How does a short-sale work? When a borrower would like to sell his/her home for market value, but the market value is less than what the borrower owes on the mortgage. The borrower applies to the bank for a short-sale. This means that the lender may accept less than what the borrower owes on the mortgage in order for the borrower to be able to sell the property on the open market.
There are several steps to a short-sale. The first step is hiring a professional Real Estate Agent who specializes in short-sales. The process starts when the Agent submits a third-party authorization form to the lender to act on behalf of the borrower. This is submitted to the bank, along with a complete package, usually consisting of the following documents: two months of bank statements, last year's tax returns, a hardship letter, 4506-T Form, RMA package, W-2's or a Profit and Loss, and utility bill for proof of occupancy. Although this may sound confusing, a professional Real Estate Agent who specializes in short-sales is well aware of the necessary forms and should guide you through the process.
Once all the required documents are completed and packaged to the lender, they can be sent for review to see if you qualify for a short-sale. When it's confirmed that all the necessary documents are on-hand by the lender, then the file is moved to a negotiator. The negotiator will negotiate the file by submitting the file to the investor who typically owns the note and will either accept or counter the short-sale offer. This can be done manually or electronically, depending on the banking institution.
This process usually takes approximately three months to complete as long as there are no other "factors" involved. If any voluntary or involuntary liens, supplemental taxes or collection companies are involved, then these "factors" will lengthen the negotiation process and prolong the short-sale approvals. In many cases there are two mortgages, a first and a second lien which are secured by the Real Estate and they must both be negotiated at the same time. Typically, two different packages will need to be submitted to two different institutions for the negotiation to take place, if these "factors" are present.
Any recorded liens against the property will need to be paid-off before the bank will issue an approval. The bank will usually pay the pro-rated property taxes, but may not cover past supplemental and penalties.
If the second lien is held by an independent collection company, this may also result in additional work and time delays. A collection company will usually want a higher percentage back to settle the debt and this can get complicated depending on whether the property was used as investment or personal residence. If the property was used for investment, the remaining balance of the settled second lien will be reported to the IRS and the borrower may receive a 1099 at the end of the year. Any settlement over $600 is reported to the IRS for a 1099. You should consult your tax advisor about tax ramifications as a result of any Real Estate transactions.
If the property is owner occupied, than the deficiency balance will often be forgiven. As a primary residence homeowner, you may apply to HAFA (Home Affordable Foreclosure Alternative)which means that you may receive a $3,000 credit from FreddyMac at the COE (Close of Escrow) to assist you in moving out expenses. However, with this credit, comes the limitation of credit balance to the second lien of 6% or $6,000.
If you are unable to negotiate the second lien because you are short on funds, then the collection company may due a lien release. This means that the collection company will accept a partial payment to temporarily remove the second lien to close escrow, but will re-post it on your credit report after the close of escrow. This tactic is often misused and abused by collection agencies to collect more money from of the borrower after the close of escrow.
If you have any further questions regarding Short-Sales or other Real Estate needs, please feel free to contact me via phone or email below. I have been specializing in Short-Sales, Foreclosures and Luxury Homes in Agoura Hills, Calabasas, Hidden Hills, West Hills, Woodland Hills, Tarzana, Encino, Sherman Oaks, Studio City, Toluca Lake, Burbank & Glendale for over 12 years. I hope my article was helpful in answering your questions.
Zevi Shafran
Broker Associate Ewing & Associates
Sotheby's International Realty, Sherman Oaks, CA 91423
Cell: 818-974-2279
E-mail: Info.ZeviShafran.com
Website: ZeviShafran.com
ListingBook: Zevi.ListingBook.com
Article Source: http://EzineArticles.com/?expert=Zevi_Shafran
Thursday, November 17, 2011
Risking Foreclosure - How Late Can You Be on Your Mortgage Before Being Foreclosed?
Just five years or less one out of four households had a negative adjustable loan. This product was very popular because you could choose to pay a negative payment (1% amortized over 30 years), interest only, 15 year amortized payment or a 30 year amortized payment. To qualify for this loan you needed to put down 10%. This loan was very popular because home values were appreciating.
Fast forward to today, "How late can I be on my mortgage before risking foreclosure?" Home values have dropped over 30% and most people who purchased the past 5 years have more than 20% negative equity in their homes. So you can do one of four things; walk away, Deed in Leu, short sale or ask the bank to modify your loan.
Loan modifications are an ongoing disaster, two years into it and you still don't know where you stand. Short Sale may be a smart option to not have a foreclosure on your credit report. A Deed in Leu may work, but many banks want the home to be listed on the market for a minimum of 90 days to qualify for this program. Lastly, walking away from the home will result in a foreclosure on your credit report and may deny you the ability to qualify for a new home loan for the next two to three years.
You ask, "How late can I be?" It depends on your bank and how pro-active you are. If you start with a loan modification and stop paying on your mortgage the bank will not stop foreclosure proceedings, approximately three months after you stop payment the bank will notify the trustee and the trustee will issue an NOD or Notice of Default. This notice will be publicly recorded against your property and this is the first stage of active foreclosure. In theory you have three months to make up the delinquency before the trustee will issue an NOS or Notice of Sale. Three weeks after the trustee issued a NOS, the property will be sold at a public auction, known as the Trustee Sale.
However, here is the loophole; if you happen to be in workout status the bank can not legally foreclose on your property. Workout status means that you have applied for a short sale or a loan modification and your file is in underwriting, awaiting a final decision or additional documentation to make a final decision. The bank is often just the servicing company of the note and they need to go back to the investor for a final workout approval.
The workout process can last several years in some cases. The bank can not legally foreclose on the home while your loan is in review. During the review process you can request to have the sale date pushed or removed completely. However, once the review process is over, there is no guarantee that you will qualify for the loan modification, short sale or a deed in lieu and that's why the bank suggests for you to continue payments on your mortgage if you can. Once in active foreclosure your only way to reinstate your balance due is in full, plus any attorney and late fees.
In conclusion, there is no set time as to how long you can be late on your mortgage loan payments, as long as the loan is in active review and you are awaiting a final decision.
Fast forward to today, "How late can I be on my mortgage before risking foreclosure?" Home values have dropped over 30% and most people who purchased the past 5 years have more than 20% negative equity in their homes. So you can do one of four things; walk away, Deed in Leu, short sale or ask the bank to modify your loan.
Loan modifications are an ongoing disaster, two years into it and you still don't know where you stand. Short Sale may be a smart option to not have a foreclosure on your credit report. A Deed in Leu may work, but many banks want the home to be listed on the market for a minimum of 90 days to qualify for this program. Lastly, walking away from the home will result in a foreclosure on your credit report and may deny you the ability to qualify for a new home loan for the next two to three years.
You ask, "How late can I be?" It depends on your bank and how pro-active you are. If you start with a loan modification and stop paying on your mortgage the bank will not stop foreclosure proceedings, approximately three months after you stop payment the bank will notify the trustee and the trustee will issue an NOD or Notice of Default. This notice will be publicly recorded against your property and this is the first stage of active foreclosure. In theory you have three months to make up the delinquency before the trustee will issue an NOS or Notice of Sale. Three weeks after the trustee issued a NOS, the property will be sold at a public auction, known as the Trustee Sale.
However, here is the loophole; if you happen to be in workout status the bank can not legally foreclose on your property. Workout status means that you have applied for a short sale or a loan modification and your file is in underwriting, awaiting a final decision or additional documentation to make a final decision. The bank is often just the servicing company of the note and they need to go back to the investor for a final workout approval.
The workout process can last several years in some cases. The bank can not legally foreclose on the home while your loan is in review. During the review process you can request to have the sale date pushed or removed completely. However, once the review process is over, there is no guarantee that you will qualify for the loan modification, short sale or a deed in lieu and that's why the bank suggests for you to continue payments on your mortgage if you can. Once in active foreclosure your only way to reinstate your balance due is in full, plus any attorney and late fees.
In conclusion, there is no set time as to how long you can be late on your mortgage loan payments, as long as the loan is in active review and you are awaiting a final decision.
If you have any additional questions please contact me. I am a professional Real Estate Broker with Ewing & Associates Sotheby's International Realty in Sherman Oaks. I specialize in Foreclosure and Short Sales properties. I can also help if the property has more than one lien holder.
Feel free to shoot me an email to Info@ZeviShafran.com.
Zevi Shafran
Broker Associate
Ewing & Associate Sotheby's International Realty
Sherman Oaks, CA 91423
ZeviShafran.com
Zevi.ListingBook.com
Article Source: http://EzineArticles.com/6667417
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