Blog

I just wanted to drop you a note to express my heartfelt thanks for being there when someone needs you. All too often, the pursuit of wealth and duplicity associated with gaining the inside track to the "All-Mighty Dollar" seems to win over and corrupt even the most honest & upright individuals among us. Thankfully, you are not among them! 

We have known each other for a short 2-3 years but it seems as though we've known each other forever. We are kindred spirits, you & I. We believe in fighting for the oppressed, the put upon, the lied to...the "Little Guy" who for one reason or another cannot or doesn't know how to fight back against the Corporate Giant banking industry in regards to protecting their homes from, oftimes, illegal "landgrab" foreclosures. It was through our dedication to fight for them that we have not only become business acquaintances but good friends.

Friendship in both personal as well as professional relationships requires a commitment to truth, honesty, respect and a dedication to others as well as oneself. You have outdone and outlasted many of the so-called "professionals" I have known in both my personal and professional lives. I can't count the times that I've called you with a question that I had that we didn't go into a long discussion & "learning exercise" that has expanded my expertise & ability to help homeowners to fight back against unscrupulous and underhanded banks. You've always been available, open and honest in your counsel, yet compassionate and understanding to the plight of the homeowner. For these qualities in you, I'm truly thankful.

In closing, let anyone who may question your ethics, who may doubt your honesty or think otherwise of your dedication contact me, personally. For all that you've done for me & everyone whose lives you've touched you are owed a huge debt of gratitude. If there is EVER anything that I may do to help you or your cause, PLEASE don' hesitate to call me!!

Sincerely
Randy Dant

I would highly recommend the MIRS Service to family and friends. In fact - I have already done so. Janet was not only competent, extremely knowledgeable and factual, but she has always followed up on commitments she made to me. After the COTA was complete, she was also able to refer me to an attorney, Dale Wiley who was successful in stopping the foreclosure process on my home. The whole process was a pleasant one. The end result was what I had expected, no surprises- which was such a relief in such a stressful time. Thank you for providing such a valuable service to the average homeowners who would otherwise not have a clue about how to stop their foreclosure!

Sincerely
Gordon and Jeannie Merritt, WA

Make a difference! Save your home with this FREE report now!
Click here for more info! http://bit.ly/get-free-info

In a briefing by Credit Suisse this week, the financial giant’s opinion was that reducing principal balances of underwater mortgages is a risky idea that has not been shown to keep underwater borrowers from later defaults.  In my practice as a Florida real estate lawyer, that opinion flies in the face of borrower sentiment.  The guiding force in the Credit Suisse statement seems to be the “moral hazard” argument, coupled with statistics about the failure of principal reductions helping homeowners.

As reported by Bloomberg News, Dale Westhoff on behalf of Credit Suisse said that of the 11 million “underwater” homeowners, about 6.5 million have never missed a payment and 2 million more are making on-time payments after delinquency.  He said that widespread principal reductions may drive defaults much, much higher as borrowers seek the aid.  But he also said that such wholesale principal reductions have never been done before and the associated risk is unknown.  Furthering that argument, he said that if principal reductions are offered, it may create the concept that the lenders are guaranteeing the value of homes.

Others don’t share the same view.  I for one find that 50% of those that seek my assistance have decided that without a meaningful principal reduction, they are merely overpaying rent and having a debt obligation as well.  This sentiment was predicted as far back as 2001. [See my article A HOME WITHOUT EQUITY IS JUST A RENTAL WITH DEBT]. 

While Fannie Mae and Freddie Mac maintain a no principal reduction policy, New York Federal Reserve Bank President William Dudley said this month that without a significant turnaround in home prices and employment, a substantial portion of deeply underwater home loans (as in Florida) will ultimately default absent a realignment of principal to market value.  This concurs with the findings I make in my office everyday by speaking with troubled borrowers.

Will the argument that principal reductions will bring out a flood of applications for similar aid hold true – I think the estimates of that flood are probably understated! - At least here in Florida.

The problem has been quantified by specialists as needing to avoid 8 to 10 million more distressed property sales through the application of principal reductions.  Although some programs for “short refinancing” are in effect, with 125% caps that is not enough in the hardest hit states – where the market value drops are far greater and the bulk of the problem loans exist.

From the macro viewpoint, short sale guru (as in billion dollar bets that the mortgage bonds would fail) Greg Lippmann wonders what the big deal is – since investors write down their portfolios anyway and have been doing business like this for years.

 It seems to me that writing down the loan at the borrower level will have the added benefit of lowering losses on the loan underlying the mortgage bonds, therefore stabilizing that market.  Without the help to the first tier borrower – the homeowner – the homeowners’ later default simply makes the foundation upon which the bonds are created subject to disintegration.  If we don’t see principal reductions then this is going to be a very slow recovery.  If we do see principal reductions we are liable to experience “non-qualified” borrower revolt and a new era of lending and doing business a very different way.

-----------------------------------------------------------

Copyright 2012 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.

See our easy to understand articles at:

TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES

You may have been reading about Bank of America short sale approval letters and some changes that have occurred. The Bank of America Short Sale Approval Letter has had various versions dealing with deficiency of the promissory note. This article will look at the BoA short sale letter recent changes.

History - Before June 2009

Until June 2009 the typical Bank of America short sale approval letter was not a release of mortgage and a release of liability of the indebtedness (release of the note). My February 2009 article LENDER SHORT SALE ACCEPTANCE LETTER EXAMPLES - READ WITH CAUTION! contains a copy of the pre-June 2009 short sale approval letter. In it you see the language, "Upon receipt of the funds the bank will release the lien. The deficiency balance will be reported to the credit bureaus as "Charge Off" collectable balance. Liabilities for the deficiency balance to be determined."

After June 2009

After June 2009, the Bank of America short sale letter was materially changed in content and in look. The simple letter was gone. Now there was a form letter with distinct sections, one of which (the 2^nd and 3^rd paragraphs) states, "BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above."

The next paragraph deals with the demand for a "new" promissory note with different terms than the original promissory note (usually with zero interest and a different term for amortization), and states, "If this short sale is contingent upon BAC Home Loans Servicing, LP and/or its investors receiving a promissory note, we will reserve the right to collect the full amount on the new promissory note which may lead to us pursuing a deficiency on that balance should the need arise.

After August 2010

Beginning in late August 2010 (so I have read) the BoA letter language was material changed. The new form used language that states, "Upon receipt of the agreed amount, BAC Home Loans Servicing, LP, and/or its investors will waive the remaining balance due on the above referenced loan and release the borrower from further obligation therein, and waive all rights to pursue further judgment or deficiency. BAC Home Loans Servicing, LP will report the debt as "settled for less than the amount owed" and issue a 1099 for the remaining balance." Now I have my hands on just such a letter.

Here is the post June 2009 BAC short sale letter:

The first paragraph in the above letter is actually very confusing and conflicting in its language. The reason for this is that the last two sentences that refer to tax consequences makes the reader think that this is a forgiveness of debt. This is because there are no material tax issues with the lender pursuing their deficiency - but there are definitely tax consequences when there is forgiveness of debt. (See my article which by its title says it all -- SHORT SELLER STILL MUST DECLARE INCOME ON SALE!). Why that language was there was because the lender "may pursue a deficiency judgment". In reality, from our experience many of the release of mortgage documents received from Bank of America after the short sale using this letter contains language that the promissory note is "fully satisfied" or "paid in full" or that the "indebtedness is satisfied", or similar language. In a few cases our clients reported collection efforts instituted by BoA, but in each the presentation of the recorded release document with the magic payment statement resulted in the collection effort being seemingly abandoned. Five years (the Florida statute of limitations to file a suit on the deficiency) has not yet run, so this supposition still has some time to be proven.

The next paragraph in the above letter is about the collection on a promissory note and is simply that the new note is a new obligation and thus the lender can sue separately on this note if it is not paid. That is simple enough. When there is an absolute need for a promissory note, I suggest to some clients to accept that offer because many of these notes get further reduced based on a present cash value payout since the NPV (net present value) of a zero percent interest note for a relatively long term (we see 10 and 20 year terms) carries a hefty discount. It takes some time (but not much) before a deal can be struck for a discount, but could be a viable option for a seller.

Next I have displayed the new BOA short sale approval letter. Unlike its predecessors, it is the first clean, clear and understandable full deficiency waiver letter Bank of America has produced. Since there is no new promissory note, that paragraph is missing. The language is so clear; I don't see what I can add in this article to make it more understandable. As expected, it mentions that a 1099 will be issued for the forgiven portion of the note, and there will be unfavorable but accurate credit reporting on the borrower's credit report. The next sentence in the letter is actually important. Some people are actually worse off because of a short sale with forgiven debt because they are liable for the IRS tax bill that results. If the IRS tax bill is a debt that will be impossible for the borrower to honor, and no arrangement for lessening that debt is available, the borrower may actually be jumping from the frying pan into the fire. In such cases some other alternative, such as bankruptcy may be beneficial. Note that if you incur a tax liability from a short sale forgiveness before filing bankruptcy, it may not be dischargable! Thus careful planning is necessary.

Here is the post August 2010 letter:

Please realize that currently BoA is using both letters, depending on numerous factors not all of which anyone outside (and probably inside) BoA can recite with certainty. In fact you can see that these letters were both received in first 2 weeks of November.

The question comes up when does BoA issue one letter or the other?? My first thought would be that the primary residence got the waiver language. Wrong! This was an investment property and the seller has multiple properties. As you may or may not know, BOA is usually not the investor who owns the promissory note and mortgage - but BoA is the servicer and given the authority to negotiate the terms of the short sale, subject to final approval by the investor. That is why different lenders have BoA issue different terms for their short sale approvals, whether it be a contribution of cash to the short sale, or a post closing promissory note, or a residual deficiency option.

Copyright 2010 Richard P. Zaretsky, Esq.

------------------------------------

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, email: RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.

See our easy to understand articles at:

TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES