fLORIDA (15)

Green Tree Short Sale rental property - Florida

This is a great site and a great resource. Thank you to all the experts providing their time and knowledge to help. New here so forgive my lengthy post.

I would very much appreciate some guidance with the early stages of a short sale process with Green Tree.

Some quick facts:

• Short sale paperwork submitted two weeks ago for one property, 2nd to follow shortly.
• Only response from GT so far was to request payment. After refusal from seller, GT representative asked for further details on hardship letter (she felt it was not enough)
• Cash buyer is interested in both properties. Ready to purchase if Green Tree approves.
• Two condos located in West Palm Beach/Greenacres, FL area.
• Approximate market price is $50k-$60k each. Less than a third of the initial purchase price.
• No second mortgage
• HOA fees paid up to date
• Both are currently rented
• No payments made for October and November 2012

Questions:

1. Green Tree rep asked that hardship letter be amended to elaborate on the hardship. Does the initial hardship letter have to include all documentation (Figured info would be provided as requested from GreenTree)?
2. How should the rental payments from both tenants be handled?
3. Seller has owned property since 2005. Owns two other properties that are not underwater, one being primary residence. Overall debt exceeds income on a monthly basis and needs to get out from under the Florida properties. Other hardship factors are; care of elderly parent, expense to maintain properties, car needed for work has recently broke down and notice from employer of job abolishment. Any tips on when and what to provide in regards to making the hardship case? Seller has decent income but is tentative on how to present the hardship properly.



Regards,
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As always please call your CPA/Accountant or the IRS for detailed info. about your specific situation.  Here is the IRS publication that deals with cancelled debt.  One of the key things distressed sellers may want to look into is insolvency.

IRS for 4681 re: Cancelled Debt

Please contact me if you are a Broward county Florida resident who has questions about short sales.

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Working on a short sale for a divorced young lady in Pembroke Pines, FL..  Soon after listing the property I placed a regular combo lock box on the property since it was vacant.  Soon after I get a call from an agent stating there is no lock box on the property!  I then found out that Chase had called my client and told her "we need the lockbox code so we can do a property condition report".  Well of course my client gave them the code.  Chase then proceeded to throw away my lockbox and change the locks!  It took months and months of calling Chase to finally mail me a key so that we could have access to the property. 

 

What's the takeaway?  As a distressed seller always refer any questions about accessing the property back to your agent.  Since this was the first time this had happened to me it is now knowledge that I pass onto every seller who is short saling a vacant property.  Chase's response is that the property was "abandoned" and they were protecting their collateral.  My take is they were successful in trying to get away with taking possession of a property they do not own!

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November 1, 2012 short sale changes

 

These changes are to streamline the short sale process and have the goal of shortening the timefram of a short sale completion.  Starting Nov. 1, 2012 even borrowers that are current on their mortgage are eligible for a short sale on loans where Fannie and Freddie are the investor-as long as a hardship still exists. Some more benefits are:

  • Relief for those underwater who need to move over 50 miles for a job
  • Waive right to pursue deficiency judgment in exchange for financial contribution when a borrower has sufficient income or assets to make a cash contribution or sign promissory notes
  • Reduced or eliminated DOCUMENTATION for those borrowers who have missed several payments, have low credit scores and serious financial hardships
  • Offer up to $6,000 to second lien holders to expedite a short sale

The last bulletpoint in my opinion may lead to a mini wave of short sale approvals PRIOR to November 1, 2012 because currently the junior lien holders receive a max of $8500 in a HAFA short sale.

Also interesting to note is that from Nov. 1, 2012 the HAFA program will be known as a Standard Short Sale/HAFA II.

 

However, borrowers who take advantage of a short sale will need to wait at least 2 years for a new mortgage that is backed by Fannie Mae or Freddie Mac.

 

Just a refresher, the Federal Housing Finance Agency (FHFA), the entity that makes these new changes is the agency that regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.  These GSEs (Government Sponsored Enterprises) provide more than $5.7 trillion in funding for the U.S. mortgage markets and financial institutions.

If you or someone you know is a distressed seller in South Florida, please have them reach out to me today!

 

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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.

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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

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PRESENTING THE SHORT SALE ADDENDUM YOU CAN'T SIGN!   Agents hold on to your wallets as this could cost you big time!  This is just too big and important to let one blog article suffice.  And developments on this are occurring quickly.  The problem was pointed out in my ActiveRain re-blog Freddie Mac Short Sale Addendum - Item #13 - I DON'T THINK SO!! on September 9, 2011.

 

On September 3rd there was a telephone conference call between ALTA (American Land Title Association) staff in Washington, DC and Freddie Mac’s Short Sale team to specifically discuss the addendum reproduced in Freddie Mac Short Sale Addendum - Item #13 - I DON'T THINK SO!! .  No resolution was then reached and as of today, none has been presented.

 

According to the below emailed alert to certain ALTA members (including our title underwriter), the problem with the document goes much further than even reported in my earlier blog article.  ALTA points out that (1) the document requires closing and escrow agents to certify information that is not available to them; (2) the document places a negligent misrepresentation standard on the escrow / closing agent that requires the escrow / closing agent to use reasonable efforts to determine if the transaction is arm’s length – without setting forth what those reasonable efforts would or could be; and (3) the document requires that the document be signed by the escrow / closing agent individually, without corporate protection, meaning that if there is a loss because of fraud or misrepresentation by any party to the transaction, the agent could be fully and personally liable. SINCE REAL ESTATE AGENTS ALSO SIGN THIS DOCUMENT, THE SAME LIABILITY AND RISK AFFECTS THEM AS WELL.

 

I am checking with my E&O carrier to see if they will cover such a claim.  If they don’t, then I cannot risk my own capital and family wealth for the meager fees of a short sale closing, and I suspect anyone who actually realizes what this document does, also will not close such a sale.

 

For any of you that think this is negotiable, here is a response I got today when I told a Bank of America negotiator on a Freddie Mac loan that I can’t sign if the E&O won’t cover the claim. “Thank you for letting me know.  Without the document we cannot proceed with the short sale and must decline the file.  How long do you think it will take for your E & O carrier to make a decision as to allow you to sign the document?  I cannot have any outstanding files, so should I decline the file at this time or do you think this is something that can be checked on quickly?

 

Fraud is a big problem with some markets of distressed property and I have written about it in several articles - often times with flipsters phoo phooing the concept as being fraud: SHORT SALE FLIP - QUESTIONABLE METHODSShort Sales and Title Insurance - Critical Look at Hybrid Closing SchemesIS SHORT SALE FLIPPING CRIMINAL ACTIVITY?.

 

ALTA is looking for examples where the Addendum is causing hardship to borrowers and consumers.  If you have any please send the information to Steve Gottheim, Legislative and Regulatory Counsel to ALTA at steve@alta.org.

 

Here is the information transmitted by ALTA:

 

 ALTA Meets With Freddie Mac Short Sale Team About Troublesome Addendums
On Friday, ALTA staff held a conference call with members of Freddie Mac's Short Sale team about the industry's concerns over new short sale addendums. These addendums are intended to help prevent short sale fraud (which is on the rise) by requiring all of the parties involved in the transaction to sign an affidavit attesting that it is a true arms-length transaction.

The addendums present three concerns for the industry. First, the affidavit requires a closing or escrow agent to certify information that is not available to them, in particular whether the transaction is arms length. The relationship between the buyer and seller may not be evident from the public record information or their identification documents. Second, the affidavit places a negligent misrepresentation standard on the escrow agent. Unlike a "to the best of my knowledge standard" a negligence standard requires the escrow agent to use the reasonable efforts of an ordinary person to determine whether the transaction is arms length. Instead of laying out clearly what the escrow agent must do to release themselves from liability, the escrow agent is at risk of liability if fraud is discovered after signing the affidavit. Lastly, the affidavit requires the escrow agent to sign the transaction in a personal capacity as well as in a corporate capacity. Thus if fraud is discovered, then Freddie or the servicer can go after the escrow agent's personal property and monies in addition to going after the corporation.

Before signing any of these addendums, ALTA suggests escrow agents reach out to their attorneys to discuss the legal risks and whether the agent has the authority to sign the document. It might also be good practice to review your companies E & O insurance policy to determine whether these addendums are within the scope of that policy.

While the short sale team expressed sympathy for the title industry's concerns and were open to discussing potential solutions, Freddie's general counsel is not keen on removing the requirement all together unless the problem becomes a bigger issue. Over the next few weeks, ALTA staff will be working with interested parties to develop potential solutions. If you would like to learn more or have any comments please contact ALTA's Legislative and Regulatory Counsel Steve Gottheim at steve@alta.org

 

I have still not heard from my errors and omission carriers on this issue.  An initial "from the hip" reaction was that E&O did not cover this as it was not the performance of legal services.  But the respondant did not realize that a "short sale facilitator" is just the title on the document and we have a written retainer with the client to perform legal services including legal advice and guidance on the completion of these and the other myriad forms.  So "the jury is still out".

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Copyright 2011 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  New Website www.Florida-Counsel.com

See our easy to understand articles at:

TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES

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Florida Short Sale Listings

I am still amazed at the number of REALTORS® that continue to list short sales and either attempt to process the short sale themselves and/or turn the file over to a third party title company. In many of these instances I have noticed the title company charging “short-sale processing fees” at closing in direct violation of the law. In fact, such a charge may be considered a felony as it violates Florida Chapter 494.

 

Federal and Florida laws involving short sales and their processing have continued to evolve over the past 2 years. Attorneys are now a most necessary and intricate player in the short sale process.

 

Florida Sellers be aware that it is unlawful for anyone other than a Florida admitted attorney to charge a fee in order to process a short sale. Real estate professionals and/or title companies are NOT permitted to charge any additional fees relating to the short sale and/or its’ processing. Only standard commissions and/or fees are deemed permitted.

 

Many title companies are attorney owned. However, such ownership does not make it lawful for that title company to charge a short sale processing fee. Title companies do not provide legal representation. Most typically, the title company’s attorney owner also does not provide legal representation to either the Seller or Buyer; their representation is typically considered transactional.

 

In the typical short sale all Sellers should consult with a competent attorney familiar with the short sale process and possible long term financial consequences. The short sale negotiations with the lender(s) should be handled exclusively by the attorney providing the Seller with legal representation. Such representation will typically be detailed in a representation agreement between the Seller and their attorney.

 

Our company routinely requires any and all short sale Sellers to consult with an attorney. Typically, we introduce the Sellers with a specific attorney that processes almost 100% of our short sale listings. This attorney has extensive short sale experience along with substantial real estate, litigation and bankruptcy experience. This provides for the best combination of professionalism and compliance with the law. Furthermore, our short sales are processed much more efficiently and to the benefit of all concerned parties.

 

I am not an attorney and this blog is not intended to provide legal advice. Quite to the contrary, my advice as a real estate professional and recognized expert is that all Short Sale Sellers should engage the services of an attorney to process their short sale negotiations. Do not reply on the REALTOR® and/or a title company to provide such important legal representation.

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It is not too often we "in the trenches" of short sale negotiations get to understand why lenders act the way they do through "behind the scenes" documentation. However a couple of months ago we did get some "lender to servicer" documentation that I thought was interesting enough to pass on to my ActiveRain readers. Note: the documentation you are about to read states in BOLD CAPITALS, "YOU MAY NOT GIVE A COPY OF THIS COVER LETTER TO THE BORROWER, THE CLOSING ATTORNEY/SETTLEMENT AGENT, REAL ESTATE BROKER, OR ANY OTHER PARTY". I would add that I am not sure how we obtained this information, but it is not the first time I have seen documentation like this.

FreddieMac is along with FreddieMac, one of the largest owners of residential mortgage paper in the country. Their procedures for processing the short sale approval should be intriguing to us that do short sales. How FreddieMac instructs its mortgage loan servicer is also important to understanding the short sale process. The document pages that follow relate to a loan that has already closed as a short sale. Some of the instructions refer to the Single Family Seller/Servicer Guide and FORM 104SF.

You will see that the documents have the "feel" of a short sale approval letter you might see from any of a number of the major loan servicers - but what you have below are the terms and conditions that the lender is giving to the servicer of the mortgage. For those that may not know, the "servicer" is the pseudo lender - they have the look and feel and touch of a lender but in fact they are only a hired agent to work as a liaison between the actual lender and the actual borrower, for which the servicer is paid a percentage of the interest received every month from the borrower as payment on the note and mortgage.

Enjoy reading. You will probably have to pause every once in a while to remind yourself that these are instructions NOT to the borrower, but to the servicer as given by the lender.

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Copyright 2011 Richard P. Zaretsky, Esq.

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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 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:

http://:activerain.com/blogsview/1153345/table-of-contents-short-sale-and-loan-modification-articlesTABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES

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5 Reasons Foreclosure Prevention Is Like Halloween

1. Tricks

I don’t know if kids do this anymore, but I remember part of the fun, the anticipation, of Halloween was coming up with a “Trick” to offer in exchange for candy – a joke, rhyme, hand stand, armpit noise or, if you were desperate, a song. Foreclosure prevention is like that, except sometimes the trick is on the homeowner. You go to the lender’s door, ring the bell, ask for short sale approval and the bank requests a trick. You do the trick, even though it’s ridiculous (e.g., provide the birth certificate of your childhood pet), stick out your palm for your treat…and…and…what the?!...the lender requires another trick. Six months worth of tricks and you might get a treat.

2. Treats

Possibly the best part of Halloween – the treats! For a kid, heaven is having to use two hands to lug home a pillowcase weighed down with candy. Sorry, there is no candy in short sales. But there are treats. For a homeowner, the treat is to “hit the reset button”, to be released from an oppressive situation & constant lender harassment, without the stigma of foreclosure. For lenders, the treat is being spared the cost to preserve vacant property and the legal cost involved in foreclosure.

3. Costumed Characters

Every year, the National Retail Federation publishes a list of the most popular costumes (Michael Jackson in 2009; Spiderman in 2004), but some costumes are classic: Zombie, Super Hero, Vampire, Witch. I have yet to encounter Spiderman in any short sale transaction, but I’m convinced that a prerequisite for hire as a bank’s short sale negotiator is Zombiehood. Bank Negotiators and Zombies. Not. Human. Not human! Both have that risen-from-the-dead, jerky, robotic shuffle. And they l-l-l-o-o-o-v-v-v-e feasting on human flesh. As a Realtor specializing in short sales, I have witnessed scenes of chaos and panic as whole neighborhoods are consumed by Hells Fargo’s (Goo-For-Brains) Zombies.

4. Terror

Halloween and Short Sales elicit more than just fright; they both give birth to Terror. Fright is like a sudden shock – painful, but not enough to leave a noticeable scar and it’s over quickly. Terror implies something more intense. Dictionary.com’s definition of terror is “extreme fear in the presence of danger or evil”, and describes it as “prolonged…and may refer to imagined or future dangers”. For months, homeowners behind on their mortgage payments (1 of 5 Florida homeowners) dread opening the mail or answering the phone. They lose sleep at night, imagining the worst, nightmare images of the Bank of Evil tossing their belongings in the street as the neighbors look on. Halloween terror is also prolonged, but only until the movie is over.

5. Spooky Houses

For homeowners, the place that once represented the future, their piece of the America Dream, is now laced with cobwebs. Windows that formerly framed Norman Rockwell holiday scenes are now hidden behind tightly drawn curtains. Crabgrass replaces flower beds. Picket fences, once proudly painted white, fade to gray in the moonlight.



Disclaimer: My husband, the historian, read this and explained that “trick or treat” actually referred to a bribe, as in, “Hand over the sweets and I won’t egg your house.” Whatevs, Honey.
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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 2nd and 3rd 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:

DEFICIENCY LETTER BoA

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:

Deficiency Waiver letter BoA

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.

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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

Read more…

Condo Association Fees In Foreclosure

When Homeowners have financial troubles, the last thing they fall behind on is the mortgage, but the first thing they stop paying is Association dues. Because of this, many Condo & Homeowner Associations in Florida are squeezed for funds and have become aggressive in pursuing every penny. They now have legal representation, have been successful in litigating similar cases, and are not as likely to back off.

What bank negotiators don’t realize is that if the property goes into foreclosure, it could end up costing radically more than just the delinquent Condo fees.

1. Special Assessments:

Unlike delinquent maintenance fees, Special Assessments are not extinguished in a foreclosure because they are part of the property’s cost basis. In other words, the assessed amount becomes real estate -- part of the property. Example: Structural improvements or repairs not covered by association reserves. Delinquent maintenance fees are part of an Association’s receivables, but assessments are part of the real estate itself. As this assessment directly affects the tax valuation of the property, it cannot be separated from it. Which means when a bank forecloses and the property becomes an REO, the entire assessment must be paid, plus the back due monthly fees and the Association’s legal fees, penalties, and the bank’s legal fees.

2. HOA or COA:

One wrinkle to check for is whether the property is governed by a Homeowner’s Association or a Condo Association. Currently, in a Florida foreclosure, the bank would only have to pay 12 months* of Condo Association dues (or 1% of the original loan amount, whichever is lower) in order to deliver clear title to the next owner. However, litigation in Florida is less certain regarding unpaid back dues owed to HOAs after a lender forecloses.

3. Attorney Fees:

Another thing the bank negotiator may not be thinking of is that, even if they only have to pay 12 months of past due monthly Condo fees after a foreclosure…what about the legal fees owed to the Condo Association’s attorney? Judges are lawyers. You think lawyers look out for other lawyers?

The bottom line is that foreclosure will cost a bank more than just a few months of fees and it is in the lender’s best interest to negotiate these costs as part of a short sale, rather than dragging its feet until foreclosure.

*only 6 months prior to new legislation in 2010
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Bank Of America Short Sales

Lets face it, most agents cringe when they find out at a listing appointment that the 3rd party is lender is Bank Of America/Countrywide. In many ways, their reputation is well deserved. I was frustrated for many months trying to get 2 separate short sales in Daytona Beach approved with them. Each started in December, and just got approved in September.Along the way, I dealt with the usual delays, lack of communication, and changes of negotiators. There were so many times that it would have been easy to pack it in. My determination to help these 2 families out of terrible situations kept me focused when all seemed quite hopeless. There are so many homes in Florida where the homeowners are under water with their mortgage.I finally began to receive some cooperation when I asked for a supervisor...and got some contact information. It was a tedious process to get a response, but once I did, things started moving along. Its a fine line between getting their attention and getting your file buried.My advice is to keep a running log of all attempted contacts with the bank and follow up on a very consistent basis. Mention prior dates of calls/emails and be friendly when you begin each conversation. You can make your point with putting the negotiator on the defensive. When I reached a supervisor, I was equally calm, and merely forwarded a long email string of my attempted communication. Once they were able to see my professional approach to documenting the file, they began to work with me. It wasn't long after that to receive the demand letter I had worked so hard for.I learn something from each short sale, and use it to be more efficient with the next one.
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NEWS FLASH: A Florida Supreme Court Justice issued an order requiring all foreclosure actions involving Florida homesteaded property to be mediated between the lenders and the Borrowers.Read more about it: Fort Lauderdale Sun-SentinelI would suggest making certain the SS negotiators are aware of this new requirement while in SS process.
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Loan Modification Program failed miserable in FloridaFlorida Homeowners hold on to their property with a needle and a thread, hoping for a loan modification under The Making Homes Affordable program. According to the Florida Realtor’s website, only 8,405 in Florida get mortgage modification. This is simply pathetic!Here are some basic rules to qualify:• The property must be owner occupied with the owner still living in the home• The borrower must have sufficient income to support the new mortgage debt• The first mortgage may not exceed 105% of the current market value of the property. For example if the property is worth $200,000, the borrower must owe $210,000 or less.• The borrower/homeowner monthly housing expenses (PITIA), defined as principal, interest, taxes, insurance and association dues must be more than 31% of gross monthly income.These are the reason, in my opinion, why this loan modification program was doomed from the beginning:• Property values in Florida declined at a staggering rate of 30%, 60% and even 80% in some areas, since the housing boom of 2005. Making it impossible to qualify based on current market values.• High unemployment rates in Florida• Homeowner must have income to qualify for this program.• BureaucracyShort Sales do close in Florida and if you are looking for more information about Short Sales, I invite you to visit www.shortsalesuperstars.com a forum for homeowners and real estate agents that deal with short sales on a daily basis and where I am a member.
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One of the great drawbacks to a broker taking on a short sale listing is the fear and often the reality that the short sale lender will demand a reduction in the broker commissions. This has created all sorts of contraptions to make the broker whole.I have seen contracts that have inflated commissions designed to make the lender reduce it; I have seen deals to have the buyer guarantee the broker commission short fall. There are more and some not yet invented. But this summer a case was decided in Iowa (and reported by the NAR) where the appellate court said the short sale lender could NOT renegotiate the commission and it is worth noting.The case of Stewart v. All States Quality Foods decided May 29th has specific facts but I have seen this type of scenario several times and it is worth noting if you are a short sale broker.In simplistic summary (you can read the case by the link above and it is not too complicated to understand even on a first read!), the broker brought a contract to the lender and in the contract the lender knew that the seller was to get a commission of 10%. The lender said it needed more money and made a counter offer of a specific amount. The broker got that counter offer. Then the lender said it needed to net more and the broker offered to cut its commission to help get part of the way to that number. The lender balked and denied the sale.The broker sued on its contract for the commission based on bringing a buyer ready, willing and able who met the counteroffer price asked by the lender. The legal theory that won was interference with advangeous business releationship - the listing agreement.The key issue here is that the lender actively participated in the transaction by making the counter offer request and it being met. Also important is the knowledge by the lender of the existing listing agreement.In all short sales that we handle we provide a copy of the Exclusive Listing Agreement to the lender, so knowledge in our situations would be met. If the lender makes a counteroffer then the lender is bound to accept it or it has violated at least one legal theory - if you are in Iowa. However the law and doctrines cited by the Iowa appellate court are in comport with many other states caselaw, Florida included.Be aware of the rights and obligations of the parties to a short sale - especially when the lender oversteps its position as a lender and becomes an active participant.Copyright 2009 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 New Website www.Florida-Counsel.com.See our easy to understand articles at:TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
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