I have receive an approval letter from CitiMortgage that states the purchase price ($45K)and buyer as well as a substantial smaller pay off amount that they will take to settle the debt ($6K). Similarly to what a second mortgage letter would say... but the catch is that this property only has one lien.
What do I do?
Any advice will help at this point LOL
Exciting News! FHA Is Allowing People that Suffered through Recent Economic Hardships to Apply for a Home Loan with the FHA Back to Work Program.
In the not so distant past people had to wait 3 years or more after suffering through a financial hardship. Bankruptcy, foreclosures and other major financial disasters would sideline people for a number of years before they could buy a house again. However, all that has changed with the FHA Back to Work Program.
Previous Guidelines
For years the FHA program has helped people finance the purchase of a home with a modest 3.25% down payment. In general, the FHA rules for credit and employment history were more forgiving than conventional loan guidelines. However, there were strict rules about waiting a significant length of time after filing bankruptcy, losing a home to foreclosure, getting a loan modification or a deed-in-lieu.
New Guidelines
The Back to Work program waives waiting periods based on certain hardship situations. People that have suffered through the following types of problems are no longer forced to wait multiple years to apply for an FHA loan
* Bankruptcy (either Chapter 7 or Chapter 13)
* Short sale of previous home
* Foreclosure
* Modification of previous mortgage
* Sale of a home due to pre-foreclosure status
* Deed-in-lieu
Due to the recession of the past few years the government has given FHA the ability to relax their rules in order to help people qualify for home loans. Now people will only have to wait 12 months.
Meeting the New Qualifications
For borrowers that have faced a hardship like the ones described above they will need to meet a few qualifications.
First the borrower will need to prove that their current financial condition is recovered from the impact of the financial hardship.
Second, the borrower will need to provide proof that their income declined by a minimum of 20% for 6 months or longer. This can usually be shown by presenting federal tax returns and the supporting W-2 forms.
Finally the borrower will have to agree to complete a counseling session aimed at educating home buyers.
In addition to these items the borrower must re-establish their credit. This does not mean that the scores must be 700+. However, once the hardship has ended the borrower will need to have good payment history on all credit accounts in order to prove that they are able and willing to make their monthly obligations.
Types of Borrowers
The Back to Work program can be used for people buying their first home as well as people buying their second, third, fourth, etc. home. It can also be used with the FHA 203(k) program for people that wish to renovate or modernize a home. Even people that are currently in a Chapter 13 plan could be approved for the FHA back to work program. The court will have to grant permission for the loan and the borrower will have to meet the other requirements.
The recent recession has hit a lot of people and left a lasting impact on them. The Back to Work program is aimed to help these people put the past behind them and return to the stability of owning a home.
Additional Mortgage Information: Mortgage Home Loans Financing
I just received an email from our Seterus negotiator asking for the seller to sign a promissory note for $27,000 and make payments of $450 for the next 60 months. Is there any body who has received a fannie mae counter and been able to counter back at a lower amount and get approved??
Understanding a short sale approval letter is a critical skill for a real estate agent, homeowner selling on a short sale, investor buying on a short sale, and anyone affected by a particular short sale transaction.
Most banks approving short sales are national. This means they have loans in most states. However, they often have legal council for the states they have loans in. Because of this, often they will adjust their short sale approvals based on what works on the state were the property collateral to the loan is located.
This subject can get real technical. That would be outside the scope of this blog post. Lets focus on what the person selling on a short sale (homeowner) really want as first choice. That is to not owe after the short sale.
Just to not miss any components, there are three important concepts to understand. Here I am simplifying to the maximum.
Needless to say, all homeowners want a short sale. The question now is to know what is that the short sale letter actually means behind all that legalese wording.
How to Distinguish a Short Sale Approval Letter:
A short sale approval will always clearly state that the loan will be satisfied in full for less than the amount owed or very similar wording. See sample below.
How to Distinguish a Release of Lien:
A release of lien letter will always indicate that the lien will be released but the debt will not be satisfied in full. In addition, most likely, the homeowner will have to sign a promissory note at closing.
Oscar Morante
Ph: 971-222-3734
Fax: 866-844-7009
PDX Experts Real Estate, LLC
www.PDXExperts.com
534 SW 3rd Avenue
Suite 305
Portland, OR 97204
Real Estate Agent
Realtor
I am helping out on a short sale in Redwood City where Chase is servicing the first and second loan. What this means is that the owner has first and second mortgages that were originally gotten from Chase. These loans were then sold to investors and Chase maintained the servicing. This means that ultimately Chase no longer makes the decision about whether or not to approve a short sale. The problem is there is also a third lender, and the third lender wants a lot of money to approve the short sale. The buyer agreed to pay the third what he wants, but the investor for Chase's first loan said no way. I guess from that investor's perspective if they foreclose they do not have to pay off the second or third and they get to keep all the money. Maybe they will make more if they foreclose.
But maybe they won't. And in any case foreclosures are complicated and costly, and we have a ready willing and able buyer. Chase seems to have tried to convince the investor to take the offer. The Short Sale Department at Chase has even told us to submit another offer in an attempt to change the investor's mind.
I do not know if the new offer will make any difference, but I am immensely impressed with Chase's efforts on our behalf. I obviously am not privy to all of the number crunching as to who gets what if there is a short sale vs a foreclosure, but I do know at least Chase is really trying to help the borrower avoid foreclosure. That makes me feel pretty warm and fuzzy about them today.
If you have any questions about short sales in San Mateo or Santa Clara County please feel free to contact me.
Marcy Moyer
marcy@marcymoyer.com
650-619-9285
D.R.E. 01191194
Provident Funding!!!! Provided me a post christmas gift that I did not anticipate.
12/22 On Thursday of last week I submitted a complete package as instructed.
12/23 Contacted by negotiator countering offer giving us till Tuesday to answer.
12/27 Accepted counter and emailed negotiator new Hud1 and contract
12/29 RECEIVED AN APPROVAL!!!!!!!!
This is by far the fastest approval I have received. If any one else has experienced anything like this let me know. I hope this becomes the norm for Provident Funding and is not some type of once in a liftime experience.
Thank you Adam with Provident for the Christmas gift.
Oscar Lopez
Short Sale , Deed in Lieu, Loan Modification, Foreclosure, HAMP, HAFA in California and what they mean to you.
Under the HAFA program you have the option of doing a Short Sale or Deed in Lieu. According to current FHA guidelines you can buy another home 2 years after the short sale. The lenders are required to give you at least 120 days to market the home and obtain an offer. The lender does not have to give you more time and you are required to follow the guidelines set forth by the lenders. Many lenders are closing short sales sooner than 120 days so be prepared to move. The only thing I have seen that has been extending the short sale timelines is Mortgage Insurance.
A Deed in Lieu is when you sign the deed over to the lender and walk away from the house. The lender has to give you permission to do so and it has to be a clean marketable title. That means no other liens on the property, second mortgage, mechanics lien, taxes are paid, etc.
Visit my website: www.edsellsre.com
Can not stress this enough.....EVERYTHING on a short sale is negotiable, including ANYTHING that comes over on an approval letter.....
If you or the Seller does not like wording, commission amounts, or short sale consequences, then ASK THEM TO CHANGE THE LETTER!!!!
Most will if you negotiate properly.
Now go kick some butts!!!
Ben Benita, Speaker, Author, Radio Guest
BBenita@Comcast.net
The word "short sale" has certainly been a buzz word in the distressed real estate market we are experiencing in 2010. Howevermany Realtors and investors are still unclear on how to determine a real estateshort sale offer that is acceptable to the lender.
The following steps are to be used as a basic guideline on determining what tooffer the lender for a short sale acceptance.
1. Determine Fair MarketValue (FMV). The FMV can be determined by evaluating sold, comparableproperties in a similar or close proximity to the subject short sale property.A realtor will have access to the MLS (Multiple Listing Service) and can createa CMA (Comparative Market Analysis) for the subject property. This analysiswill identify sold comparable properties with same square footage, bedrooms,baths, garage and other similar characteristics as subject property. Requestthe realtors use a sold time frame within 6-12 months when pulling properties inthe immediate or surrounding areas. Usually the short sale lender will notconsider any sold comparables that are older than 12 months and that arefurther away than 2 miles from the location of the subject property. Find avalue here. http://www.bankofamerica.com/modular/index.cfm?city=enter&state=enter&zipcode=enter&template=hc_home_worth_modular&app=oma&sitename=modular&fulladdress=enter
2. Evaluating sold comps systematically. Contrary topopular and often misguided belief, you can use a formulaic system to work inyour favor when determining what to offer on the short sale property. Thissystem has been around for years, but for some reason you may have not heard ofit mentioned dealing with real estate. Here is the system. You will use the lawof averaging. The way this works is like this.
Let's say you have eight sold comparables thatare all similar in size, square feet, bedrooms etc. Here is how you apply theformula. You would take out the two highest comps and the two lowest ones andaverage the rest.
EXAMPLE:
You have a property you think is worth $145,000.
You have a realtor pull a CMA and you find eightsold comparable properties that match the criteria above.
The MLS shows the following:
$159,000
$154,000
$153,000
$161,000
$148,000
$143,000
$146,000
$151,500
Using our formulaic approach you would take outthe two highest sold comparables ($159,000 and $161,000). Then take out the twolowest sold comparables ($143,000 and $146,000). This would leave four othersold comparables.
$154,000
$153,000
$148,000
$151,500
-----------
You would then take an average by simply addingup the sum of all the sold comparables and dividing them by the total number ofproperties left. In this case, that number would be four.
Total: $606,500 divided by 4 = $151,625
You can reasonably justify the house may sellfor $151,625 instead of the $145,00 you originally estimated.
3. Revealing the ARV (After Repair Value). This terminologyis slang often used with real estate investors. It is similar to the FMV with afew differences made up by the amount of repairs the investor estimates theproperty needs in order to sell quickly on the open market using FSBO (for saleby owner) techniques and not using the MLS. It can be argued the ARV is more ofa guess or suggested value derived by using sold comparables from houses thatwere NOT sold by a realtor. One way to explain the difference is a realtor willtypically use a FMV and a real estate investor may elect to use an ARV. Anappraiser can use both value methods, but generally sticks to the ones thatcome from off the MLS. In my opinion... the ARV is a less accurate anddependable value than what come off the MLS.
4. Figuringout the BPO. The BPO (Broker Price Opinion) is perhaps the single greatestvalue factor the lender will use to determine the acceptance of your short saleoffer. The BPO is KING! BPO is a generalized opinion or value of a property thelender uses to determine what the short sale property is worth on paper. Theyare ordered by the lender and sent to a Third Party Company, such as BPODirect, First America, LandSafe, etc. These companies have a list of realtorsfor each state. The BPO's are ordered and conducted by realtors. The BPO can bean Interior or Exterior type. If an Exterior type BPO is conducted, it meansthe realtor (BPO agent) did not go inside the property to evaluate itscondition. This could be due to the homeowner vacating the house or not beingcooperative with the BPO agent when requesting a time to come appraise thehouse.
Dealingwith "Pretty House" type short sales (categories later defined),you will find the BPO will typically come in 10-20% lower than FMV or ARV.Based on this, you might consider offering 60% of the ARV or FMV value for yourinitial purchase offer. Of course, this depends on the amount of repairs neededfor the property. If you have what can be classified as a "PrettyHouse" short sale, which would show very little needed repairs, don'texpect to get a huge discount from the lender for it. If you cannot JUSTIFY areason for the lender to accept either a small or large discount ... don'texpect them to give one to you. This also dispels the myth that all housesheading towards foreclosure are good short sale candidates. They are not.
Here are some classifications and examples tomake it easier to determine how much of a loss the lender may agree to accept.
ShortSale Classifications:
PRETTY HOUSE
UGLY HOUSE
SCARY HOUSE
EXAMPLES:
* Pretty House: (Generallyin safe, desirable areas and houses selling fairly quickly)
ARV/FMV:$100,000
REPAIRS:$5-10,000 (5-10%)
BPO:$80-90,000 +/- 5%
* Ugly House: (Generallya light rehab or fixer-upper, handyman special house in fair neighborhoods)
ARV/FMV:$100,000 (With Ugly Houses this number tends to be the "as is" valueinstead of ARV.)
REPAIRS:$11-20,000 (11-20%)
BPO: $80,000+/- 5%
* Scary House:(Generally in areas that are not desirable, massive repairs needed, lots ofcrime isn't uncommon)
ARV/FMV:$100,000 (With Scary Houses this value tends to be the "as is" valueinstead of ARV.)
REPAIRS:$35,000 (21 - 35% +)
BPO: $65,000+/- 5-10%
You can have a Scary House located in a great,fast selling neighborhood and combination of the others, but generally speakingScary and Ugly Houses will not be located in excellent neighborhoods. Rememberthis is a guideline, not an exact science. The BPO agent will generallyconsider the "as is" value for both Ugly and Scary Houses.
Now let's discuss the different loan typesthe lenders will consider a factor per short sale submission.
5. Learning the loan types. When you learn these, you canincrease your closing rate for lender accepting your short sale by as much as50%! Here's why: if you know more about any property, it provides you betterleveraging and ultimately negotiation strategies to target. Not all short salesare created equal.
* Conventional loans.These loans are found all over the place. They provide the most flexibilityespecially dealing with short sales. Using the $100,000 example, you mightstart out your offer submitting 60% x 100,000 (FMV) = $60,000... The $60,000 isactually 70% of the BPO Price. However it is very common to see the lenderaccepting around 80-85% of the BPO price, which would be around $68,000 -$72,250.
This modelcan fluctuate a little bit, but this is a common average. The BPO (valueopinion also considered the PERCEIVED value of the property) to the lender isthe MAIN FACTOR. Therefore in this example if you thought the BPO was going tocome in around $65,000 ... You would take 82% of THAT number, which would be$53,300. The lender may very well accept $53,300 based on their perception ofthe value of the property (their asset).
* FHA loan. I repeat:this is not a scientific grading scale. It is the model used by many short saleinvestors as a guideline. You can and will have other factors that make youstray from this. If you are dealing with an FHA type loan or any governmentbacked loan, they are going to recoup a set amount if the foreclosure iscompleted. For example with FHA loans, the insurer will basically guarantee thelender 82% of an FHA Certified Appraisal amount. Notice I did not say BPO. Forthese loans, you will need an FHA Certified Appraisal for the lender toconsider in their evaluation process on the property. The BPO will not sufficeon these types of loans. You can massage the numbers 1-2%, but 82% is listed intheir guidelines.
Here is acompiled list that I provide in my home study course. You can go online to finda similar list for free too.
o All FHA loans are insured by the federal government.
o As long as the lender follows FHA guidelines, they are guaranteed at least82% of the "as is" appraised value.
o FHA-type loans will not use a BPO. Instead they will require an FHA CertifiedAppraisal. Use the same techniques on the FHA Appraisal that you would for atypical short sale deal.
o If the debtor is in bankruptcy, no short sale will be approved.
o If the property was used as a rental for more than 12 months, no short salewill be approved.
o If the homeowner does not occupy the property, no short sale will be approved.(There can be exceptions to this.)
o The cooperating lender is eligible to receive $1,000 from FHA for performinga short sale.
o Seller MUST fill out FHA specific forms for approval. This will include anApplication to participate and a Homeowners Counseling Certificate, all ofwhich the lender will supply in their FHA Short Sale Packet.
o FHA loans must be at least 30 days past due for short sale consideration.
o The lender is required to give a copy of the appraisal to the homeowner.
o The homeowner can receive up to $1,000 directly from the HUD 1.
o FHA will not go after the homeowner for a deficiency once the short sale isaccepted and closed.
* VA (Veterans Affairs)loans. These type of loans have a guarantee of 88% of the appraised value ofthe property.
o Designed for veterans.
o These loans are federally insured.
o VA guarantees the lender at least 88% of the “as is” appraised value.
o A VA appraisal is usually automatically ordered once the debtor becomes 60days past due.
o The appraisal value can be appealed by the homeowner.
o The VA will work the homeowner and do everything possible for the homeownerto retain VA benefits.
Note:Absolutely NO BPO's allowed. All VA loans require certified appraisers todetermine value.
* Freddie Mac loans(FDMC).
o FDMC will not allow the buyer of a short sale property to be anyone but anindividual. This means the buyer on the Purchase and Sale Agreement and HUD 1cannot be a company, LLC, trustee, or anything of the sort. The purchaser mustbe an individual name.
o Freddie Mac will almost always require that the property be listed with arealtor, which means they are going to ask for a Listing Agreement. If theoffer nets the lender less than 92%, Freddie Mac will require that the propertyis listed for at least 90 days before approval will be issued.
o The lender has the authority to approve short sales at a threshold of 92% orhigher. Anything lower than 92% must be approved by Freddie Mac.
o Freddie Mac has a high customer service standard, which means that if thelender is not responsive to your offers, they are going to want to know aboutit. This creates another point of leverage to get your offer accepted.
* Fannie Mae (FNMA).
o Fannie Mae has a high customer service standard. If the lender is notresponsive to your offers, they may actually step in and take over the shortsale negotiation process.
o The lender has the authority to approve short sales at a threshold of 90-92%or higher. Anything lower than 90% must be approved by Fannie Mae.
o Fannie Mae rarely requires that the property be listed with a real estateagent.
o Fannie Mae will allow the lender the authority to approve short sales at athreshold of 90% or higher, but will also allow a heavier discount if needed.
For Fannie Mae, Conventional, VA and FHA shortsales: The buyer can be any entity, company, person or trust (the bank mayrequire written proof of the company or of the trust). Most of the loans thatyou come across regarding short sales are going to be conventional loans.
6. Memorizing the minimum accepted NET offers (of the BPOor FHA appraisal).
* VA 88%
* FHA 82%
* Freddie Mac (FDMC) 92%
* Fannie Mae (FNMA)90-92%
* Conventional Loans 80%(no set limit)
IMPORTANT: Understand that these are NETpercentages to the bank. If you have your offers padded with things likerealtor commissions, closing costs and additional fees, these are NOT to beincluded in this percentage.
EXAMPLE: The BPO on one of your deals comes in$100,000. Offers that may be accepted based on the above criteria would be:
* VA 88% = $88,000
* FHA 82% = $82,000
* Freddie Mac (FDMC) 92%= $92,000
* Fannie Mae (MNMA)90-92% = $90-92,000
Something else to consider is this: all LOCALbanks, usually the smaller ones, will almost always NOT ALLOW more than a10%-15% discount off the property depending on the amount of repairs needed tofix. Local banks tend to be more conservative in their approach to discount theproperty. This is partly due to the network of local affiliates the bank cancall to get more than one opinion of repairs needed or value of the subjectproperty.
7. Dealing with second mortgages and junior lien holders.If you are dealing with a second mortgage holder, you are basically going tonegotiate with them the same way. You will find that many 2ND Mortgage Holderswill not require as much information to make a decision quickly on discountingtheir loan amount. They will generally order a BPO or have an appraisal onfile. It could be older or current. Make sure and ask about it depending on thenumbers you find out dealing with them. Sometimes a lender will actually tellyou a BPO price. Now before you get all excited and think that is GREAT…thinkagain! Typically, they will LIE to you about the price and actually inflate it.Yeah…I know… you never thought lenders lied, did you? Well…they do…and they doit a lot.
When you are dealing with the 1st mortgageholder, it is not uncommon to find out they will only allow $500 - $1000towards paying off any 2nd Mortgages, Liens, Judgments, etc. All lenders are alittle different, but the norm is $1,000. This is another reason why you willdeal with more 2ND position lenders that are willing to take pennies on thedollar to satisfy their loans with the homeowner. In fact, you will oftennegotiate for 80-90% discounts or get approval for 10-20 cents on the dollar!It is can be beneficial if you get the 1st to accept a short sale and thenpresent that information to the 2nd IN WRITING! If the 1st is willing to take ahit, where does that leave the 2nd? This can be a powerful negotiation technique.
Remember any junior lien-holder who is holdingan over-leveraged or nearly over-leverage asset (the house) is in a HORRIBLEposition. They realize this and if you can build a strong case why it would bein their better interest to discount their holding position rather than risklosing EVERYTHING at the foreclosure auction sale. It will not only generallyhelp them, but it can make you, the investor, a HUGE PILE OF MONEY. Why? Youjust created equity out of thin air. That is the power of short salenegotiations.
In closing, this is probably the most concise definition of putting together anadequate short sale offer ever printed. The power of this document once putinto action can literally make the user of it extremely wealthy. Other realestate home study courses, books, audios etc for the most part leave out whatthis document disclosed. It is the "meat" of preparing a satisfactoryshort sale offer. There are no more secrets you need to know about doing shortsales. I just revealed them all to you. If you take the steps for preparing ashort sale offer exactly as shown above and apply them to your real estateshort sale business; the sky is the limit for your continued success gettingthem approved.
*This is info found on the internet that I feel is very useful!
Feel free to contact me with questions!!
KEMP HOOPER
1millionandup@gmail.com
843 478 6814
I represent a seller who has a first and a second with B of A. The second is a HELOC. The file is hardly short but just short enough that we needed to request a debt relief on the HELOC.
This file went very smoothly through Equator since we started it on January 19th. By March 18th we had a counter offer and on March 23rd we had an approval letter for escrow to begin closing the file. Very cool!
The buyers completed all of their inspections, new loan contingencies are completed, seller vacates the home for possession by April 1st, buyer signs his loan documents in escrow and the file funded! HALT!~ Step away from the transaction……..there has been a development.
Equator or Bank of America is requesting a strange payoff for each loan. Remember that the first is not short and is scheduled to be paid in full. The second or HELOC is the short one. Well, Bank of America is requesting that escrow pay the first trust deed $244,000 on a $190,000 balance and $12,000 towards the second on a $115,000 balance.
Is this feasible? I suppose, maybe. How will escrow explain this to title? What most concerned me is the amount of the forgiven debt on the recourse loan which could lead the seller into some serious state income tax issues.
We have been trying to get an explanation from our negotiator through the Equator system and have had zero response. Three calls a day to all departments with no answers either. The buyer’s loan has now been refunded and all parties are very discouraged as you can imagine. Any idea on how to proceed? The file is still showing as approved until May 3rd.
**********************************
like buttons
************************