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/

 

Wells Fargo’s New Fast Track Short Sale Program for Old Wachovia Loans

Seattle Short Sales - Friday, July 13, 2012

Former mortgage lender Wachovia merged with Wells Fargo in 2009. As part of ongoing lawsuits and settlements, Wells Fargo has created a Fast Track short sale program for all of the old Wachovia loans.

This is how easy short sales can be....

  • Upfront appraisal.
  • No borrower financials required.
  • Immediate approval.
  • Close within 45 days of submission.

It's pretty amazing really. 8 simple steps. We have the form available for you on our website on our Lender Contact Page, where we post all of the updated phone numbers and forms for all the lenders we work with. Check it out here:
http://seattleshortsales.com/agents/short-sale-lender-contacts.htm

To find the Wachovia/Wells Fargo form, scroll down to line 72, and click on the paperclip icon.

I suggest you bookmark this page, as it is constantly changing.

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 Wells Fargo Short Sale Approval Letter: Homeowner in Kirkland, WA, Receives $168,000 Loan Discount, Deficiency Waived!

Seattle Short Sales - Thursday, July 12, 2012
This Kirkland, WA, homeowner avoided foreclosure through a short sale. She and her ex-husband owed $393,000 on their Wells Fargo mortgage. However, her ex-husband had not contributed to mortgage payments since 2009, and was behind on his child support for their son. She could not afford to make the mortgage payments alone, but her home was valued at only $252,500 - over $140,000 less than what was owing on the mortgage.

Wells Fargo has just issued their approval letter for the short sale, accepting $233,000 net proceeds (after commissions and closing costs) on the $393,000 mortgage balance owing - a discount of $168,000. The short sale approval letter waived this Kirkland homeowner of ever having to repay that deficiency! She can now focus on raising her son, and moving forward in her life.

You can read the Wells Fargo short sale approval letter here: 6.29.12_Wells_Fargo_1st_Lien_168k_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/

If PMI Demands a Cash Contribution From a Seller in a Short Sale, Can Anyone Contribute?

Ross Kilburn - Monday, July 09, 2012

Occasionally in a short sale, the lender or private mortgage insurance, (PMI) will require that the seller make a cash contribution in order to approve the short sale. In a way, it's sort of a token "shared sacrifice" as the amount is usually pretty small. The lender or PMI may be taking a loss of $100,000 or more, and the seller may not have made payments in over a year. Therefore, the lender or PMI feels that the seller should have some cash to contribute to get the short sale done.

For example, in a reasonable situation, the contract sales price might be $200,000 and the required seller contribution is $2,000.

While that sounds reasonable, in many short sale situations where the hardship is unemployment, or a medical emergency, even $2,000 may be too much to ask. In these situations, the buyer or the real estate brokers would be the likely individuals who would contribute to the $2,000 and make the payment on behalf of the seller, as they both stand to benefit from the short sale closing.

There is a potential snag in this situation though.

  1. If the short sale approval letter says that it is a cash contribution from the seller, can other parties contribute?
  2. And if they can contribute, how is it supposed to show on the HUD?

In a recent case with Wells Fargo, we posed that question to the short sale negotiator. Here was the reply from Jacinda, the Liquidation Negotiator: "The sellers can get the money from someone else but it has to be shown on the HUD as coming from the sellers."

Great! The buyer or brokers can contribute. But wait! It has to show on the HUD as coming from the seller? That would be RESPA fraud. You can't state that the money is coming from the seller when it is actually coming from the buyer!

I may be acting surprised, but in reality, this is what homeowners face every day. The lenders like Wells Fargo, or Chase, or Bank of America make the rules. They may not make sense, they may not be legal, they may be harmful, but they are required. You either jump through their hoops, or you don't make it to the finish line.

 

New Wells Fargo Short Sale Approval Letter: $141k Deficiency Waived for this Seattle Homeowner!

Seattle Short Sales - Wednesday, May 23, 2012
Great news for this Seattle, WA, homeowner! Not only did he avoid foreclosure through a short sale, he also had the $141,000 deficiency balance waived.

He owed over $215,000 on his Wells Fargo mortgage, as well as another $31,910 in arrears - a total of $247,000 of debt. But his home was valued at only $124,000.

Wells Fargo issued an approval letter for the short sale, accepting $106,000 net proceeds on the $247,000 mortgage balance owing - a discount of $141,000. However, the approval letter did not waive the deficiency - which means that down the road, debt collectors could pursue our Seattle homeowner to repay that deficiency.

We had our lawyer write a letter to Wells Fargo, explaining to them that if they did not waive the deficiency balance, they would end up owning the home outright (and have to absorb all of the costs of marketing it) - either by the homeowner declaring bankruptcy and not having to repay the deficiency, or through foreclosure.

Wells Fargo promptly reissued the short sale approval letter, waiving the Seattle homeowner of having to repay the deficiency balance.

You can read the original Wells Fargo short sale approval letter here: 4.25.12 - Wells Fargo - 1st Lien - 141k Deficiency - Lien Release - Short Sale Approval

You can read the revised Wells Fargo short sale approval letter, waiving the deficiency, here: 5.16.12 - Wells Fargo - 1st Lien - 141k Deficiency - Debt Settled - Short Sale Approval

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

Well Fargo to Allow Postponement of Foreclosures for Short Sales in Some Situations

Seattle Short Sales - Wednesday, November 24, 2010

Wells Fargo has informed the National Association of Realtors that it will allow postponement of scheduled foreclosures in order that a short sale may go ahead, but only in specific circumstances.

This development follows their announcement in September, reported in The American Banker, that Wells Fargo was implementing a new policy to stop issuing extensions to foreclosure sale dates. According to Wells Fargo, they were implementing that new no-extension policy at the request of their investors.

This month’s announcement is a partial reversal of that policy. Postponement of a scheduled foreclosure in order to facilitate a short sale may be permitted, but only under the following circumstances:

  • Wells Fargo must have an approved short sale sales contract in hand (including approvals from junior lien-holders and mortgage insurers)
  • the buyer has financing approved or has proof of funds
  • the short sale can close within 30 days of the scheduled foreclosure sale

These guidelines apply to loans owned by Wells Fargo (including Wachovia) as well as loans serviced by Wells Fargo but owned by an investor provided that that investor approves, and in reference to one single postponement. Wells Fargo will consider postponements for situations that do not fit the criteria above on a case-by-case basis.

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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