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Barack Obama was elected for his second term as president of the United States and now it’s time for action especially in the distressed housing sector which has affected millions of Americans around the nation. Both houses of congress unanimously agree that the mortgage forgiveness debt relief act is a good policy and support an extension. However, there is no concrete evidence of an extension yet which will be detrimental to all distressed homeowners. How and when will this policy be extended?

What happens if there is no extension Jan. 1, 2013?

If you are involved in a loan modification, short sale, or a foreclosure, you will be liable for taxes on the forgiven amount because it is deemed as income. This is not a small tax liability. An example would be, if you owe $150,000 on your home and it sells in a foreclosure auction for $100,000, the amount remaining of $50,000 would be taxable income. If you are in the 25% tax bracket, you will have to pay the IRS $12,500 in taxes on the foreclosure.

Expecting struggling homeowners to be burdened with this tax liability after losing their biggest asset, would leave the homeowner in a dire financial crisis. Obama’s FY2013 budget proposal does include the extension of this act to 2015 but we are coming close to the expiration of this policy (Dec 31, 2012). Homeowners are now panicking and the National Association of Realtors as well as numerous realtors around the globe are participating in a call to action to extend this forgiveness act asap.

I believe the extension of this act will be extended. However, when and how are the questions that are up in the air. More than 50,000 homeowners go through foreclosure monthly. What should a struggling homeowner do when they are in pre-foreclosure and not sure of when this act will be extended?

Solutions: Short sales are still the best answer

Now that Obama has been elected, we are assured via his FY2013 budget that the forgiveness act will be extended. If you however lose your home to foreclosure after the expiration and before the extension, it could mean tens of thousands of dollars owed to the IRS post foreclosure, loan mod, or short sale.

If you are in at risk of foreclosure, I strongly suggest you begin trying to qualify for a short sale and get your short sale started right away. This way, you will be able postpone your foreclosure date and initiate your short sale which will take typically 3-6 months to close.

This would be your smartest financial move for your situation because you are avoiding a huge tax liability, avoiding a foreclosure which would be detrimental to your situation, and walking away from your home without being vulnerable of pursuit by your lender post foreclosure for the remaining balance.

Hope this helps

Peter

This is common question asked by our clients here in Texas. In this article, I want to give you some things to think about if your client is asking this question..  In deciding whether you should or should not recommend that your client stop making your mortgage payments, these are things we have learned from experience and face every day with our clients.

To begin, you should never recommend that someone stop making a mortgage payment. Its not ethical and lenders would not be happy.  However, you can tell you client what happens if they stop making the payments during a short sale.
 
What happens when a client stops making the mortgage payment:
 
When you are trying to do a short sale  the bank is looking for a hardship, and this can be a number of things. A hardship can be a job loss, Income reduction, forced relocation, Illness or a divorce. If a client continues to make the mortgage payments the bank is less likely to accept the short sale. A lot of investors are rejecting short sales if the mortgage is current. We have had lenders who will tell us just by looking at the file that our clients do not “qualify” because their loan is current.
 
A lot of our clients struggle with this fact because they do not want the missed payments to affect their credit. Most likely if they are in the situation of a hardship their credit has already been affected in some way. If they continue to make the payments the bank may assume they can afford the mortgage and will not consider the “hardship”. The bank will not make the file a priority as they are not in “default”. This is a hard concept to understand as you would think the bank would want to continue to receive payments and still work with struggling homeowners. Unfortunately that is not the case, in order to be considered for most short sales, banks will only review if they are in default. Some banks are now requiring the homeowners to be at least 30-60 days behind on their mortgage. Although this goes for the majority of the banks, there are still a small few that will work with homeowners without being behind.
 
If your client stops the mortgage payment, they need to understand it maybe impossible to "catch back up".  I've had a couple of clients say they plan on stopping the mortgage payments to get the bank to do a short sale and if the short sale is not approved they will get the payments caught back up. 

After a client has missed several payments, the late fees and penalties can be overwhelming. This can make it outside the clients financial ability to actually catch back up.

Bottom line:  Missing payments maybe necessary to get a short sale approved; however, it will impact their credit report and it make cause a foreclosure if the short sale is not approved.

Good morning Superstars.

Here are this week's top short sale discussions.

Discussions	Replies	Latest Activity
Does a Deed in Lieu Prevent a Security Clearance? I've got a military client and I've been working on a short sale with him. Bank of America won't budge on the price and a new attorney who… Started by Valerie Pressley	5	6 seconds ago Reply by Bryant Tutas
Bank of America and LLC problem I am having a problem with B of A and an LLC joe beauchamp responded to a similar situation and I was hoping fo assistance with my situatio… Started by ERIC MOBLEY	5	5 hours ago Reply by ERIC MOBLEY
Green Tree Short sale or Deed-in-Lieu In early stages of Short sale process with Green Tree. Green Tree rep is asking whether to pursue short sale or Deed-in-lieu. She stated sh… Started by Dom	5	5 hours ago Reply by ivan diaz ikon capital group
CHASE SHORT SALE - 2nd MTG - APPROVAL GONE BAD - HELP! I have a short sale in which Chase is the 2nd lien servicer. It is a purchase $ loan in CA. The loan amount is +/-$48,000. The 2nd was s… Started by Cale Thomas	3	6 hours ago Reply by ivan diaz ikon capital group
*FHA and WElls Fargo-Invalid Aproval to Participate-ZERO SHOWINGS!! WHat do I do??? Help! I am working a short sale and I am stuck with a super ridiculously high appraisal and Approval to Participate price of 165K! The pric… Started by Selinda Kennedy-Bryant	6	6 hours ago Reply by ivan diaz ikon capital group

Cash Contribution To MI Company For HAFA Approval? Good morning! We received an offer from the lender today that approves my seller for HAFA provided that she pay $2,200 outside of closing t… Started by Alex Krumm	6	yesterday Reply by Ron Scribner

Wells Fargo Negotiator pushing for an over priced counter offer...What to do?! I have a destressed property that previously was accepted at a lower price. We resubmitted a second CASH offer at the same (previous) price… Started by Scott Cary	2	on Thursday Reply by Brent Innocenzi
Tenant relative purchasing property Someone approached me about short selling their home. Their tenant pays the mortgage directly, and his daughter is interested in purchasin… Started by Constance Carter	2	on Thursday Reply by Brian Avery

Tax lIens I am the buyer on a short sale...6 months in we find out the seller has state and federal tax liens against the property. The house is in O… Started by Kristen tateosian	15	on Wednesday Reply by Edwin Acevedo
Bankruptcy, judge to okay our SS contract, loan Modification, will they foreclose??, I cannot believe this is happening, but if anyone can explain what the chances are that my sellers will be allowed to get a loan modificati… Started by Tanya Spotts	4	on Wednesday Reply by Ron Scribner

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was trying to buy a short sale in new hampshire that just got foreclosed on yesterday. no one bid so it went back to the bank. we started this 8 months ago(in those 8 months had a verbal approval from both banks that had liens but never saw paperwork), everything that was asked of me was completed and turned in on time. my loan approved all the through underwriting,appraisal,insurance binder all completed. problem was there were two banks with liens and they couldn't get there stuff together in 8 months of waiting and so it went to auction.( and by the way it was bought back for way less then the price on our short sale agreement,someone explain how that's good business for the banks!) i did not bid because i am not educated on the process enough as far as 2nd and 3rd liens chasing me after the fact and could not get a real estate lawyer in time for the auction.( as much as we wanted the house i couldn't be reckless about it and put my family's financial future in jeopardy ) so now the question is how do i find the asset manager ? anyone who lives around new england knows a vacant home and new england winters don't get along. my second question is the lien info during the short sale game were wells fargo and small 2nd and 3rds with td bank. thought i heard the auctioneer say first horizon opens bidding at ****** and then there were no bids after that. so who is who as far as banks go ? i found this in my research which has nothing to do with any doc's on the home i'm trying to buy.

WELLS FARGO BANK, N.A., Index No.:
A NATIONAL BANKING ASSOCIATION, AS
BOTH ORIGINATING CREDITOR AND AS
ASSIGNEE OF FIRST TENNESSEE
BANK NATIONAL ASSOCIATION ,
TRADING AS FIRST HORIZON (“BANK”),
Plaintiff,

so are wells fargo, first horizon and first tennessee banks all the same people ? and then when does fannie mae come in and should i be trying to contact them ? as you can see i'm pretty lost at this point and have so much invested in this home already. there has to be a way to keep moving forward and not gambling on finding it back in the mls and getting into a bidding war. thank you to all who took the time to read and comment 

I have a client who wants to short sale but their foreclosure date is Dec 4th which is very little time. Is the only way to stop the foreclosure date with a contract? The home is not in good condition but the owner is willing to do a little work which should help get it sold quicker. Please advise...Wells is the servicer which I have heard bad things about!

HELP... I am representing a buyer for a short sale that was advertised for $109,900 in Orlando, FL on MLS per the following: "BPO COMPLETED AND BANK IS READY TO GO! PRICE ACCEPTED BY BANK!" My buyer offered $110K conventional loan with $30K down. Listing agent advised the FIRST buyer walked ( IMAGINE THAT!!!!) when NATIONSTAR bank countered previous buyer within a very short time period prior to putting house back on the market, at $109,900. Listing agent/short sale processor has EVERYTHING in writing from recent deal that became dead and has CLEAR documentation that bank WANTS & APPROVED within last 30-60 days at $109,900.  When buyer walked, NATIONSTAR advised to get a buyer at that APPROVED price- $109,900. THREE "MOST RECENT" comps, show every house with same square footage/bedrooms, etc ALL CLOSED for $110K ( which was sent to NATIONSTAR yesterday along with a letter from me advocating and describing the facts to explain my client's position in DETAIL and inability to pay $116K. Buyer did agreed to pay $1500 toward back HOA dues, which she was BLINDSIDED by being asked to do so, but didn't want to lose a deal over $1500 so she reluctantly agreed. In addition, she wants to be in a house for the holidays so she decided to move forward. However, she is NOW being asked for an extra $6K (Buyer Only approved to finance $80K and her dad gifting her $30K) which will in turn also increase her closing costs. At this point per counter proposal, my buyer's out of pocket expenses will be an ADDITIONAL $7500+++++. NATIONSTAR is the bank negotiating and for WHATEVER reason, is NOT approving the current pending deal,as presented, despite us GUARANTEEING closure by 11/30/13! We have the Outstanding HOA dues taken care in the amount of $4352.68 ( HOA WON'T BUDGE) and Nationstar only paying $1500 toward outstanding balance and seller paying $1K and agents splitting the difference of $852.68. I have a WELL Qualified buyer NOW, that can close in less than 30 days and Nationstar is standing firm on $116K and told listing agent to put the house back on market and get an offer for $116K. (when next buyer walks, I guess the house will be listed at $125K-LOL) The house has been on the market since 06/12. This house won't appraise for $116K, needs some work and certainly NOT worth $116K! Nationstar NEVER did another BPO b/c when 1st buyer walked, we came in with an offer immediately afterward, so that BPO is still valid and is where NATIONSTAR came back with initial counter of $109,900 to original buyer. The longer it takes this house to close, the more HOA dues. property taxes, etc will accrue and I can't believe NATIONSTAR is taking this risk and stance. This deal is through EQUATOR & SAME negotiator BTW! (Comps, letter from me, etc sent via email & uploaded in library) Can ANYONE explain this to me on why reportedly, "the investor" is declining my buyer's offer of $110K, with closure in 23 days or less or give me head honchos #'s or email address at NATIONSTAR so I can address this above described matter accordingly. My first time home buyer ( her mother used to be a Realtor/owner/broker) DID NOT WANT TO pursue a short sale b/c she didn't want the HASSLE and since the property was advertised at approved price of $109,900 and I talked to listing agent about ordeal PRIOR to submitting an offer, I told my buyer this deal should go smoothly if she offers $110K. Me and the listing agent are on the same page and together we have tried ALL WE CAN!!!! PLEASE HELP!!!! Any guidance, feedback, advice or contact information for NATIONSTAR would be GREATLY appreciated as TIME IS OF THE ESSENCE for ALL concerned parties. Thank you kindly, KIM CENTURY 21

Good question. My opinion is..........

We sell many vacation homes in the Orlando area. We normally sell the furniture separately. To me the key is that it is being sold as a legitimate purchase and the value is not being inflated just to get money to the seller.

Also, was the chattel part of the original collateral for the loan? If so then it's my opinion it should be included with the purchase of the real estate. Does removing it affect the value? For example: light fixtures, blinds and built in appliances become real estate once attached and are included in the appraised value of the property. If removed the value goes down. If these items were included in the original purchase mortgage then they should stay.

Furniture, on the other hand, is personal property. It is not included as real estate. In my opinion the seller can sell their personal property to anyone they want. And it does not need to be disclosed as it is not a part of the real estate (collateral) and has no baring on the value of the property. But again do not inflate the value.

Personal property does not need to be on the HUD.

So.....in summary...use common sense.

Does anyone know whether the law that allows the sellers on our short sales not to have to pay the loss reported on the 1099 they get after the closing of their property if it was their primary residence?

Tomorrow is the election day of our presidential candidates and homeowners all across the nation are waiting in anticipation for their respective candidate to rescue us from our current economic crisis. The crash of the housing market due to the Subprime Mortgage Crisis was one of the most prominent factors leading to the economic downfall we are facing today.

Whoever becomes president for the next four year term will need to focus much of his efforts in stabilizing the housing market as catalyzing the housing recovery will be in lockstep with our economic recovery. How does Governor Romney and President Obama plan on helping struggling homeowners? Let’s pick their brains a bit on this sensitive subject.

President Barack Obama

What He Did

First, what did Obama do during his 1^st term tenure? Obama’s housing recovery efforts were executed via the Making Home Affordable Program (MHA). The MHA has various programs available and is well known for their HARP – refinancing program, HAFA – Short sale & Deed-in-lieu program, and HAMP – A Loan Modification program. Although results did not meet our expectations, several updates to these programs were implemented throughout the years and these programs did help millions of borrowers at risk of foreclosure.

One well known action he enforced was the $25 billion dollar settlement with 5 of the nation’s largest banks for the robo-signing foreclosure abuses, helping millions of borrowers by reducing their mortgage payments.

Obama’s Plans

Obama’s plan for the housing recovery consists of multiple plans of action including Broad Based Refinancing which helps borrowers who are current on their payments refinance their homes. The plan aims to streamline their refinance program by way of different requirements such as no longer having to submit a new appraisal or tax return when applying for the refinance program. For borrowers in pre-foreclosure, he aims to press mortgage lenders to increase the forbearance period from 4 months (under FHA) and 3 months (under HAMP) to 12 months for homeowners who lost their jobs.

He also plans on expanding the HAMP eligibility, tripling incentives to encourage the reduction of principle for underwater borrowers, and encouraging the GSE’s (Government sponsored enterprises) regulator, the Federal Housing Finance Agency (FHFA), by promising incentives to Freddie and Fannie if servicers forgive principle in addition to the HAMP modification.

According to Obama’s 2013 FY Budget plan, he also plans on putting $5 Billion to the Department of Housing and Urban Development (HUD). HUD’s goals are to keep struggling borrowers in their homes, create jobs in hard hit communities and revitalize areas ravaged by foreclosure.

Governor Mitt Romney

Romney’s Plan

Here are the 5 points directly from Mitt Romney’s website:

• Responsibly sell the 200,000 vacant foreclosed homes owned by the government
• Facilitate foreclosure alternatives for those who cannot afford to pay their mortgage
• Replace complex rules with smart regulation to hold banks accountable, restore a functioning marketplace and restart lending to creditworthy borrowers
• Protect taxpayers from additional risk in the future by reforming Fannie Mae and Freddie Mac

Although both made promises to reform Fannie Mae and Freddie Mac, here is an excerpt from the white paper, Securing the American Dream and the Future of Housing Policy discussing GSE’s reformation.

“End “Too-Big-To-Fail” And Reform Fannie Mae And Freddie Mac. The Romney-Ryan plan will completely end “too-big-to-fail” by reforming the GSEs. The four years since taxpayers took over Fannie Mae and Freddie Mac, spending $140 billion in the process, is too long to wait for reform. Rather than just talk about reform, a Romney-Ryan Administration will protect taxpayers from additional risk in the future by reforming Fannie Mae and Freddie Mac and provide a long-term, sustainable solution for the future of housing finance reform in our country.”

One notable option for struggling homeowners from Romney is the Shared Appreciation Modification in which the lender agrees to write down the principal of a mortgage and then get a percentage of the price increase when the home is sold. This way, both parties win. No foreclosure, the borrower gets reduced mortgage payments, and the lender benefits from the appreciation of the home.

What Very Important Factor That Has Been Omitted In Both Plans?

The extension of the Mortgage Forgiveness Debt Relief Act of 2007. This act relieves homeowners from receiving a huge tax liability due to the forgiven debt (considered income) when doing a refi, short sale, modification, or even foreclosure. This extension was mentioned in the FY 2013 Budget plan by Obama but we are awfully close to the end of the year and any mention of this is sparse.

What are your thoughts on this topic? Which candidate do you think will actually help struggling homeowners get out of their slump? Please comment on our website: www.seattleshortsaleblog.com All comments are welcome!

Peter

Good morning Superstars.

Here are this week's Superstar discussions.

Sellers Instruction to listing agent I've showed a couple of short sale properties that have sellers instructions attached to the listings. I view this practice as intrusive a… Started by Gary Johansen	35	13 hours ago Reply by Smitty
Help with Legitimate Short Sale for Military Mom Please advise quickly if you can give suggestions for me to assist this military Mom with short sale of her property. Brief summary: Mom w… Started by Linda Cadotte	8	21 hours ago Reply by Linda Cadotte
Short Sale Timeline Help! I am currently in a contract on a short sale which the seller/owner accepted about 90 days ago. The offer was submitted to the bank (Bank… Started by Kit Wieboldt	3	yesterday Reply by Tara Semtner
In short sale for 18 months, buyer, we closed 10-3-12, bank rescinded approval on 10-2, we recorded... and closed on 10-3-12, but about 2 weeks later we got a notice of trustees sale on our door, it has the old owners names and our names and,… Started by Christi Cason	7	yesterday Reply by Tara Semtner
Another Arm-Length Question Can you Owner of a Short Sale legally sell his/her furnitures, appliances, deck?, blinds, etc. to the Buyer? If so, can it happen legally… Started by Trong Dang	3	yesterday Reply by Janis Schade
New Law stating SHORT SALES as bad as FORECLOSURES? Hi All, Just wanted to see if anyone has heard about a new law recently passed. I was speaking to a lender and she is pretty knowledgable… Started by Catherine Smith	7	yesterday Reply by Jeff Payne
Fannie Mae has become unreasonable on their asking price Over the last few months, it has become apparent that Fannie Mae is more interested in foreclosing than approving short sales. The scenari… Started by Mike Rizzo Is It Time to Get Your Short Sale "Game" On? Don't just "get by" with your short sale business. Win! Take it up to the next level! Bryant and Wendy will show you how. Are your short sales declined? Are you losing closings? Are you losing buyers? Losing sellers to foreclosure? Do you have to re-start your short sales dozens of times? Are your short sales taking forever? Are you stressed out over your short sale success or...worse, your short sale failure? And no one seems to be able to show you how to do it quickly, with no stress? UNTIL NOW. WE can HELP YOU Succeed with Short Sales! Broker Bryant and Wendy Rulnick... Real Answers from REAL PRACTICING SUCCESSFUL SHORT SALE BROKERS. We want to help you. Wendy and Bryant LEARN MORE ABOUT OUR ADVANCED SHORT SALE TRAINING. ORDER NOW ***Use coupon code SSS10000 for a $50 discount	11	yesterday Reply by Brent Innocenzi

I'm a buyer who has been waiting PATIENTLY for the lender, the servicer and now Freddie Mac to approve the short sale.  I've been waiting since early August and have been told by the listing agent that we're only about a week away from a final approval.  Does anyone know if Freddie Mac will apply the new guidelines to short sale applications already in progress?