Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

Dual-Tracking: Can my Lender Continue Foreclosure Proceedings While I Negotiate a Short Sale?

Seattle Short Sales - Thursday, March 07, 2013

The National Mortgage Settlement of February 2012 provides for relief and compensation to borrowers who lost their homes to foreclosure, and for some borrowers who are threatened with foreclosure. However, it does not have provisions to help everyone. One common misunderstanding of what the terms of that mortgage settlement mean is with respect to dual-tracking: where lenders continue with foreclosure proceedings even while a loan modification or short sale is being negotiated.

The National Mortgage Settlement has a provision in it that forbids lenders from dual-tracking - but this provision applies only to loan modifications. Banks may not foreclose on a homeowner while they are under consideration for a loan modification. However, there is no proviso that prohibits banks from proceeding with foreclosure while the homeowner is working on negotiating a short sale.

The wording is confusing - the "no dual-tracking" provision may make it sound like this also applies to short sales - so some lenders have been working to clear up any confusion. In January, Bank of America sent a notice out to short sale agents specifying: “As of January 15, 2013, there will no longer be a temporary foreclosure hold during the Cooperative Short Sale property marketing phase. We may begin or continue the foreclosure process up until a submitted offer to purchase the property is approved by all relevant parties.”

The terms of the Settlement state only that the lender/servicer may not proceed with foreclosure if the short sale has been approved by all parties. Two cautionary notes here are:

  • this means that they may proceed with foreclosure even while a short sale is being negotiated
  • this provision only applies to the five servicers who are party to the National Mortgage Settlement: Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo.

Other lenders may still continue to dual-track foreclosure proceedings, even though a short sale is being negotiated and is close to approval - or even approved and about to close! For example, this short sale approval that we negotiated in February with Ocwen, a lender that is not party to the National Mortgage Settlement, states in its first paragraph “Ocwen will NOT postpone a scheduled foreclosure sale, even if there is a pending sales contract.”

The take-away is to be efficient with short sale negotiation: do all that you can to make the process move forward quickly. A lender’s foreclosure department may not even be in contact with their short sale department - so pay attention to any foreclosure notices, such as demand letters or Notice of Trustee Sale communications, even if you have a short sale in the works. If there is a Trustee Sale scheduled, make sure that your short sale will close before that sale date.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/
 

Cash Incentives and Relocation Assistance for Short Sales: A Guide to Government and Lender Programs

Seattle Short Sales - Wednesday, February 20, 2013

Only a few years ago, struggling homeowners who wanted to get out of their underwater mortgages had a tough time convincing their lenders to approve a short sale. However, things have turned around completely since then. Lenders now realize that, in most cases, approving a short sale costs them far less than pushing the homeowner into foreclosure. In fact, many lenders are now actually paying borrowers cash - as incentive payments or relocation payments - for completing a short sale!

There is a lot of information about the various government short sale incentive programs out there. But it's harder to find information about cash incentive progams run by the banks, and some people may be wondering if the stories they have heard, for example of cash payments of $20,000 or more to underwater homeowners, are true.

Well, they are! We have worked directly with most of these programs, and they really do exist! Here is a brief overview of the various government and lender programs that pay cash incentives, as well as samples of real approval letters that we have obtained, to show exactly how much cash was paid to each homeowner for completing their short sale:

Government Programs:

FHA Pre-foreclosure Sale Program: If the loan is FHA-insured and the short sale is approved, HUD will pay the borrower between $750 and $1000 towards relocation costs.

This Maple Valley homeowner received $1000 towards relocation on his FHA short sale: 6.23.12 - MetLife - 1st Lien - 79k Deficiency - Debt Settled - Short Sale Approval

VA Compromise Sale Program: If the loan is VA-insured, VA will pay up to $1500 in relocation assistance to borrowers who complete a short sale with a VA compromise claim. This temporary cash incentive program was brought into place in January 2011, and is currently set to expire on December 31, 2013.

This GMAC short sale approval letter for a VA loan allows a Spanaway homeowner $1000 in relocation assistance: 11.16.12 - GMAC - 1st Lien - 92k Deficiency - Debt Settled - Short Sale Approval

HAFA: Short sales that are processed through the federal government’s HAFA program pay a $3,000 cash relocation incentive to the seller. If the home is not owner-occupied, the payment goes to the occupant, not the owner. The incentive is not paid if the home is unoccupied.

This Sammamish homeowner received $3,000 in relocation assistance by processing her Wells Fargo short sale through the HAFA program: 3.14.12 - Wells Fargo - 1st Lien - 146k Deficiency - Debt Settled - Short Sale Approval

FHFA “Standard Short Sale” Program: This new program replaces the HAFA program if the investor is Freddie Mac or Fannie Mae. It also offers up $3,000 in relocation costs to the borrower - but it's important to understand that this amount is a maximum total relocation costs. For example, if the borrower receives other relocation contributions, e.g. from their employer, that amount is subtracted from the $3,000.

Lenders’ In-House Programs:

Bank of America Cooperative Short Sale Program: Available to select homeowners who apply for it before submitting a short sale offer through BofA’s Equator system. Cash incentives to borrowers range from $2,500 to $30,000, and are offered at BofA’s discretion.

This Seattle homeowner received $27,388 in relocation assistance through the B of A Coop program: 12.13.12 - Bank of America - 1st Lien - 110k Deficiency - Debt Settled - Short Sale Approval

This Arlington homeowner received $5,000 in relocation assistance from B of A (incentive itemized on HUD, but not listed in the approval letter): 11.19.12 - Bank of America - 1st Lien - 45k Deficiency - Debt Settled - Short Sale Approval

Wells Fargo: Cash incentives reportedly range from $3,000 to $20,000, and are offered at Wells Fargo’s discretion.

Chase: Cash incentives of up to $35,000 have been offered to select homeowners by invitation from Chase.

This Snohomish homeowner received a $20,000 relocation incentive for doing a short sale of his home: 9.12.12 - Chase - 1st Lien - 105k Deficiency - Debt Settled - Short Sale Approval

And this homeowner received a $25,000 “relocation incentive” for selling his Enumclaw home - even though the home that he sold was a rental! 12.13.12 - Chase - 1st and 2nd Lien - 161k Deficiency - Debt Settled - Short Sale Approval

In some cases, cash incentives may be “doubled up.” For example, a borrower offered a cash incentive from their lender may also be eligible for HAFA’s relocation incentive of $3,000.

This Kirkland homeowner received $2,000 from her lender, Bank of America, in addition to the HAFA $3,000 relocation assistance - for a total of $5,000 in cash for selling her home: 10.26.12 - Bank of America - 1st Lien - 122k Deficiency - Debt Settled - Short Sale Approval

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

To find out what short sale cash incentive programs you may be eligible for, contact us for a no-obligation, no-fee consultation: http://seattleshortsales.com/homeowners/

How to Settle Your Remaining Mortgage Debt After Your Short Sale Closing

Ross Kilburn - Monday, July 16, 2012

Ideally in a short sale, you settle all of the debt once and for all. Whether you have two mortgages, a mortgage and a home equity line of credit, or a mortgage and a credit card lien, the goal is to get a full settlement and a waiver of deficiency rights by both lien holders.

But, sometimes, you can't settle all the debt in the short sale. Let's go over what to do if that happens. First, a little review on the mortgage settlement process.

First liens are pretty easy to settle in almost all cases

 In Washington state, it is pretty straightforward to get the foreclosing first lien holder to agree to a full settlement in a short sale. The reason is that by law, if the property were instead to go to foreclosure, the first lien holder would lose their right to pursue the borrower for the deficiency. So, therefore, they don't usually press too hard during the short sale for deficiency rights, as that might scare away the borrower and result in a foreclosure, which wouldn't do them any good.

Why junior liens don't just roll over and die

What about the junior lien holder? Well, in a foreclosure, the junior lien holder doesn't give up their right to pursue the borrower for the deficiency. So therefore, there is a good chance that in a short sale, the lien holder won't be motivated to waive their deficiency rights. As a result, in a short sale, most of the efforts are focused on finding ways to get the junior lien holder enough money so that they are compelled to fully settle the debt.

Some banks are easy to work with

Here is the good news. If your 2nd loan is with a large bank/servicer, such as Bank of America or Chase, there is a good chance that you will walk away with a full settlement. If you want to see what your bank will probably do, enter their name in our Short Sale Approval Letter Search Engine and review a recent short sale approval letter and you can review the exact settlement terms. You'll see that quite a few 2nds settle for the amount that the 1st is allowing them in the short sale. Also, many 2nds that require a cash contribution, only require a total of around 10% of the debt to settle.

Credit unions can be fierce 

Now the bad news. If you have a 2nd with a credit union, such as BECU or WSECU, they most likely won't do a full settlement in the short sale. Some Wells Fargo seconds also refuse to offer full settlements during the short sale, and require the borrower to work something out after the short sale closing.

A Wells Fargo second is relatively easy to settle after closing. If you have cash available, you can offer them around 20% of the unpaid principal balance (UPB) and have a very good shot at settling, all things considered.

Let's look at credit unions. Typically, they will be much tougher to deal with. They will be looking for more like 50% of the UPB to settle.

If you don't have cash to offer the bank, and you want to finance the settlement, then you need to expect the total amount to go up.

Strategy 1: Always send in a bankruptcy schedule with your settlement offer 

That being said, if the borrower looks terrible (financially) on paper, then threatening bankruptcy may convince the creditor to settle for less. But don't just verbally threaten to file BK. Get a bankruptcy attorney to work up a BK schedule and submit that to the lender for review along with the settlement offer. 

Strategy 2: Engage, but slow play the lender

Here's a tip. As a general rule, you don’t want to ignore the lender. They will just file suit. The suit will be their attempt to get a judgment, and the right to garnish wages. If you are the borrower, you want to keep talking to the lender…periodically…and consistently express a desire to settle the debt somehow. Surprisingly, a good percentage of the time, the lender gets tired of the offers going back and forth and the file just ends up in some sort of collection purgatory. That of course, is a great thing.

Strategy 3: "Move" out of state

The key is leverage. As mentioned, bankruptcy is the ultimate leverage. Moving out of state is also very helpful. Opening up a mailbox in a new state, and providing that as your new forwarding address is one possibility. Most lien holders will not go to the effort to get a local judgment and then transfer the judgment to the new state where they will be forced to hire new attorneys to collect. Usually it is in the client's best interest to just go dark if they are 'moving' out of state. 

Another thing to always do before settling with the 2nd. Review the reconveyance paperwork filed by the 2nd after the short sale. We have found a number of lenders mess up and fully reconvey their lien with "full satisfaction of the debt" language.

The bottom line is that there are a variety of highly effective settlement options and strategies available to every borrower that can be customized to their exact situation.

If you are in a situation where you need to settle your debt, simply call our office at 1-800-603-3525 for a free consultation with one of our attorneys.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

 

Lender Financial Incentives for Short Sales: B of A and Chase

Seattle Short Sales - Tuesday, June 26, 2012

We've had a number of people ask us about the Bank of America and
Chase Incentive programs. The reality is that there isn't a ton of specific
information available on either program.

Here's what we know, from our personal experience:

CHASE:

We've had a number of homeowners receive a letter from Chase,
letting them know that they were eligible for a $20,000 incentive.
It's our understanding that these are only for the old WAMU loans.

Here is a recent Chase Case Study:

10.1.11 - Homeowner is six payments behind, owes $302k, arrears of $16k

10.4.11 -  Homeowner receives $20k Chase letter. Click here to download

12.21.11 - Homeowner lists home for $315k

2.15.12 - Homeowner and listing broker receive Chase letter instructing
them to lower price to the pre-approved amount of $247,500

3.15.12 - Offer received

6.11.12 - Approval received. Click here to download. Includes $3k for HAFA,
the $20k incentive payment, $8,500 for jr. liens, and a full 6% commission
for just one broker!

BANK OF AMERICA:

The BofA program pays between $2,500 and $30,000. It is a program only
available to homeowners who apply prior to submitting an offer via Equator.
(Therefore, if you are working with us on your short sale, be sure to send in
the DocPac either prior to, or at the time of listing, so that we can apply for
the program.)

BofA is grandfathering short sales into the program that are already in
progress. We have recently had two deals in the last two weeks that received
the new incentive.

Here is a recent BofA Case Study:

Homeowner was scheduled to receive the $2,500 coop bonus. Three days
before closing, approval letter re-issued, adding a $6,626.35 homeowner
incentive!

The revised approval letter did not spell out the new incentive. It can only
be seen on the worksheet, which you can download here.

BOTTOM LINE:

  1. You can't apply for the $20k Chase incentive.
  2. You need to pre-apply for the new BofA incentive.

If you have a listing appointment with a homeowner with a BofA loan,
offer to find out for them what incentive they qualify for. There is no risk
to them, and it doesn't commit them to sell their home. The incentive may
be the trick that gets them to list with you!

We would love to help you with your short sale, or help you find out what
your homeowner qualifies for. To learn more about our program, you can
download our S3 DocPac right here.

Please let me know if you have any questions, or if there is anything else
we can do for you!

To your success,

Ross Kilburn
Seattle Short Sales, Inc.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

New Chase Short Sale Approval Letter: Homeowner in Edmonds, WA, Receives $239,000 Loan Discount, Deficiency Waived!

Seattle Short Sales - Sunday, May 06, 2012
This Edmonds, WA, homeowner avoided foreclosure through a short sale. He owed over $440,000 on his Suntrust first mortgage, and $259,000 on his Chase second mortgage - a total of $700,000 of debt. But his home was valued at only $429,000.

Chase has just issued their approval letter for the short sale, accepting $20,000 net proceeds on the $259,000 mortgage balance owing - a discount of $239,000. The short sale approval letter waived the Edmonds homeowner of ever having to repay that deficiency.

You can read the Chase short sale approval letter here: 3.7.12_Chase_2nd_Lien_240k_Deficiency_Debt_Settled_Short_Sale_Approval.pdf

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

Big Banks Now Proactive About Short Sales, Even Approaching Homeowners With Cash Incentives

Seattle Short Sales - Friday, July 08, 2011

My, how things have changed in a year or two!

It was not so long ago that struggling homeowners had to beg lenders to approve them for a short sale. But now, some of the major lenders are making the first move - contacting the sellers themselves to propose a short sale, and even offering cash incentives to homeowners!

These short sale incentive programs are not widely publicized, and they are considered to be “by invitation.” As banks realize that they may recover more of their losses by allowing a short sale than by pushing to foreclosure, they are targeting homeowners who are at risk of defaulting - often, before they are even in mortgage trouble.

The lenders proactively contact these homeowners, suggesting that they undertake a short sale, and often offering a hefty cash payment to the homeowner upon completion of the short sale. These cash payments are reported to range from a few thousand dollars to up to $35,000.

Some of the lenders implementing these incentive programs, and the reported incentives, are:

Bank of America Cooperative Sale Program - upon completion of the short sale, the homeowner receives a $2,500 to $3,000 relocation payment, and the real estate agents receives a 6% commission.

Citi Proactive Short Sale Program - according to the HousingWire, the average cash payment to sellers this year was $12,000

Chase - offers cash payments up to $30-$35,000 to sellers

GMAC - there are reports of cash incentive payments to sellers of up to $1,600

Litton - reportedly offers cash incentives to sellers of $3,000 to $5,000

Wachovia/Wells Fargo
- offers cash payments of 1% of the sales price (minimum $2,500) for sellers.

Although these programs are considered “invitation only” - meaning that the lenders contact the homeowners, rather than homeowners applying for them - there are some reports of short sales negotiators successfully requesting that the homeowners they represent be considered for incentive programs.

But the big take-away from this story is that lenders no longer merely consider short sale requests - but that they are now proactively initiating short sales. This means that they are far more likely to consider and approve any short sale offer put to them than they were a year or two ago.

As Citi’s senior vice president of loss mitigation told the HousingWire, "We're not going to turn anybody away if the short sale meets the net requirement we're looking for." This means that the lenders are no longer looking for stories of exceptional hardship in order to approve a short sale. As long as the short sale represents the best way for the lender to maximize their recovery on a distressed asset, they will approve it.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

J.P. Morgan Chase Overcharged 4,500 Military Members, Wrongfully Foreclosed on 18

Seattle Short Sales - Monday, March 07, 2011

J.P. Morgan Chase has apologized for overcharging 4,500 active-service military members on their mortgages, and for wrongfully foreclosing on 18 of them. But for California Rep. Bob Filner, an apology is not enough. “Everything is impersonal. Nobody is ever responsible and yet these people’s lives were turned upside down.”

This story was reported last month by the Wall Street Journal. The report indicates that a spokesperson for the lender has acknowledged that they did not comply with the law, and that they are embarrassed about the incident.

The Servicemembers Civil Relief Act, or SCRA, is a federal law that protects soldiers, sailors, airmen and Marines from being sued - both when in active service, and for up to a year afterward. The origins of the act date back to the Civil War; the law was redrafted under its current title in the 1940s.

Two of the results of this act, for servicemembers who fall under its protection, are that interest rates are capped, and foreclosures cannot take place.

Chase’s error was discovered partly because a U.S. Marine Corps captain who felt that he had been overcharged on his mortgage filed a lawsuit against the lender. The lawmakers who participated in this hearing expressed their concerns that, although this problem was discovered with this one lender, it may also occur with many other lenders - and that other military personnel may also be being overcharged or threatened with having their homes taken away.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/


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