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Short sales: Are they worth the trouble?

August 18, 2011 By Leave a Comment

Short sales – a real estate transaction in which the homeowner needs to sell the property, but owes more on the mortgage than the home currently is worth – continue to dominate the housing market, but these real estate transactions aren’t for everyone.

Making sense of the story

Typically with a short sale, the homeowner is underwater and has experienced a financial hardship such as a job loss. To limit the damage to his credit rating, a homeowner may attempt to work with his lender to negotiate a short sale. Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.

Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant – and sometimes vandalized – property, a short sale isn’t a distressed home that will sell at an extremely low price. According to data from RealtyTrac, short sales typically sold for nearly 10 percent less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35 percent.

Home buyers wanting to purchase a short sale must have patience. In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours. With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases. It may take 30 days or longer for a buyer to receive a response from the bank.

In a traditional real estate transaction, it is common for a home buyer who currently owns his home to make his offer contingent on selling his current home. In short sales, most banks will not approve an offer that is contingent on the buyer selling his current home, as too many things can go wrong.

Banks also typically won’t consider short-sale offers that have inspection contingencies in them, so buyers can either do an inspection prior to making an offer or forego an inspection altogether.
Even with the challenges associated with short sales, buyers should not avoid these transactions. Being prepared ahead of the time and working with an experienced REALTOR® can help buyers avoid frustration and surprises down the line.
Read the full story AOL Real Estate

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Short Sale Soundoff: Victory for short sale sellers

July 27, 2011 By Leave a Comment

July 15th, Gov. Jerry Brown signed SB 458 (Corbett) into law. SB 458 extends the protections of SB 931 (2010), to ensure that any lender that agrees to a short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans.

Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.

SB 458 contains an urgency clause making it effective upon signing.
CAR Newsline

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Short Sale Soundoff: Partial release of lien for short sales

July 6, 2011 By Leave a Comment

The California Franchise Tax Board is accepting requests from taxpayers who have short sold their home and do not have enough funds in escrow accounts to pay the recorded state tax lien in full.

Taxpayers in this situation may apply for a Partial Release of Lien, which releases a specific piece of property from a recorded state tax lien. However, it does not release the lien in its entirety. The lien remains in effect against the taxpayer and continues to encumber other property the taxpayer owns or acquires in the future.

To learn which documents are required to request a Partial Release of Lien and the evaluation process, please visit http://www.ftb.ca.gov/professionals/taxnews/2011/July/Article_1.shtml.

California Association of Realtors

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Foreclosure myths, debunked

June 23, 2011 By Leave a Comment

Although there are a number of programs available to help homeowners who have defaulted on their mortgages keep their home, the large amount of misinformation tends to result in troubled homeowners failing to contact their lender until it is too late.

Making sense of the story

Some homeowners believe, incorrectly, that contacting their lender early in the process will draw attention to their situation and result in a quicker foreclosure. In reality, contacting the lender or servicer is an important first step, and the sooner, the better. Contacting the lender provides the homeowner with an opportunity to explain their situation and the steps necessary to deal with it.

It is a common misconception that missing one mortgage payment will lead to foreclosure. However, the foreclosure process doesn’t begin until payments are 90 days delinquent. Lenders generally have a financial interest in keeping homeowners in their homes, so making contact as early as possible could help lenders modify terms of the mortgage or devise a repayment plan.

Once homeowners are behind on their mortgage payments, it becomes challenging to dig out of the hole. Some homeowners try to solve this by depleting their savings or dipping into their retirement accounts to become current on the loan. Most financial experts advise against this.

Delinquent homeowners may think they should stop making mortgage payments to get their lender’s attention, which often isn’t the case. When possible, homeowners should stay current on their mortgage payments and continue to contact their lender on a regular basis.

Homeowners who have applied for assistance or loan modification programs in the past and were turned down are advised to reapply. Program parameters are constantly changing, so the rules might have been liberalized since the last time the borrower sought help.

A number of free, government-sponsored housing services are available through the Dept. of Housing and Urban Development (HUD). A list of HUD-approved agencies can be found at http://www.hud.gov.
Read the full story Los Angeles Times

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Mortgage aid offered to those who cashed out equity

April 14, 2011 By Leave a Comment

The California Housing Finance Agency announced this week that people who cashed out equity on their home now are eligible for three of the four “Keep Your Home California” programs.

MAKING SENSE OF THE STORY

Keep Your Home California is a state-run program funded with $2 billion from the U.S. Treasury’s Hardest Hit Fund. It is designed to help low- and moderate-income people who are unemployed or owe more than their home is worth pay their mortgage.

There are four individual programs that fall under Keep Your Home California. Eligible homeowners can get up to $50,000 in assistance from one or more of the four programs combined.

Under the new rules, people who took equity out of their homes will be eligible for the unemployment mortgage assistance, mortgage reinstatement assistance, and transition assistance programs if they meet all the other program requirements. Homeowners who cashed out equity will continue to be ineligible for the principal reduction program.

When the program first started, homeowners who had tapped the equity in their homes were ineligible for the programs. CalHFA decided to include these homeowners due to the large number of homeowners who were being turned away for assistance.

Under the program revisions, homeowners who originated mortgages after Jan. 1, 2009 also are eligible for the same three programs. Originally, these borrowers were excluded because they also are excluded under the federal Home Affordable Modification Program, so CalHFA wanted to be consistent with HAMP.

To qualify for any of the four programs, homeowners must fall below certain income limits, must be living in the home, and cannot own a second home, among other criteria. For additional requirements, visit www.keepyourhomecalifornia.org/eligibility.htm.

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The California Housing Finance Agency

November 4, 2010 By Leave a Comment

California expects mortgage-aid program to begin in weeks
The California Housing Finance Agency (CalHFA) reported this week that its “Keep Your Home California” program will be delayed because of logistical issues with the program.  The program was scheduled to begin Monday, Nov. 1 MAKING SENSE OF THE STORY FOR CONSUMERS

The Sacramento Bee

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New California Law Restricts Lenders With Respect To Deficiency Judgments After Short Sale Approval

October 18, 2010 By Leave a Comment

 Finally some good news!  SB 931 (Ducheny) provides welcome relief to many California homeowners.  A new law in California, “The Golden State” will PREVENT A BORROWER’S FIRST TRUST DEED LENDER (“Senior Lien Holder”) FROM OBTAINING A DEFICIENCY JUDGMENT AGAINST THE SELLER AFTER THAT LENDER APPROVES A SHORT SALE.

The law will become effective January 1, 2011. Read more

 Coldwell Banker Marketing Dept.

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No Short Sale Deficiencies:

October 5, 2010 By Leave a Comment

Starting January 1, 2011, a seller’s first trust deed lender cannot obtain a deficiency judgment against the seller after a short sale. Providing written consent to a short sale shall obligate the first trust deed lender to accept the sales proceeds as full payment and discharge of the remaining amount owed on the loan. This law applies to first trust deeds secured by one-to-four residential units, but does not limit the lender from seeking damages for fraud or waste by the borrower. Senate Bill 931. Governor Schwarzenegger vetoed Senate Bill 1178, Ca. Ass. of Realtors sponsored bill, which would have extended California’s anti-deficiency protection to refinanced loans.  To view the full text of the following bills, go to www.leginfo.ca.gov.

Copyright © 2010 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)

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California Won't Tax Forgiven Home Debt

April 24, 2010 By Leave a Comment

Sacramento Bee
California won’t tax forgiven home debt
Governor Schwarzenegger on Monday signed SB 401 (Wolk) into law providing distressed homeowners with state tax exemption on debt forgiven in a short sale, foreclosure, or loan modification. KEEP THIS IN MIND
• SB 401 generally aligns California’s treatment of taxes on forgiven mortgage debt with that of federal law. For debt forgiven on a loan secured by a “qualified principal residence,” borrowers now will be exempt from both federal and state income tax consequences. Previously, California homeowners generally were exempt from owing federal taxes on the forgiven mortgage debt, but still were required to pay California taxes on the so-called “phantom income.”
• Qualified principal residence indebtedness is defined as debt incurred in acquiring, constructing, or substantially improving a principal residence, including both first and second mortgages. It also includes refinance loans to the extent the funds were used to payoff a previous loan that would have qualified under these guidelines.
• The tax relief applies to debts discharged from 2009 through 2012. Californians who already have filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.
• Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) still may be exempt from paying taxes on forgiven mortgage debt under other provisions. Most notably, bankrupt taxpayers are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.

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