been announced on March 4th when the program started. The criteria for eligibility will include having enough provable income to make the new set mortgage payments along with a decent mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

• Will refinancing lower my payments?

The objective of the Homeowner Affordability and Stability Plan is to provide credit worthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

EVERYONE needs to call their bank to see if they can get into a better loan! Even if you loan is not due to adjust for another year, I still recommend you contact now to get into a new today! You don't wait to wait until your loan adjust before you start working on it, that's how people get into trouble!

• 
  Will refinancing reduce the amount that I owe on my loan?

No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

No Way! Other than doing a short sale there is never a way to reduce principle balance!

• Do I need to be behind on my mortgage payments to be eligible for a modification?

No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

If you see your financial situation changing in the future, Modify Now or Short Sale Now!!

• How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

• I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?

Only the first mortgage is eligible for a modification. One a short sale both banks will negotiate both down.

If you are very upside down on your property and don't really see yourself being able to afford the payments in the future, do a short sale now!

I recently read somewhere that over 50% of loan mods go back into default!

• How much will a modification cost me?

There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

There is a lot of nonprofit loan mod companies out there. I suggest you hunt one down and go with them!

• Is my lender required to modify my loan?

No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.

I think this is going to open a lot more doors for people that where previously out of luck.

• I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?

The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.

Shot Sale Time! If you owe a lot more than what your house is currently worth and you don't see your equity coming back up for 10 years.. . you should start thinking about doing a short sale as long as you can't make your payments anymore.

I think that Shorts Sales are great option for a lot of people!! The best part is that it cost the Homeowners nothing!

Lenders will not negotiate on short sale that is being purchased by one of your relatives.

A Short Sale helps every party involved! The bank will always net more with a short sale than with a foreclosure.

The Realtor or Mitigation Company negotiating your short sale should have sufficient knowledge with short sales. Sometimes get get a little tough to do and that is why you want to make sure you have a Pro!

No matter what the size of your loan the chances are a short sale will work for you!

For any help with Property Foreclosure questions contact:

Sam Khorramian
Success Expert


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