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“Can My Lender Take My Assets?”

Your Questions Answered

One of the questions I get frequently is the concern from borrowers that trying to sell their home short will result in the lender attempting to take their retirement or other assets to make up the difference in the sales price of their home and their mortgage amount.

First, the mortgage is secured by the property.  The mortgage reads, essentially, that if  you don’t pay the mortgage, you lose the house.  Second, California is a non  recourse state by and large.  This means that after the foreclosure or short sale, which the bank has approved, they are not entitled to come after a borrower for damages.

Laws have been recently enacted to protect the struggling homeowner against the lenders from judgments from lenders.  Civil Code of Procedure 580e being the example of this.

Legislators in California know, unlike the federal government, that the foreclosure crisis is too big to prevent so they have made it easy for homeowners to walk away from underwater mortgages by passing laws to protect them when or if they make a decision to so do.

The only liability a seller will have to deal with at this point is with the IRS.  The difference in the amount the home sells for and what is owed is considered taxable income.  The best bet is to hire a CPA or consult with a financial professional, I have a referral if you need one, to find out what your tax liability might be.

In my experience, most are finding out that they aren’t getting as much back as they thought they would otherwise get.

The Morality Of Foreclosure Or A Short Sale

Most people have a stigma and feel irresponsible at the thought of walking away from their home or going through the foreclosure process.  We all feel that it’s our responsibility to pay our bills on time and in full.  This is the responsible thing to do.

However the current economic conditions, especially with regard to housing, require a different perspective or mindset.  Keep the following in mind:

1) Since February of 2007, at least 400 banking institutions have failed.  Click here for the list.

2) In December of 2009, Morgan Stanley walked away from, aka “gave back” to their lender, $8 billion in commercial real estate in San Francisco.  Click here for the link to this story.

3)  In 2008, Morgan Stanley borrowed $107 billion from the Fed.  Citicorp borrowed $99.5 billion and Bank of America $91.4 billion just to stay afloat.  These numbers don’t include the money borrowed from the Treasury Department.  The country was on the verge of complete economic collapse.

4)  The amount lent to private banking by the federal government was about the same as the current amount of $6.5 million delinquent of foreclosed mortgages according to Bloomberg while borrowers/homeowners haven’t gotten any meaningful help from the officials we’ve elected into office.  Click here for the data on this

(As a side note, is it any wonder Obama’s approval ratings are so low?  Mystery solved.)

5)  The saddest commentary on this entire thing is that nothing has been done to correct or eliminate the conditions which would allow this to happen again.  The Frank Dodd act not withstanding.

6)  While borrowers/homeowners got no meaningful help, we manage to bailout foreign banks as well to the tune of $600 billion or more.  Sweet!  Click here for references or just Google “fed bank bailouts foreign banks” yourself.

Out of all of this my question is:

If the largest financial institutions cannot make decisions in their own best financial interest, why would the homeowners of this country make decisions that benefit the financial institutions such as paying upwards of $300,000 more for your home than you need to? Can you afford that?

The reason your home is underwater is not your fault.  The reason your home will not appreciate to your loan value for years to come is not your fault.

All of this was out of your control and was in the control of the most “trusted” financial institutions in this country.  Our government bailed them out and left the people most affected by this crisis high and dry.

Now is responsibility time.  Now is the time that we all get financially responsible as the banks have shown us what makes good financial sense.  Keeping a non performing asset isn’t a good financial plan for anyone.  Not for the banks or for homeowners.

Should You Walk Away From Your Home?

I’m not suggesting you get up and walk out of your home right now.  That may not, and I say this tongue and cheek, the best decision for you at the moment.  What I am suggesting is that you look at your situation and the direction of the wind then determine what the right course of action is for you.

Take a look at the following questions, answer them and decide for yourself.

1)  How much do I owe on my home?  What is my home currently worth?

2)  When will the housing market begin appreciate?

3)  If I were to short sale or walk away from my home, how soon could I buy again?

4)  What are the ramifications if I do let my home go to short sale or foreclosure?

5)  How will my credit be affected?

Do your research.  Find your own answers.  I’m here to help if you need help.  Please call, text, email or simply fill out the form below for a private no obligation consultation of your situation.  Personal and free.

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Tags: short sales rocklin roseville sacramento homes

Your Options To Avoid Foreclosure

Rocklin & Roseville Foreclosures and Short Sales Increase

With notices of defaults finally going down a little, there are still many, many homeowners struggling to make their mortgage payments for one reason or another.

It wasn’t so long ago that the Rocklin and Roseville real estate markets were happy places where everyone was doing well, making money and the thought of losing your home was the furthest thing from anyone’s mind.

Unfortunately, for now, those days are over.  Everything is cyclical though and our market will get better sooner than later.  Can it get any worse?  I suppose it can but, like what we’re going through now, I can’t imagine it.

I guess that’s why I do what I do.

Avoiding Foreclosure

Avoiding foreclosure boils down to a couple of things these days.  Because values in the Rocklin and Roseville real estate markets, some options are largely not available any longer.

Our market isn’t going to recover or begin appreciating for at least the next year and that’s probably optimistic.  Given the unemployment situation in the Sacramento region, demand for homes won’t be there until our state gets a handle on the economy and employers begin hiring again.

This being the case, you’ve got to weigh your options as to whether it’s smart financial decision to keep your home at all.  Doing so could jeopardize your financial future and retirement plans.

Scenario: You bought your home in 2006 for $400,000.  You put 25% down on a 30 year fixed mortgage.  Your home is 1600 square feet, 3 beds, 2 baths.  The same home now sells for $235,000. (this is generous)

Your payments on this home are $2120 per month and at the end of 30 years you will have paid $763,212 for this home with a payoff date of 2036 at 5.5% interest.

At the end of 2010 you’ve paid $18,405 in principal on your home and $66,764 in interest.  The current loan balance on your note is $281,595 but your home is worth $235,000.  Your home is worth $46,595 less than you owe on your mortgage and values are still edging down slightly.  You’re 16.5% underwater.

What can you do in this situation?  What are your options?  Honestly, from what I’m seeing, this situation is pretty positive!

In your figuring, you’ve got to take into account that, according to economists far and wide, the economy on a national level will be sluggish to recover from the worst recession in the history of this nation.  The outlook for the Sacramento region isn’t as rosy.

Options

Refinancing is out because you’re underwater.

Deed in lieu of foreclosure is very rare right now but seems possible.  For details on how to get through that process, please consult a real estate attorney.  There is a process to deed in lieu of foreclosure and it has to be approved by your lender.

A loan modification could help you on a monthly basis but largely, lenders aren’t approving principal loan amount reductions in favor of interest rate reductions in most cases.  Here are some great tips on getting that done, click here.  We don’t handle loan modifications but the link will take you to a page with great tips so that you can do it yourself.

If your monthly payment is too high, you want to stay in your home and lowering your payment makes the difference  between going into foreclosure and not, loan modification is your best option.

95% of all loan modifications are now being denied.  This far down the road, lenders have gotten very particular about whom they approve.  Of the 5% of all applications that are approved, roughly half of them will default within 6 months.

This being the case, lenders deny almost all applications for loan modifications.

It doesn’t make sense, none of it.  If lenders would just suck it up and find a way to work with people to modify principal loan amounts down to somewhere near current market value, this problem would be over.  But they won’t do it for whatever reason.

If you’re financially in trouble, bankruptcy could help to you to afford your payment by wiping out all of your other debts.  This is a short term solution but you’ll still be saddled with house debt that puts your financial future in question.

If you’re in financial trouble and can’t make your payments, short sale is an option for you. Short selling your home is an option that must be approved by your lender.   Although in the past most lenders require you to have a hardship situation to sell short, that’s not the case now.

All lenders are different and getting an approval could be relatively easy or difficult but short sales are being approved in higher numbers than ever before.

What a short sale will do for you is to get you out from underneath the house debt as the lender has approved accepting less for the home than is owed curing your long term financial problem.

Because, in this scenario, the loan was a purchase money loan used to purchase the home initially so there will be no deficiency judgment or debt issue to worry about under California law.  No promissory note either.

Short sale will hurt your credit in the short term.  How much it will hurt your credit depends on if you’ve missed payments as well as selling short.  In short, no pun intended, it’s difficult to say how much your credit will be affected.  This is a short term issue.

I was speaking to a fellow agent last night and after a foreclosure, not a short sale, her credit went down into the mid 500’s.  She checked it in August and her credit had already recovered to 680.  This was after a foreclosure which tends to be more damaging than a short sale.

After a short sale, you’ll be able to purchase again in as little as 3 years. Going forward, that will be relaxed I think but as of now, a short sale in this scenario benefits the homeowner the most.

It also benefits the lender.  Selling a home short saves the lender about $27,000 over a foreclosure in the state of California.

Buyers benefit as well.  Short sales are generally slightly better deals that non distress sales by as much as 8% to 12%.  It’s better for the homeowner, better for the bank than foreclosure and better for the buyer.

No One Wants To Give Up Their Home

Honestly, none of these options are anything to get excited about.  Bankruptcy, short sale, foreclosure and loan modifications…there isn’t anything fun about any of these.

But when your family is suffering, you and your spouse are at each others throats with stress, the kids are reacting to the stress you’re putting out, things at work are tough, you’re late for soccer practice, the garbage needs to be taken out…..!!!

You get the picture and know it well.  Do you need to add severe long term financial distress to all of this?  Is it worth your health?

Nothing is worth your health.  Nothing.

If you need help figuring out the best option for you, please give us a call or fill out the form below.  We can sit down with you and go over all the options based on your situation in confidence.

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Tags: loan modification rocklin roseville lincoln sacramento short sale

“Will I Get a Deficiency Judgment After A Short Sale or Foreclosure?”

Your Questions Answered!

Distress sales are a reality of the Rocklin and Roseville real estate markets today and for the foreseeable future.

It isn’t fun to go through it but when you look at the long term ramifications, which tend to pale in comparison to holding onto an underwater mortgage, considering our market will not be appreciating back to what most people owe on their homes some feel they have no choice but to let go of their homes.

One of the questions that came up in our Homeowners Workshop last week was a concern about receiving a deficiency judgment after a distressed sale.

Deficiency Judgments

California homeowners are exempt from deficiency judgments on purchase money loans on properties of 1 to 4 dwelling units.  Purchase money is the original loan obtained to purchase the property.

That’s good news.

According to my favorite real estate attorney, the other good news is that to file a deficiency judgment the foreclosure must be judicial not non-judicial as the majority of foreclosures are in California.

To do this, the lender must weigh their options.  Judicial foreclosure in the State of California requires the lender to spend a lot more money to chase the homeowner.  They have to know they can get the deficiency amount out of the borrower to justify the additional expense to chase them.

Generally, this isn’t the case and the lender will forego the judicial process and go with the non judicial type of foreclosure thus legally waiving their right to a deficiency judgment.

Non judicial foreclosure is a more efficient process, takes less time, less money and results in the process being completed in roughly 3 months and 20 days from the filing of the notice of default.

I don’t know exactly how many foreclosures in the Sacramento regional real estate market were judicial vs. non judicial but my guess would be that virtually all foreclosures in the region are non judicial.

Could the lender file a deficiency judgment against you?  Based on what I’ve learned, it’s possible but not likely.

Need information about your specific situation or a consultation about your options?  Just fill out the form below and we’ll be in touch promptly.

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Tags: short sales rocklin roseville sacramento lincoln granite bay

Your Questions Answered!

“What Percentage Of The Market Is Short Sales?”

As most full time, active Realtors do, I get questions from my clients all the time.  If you’ve been following my blog at all, you know that I look at all aspects of the market to try to accurately assess what direction this “bus’’ is headed.  While seemingly an impossible task, it’s fun!  Not that I’m always right but I enjoy writing about our market.

It’s been said that 2010 is the “Year of the Short Sale”.  I’m willing to bet that’s NO WHERE on any Chinese calendar but it does seem that short sales will be happening in record numbers this year.

Especially considering the government has just come out with a new program, HAFA, that will incentivize banks for working with the homeowner to get them through a short sale rather than foreclose.

This is a good move as it’s clear to everyone the banks have absolutely no interest in a serious loan modification program but short sales save them money in the short run.  Occupied homes are better taken care of than a vacant home.

As of this writing, short sales represent just over 30% of the available homes for sale in the Sacramento, Placer and El Dorado county area.  REO’s, also known as bank owned homes, represents just about 17% of the available homes for sale and regular real estate represents just over 52% of available homes for sale.

Being that such a high percentage of home owners are underwater in our region, and nationally for that matter, it surprised me that there such a high percentage of regular real estate homes available.

Looking for a Realtor to help you with a short sale?  Just fill out the information form below and we’ll get back to you promptly.  Our team handles many short sales every month with success.  We can help you too.

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Tags: short sale sacramento rocklin roseville

Is It Available or Not!?

The Term “Active Short Sale Cont.”

There is some confusion in the market today with a relatively new term that relates to the market status of a home called “active short sale cont.”

Short sales are new for our market.  They have only been around in abundance for the last year and a half in this cycle and most buyers, first timers especially, aren’t familiar with the term.  It appears that the home is available because the word “active” is there but this is misleading.

In the process of a short sale, the seller/borrower must produce financial documents showing that there is a legitimate need to sell for less that what is owed on the home.  The lender doesn’t want to take a loss and won’t approve the short sale without good reason to do so.

Currently, this process takes forever due to the volume of short sales happening nationwide. Our economy and value losses in our region have taken their toll and some can no longer afford to stay in their homes.

Waiting On Lender Approval

After the seller/borrower of the home to be sold short has gathered together all of the financial information they need to submit to the lender, the listing agent packages those documents along with the listing agreement and the highest and best offer and sends it to the lender for their approval.

This is when the property goes into the status “active short sale cont.”.

Listing agents tend to submit only one offer to the lender so that the financial package is streamlined and efficient in the hope of getting a speedy approval.

This rarely happens as the volume of files the lender is  receiving requesting a short sale is just more than their loss mitigation departments can handle.

And More Waiting

After the package is submitted, the waiting game begins…and goes on and on and on.

While the short sales process has gotten quicker, in the Rocklin and Roseville real estate markets, the average days on the market for a short sale is 169 days. This is the average amount of time it takes for a short sale to go into “pending” status.

Then add 30 to 45 days in escrow and the average time for a home to be sold short in Rocklin and Roseville since August 1st of 2009 is roughly 209 days!

Sweet!

The days on market time stops when a home goes pending sale.

“Pending” status in a short sale is when the package has been approved by the lender and the offer has been accepted…if the buyer is still around to close!

Often, the original buyer disappears long before the short sale approval ever happens and then the seller/borrower starts over with a new buyer.  The process just takes too long.

With the new buyer, time frames are shortened as the short sale has already been approved and it’s then a matter of submitting a new offer and getting lender approval.

“Buyer disappeared, need offers!” is a common comment in the confidential agent remarks in the MLS.

All in all, and I’ve said this before far too many times, there is nothing short about a short sale.  If you’re in a hurry trying to take advantage of the first time home buyer tax credit..you won’t have enough time to get it closed before the expiration date.

Have questions?  Please feel free to call or email.

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Tags: short sales sacramento rocklin roseville

How To Get Your Offer Accepted!

Results of Sold Homes Survey in North Natomas

I’ve got a buyer who I just love working with.  As much as I like he and his girlfriend, they are depending on me to get them into a home for the holidays.

This used to be a pretty easy task.  You find a home, write an offer that’s attractive to the seller and off you go to escrow.

Now, not so much!

Dramatically Low Inventory Levels

As the foreclosure crisis churns on and banks are releasing fewer of the foreclosures to the open market for whatever the reason, the number of available homes for sale has decreased dramatically in the last year.

This has created a fiercely competitive market for buyers and sellers are, again, enjoying getting their listing prices as high as appraisers will allow them to go due to multiple offers on almost every home.

Days on market, depending on the area and price range, has declined as well.

The declining amount of homes for sale is why you’re currently having trouble getting your offer accepted.

Agents are communicating with each other only to the extent of “give us your highest and best”.

Beyond that, mum’s the word.  As a result, it then becomes a mystery has to how to structure an offer that gets accepted.

Until now!

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Tags: homes for sale in sacramento

Your Questions Answered!

“Has the market cooled at all with the Nov. first time home buyer money coming to an end?  Is it a waste of time to offer less?”

I got these questions today and I thought they were great ones to address because in 45 days or so the first time home buyer tax credit may come to an end.

No, the market hasn’t cooled because the number of homes for sale has decreased dramatically.  There are multiple offers everywhere, prices have increased a bit due to the competition for homes and the title companies are seeing short sales closing a little faster as well as an increase in regular real estate transactions. (between willing buyer and seller, like it used to be!)

Should you offer less?

Only on properties that have been on the market for extended periods of time. This applies to homes in higher price ranges that are taking longer to sell.  Everything below $300K or so is flying off the shelf, so to speak.

First Time Home Buyer Tax Credit Extension

Based on my research, I have a feeling the tax credit will be extended. There is so much support for the first time home buyer tax credit as it has added 400,000 additional sales this year and could add up to another 1.86 million sales* in 2010 if it was extended for one more year.

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