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Are Realtors Who Work On Short Sales Subject To The FTC MARS Ruling?

As a real estate professional that exclusively handles Massachusetts short sales,  I continue to receive numerous inquiries about the Federal Trade Commission’s (FTC)Mortgage Assistance Relief Services Act (MARS) that went into effect January 1, 2011. I work with real estate agents on a daily basis and depend on them for a large portion of my business, yet I am still surprised that so much confusion remains over whether MARS applies to Realtors. In response to this confusion, I decided to share my thoughts on whether MARS applies to Realtors. In order to do this, however, it is important to understand what events led to MARS and why the FTC decided to take action.

In November of 2010, The FTC announced that it would be issuing a new rule, effective in 2011, to protect struggling homeowners from mortgage relief scams. This rule was originally created to target fraudulent mortgage relief companies that were collecting upfront fees from homeowners without performing any actual services. In practice, however, MARS encompasses services far greater than those provided by the sham mortgage relief companies and currently affects all Realtors working in the short sale industry. According to the current rule, any Realtor working on a short sale transaction must comply with MARS otherwise they could face fines of $11,000 per day.Surprisingly, very few Realtors are aware of the new changes and even less are compliant with the new disclosure requirements. In the paragraphs that follow, I am going to provide a MARS primer for all real estate professionals who claim to be short sale experts but may not be abreast of the recent changes in the law.

MARS 101: A PRIMER FOR ALL REALTORS, ATTORNEYS AND NEGOTIATORS:

A) MARS: AN OVERVIEW OF THE RULE:

While the entire MARS ruling can be read here, I believe that the FTC Media Advisory dated November 19, 2001 provides the most clear and concise summation of the rule and is the best place to start the analysis.

(FTC Media Advisory excerpt)

I. Rule Outlaws Advance Fees and False Claims, Requires Clear Disclosures:

Homeowners will be protected by a new Federal Trade Commission rule that bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender that they decide is acceptable.

“At a time when many Americans are struggling to pay their mortgages, peddlers of so-called mortgage relief services have taken hundreds of millions of dollars from hundreds of thousands of homeowners without ever delivering results,” an FTC Chairman said. “By banning providers of these services from collecting fees until the customer is satisfied with the results, this rule will protect consumers from being victimized by these scams.”

The FTC is issuing the Mortgage Assistance Relief Services (MARS) Rule to protect distressed homeowners from mortgage relief scams that have sprung up during the mortgage crisis. Bogus operations falsely claim that, for a fee, they will negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, a short sale, or other relief from foreclosure. Many of these operations pretend to be affiliated with the government and government housing assistance programs. The FTC has brought more than 30 cases against operations like these, and state and federal law enforcement partners have brought hundreds more.

i) Advance fee ban:

The most significant consumer protection under the FTC’s new rule is the advance fee ban. Under this provision, mortgage relief companies may not collect any fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable, and a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer. The companies also must remind consumers of their right to reject the offer without any charge.

ii) Prohibited claims:

The MARS Rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about:

• the likelihood of consumers getting the results they seek;

• the company’s affiliation with government or private entities;

• the consumer’s payment and other mortgage obligations;

• the company’s refund and cancellation policies;

• whether the company has performed the services it promised;

• the availability or cost of any alternative to for-profit mortgage assistance relief services;

• the amount of money a consumer will save by using their services; or

• the cost of the services.

   

In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers. Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.

iii) Disclosures:

The Rule requires mortgage relief companies to disclose key information to consumers to protect them from being misled and to help them make better informed purchasing decisions. In their advertising and in communications directed at individual consumers (such as telemarketing calls), the companies must disclose that:

• they are not associated with the government, and their services have not been approved by the government or the consumer’s lender;

• the lender may not agree to change the consumer’s loan; and

• if companies tell consumers to stop paying their mortgage, they must also tell them that they could lose their home and damage their credit rating.

Companies also must explain in their communications to consumers that they can stop doing business with the company at any time, can accept or reject any offer the company obtains from the lender or servicer, and, if they reject the offer, they don’t have to pay the company’s fee. The companies also must disclose the amount of the fee.

iv) Attorney exemption:

Attorneys are generally exempt from the rule if they meet three conditions: they are engaged in the practice of law, they are licensed in the state where the consumer or the dwelling is located, and they are complying with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must meet a fourth requirement – they must place any fees they collect in a client trust account and abide by state laws and regulations covering such accounts.

v) Effective Date:

All provisions of the rule except the advance-fee ban will become effective December 29, 2010. The advance-fee ban provisions will become effective January 31, 2011.

(End of FTC Media Advisory)

Following the November Press Release, many Realtors dismissed the new law as not applying to them. It quickly became evident, however, that those Realtors were mistaken.

B) THE MARS DEBATE: DOES THE RULE APPLY TO REALTORS?

As the FTC report clearly stated, MARS was issued with the intent to protect distressed homeowners from mortgage relief scams by specifically targeting the numerous bogus operations that claim, for a fee, they will negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, a short sale or other relief from foreclosure. What was conspicuously absent from the ruling, however, was any language regarding Realtors and whether they would be exempt from the ruling. The FTC took deliberate acts to clearly exempt attorneys from the ruling as long as they met minimum standards. Realtors, on the other hand, were left to guess as to whether they were subject to the rule. As Realtors scrambled for an interpretation, many attorneys and industry experts began to comment on the matter. The legal experts quickly focused on Page 35, Footnote 126 of the MARS rule in order to ascertain whether MARS applies to Realtors.

C) A LEGAL INTERPRETATION OF MARS:

As one legal expert explained in a letter to the National Association of Realtors,Page 35, Footnote 126 of the FTC MARS rule makes it ‘sound’ like agents are exempt, but the parts highlighted below are the points where many attorneys say it is not clear that Realtors are fully exempt:

“As a general matter, the Final Rule is not intended to apply to the marketing of services to assist consumers in selling their properties to third parties. The Final Rule, however, does specifically cover the marketing of services involving the sale of properties to third parties if those services are designed or intended to assist consumers in averting foreclosure, e.g., through a short sale or deed-in-lieu of foreclosure. One commenter urged the Commission to exempt licensed real estate professionals from the Final Rule. NAR at 1-2. The commenter argued the Rule would restrict real estate agents in helping consumers with the process of selling their homes through short sales. Id. The Commission concludes that an exemption for real estate agents is not necessary. Real estate agents customarily assist consumers in selling or buying homes and perform functions such as listing homes for sale, showing homes, and finding desirable homes for consumers. The Commission is aware that real estate agents may perform these functions when properties are bought or sold through a short sale transaction, but does not consider these services to be MARS.”

Upon first reading, it appears as if MARS does not apply to Realtors because the FTC considers their customary functions to be outside purview of the rule. In my non-legal opinion, however, this in an incorrect assumption. The FTC dropped the ball by not expressly exempting Realtors from the rule, as they did attorneys. Instead of providing a provision that clearly exempted Realtors, the FTC left a glaring ambiguity by simply stating that “agents can perform these services in a short sale transaction and not be considered MARS. When interpreting the rule, however, legal experts focus on the fact that the FTC narrowly defines these services as the function of “assisting consumers in selling or buying homes and performing functions such as listing homes for sale, showing homes, and finding desirable homes for consumers.” The FTC’s narrow definition of which services are not MARS services leaves the door open that additional services performed by a Realtor may qualify as MARS services.

The FTC failed address whether Realtors were excluded from MARS if they perform any functions beyond listing, showing and finding homes. Anyone who has worked on a short sale knows that the functions performed clearly involve services beyond simply listing and showing the home. The rule is incredibly broad, yet it fails to examine whether the services customarily performed by agents as a part of a short sale transaction are MARS services. What if the Realtor contacts the bank on behalf of a homeowner or negotiates a short sale of the property? Don’t these qualify as the types of services that MARS was intended to regulate? The Rule clearly defines which services it intends to encompass:

Section 322.2 DEFINITIONS: (I) ‘‘Mortgage Assistance Relief Service’’means any service, plan, or program, offered or provided to the consumer in exchange for consideration that is represented, expressly or by implication, to assist or attempt to assist the consumer with any of the following: and followed by subsection (6) Negotiating, obtaining or arranging:
(i) A short sale of a dwelling,
(ii) A deed-in-lieu of foreclosure, or
(iii) Any other disposition of a dwelling other than a sale to a third party who is not the dwelling loan holder.

It seems to me that the rule clearly intends to cover the services of negotiating, obtaining or arranging the short sale of a dwelling. As a result, Realtors should proceed with caution until theNational Association of Realtors (NAR) or local State Associations issue a legal opinion on the MARS rule. Without such an opinion, the conclusion that Realtors are exempt from MARS is short sighted and needs to take into consideration whether the FTC intended to exclude the additional services provided by Realtors during a short sale transaction. If these services were not considered to be MARS services, why didn’t the FTC make an explicit Realtor exemption when they had the chance?

D) WHAT MARS MEANS TO REALTORS: ARE YOU IN COMPLIANCE?

Based on the above analysis, it is reasonable to assume at the very least that the FTC MARS ruling is unclear. In short, if you are a Realtor and you are are performing any services beyond listing and showing a home, you should assume that MARS applies to you. If you are paid for negotiating the short sale, MARS unquestionably applies to you. Whether your compensation derives from the the listing commission or a separate negotiation fee, the FTC’s failure to explicitly exempt Realtors from MARS could result in major fines. Is it worth risking the hefty fines simply because you didn’t properly disclose your role as a MARS provider to the consumer?

E) CONCLUSION:

Again, I am not an attorney, nor do I claim to be a real estate expert, but until the FTC expounds on the rule or NAR issues a legal opinion, it would be safe to assume that all Realtors working on a short sale transaction should err on the side of caution and comply with the statutory requirements set forth by the FTC MARS Rule. It is also important to note that even if you are simply providing a short sale referral to another agent, a third party negotiator or even an attorney, you may also be subject to the MARS requirements as the rule currently reads. As someone who works exclusively on short sales, I am going to encourage all of the Realtors with whom I work that they are likely subject to the FTC MARS Ruling because they are performing services beyond the mere function of finding, listing and showing homes. Do you have your disclosures and advertising materials in order?

If you have any comments or would like to read the original post you can access it here.

Please Advise. Does Freddie Mac typically allow for Broker contributions to go to the 2nd lien holder? This file is providing sufficient net to the 1st B of A, but the 2nd US Bank has refused to accept the allowed payoff.

Thank you.

Stimulus. . .Coming to an end. The experts are saying, the shrinkage of government will represent a major drag upon the economy during the next few years. This follows a period in which we experienced major economic stimulus from tax rebates, massive grants and the spending associated with two wars. State and local governments are facing huge deficits and one-by-one austerity plans are cutting jobs and programs or raising taxes. However, these deficits pale when compared to the shortfall the Federal government is facing. The President’s proposed budget cuts and revenue enhancements run the gamut from small businesses to housing counseling programs. And that is just the first salvo. Congress has lined up hundreds of bills, many of which propose to cut much further. 

Let’s advance a couple of points here. First, with the economy entering a stronger recovery phase necessary to reduce unemployment, to keep that momentum going the economy must overcome a second significant factor besides housing — the shrinkage of government. However, there is no choice. Lack of action would result in higher rates that would constrict the recovery even further. Think of the situation as the government getting out of the way so that the economy can expand after the government has helped business up to their feet during the fiscal crisis we experienced. Second, as severe as these cuts sound, they don’t even represent a significant dent in the long-term deficit picture. That is because the vast majority of the budget can’t be changed by simply cutting spending or raising a few taxes. Social Security, Medicare, interest on the debt and non-war defense spending, including homeland security, take up too large a percentage of the budget for the other cuts to be effective. That means the government must make some really hard choices, including raising revenue, in order to solve the problem. In other words, an immediate cut in spending is a necessary first step, but it is only one step. The government faces a very important and difficult balancing act comprised of cutting and preserving the recovery.

Now is a great time to buy according to Michael Corbett, author of Before You Buy: The Homebuyer’s Handbook for Today’s Market. "I’m pretty comfortable saying that five years from now, people are going to be saying, ‘Damn, if I had just bought in 2011,’ " said Corbett, who is also host of the "Mansions & Millionaires" segment on the syndicated TV show "Extra." "Prices are bumping along the bottom and rates are really low," he said. "When you have those two together, you have the perfect buying opportunity." Housing prices may not have hit rock bottom, Corbett acknowledged. But he thinks that people who wait to find the market’s bottom are likely to miss out on the current low rates. And rates can be every bit as important to the cost of a deal as price. You might think you can snag a great deal by lying in wait — hoping that the owner of a $500,000 listing will get desperate enough to accept $450,000, for example. But if rates rise 1% during the time you wait, you’ll end up shooting yourself in the foot. Assuming you finance $400,000 of the purchase price of that home, the 1-percentage-point difference between a 5% and a 6% loan will cost you more than $90,000 over the life of a 30-year loan. "It’s hard to tell where the bottom of a market is, until prices start going up," said Dianne Patton, a consumer real estate specialist with Coldwell Banker Real Estate. "But the stars are aligned for buyers right now." Source: LATimes.com

All-cash transactions accounted for 28 percent of home sales last year –double the rate of October 2008 — reports the National Association of Realtors. Cash deals are gaining in popularity because buyers believe prices are at or near the bottom. In addition, new home sales may bounce back this spring, and the rebound could last through at least 2012, predict market watchers. The Mortgage Bankers Association forecasts a 10 percent jump in volume; while Fannie Mae and the National Association of Home Builders project gains of 18 percent and 20 percent, respectively. The groups are optimistic despite tighter underwriting, the absence of a home buyer tax credit and stiff competition from bargain-priced foreclosure properties Sources: WSJ.com and BusinessWeek.com

 ~Trisha Bush, Principal Broker

Cell: 509.301.0975

Just because you were not able to work out an agreeable refinance or modification program with you lender under the "Making Homes Affordable Program", does not mean that you will not qualify for short selling your Kansas City home.

The series of posts that I will be providing next are going to focus on the "Streamlined Short Sale" process.  This is a short sale process that is available to borrowers who are eligible for the Making Home Affordable Loan Modification Program, but for some reason do not qualify for the modification for other reason(s).

Because the short sale process is becoming more popular, the first important issue to understand to determine if you would qualify for the Streamlined Short Sale is knowing what is a short sale.

A informative question and answer document presented by ReMax provides a very good and understandable explanation.  "In a short sale, a lender agrees to let a homeowner facing financing hardship sell a home for less than the mortgage owed." (2010 ReMax International)

Therefore, if you believe that your home's value is less than what is currently owed on the home or you simply are not sure, you would want to confirm this through a market analysis of your home by an experienced realtor which would then confirm if you would currently qualify for the first step to determining if you would qualify for the Streamlined Short  Sale process of your Kansas City home.

The bottom line is DON’T believe that there is nothing that you can do.  There is the possibility of a short sale of your Kansas City home.  I really want to help educate the public and those in need of gathering as much information as possible to better understand what you may be able to do to lessen the burden of your Kansas City home situation in Kansas or Missouri.  I have really learned, while working with foreclosures of Kansas and Missouri homes and while assisting home sellers with their Kansas short sale and Missouri short sale that knowledge can be power in your making the right decisions for your current and future well-being. 

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I will continue to provide updates to this subject over a short period of time.  If you or someone you know don’t know what to do if you owe more than your home is worth, you are falling behind on your mortgage payments or you are currently facing foreclosure of your Kansas City home, Kansas or Missouri,  please continue to read the upcoming posts.

Request a Free Confidential, no obligation, analysis of your home and options that may be available to you to help reduce the burden you may have.

It has been my pleasure to help a number of Sellers with their Kansas short sale or Missouri short sale.  Consider me an available resource to help you determine what the best direction is for you.

(There are potential tax consequences that should be discussed with a tax professional. Please do not interpret this information as providing legal, tax or other professional advice which you should seek independently.)

(Image via Flickr)

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About the Author:

• Homes for sale in Kansas City    •What’s My Home Worth In this Market

Suzanne Hinton
Hinton Homes-Affiliated with ReMax Premier Realty
Voted 5 Star Best in Customer Satisfaction Real Estate Agent
Phone: 816-520-0917
Email: shinton@remax.net
www.hintonhomes.com

©2011 Suzanne Hinton-Hinton Homes-Kansas City Short Sale Realtor
Kansas City Short Sales

If we are to believe the Mortgage Bankers Association, we are out of the quagmire and moving to higher ground in the housing market.  In this same publication the next day, one article referring to the MBA's analysis of the statistics indicates that delinquencies are falling and “Absent a significant economic reversal, the delinquency picture should continue to improve during 2011.” and another article referring to LPS' analysis of the data indicates that, "both the delinquency rate and foreclosure inventory rate edged up" in January, 2011.  It is this kind of blatant lies that got Mozillo indicted and possibly facing crushing monetary penalties and jail time.  They just don't learn to tell the truth even while their cronies are being fined, sued and locked up.

We, in society behave based on our values. At the highest level we treat each other with care for our neighbor's needs and live by a code of ethics.  Then some of us live in mutual respect for the neighbor even if we don't give care for them - at least there is respeict for the neighbor's autonomy.  The next level is law abiding - some people are out for themselves but behave in a law abiding manner.  This is the line that separates society and criminals.  Lately, it has come to liaght that the lenders live below the criminal line and rise up to the line when called to by the courts. They can claim to call it "misinterpretations" but lets call it what it is - Criminal!

If Countrywide's Mozillo is being dragged into court for his alleged crimes, countless ranks of his perpetrated the crimes in the offices and homes of millions of members of society.  We thought we were dealing in good faith with other like-minded, trustworthy members of society who guard our money and had our best interest in mind above any self-interest. Now it comes to light that we were lied to and just used as tools to pump money into the bank accounts of everyone in the chain from the loan application to Mozillo. The secondary market & the SEC are pursuing damages but what can we, members of society, who are suffering damages in the streets do to seek compensation?

I had the opportunity to interview with a former vice-president of a bank for the job of representing him and his family to short sale his house.  He was wealthy and getting wealthier, so the decision was definitely "strategic" and not based on a hardship.  He indicated during the interview that his wife had a friend in real estate and was really just using my expertise to decide on pricing for his short sale strategy, so realizing that I wasn't going to get the job, I asked him for his personal take on how we would get out of the housing problem we were in.  His answer was one syllable - "Greed".  I said, "Pardon me, but I didn't mean what got us into this problem, but how you think we can get out of the problem.” He clarified his comment – “Greed got us into this mess and Greed will get us out”. You see, there is only one value in the minds of the executives at the banks – “Greed”!

People considering a short sale need to understand the mindset of the people working for the banks, lenders and servicers. They are in business to collect on a debt - no matter how criminal the process was to put the borrower into that loan - their job today is to collect on that debt.  They don’t care if you are dying of cancer and need the money for chemotherapy – pay them first.  They don’t care if you drain your retirement account or charge up your credit cards to put food on the table – write them that check. If the collection people don’t collect, they are pushed out and replaced with someone who will learn the scripts to collect mortgage payments.

As a real estate agent, I cannot advise people on whether to stop paying on a home loan, but if you or someone you know decides that it is best to stop paying on the home loan and is wrestling with their morals and values over paying or not paying on a bad loan, please share this article with them. We need to understand who we are dealing with and that they do not share our values of mutual respect but are focused on one value - Greed.

Brentwood Governors Club Seeing More Distress Sales
Well Known Gated Brentwood Tennessee Neighborhood Experiencing Increased Short Sale and Foreclosure Activity

Per my previous blog posts, Financial Distress Hitting Affluent Towns and Neighborhoods, Brentwood Distressed Sales Activity Increasing and Franklin Distressed Sales Activity Increasing, it is clear that exclusive, affluent, executive, luxury, gated, high-end and golf course neighborhoods are experiencing increased levels of Distress Sales (short sales and foreclosures). However, even with this information it is still surprising to such a prominent Brentwood Tennessee neighborhood like the Governors Club be hit with so many distress sales. Please consider the following sales figures which I obtained from the Middle Tennessee RealTracs MLS:

• There are currently 35 Active Listings (i.e. homes that are actively being marketed for sale) in the Governors Club. Out of those 35 Active Listings 4 are Distress Sales (i.e. short sales and foreclosures account for over 11% of the Active Listings in the Governors Club).
• There are currently 4 Pending Sales (i.e. homes that are under contract with buyers and are probable to close) in the Governors Club. Out of those 4 Pending Sales, 1 is a Distress Sale (i.e. short sales and foreclosures account for 25% of the Pending Sales in the Governors Club).
• Since 1/1/2010 there have been 31 Closed Sales in the Governors Club. Out of those 31 Closed Sales, 4 were Distress Sales (i.e. short sales and foreclosures account for almost 13% of the Closed Sales in the Governors Club).

While the numbers above are not staggering when compared to other parts of the country and even other parts of the Nashville Tennessee, for a neighborhood like the Brentwood Governors Club to have 11%+ distress sales in every sales category is really bad. It is clear that even ultra exclusive, affluent, executive, luxury, gated, high-end and golf course neighborhoods are not immune to the economic and housing market collapse, and, as a result are seeing increased levels of short sales and foreclosures. I highly recommend that these homeowners seek qualified professional real estate, legal and financial advice right away to avoid foreclosure. Since I understand that many homeowners do not want their neighbors to know about their financial hardship, I generally do not use For Sale signs on my listings. I also use short sale pre-qualification techniques to minimize the marketing period of my short sale listings by thoroughly researching the financially distressed homeowners' loan type and actual lender (i.e. the loan owner or loan investor) and communicate with my clients via their cell phone (calls and text messages) and personal email to avoid embarrassment. In short, I market my listings as the "Discreet Short Sale and Foreclosure REALTOR and Real Estate Expert".

Free* Short Sale and Foreclosure Help and Assistance for Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Murfreesboro, Smyrna, La Vergne, Columbia, Mt. Juliet, Springfield, Gallatin and Middle Tennessee Financially Distressed Homeowners and Property Owners. Stop the Bank from Foreclosing with a Quick Cash Offer or Short Sale. If you are a Nashville Tennessee, Franklin Tennessee, Brentwood Tennessee, Nolensville Tennessee, Spring Hill Tennessee, Murfreesboro Tennessee, Smyrna Tennessee or La Vergne Tennessee homeowner, property owner, condo owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact Jim to discuss a short sale (when the real estate sale proceeds are not sufficient to pay off the mortgages and liens on the property). Jim helps sellers (homeowners, property owners, condo owners, owners of high end homes and properties (estate homes, luxury homes and executive homes), real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in any Middle TN County (Rutherford, Williamson, Davidson, Maury, Sumner & Robertson). If you need to short sell your house or property, or you need a quick sale to stop a foreclosure sale, you can Get Free* Short Sale and Foreclosure Help and Assistance from a Nashville Tennessee and Middle Tennessee Short Sale and Foreclosure REALTOR, Real Estate Expert and Real Estate Investor. (*Free: In a real estate short sale, the bank or mortgage company usually approves and pays all of Jim's commissions and fees.)

• Be the first to get new realty listings that match your criteria. Search all the counties in Middle Tennessee including Davidson, Williamson, Rutherford, Sumner, Maury, and Wilson or search by real estate city like Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Murfreesboro, Smyrna, La Vergne, Columbia, Mt. Juliet, Springfield, Gallatin and Middle Tennesseee.
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Missing a mortgage payment (i.e. defaulting on your mortgage loan) creates a lot of personal and financial stress. This stress is even worse if the financially distressed homeowner and borrower receives a foreclosure notice, Notice of Default, or Notice of Trustee's Sale (or Notice of Substitute Trustee's Sale) from the mortgage lender or bank, or an attorney representing the mortgage lender or bank. This stress is absolutely legitimate and understandable since foreclosure severely damages a borrower's credit, and, in many states, will leave the borrower open to the mortgage lender/bank pursuing the borrower for the deficiency balance (essentially, the amount of the mortgage loan owed by the borrower, but not recovered by the mortgage lender/bank upon the sale of the foreclosed property). Declining housing prices have left many homeowners in a situation where they owe more than the market value of their home. The deficiency balance is a serious issue since when mortgage lender forecloses and resells the property the amount they recoup can be substantially less than the amount owed by the borrower. However, there is some good news for homeowners in foreclosure. If the property is the borrower's home (i.e. principal residence / primary residence), the borrower obtained a Federal Housing Administration (FHA) Insured Mortgage Loan (either when they purchased the home, or when they refinanced the mortgage loan), and the borrower wants to sell the home, there is a way to possibly avoid foreclosure altogether and to ensure that they are never pursued for the deficiency balance. Since the FHA is part of the U.S. Department of Housing and Urban Development's (HUD), financially distressed homeowners can request help under a HUD Loss Mitigation Program known as the HUD Pre-Foreclosure Sales Program (aka HUD PFS Program). Some valuable information about the HUD Pre-Foreclosure Sales Program can be viewed here: HUD Pre-Foreclosure Sales Program Facts Sheet and HUD Pre-Foreclosure Sales Program Mortgagee Letter 2008-43. As these documents suggest, the HUD Pre-Foreclosure Sales Program has certain borrower financial and hardship requirements as well as property type, use and market value requirements. If a financially distressed homeowner is not sure if they qualify for the HUD Pre-Foreclosure Sales Program they should seek out the advice of an experienced short sale and pre-foreclosure real estate broker who has been through the HUD Pre-Foreclosure Sales Program before. If the financially distressed homeowner is not sure if their mortgage loan is FHA Insured, they can find out by looking at the Settlement Statement (HUD-1) from when they purchased the property, or refinanced the mortgage loan. In the first box on the top left hand side of the HUD-1 there is a box titled "B. Type of Loan". In that box the type of mortgage loan will be checked. If "FHA" is checked then the borrower's loan is FHA Insured, and, therefore, they may be eligible to participate in the HUD Pre-Foreclosure Sales Program. If the financially distressed homeowner does not have a copy of the HUD-1 then they should contact an experienced short sale and pre-foreclosure real estate broker since they should be able to look up this information, or at least help find out if the mortgage loan is FHA insured. If the mortgage loan is FHA insured then the borrower should apply for the HUD Pre-Foreclosure Sales Program. If the borrower is accepted into the program, they are protected from foreclosure for a period of not less than 4 months and will never have to worry about a deficiency balance. That alone is worth the time and effort spent on the HUD Pre-Foreclosure Sales Program application process. here again, an experienced short sale and pre-foreclosure real estate broker who has been through the HUD Pre-Foreclosure Sales Program before will be a great help to a financially distressed homeowner since they will be able to assist in the application process.

Free* Short Sale and Foreclosure Help and Assistance for Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Murfreesboro, Smyrna, La Vergne, Columbia, Mt. Juliet, Springfield, Gallatin and Middle Tennessee Financially Distressed Homeowners and Property Owners. Stop the Bank from Foreclosing with a Quick Cash Offer or Short Sale. If you are a Nashville Tennessee, Franklin Tennessee, Brentwood Tennessee, Nolensville Tennessee, Spring Hill Tennessee, Murfreesboro Tennessee, Smyrna Tennessee or La Vergne Tennessee homeowner, property owner, condo owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact Jim to discuss a short sale (when the real estate sale proceeds are not sufficient to pay off the mortgages and liens on the property). Jim helps sellers (homeowners, property owners, condo owners, owners of high end homes and properties (estate homes, luxury homes and executive homes), real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in any Middle TN County (Rutherford, Williamson, Davidson, Maury, Sumner & Robertson). If you need to short sell your house or property, or you need a quick sale to stop a foreclosure sale, you can Get Free* Short Sale and Foreclosure Help and Assistance from a Nashville Tennessee and Middle Tennessee Short Sale and Foreclosure REALTOR, Real Estate Expert and Real Estate Investor. (*Free: In a real estate short sale, the bank or mortgage company usually approves and pays all of Jim's commissions and fees.)

Per my previous blog posts, Brentwood Distressed Sales Activity Increasing and Franklin Distressed Sales Activity Increasing, there are now larger numbers of short sales and foreclosures in wealthy areas as such as Brentwood Tennessee and Franklin Tennessee (both are located in Williamson County Tennessee). Both of these affluent towns were previously immune to the effects of the failing economy and housing market decline. The primary cause of these increased real estate distress sales are homeowners suffering from financial distress (i.e. job layoffs, and long-term unemployment). Recently, I have been contacted by two financially distressed homeowners who previously were earning in excess of $100,000 per year working in the health care industry. I say "previously" since both homeowners were recently laid off from their high paying jobs in an industry that was once thought of as a safe haven for employees. This is proof that almost no job is really "safe".

I think many financially distressed homeowners who are well educated and were formerly high income earners try to handle their mortgage delinquencies without the help of a real estate professional since they think that the bank will work with them at first. Of course, many will find out the unfortunate truth about how little the banks will do for them despite their once stellar payment history and credit. I think embarrassment is another reason why financially distressed homeowners who live in executive, luxury or otherwise high-end towns and neighborhoods delay seeking out professional real estate assistance from a short sale expert. In short, they do not want their neighbors to know about their financial hardship. This desire for discretion is fully understandable. The good news is that I am keenly aware of this concern. For example, several short sale sellers have asked me not to use a For Sale on their home. As a result, I don't use For Sale signs on my short sale listings. I also use short sale pre-qualification techniques to minimize the marketing period of their home by thoroughly researching their loan type and lender. Another way I keep the circumstances of my financially distressed seller clients as quiet as possible is communicate with these clients via their cell phone (calls and text messages) and personal email. In short, you can call me the "Discreet Short Sale and Foreclosure REALTOR and Real Estate Expert".

Free* Short Sale and Foreclosure Help and Assistance for Nashville, Brentwood, Franklin, Nolensville, Spring Hill, Murfreesboro, Smyrna, La Vergne, Columbia, Mt. Juliet, Springfield, Gallatin and Middle Tennessee Financially Distressed Homeowners and Property Owners. Stop the Bank from Foreclosing with a Quick Cash Offer or Short Sale. If you are a Nashville Tennessee, Franklin Tennessee, Brentwood Tennessee, Nolensville Tennessee, Spring Hill Tennessee, Murfreesboro Tennessee, Smyrna Tennessee or La Vergne Tennessee homeowner, property owner, condo owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact Jim to discuss a short sale (when the real estate sale proceeds are not sufficient to pay off the mortgages and liens on the property). Jim helps sellers (homeowners, property owners, condo owners, owners of high end homes and properties (estate homes, luxury homes and executive homes), real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in any Middle TN County (Rutherford, Williamson, Davidson, Maury, Sumner & Robertson). If you need to short sell your house or property, or you need a quick sale to stop a foreclosure sale, you can Get Free* Short Sale and Foreclosure Help and Assistance from a Nashville Tennessee and Middle Tennessee Short Sale and Foreclosure REALTOR, Real Estate Expert and Real Estate Investor. (*Free: In a real estate short sale, the bank or mortgage company usually approves and pays all of Jim's commissions and fees.)

Good afternoon, all!

I apologize if this is not the proper forum for my questions, as this is all completely new to me.  I am an anxious first time home buyer who just entered into a contract on a home that is a short-sale with BoA, and am really hoping for a smooth process.

I will attempt to be as brief as possible.  Here is the scenario....

Home was listed 1 week ago as a short-sale.  The seller's lender is BoA, and appears to be the only lender.  The sellers refinanced their home in October 2010, and listed it last week for $6k under what they owe.  Nothing is known as to the reason they are proceeding with a short-sale 5 months after the refinance.

I jumped on the property as soon as I was alerted it was on the market (this is the 5th home I have entered a bid on and gotten into contract!).  Made offer same day for $15k under the listing price.  Once offer was made, we were made aware that the sellers have an attorney to mitigate between them and BoA, in which it was disclosed that me, the buyer, would be responsible for 1.5% of the contract price towards attorney fees.  Given this new information, we decreased our offer by the cost of the attorney fees, which is less than $3k.  Contract also states sellers to pay up to 4% of closing costs, an initial escrow deposit of $1k, and 30 days for bank acceptance or I or the sellers can walk away, with the max of 120 days.

Given this information, does anyone have a professional opinion on how likely it is BoA will accept, or what I can expect?  I instantly fell in love with this home, and have a 'little' flexibility if they counter (as I have been reading on here that they will).  I read several posts that suggested contacting the listing agent directly for any potential additional information they may have about what the bank will want, which I did...needless to say, she wasn't very receptive and said it was unethical for her to speak with me...I didn't know that and apologized profusely....I also don't want to upset my agent, but I am positive it will.

I am already pre-approved with SunTrust, and my loan is currently in underwriting and should be final within the next week or so.  I am approved for a 30-year fixed VA loan and am financing 100%.  In addition, I qualify for disabled veteran benefits.

Should I have offered more earnest money, or increased the number of days for bank acceptance, even though I really want this to go as fast as possible?  I just want to be well prepared for whatever may come my way.

Thank-you  in advance to any and all responses!