Short Sale Deficiencies

Short Sale Deficiencies

The California Legislature recently enacted Senate Bill 931 generally prohibiting a deficiency judgment after a short sale for first trust deed lenders of one-to-four residential units.  The following charts are easy-to-use reference guides for REALTORS® and their clients to determine the general applicability of anti-deficiency rules for short sales and foreclosures.  These charts do not cover all aspects of any individual case or situation.

Short Sale Deficiencies Fact Sheet

General Rule	Unless otherwise exempt, no judgment shall be rendered for a deficiency for a first trust deed lender of one-to-four residential units if the borrower sells for less than the amount owed with the lender’s written consent. A first trust deed lender’s written consent shall obligate the lender to accept the sale proceeds as full payment and to fully discharge the remaining debt on the first trust deed.
Effective Date	January 1, 2011
Applicability	First deed of trust for a dwelling of not more than four units.
Exceptions	Exceptions include: Junior liens Lender seeking damages for fraud or waste; Borrower is a corporation; or Borrower is a political subdivision of the state.
C.A.R. Standard Form	C.A.R.’s Short Sale Information and Advisory (Form SSIA) paragraph 4A2 discloses this law to sellers and buyers.
Practice Tip	Regardless of the law, it would be prudent for a borrower to obtain the lender’s agreement to release the borrower from liability for the balance due on the note in writing and signed by the lender.
Legal Authority	The full text of SB 931, which adds section 580e to the California Code of Civil Procedure, is available at http://www.car.org/legal/2011-new-laws/.

Short Sale v. Judicial Foreclosure Homeowner (1 to 4 units) Generally Protected Against Deficiency

Type of Loan	After Short Sale	After Judicial Foreclosure*
First Trust Deed	Yes	Yes, if purchase-money and owner-occupied
Second Trust Deed	No	Yes, if purchase-money and owner- occupied
Purchase Money Loan	Yes	Yes, if owner-occupied
Rate-and-Term Refinance	Yes	No
Cash-Out Refinance	Yes	No
Owner-Occupied Home	Yes	Yes, if purchase money
Nonowner-Occupied Home	Yes	No

*Note: Certain exceptions may apply, including wiped-out junior liens, fraud, and bad faith waste. Also no deficiency judgment shall be rendered if a lender forecloses by trustee’s sale (CCP § 580d) or if a loan is seller-financed (CCP § 580b). See C.A.R.’s legal article entitled Deficiency Judgments and California Law, available for C.A.R. members at http://qa.car.org.

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This chart is just one of the many legal publications and services offered by C.A.R. to its members.  For a complete listing of C.A.R.’s legal products and services, please visit www.car.org.

Readers who require specific advice should consult an attorney.  C.A.R. members requiring legal assistance may contact C.A.R.’s Member Legal Hotline at (213) 739 8282, Monday through Friday, 9:00 a.m. to 6:00 p.m. and Saturday, from 10 a.m. to 2 p.m.  C.A.R. members who are broker-owners, office managers, or Designated REALTORS® may contact the Member Legal Hotline at (213) 739 8350 to receive expedited service.  Members may also submit online requests to speak with an attorney on the Member Legal Hotline by going to http://www.car.org/legal/legal-hotline-access/.  Written correspondence should be addressed to:

CALIFORNIA ASSOCIATION OF REALTORS®
Member Legal Services
525 South Virgil Avenue
Los Angeles, California 90020

*** This information has been provided by the California Association of Realtors legal department. Housing Assist of America does not offer tax or legal advice and recommends homeowners to consult with their tax preparers and attorneys before making any decision regarding their properties.

Unemployment Causes More Foreclosures

High Levels of Unemployment Deepen the Foreclosure Crisis

The foreclosure crisis continues to get worse as a slow job market forces many homeowners into the worst financial situation of their lives.

In cities like Seattle, Houston and Chicago, who seemed to be dealing with the foreclosure bust quite well, are now having a more difficult time keeping up with their mortgage payments.  Many have already seen their homes repossessed by lenders.

All told, foreclosure activity jumped in 149 of the country’s 206 largest metropolitan areas last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

Questions Regarding Your Home?

Unemployment has been the main cause of foreclosures, rather than the time-bomb mortgages resetting to higher payments.

Just to show you a quick example of what I am talking about:

The Houston-Sugar Land-Baytown metropolitan area in Texas saw its foreclosure rate jump 26 percent from 2009, the largest increase among the top 20 biggest metro areas, the firm said.

Still, foreclosure activity in many of the metro areas in these states actually declined last year.

Three California metro areas posted among the biggest annual drops in foreclosure activity: Riverside-San Bernardino-Ontario, down 20 percent; San Diego-Carlsbad-San Marcos, down 17 percent; and, Los Angeles-Long Beach-Santa Ana, down 16 percent.

A large reason for the reasonable decline is that lenders took steps to delay foreclosure actions in these states as they sought to manage the flow of troubled properties coming onto their books. In the closing months of last year, several lenders went further, temporarily halting foreclosure activity to deal with allegations of improper evictions.

Currently many of the banks have resumed their foreclosure activity, and have begun taking action once again.  The pace of foreclosures is expected to pick up this year and most definitely outpace the rate of foreclosures from 2010.

We will most likely see the values of homes plummet even more so this next year.  More borrowers will be in negative equity this year, forcing more foreclosures.

Lenders took back 1 million properties in 2010, and no metro area saw more homes repossessed by lenders than Phoenix-Mesa-Scottsdale in Arizona.

Some 55,372 properties were taken back by lenders there last year, up 17 percent from the year before.

The Chicago metro area was second, followed by the Detroit-Warren-Livonia metro area in Michigan. Its home repossessions rose 19 percent.

Foreclosures Continue to Bring Down The Housing Market

Foreclosures continue to bring down the housing market despite a recent decline in underwater mortgages

By Joshua C Anderson, Lexington Realty Correspondent

As the holidays approach, many Americans are considering relocating to take advantage of the low prices available in the market. However, the savings are not a result of an amazing deal, there the aftermath of the worst housing crisis in history. For the miniscule market of qualified buyers, there are some great opportunities, but for the rest of the nation the turmoil continues. Just last week Forbes online magazine released an article of the worst hit cities in the nation, and that list continues to grow.

Cleveland Ohio was the top city to have the sharpest decline in home values, followed closely by Minneapolis and Portland. The nation however has seen somewhat of a decrease in underwater mortgage holders. But the problem of underwater homeowners still has an adverse effect on the market. The underwater homes carry the highest risk of default and foreclosures. The only realistic solution for these homeowners is a short sale. The short sale process has several benefits for the homeowners as well as the lender. The market will continue decline regardless of new buyers as long as there are foreclosures. Many delinquent borrowers do not want to face the fact that they will lose the house to foreclosure if they do not short sale, and there are still many holding on to the idea of the failed modification program.

In addition to the devastating consequences of foreclosure, many homeowners are opting for bankruptcy, deed in lieu and abandonment. All of which will continue to drive down the economy. If all of these delinquent borrowers choose a short sale, they will avoid all of these problems. Housing Assist of America is a southern California based company that has been named number one and is platinum certified through equator. HAA also has an immaculate rating with the better business bureau and doesn’t charge fees to facilitate the transaction. To learn more about them you can visit www.housingassist.com In these uncertain economic times its prudent to make the right decisions for the long run.

A Grim Reality

A Grim Reality

Why this holiday season won’t be so jovial for millions of Americans

Joshua Anderson, Lexington Realty correspondent. Thursday December 2^nd 2010 9:55 PST

This holiday season, retail stores will be packed beyond capacity, just as they are every year. Hot items like the Apple iPad, Xbox gaming system and the latest in children’s toys will fill shopping bags. But not so distant from the dreamlike ambience of the mall there lies a grim reality. Millions of families will not be at the malls and outlets; they will be without heat, electricity, food and of course, without Christmas festivities. One of the main reasons for this is the fact that unemployment benefits will run out for more than two million Americans. The maximum time allowed for unemployment benefits is 99 weeks. In addition to the record unemployment, there is a large surplus of foreclosures. This is the highest ever record of foreclosures in the nations history, probably in the world. When you factor in losing a job and losing a home, the hope for a person can decline very sharply. Many just want to find a way to put all of this behind them, there are a few small options that just might be able to salvage what’s left.

When economic times are at the worst, there are very limited options as to what’s available. When you factor in job loss and foreclosure risk, the main concern should be cutting your losses before it spirals out of control. Bankruptcy obviously has long term ramifications and foreclosure is not much different. A boutique firm in Los Angeles has been advising nearly all of there clients to short sale. In that process the lender agrees to accept less than what’s owed on the loan. Most of the time, the homeowner can walk away with very little damage and is usually eligible to purchase again within 14-18 months. Whichever direction the homeowner decides to go there is still the issue of unemployment that needs to be resolved.

Job seekers need to maximize their resources and find ways to stand out amongst the crowd. Thousand of seasonal retail jobs are available every year and it’s usually on a first come first serve basis. In large metropolitan cites like Los Angeles, Chicago or New York, there are many opportunities, even at a temporary level. An employees performance during the holidays season could dictate weather or not they will be rehired the following year or even be eligible for a full time position. In the end it is up to the job seeker to make a lasting impression that will insure their job security.

The Invisible Recession

The Invisible Recession

“An in depth look into what really happened after the economic collapse”

Joshua Anderson. Lexington Realty Correspondent.

We have all seen the apparent signs of the big recession. First there was the mortgage crisis, the failed banks, the Wall Street scandals and of course the unemployment rate. All of this began when the housing market began to collapse and continued on a downward spiral. The more homes that were foreclosed, the less equity became available. Small businesses began to take a dive and within a matter of months the entire financial infrastructure of the United States was faltering at a record rate. As the smoke began to clear, massive layoffs ensued and corporate giants began to buckle.

One of the highlights in this crisis was the big Wall Street bailout. Stronger banks acquired the weaker banks and we all believed that we, the American people, were somehow going to benefit from this. The outcome, we didn’t, not at all in fact. The only noticeable signs we saw of this bailout was that Wamu’s became Chase and Merrill Lynch became Bank of America. Aside form the obvious acquisitions in the news; we were left waiting for a savior. Homeowners who were delinquent were expecting modifications that never came to fruition, and the unemployed waiting to be hired again. In the midst of this fiasco, several large banks were compensating there executives with skyrocketing incomes & bonuses.

While the rest of the economy was struggling to keep up, Bank of America CEO Thomas Montag received a total compensation of $29,930.431. This was considered only slightly larger that that of Wells Fargo CEO John Stumpf who made just over $21,000,000.  These numbers are astronomical and completely unfair to the American people who are barely able to stay in their homes. The most terrifying factor is that for those who are facing foreclosure thought they had a fighting chance. However, the Obama administration made it clear that stepping up foreclosures is the only way to stabilize the doomed housing market.

At this point in time, there are not many options available to those who are struggling. There is however some long term tips to keep in mind. Continuing education may be the best way to secure a great career and of course smart savings and investments. There may be a recession but as you can see there is a dramatic difference between those who are feeling the effects, and those who aren’t.

Obama Advocates Foreclosure

Obama Advocates Foreclosures

By Joshua C Anderson, Lexington Realty Correspondent November 14, 2010 3:39 PM PT

Los Angeles—The housing market has been jolted by several failed attempts to recover and the only solution at this point, seems to destroy and rebuild.

In the midst of the month long foreclosure moratorium, harsh decisions had to be made. Obama administration officials stated that all lending and servicing institutions needed to review there foreclosure policies and procedures, this however did not result in a mass of homeowners getting out of trouble. The officials made it clear that they did not support the moratorium for several reasons. One main point being that the housing market wouldn’t return to normal without foreclosures.

A stable market in the future does not come without consequences. The continuation of foreclosures will not only hurt the housing market, but it will also have an adverse affect on the overall economy. The Mortgage modification program was supposed to lower homeowner’s monthly payments by 31%. The program was a complete failure and many homeowners have been misinformed.  Laurie Goodman of Amherst Securities said in a statement, “What they have now realized is there are a lot of borrowers who can’t be saved and have to be moved through the foreclosure process.”

This will be a hard fact to address to the American people. There will be a lot of animosity and many will feel left out. There are however, alternative options to foreclosure. The most popular and less damaging is the short sale.

Southern California based Housing Assist of America has made quite an impact on the short sale market. They are among the nation’s best negotiators and have over a 90% percent success rate. Typically in a short sale the lender will accept less than what you owe on the property and in most cases forgive the left over balance. The consequences are significantly less detrimental to the homeowner’s credit and financial situation than that in a foreclosure. Housing Assist of America has recently made an alliance with tax powerhouse H&R Block. Together, they educate at risk homeowners on short sales and tax ramifications. There scheduled to host a free seminar next week in Culver City, a hard hit  suburb of Los Angeles. As the foreclosures in the nation increase so do the opportunities for scammers. When the loan modification wave hit, several fly by night firms starting collection retainer fees from homeowners, only to yield no results. Other signs to watch out for include companies that promise results and charge an upfront fee. Banks do not charge there clients to modify or short sale there homes.

In this vulnerable time it’s important to be vigilant to what your options are. The government has made it clear that foreclosures will continue and everyone who falls into that category will inevitably fall into it, one way or the other. From a homeowner’s perspective, the best option is to accept the demise and seek out the best exit strategy. For those who are still holding on to hope or speculation, this message from the top should clearly define the future housing forecast.

“As we near the end of 2010, the housing market remains fragile, and has recently come under renewed pressure from slowing economic growth, weaker employment and foreclosure uncertainties, We believe that it will be a considerable time until the housing market has a sustained recovery.” A chilling statement from Freddie (FMCC) Mac CEO, Charles Haldeman.

Foreclosures Crippling the Economic Recovery

Home prices & sales are up but foreclosures are still crippling the economic recovery.

By Joshua C Anderson, Lexington Realty correspondent. October 26, 2010

Los Angeles-It’s been more than a few weeks since the major lenders have enacted the foreclosure moratorium. “We are looking intensively at the firms’ policies, procedures, and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures,” said Fed Chairman Ben S. Bernanke. Many homeowners are still clinging on to the idea that they will not be foreclosed as a result of this investigation. The reality of the situation is that only ten percent of at risk homeowners will get out the situation there in.

Several key factors that are adding to the demise of the housing market include the fact that the housing recession is nowhere near over. Most of the nation’s communities have not yet bottomed out and optimistic speculation is merely opinion driven. Once the market does officially bottom out, prices will not rebound automatically. It will take quite some time for the rest of the economy to get up to speed, and even then it will be a long recovery. Another common misconception is that the worst is in the past. Rick Sharga from Realty Trac, an online foreclosure company, says he does not envision foreclosure activity stabilizing until late 2011. There are still those who will continue to believe that there loans will be modified, even though several reports from the top news and government agencies confirmed that it was a huge failure.  One of the realistic solutions in this market is to mitigate as much as loss as possible. Many of the homeowners who are facing foreclosure do have an opportunity to salvage what’s left of there credit and financial future by attempting a short sale.

Knowing that are very few positive solutions to this crises, it would behoove homeowners to seek out reputable companies, attorneys and accountants. By doing adequate research, the average homeowner can avoid fraud and even foreclosure. According to the California department of real estate, companies that are conducting modifications, loans, short sale and forensic loan audits, arte required to be registered and certified with the department. It is up to the homeowner to seek out this information and make the right decision based on there situation.

Bank of America Resumes Foreclosures

Bank of America Resumes Foreclosures

On Monday, Bank of America stated that, after having reviewed 102,000 foreclosures in 23 states where courts must sign off on proceedings, they are now resuming the process on said cases.

B of A stated that the first of the new affidavits are scheduled to be submitted by October 25, 2010, and will continue reviewing in 27 other states soon after. According to a B of A spokeswoman, no errors were found during their review, and less than 30,000 foreclosure sales across all 50 states will be delayed as result of the investigation. The announcement came one day before the banks third quarter earnings report, the news sending B of A’s shares up 36 cents to $12.34 or 3.01%. B of A stated that the review process, “has been an important step to give customers confidence they are being treated fairly.”State Attorneys General have stepped up pressure on banks recently after it was revealed that some bank employees had signed foreclosure affidavits without verifying that the documents were accurate, also known as “Robo-signing”.

October 1^st was the initial launch of review for B of A, and October 18^th is said to be the day the bank will expand its document probe to all 50 states. The bank says that their initial assessments in the remaining 27 states show that the basis for their foreclosure decisions were indeed accurate.

So far at least five other major mortgage servicers have announced their own document review process. 1.8 million Loans are in foreclosure in the 23 judicial states, while 1.3 million are pending in other parts of the country, according to a Morgan Stanley analyst report.

Underwater Homeowners Buying New Homes

Underwater Homeowners Purchasing New Homes

Blame the America dream for the ingenuity in this new trend that we are now seeing.  People are fixated on the fact of owning a home, even if they are currently upside down on their existing property.   Some people are trying to sell their existing homes at a loss (short sale) and purchase bigger homes at a similar cost in today’s market.

Some experts say it makes a lot of sense, since homeowners can get out of bad, old mortgages and get into fresh, larger ones, without raising their monthly payment much. That’s because home prices have dropped and interest rates have gone so low.  What are your thoughts?

Bankruptcy May Prevent Foreclosure

Can Bankruptcy Prevent Foreclosure?

There are some cases where bankruptcy can help homeowners prevent foreclosure.  The first and foremost thing a bankruptcy will do is stop the foreclosure process.  Lenders are unable to proceed with a foreclosure until permitted to do so by the courts.

When filing for bankruptcy, there are two types to decide from: Chapter 7 and Chapter 13.

A chapter 7 bankruptcy will stop foreclosure, but this will usually lead to having to liquidate your assets.  Many BK attorneys prefer this method because it gets rid of all unsecured debt, but leaves secured debt such as your mortgage, exempt.  In a case like this, borrowers will still owe their mortgage payments but they can now afford to make them because all of their other debts have been discharged.

Although many experts claim that Chapter 13 is usually more effective at helping homeowners keep their home.  This gives them time to repair their finances, lasting anywhere from 3-5 years, over this period of time the court allows an income based budget with monthly payments made to trustees.

The trustees pay the bills, first paying off the secured debt. After that, the trustee pays off unsecured debt, starting with back income taxes.  Following this  comes unsecured debt, such as credit cards and medical bills.  If borrowers keep up on their payments they can emerge from bankruptcy with their homes still in their possessions.

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