I have been getting a lot of questions from homeowners about this new HAFA government program, as well as some from the real estate agents I teach in my short sale seminars. The program is a government initialed program that spells out guidelines for servicers of loans (banks) to tell them how to handle a short sale and is completely VOLUNTARY. The program starts April 5th, 2010. The guideline basically states that the banks has to release deficiency on the loans, on both the first loan and the second loan is there is one. Also that the banks have to answer and respond to a homeowners request for a short sale or an offer from a buyer within a short timeline. The guidelines also spell out additional government forms that need to be filled out by the servicer. And if the banks does all of these things then they will receive a bonus or payout of $1000.00. The program typically requires that the homeowner try a loan modification first, and it does not apply to homeowners whose loans are owned by Fannie Mae or Freddie Mac. Those guidelines have yet to be released.

I am not going to go into all of the guidelines as they can be found here www.makinghomeaffordable.gov. But what I would like to consider is this. If a bank has to release deficiency then they are essentially eliminating their opportunity to try and collect money from the borrower at a later date or sell off this bad debt on the scratch and dent market. This is an emerging enterprise especially with 2^nd loans that are recourse debt. Many of these banks are now selling off this bad debt for anywhere from 5 cents to 30 cents on the dollar. There are debt collectors everywhere springing up and buying this bad debt. Secondly you are asking a bank to fill out more paperwork and respond quicker, which is essence will require more man power and employees and overhead for these servicers, and for what? $1000?

I recently asked someone (who will go unnamed) face to face, who sat on the government advisory board for the HAFA program if the metrics had been run to determine if the banks would come out ahead, meaning it would be worth their while to waive deficiency rights and give up their scratch and dent market, hire a ton of new employees to handle the workload, all for $1000. He replied “no.” I then asked what bank in their right mind would ever go along with this government program if they stand to possibly lose more money? He point blank told me, “probably none of them, but it will raise awareness of short sales with consumers, which is our ultimate goal.” This coming from someone who sat on the advisory board!

I recently was a national short sale convention, at which one point there was a panel of 4 members representing 4 VERY large lending institutions in our country, answering prescreened questions about this new government program (HAFA) and short sales. The questions were soft balls pitched up with canned answers, and geared towards getting real estate brokers behind this new program. The moderator ended his questions early and decided to go off script and ask his own on the fly questions. The first question he asked was “What have each of you (lenders) done to prepare for the new HAFA program within your own companies?”. I thought this to be a reasonable easy question from them to answer but their answer shocked me. Their answer….there was no answer. From ANY OF THEM. They sat there in silence and didn’t know what to say.

This tells me that the banks are not taking this program seriously and the amount of people that will actually be helped by it will be very minimal and on a case by case basis. It became apparent that this government program is simply a PR move by the government and lenders to raise awareness of the short sale option, which in whole isn’t a bad thing. It can just be very deceiving.

If you would like for me to discuss with you whether or not your lender is a member of this voluntary program and if you would apply give me a call, for a free hour phone consult. Short Sale Kurt 858.405.5878

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               I am now starting to get national recognition for my blogs about banks, I thought I would share to my national audience some information about Chase banks and how they operate within the world of short sales from all of my experience of dealing with them and the hundreds of files I have completed or tried to complete with them. I have been doing short sales for over 5 years now in San Diego so my tenure is extensive.

               First I would like to address one procedure Chase Bank has when doing a short sale. On about 50% of my short sale files with them they make it a procedure of speaking with a short sale client on the phone before deciding whether or not they will allow the homeowner to do the short sale. The purpose of this is clear and simple, and I have sat in almost all of these conversations. The reason behind this is, is most of Chase banks representatives that handle short sales are trained in the art of being a debt collector. Their goal is to get the short sale homeowner on the phone to berate them and try to squeeze more money out of them before the property goes to foreclosure. They will say things such as “How could you do this to Chase bank?”, “How could you steal our money?”, “ Can you borrow money friends or family and give it to us?”, “Can you empty your retirement savings (401K) and give that to us?” and also my favorite, “ We will come after you for everything you got for as long as we can!”. Now understand these are clients and homeowners who are already in distress and are trying to do the right thing by doing a short sale on their home. Any attempt to by pass this part of the short sale process will result in Chase Bank closing out the file or denying the short sale. I have seen and heard this first hand and I usually have to coach my clients ever before speaking with Chase Bank and interject when things get out of hand. The whole point of hiring a real estate broker or attorney is so the clients do not have to deal with any additional harassment, but to put it simply Chase Bank does not care about their clients. They only see them as people whose lives they can destroy, to collect further money.

               When it comes to approving a short sale, I will say, Chase Bank will approve them (in time) and will try everything they can to maintain the right to collect upon their distressed client in a short sale if they can. If they are they investor (owner of the loan) they will forgive any remaining deficiency balance if your broker has enough experience to negotiate this in the approval letter. If they do not, Chase Bank will try to issue an approval letter stating they will come after the home owner. If Chase Bank is not the investor they will always issue an approval letter stating that they reserve the right to possibly come after the home owner for the balance unless it is fought at the administrative level or with use of an attorney. I have even seen at times that Chase will issue a letter stating they would rather foreclose on a homeowner than allow a short sale, even when the bank will make will make more money with a short sale. So be very careful.

               When it comes to loan that are second loans with Chase Bank, which are typically recourse loans, meaning they can come after you for the remaining balance they will almost always issue an approval letter for a short sale stating they will be coming after you. And Chase will always choose to let a property to go to foreclosure and reject a short sale than deviate from this standard approval letter stating they will come after the home owner. Any attempts to bring this to the attention to the administrative level or CEO will go unheard and unanswered because Chase bank would rather sell off this bad debt to a debt collector if they can, and make another dollar than help a distressed homeowner do a short sale and help a community retain its property values.

               Bottom line is this. I deal with hundreds of banks of a daily basis in the short sale world, and no other bank treats its clients so poorly and with such viciousness as Chase Bank. I kind of see it as the same situation as when things go bad in life you learn who your friends are who you can count on. When this market started to turn for the worse over 5 years ago every bank developed their own personalities and developed their own methods of dealing with their clients. Banks like Wells Fargo and Wachovia took the high road and treated clients with respect and looked to the future of retaining and keeping distressed homeowners as clients for the future ad also forgave them for any remaining balance on a loan in a short sale. Chase Bank became public enemy number one in my world along with Bank of America, and treat their clients so poorly and I was so appalled that I made a vow to never use Chas Bank again for any of my personal business nor allow any client of mine to ever use them for any banking, loan, or financing of any kind. I made a promise to inform everyone I knew about Chase Bank worked and how they treated clients who were going through the foreclosure or short sale process. So be careful if you are a homeowner with a loan with Chase before you agree to a short sale, and make sure you know what kind of loan you have and make sure your agent or broker knows what they are doing when dealing with Chase, and have the ability to have an attorney negotiate on your behalf if needed. I always have attorneys working with me now when it comes to dealing with Chase bank and their short sales.

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If you are looking to buy a home at this time and have an iPhone you definately need to check out this app. I was fiddling around with it and think it’s really handy.

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How To write an offer on a Bank Owned Property

 

 

 

Now you’ve taken the first step of working with a professional broker, but if you haven’t set up your free consultation yet, I wanted to share with you these 8 steps to make sure you offers are getting accepted on foreclosure properties. SO here we go..

1.      Make sure you have gone through the entire pre approval process with a mortgage broker and have your credit run if you plan on doing any financing. If you are paying cash all you will need is a copy of a bank statement showing your proof of funds.

2.      Submit complete packet – proof of funds less than 30 days old, copy of deposit check, pre-qual from the foreclosure banks designated lender if they ask for it! ( I am amazed at how many agents blow this off).  If you are getting a loan, present a copy of the front page of your credit report proving credit scores within 60 days.

3.      The biggest Earnest Money Deposit/Good Faith Deposit possible.  As a buyer you can still cancel and get your money back but the banks give the deposit amount merit.

4.      HIGHLIGHT “to close in 30 days or less”.  You will often times be able to take it far longer, but the bank will see this as a sure sign the buyer is committed.  IF all cash, ask “to close in 14 days or less”.  Some banks have streamlined closing for cash buyers now.

5.      If you want seller closing credits, include that up front, but know what your offer NETS the bank.  They don’t care about credits if the NET is high enough.

6.      Give the Seller choice of all services. It is one less thing to clarify in addendums or counters.

7.      Have the complete packet already in our hands and be prepared to write on multiple homes.  The objective is to get your offer accepted, you can decide if you will move forward on the specific house once you clear the hurdle of getting the banks acceptance.

8.      Even though they are all “As-IS”, FHA repairs have been completed on almost all of our properties when requested.  Don’t fight this in the offer price, wait for an FHA appraisal to call issues out, then request repair.  The bank will have to deal with it or fore-go any FHA lending since the case number follows the property.

 

SO now that you have seen some of my tricks to getting your offer accepted on foreclosure properties, give me call to set up your appointment with me and I will share you my resources to finding these properties before they go on the market. Again it so important to be working with a broker who knows the ins and outs of buying foreclosures, and I only work with 10 serious buyers at a time. So give me a call and set up your free and no obligation consultation. I also have videos of how to buy a short sale I can send you. Thank you for your time and I look forward to meeting with you. Kurt Wannebo.

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CitiMortgage is offering a new program for homeowners who might not want go through the process of a short sale. The first problem is that this still affects the borrower’s credit the same as a foreclosure. So people who want to maintain their credit with the process of a short sale, will not be able to purchase another property for a period of 5 years vs. 2 years with a short sale. Secondly, this program is not available in California, and my clients live here in San Diego. The last issue would be that if there is a second lien holder, then this program will not work unless the second lien holder is willing to settle for no money. This in most cases will never happen. So for the people with second liens this program will probably not apply.

Here is a copy of the article.

(Updates with comments from CitiMortgage CEO Sanjiv Das and adds details throughout)

   By James R. Hagerty and Matthias Rieker

Mortgage lenders are trying to arrange smoother departures for distressed homeowners who can’t be saved by loan modifications–and discourage them from trashing the homes on their way out.

CitiMortgage, a unit of Citigroup Inc. (C), announced Wednesday a pilot project that will let some delinquent borrowers remain in their homes without making mortgage payments for six months if they voluntarily transfer ownership to the bank.

Over the past two years, millions of foreclosures have been delayed by state and federal programs requiring lenders to try to keep borrowers in their homes by easing their monthly payments. But the moment of truth is approaching for hundreds of thousands of households that sought help under the Obama administration’s Home Affordable Modification Program, or HAMP, launched a year ago, as well as borrowers who have sought help through other programs.

"We are concerned that if there is a foreclosure glut at some point in the cycle it would have to have a negative impact on house prices," and Citi’s pilot program should help prevent a build-up in foreclosed homes, said Sanjiv Das, the chief executive of CitiMortgage in an interview.

As of Dec. 31, about 900,000 borrowers had been given trial modifications under HAMP. Many have been unable to document that they have enough income to qualify for that program, however. Some soon will run out of options for keeping their homes.

The CitiMortgage pilot program provides incentives for more borrowers to use a procedure known as a "deed in lieu of foreclosure," in which the borrower voluntarily transfers ownership of the home to the lender, which then cancels the mortgage debt. Aside from letting such people stay in the homes for six months, CitiMortgage says it will give them at least $1,000 to cover relocation costs, an incentive sometimes dubbed "cash for keys."

Mr. Das said, "Something formally needs to be done in addition to the modifications. We are in a different stage of the housing cycle. Restructuring mortgage payments was part one of the cycle, making sure that foreclosure glut doesn’t hit the industry is part two of the cycle. Citi is trying to stay ahead of it."

The pilot program is available for certain people whose mortgages are owned by CitiMortgage in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. The bank should benefit by avoiding legal costs and reducing the time homes are left vacant and exposed to vandalism. Participants will be required to "maintain the property in its current condition," the bank said. It plans to expand the program if the pilot is successful.

Mr. Das said the bank had talked with the Treasury Department "about a coordinated, collective action" for customers that don’t qualify for HAMP. "We believe if all banks take action collectively similar to this [Citi program], the impact on neighborhoods and on the late stage delinquencies that are building up would be a very good thing."

The program also reflects a realization that some people have the wrong house, rather than the wrong mortgage, and want to get out, Mr. Das said.

Another alternative to foreclosure is a short sale, in which lenders agree to allow a distressed borrower to sell the home for less than the loan balance due. Though the lender takes a loss, it can be much smaller than the hit that would arise from foreclosing and then maintaining the house while waiting for it to be sold.

But "often times in a short sale [the homeowner gets] a ridiculous offer" from a potential buyer that Citi wouldn’t accept, Mr. Das said. In those cases, foreclosure or deed in lieu are the only options.

The Greater Las Vegas Association of Realtors says about 21% of home resales in January were short sales, up from 19% a month earlier. Potential buyers of homes in short-sale situations have long complained that banks often take months to respond to offers. But banks, prodded by the U.S. Treasury, have been trying to streamline the short-sale process. CitiMortgage last year set up a dedicated team charged with responding faster. J.P. Morgan Chase & Co. (JPM) also has beefed up its short-sale team.

Bank of America Corp. (BAC) said it has a pilot program that streamlines short sales. The bank said it would be able to approve sales within two weeks of receiving offers under that program. For homeowners who don’t find a buyer within 120 days, Bank of America will offer a deed in lieu. Bank of America said borrowers will have cash incentives for completing this program.

In addition, the government-backed mortgage investors Fannie Mae (FNM) and Freddie Mac (FRE) both have programs that allow people who give up ownership of their homes to remain in them as renters.

One big problem is that many borrowers no longer have equity in their homes and thus may be tempted to abandon them. At the end of 2009, 21% of households with mortgages on single-family homes owed more than the current value of their homes, a predicament known as being under water, according to a new estimate from Zillow.com, a real estate data provider.

Laurie Goodman, a senior managing director at mortgage-bond trader Amherst Securities Group LP, estimates 7.1 million of the 7.9 million households behind on their mortgage payments will lose their homes to foreclosure if nothing is done to improve current loan-modification programs. She believes banks should put much more emphasis on loan modifications that reduce the principal for people who are deeply under water.

-By James R. Hagerty, The Wall Street Journal; 412-261-1817; bob.hagerty@wsj.com; and Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com

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People ask me why do I teach my short sale secrets to other agents in my area of San Diego and across the country? They think I am giving away advise or tricks that make me so successful. The answer is simple, I am helping people. There are too many agents who are taking short sale listings on and have no idea what it is they are doing and will ultimately lead to a homeowner possibly losing their home to foreclosure. I am amazing at the reasons agent come to me with questions or for coaching on a deal that they already had let go to foreclosure because they didn’t have the proper training or knowledge. Many times the reasons are very simple avoidable problems. It is so important to understand that these are very difficult deals to structure and without the proper training or knowledge the consequences for homeowners can be severe. We as real estate brokers basically have our clients financial and credit future in our hands and trying to undertake a listing without proper guidance can be detrimental to our clients. I can safely say I have been doing short sales for over 5 years and still don’t know everything there is to know because short sale laws, tax codes and bank policies and procedures on short sales are changing daily, and it can be touch to keep up with. So with that being said, I feel it is extremely important to relay my experience and knowledge to other agents out there even if it is my direct competition, because I am helping people (although indirectly). So if you feel your agent doesn’t have the experience to get your deal done, it might be in your best interest to take one of my next or upcoming seminars so that they can get your transaction done correctly. Short Sale Kurt.

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Many buyers call on our short sale listings and have no idea how to buy a short sale listing. I even got a call from someone the other day asking me some questions about a property who was working with an agent. When I asked why, they were calling me and not their agent, they explained that their agent was checking on the 22 other offers they already had out on short sale listings. Another person called me the other asking if it was normal to have written 40 offers, and had none of them accepted, I said ehhh, no its not normal.

The reason buyers don’t know how to buy a short sale is because they are working with agents who have no experience in this market or with short sales. If you are working with a buyer’s agent who has never sold a short sale property, the odds of you actually buying a home are substantially slim. You want to be working with a buyer’s agent who has actually closed hundreds of short sale listings so that you offer gets accepted. Since working with a buyer’s agent costs you nothing, since it will be the banks that pay all the commissions in a short sale listing or a foreclosure, why shouldn’t you work with the best? If you want to work with a buyer’s agent who will sit down and have a free hour consultation with you over the phone to explain to you the difference of buying a short sale in san diego, a foreclosure or a normal sale in this market, give me a call or fill out the online form.

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I went to the DMV today. When I arrived there were 145 people in line (I counted on the way out). I bypassed the line and went straight the front and asked where do I go if I have an appointment? I was directed to window 20, which I went to and there was no one there. I was given a ticket with a number. Immediately the television screen called my number and I walked over to take care of my business. I paid my renewal fees, and then was directed over to the line to take my new picture. While I was in the 3 person line to take my picture, I overheard some waiting saying they had been there 3.5 hours, and didn’t know how much longer they would be there. I took my picture for my new license and was out of there in 15 minutes flat.

The point of the story is this. The reason I was able to be in and out of there, was that I took the time to research the DMV and how to complete my renewal as quickly and as efficiently as I could. I aggressively asked questions, filled out the proper paperwork, and was prepared with all necessary items. I apply this model to everything I do in life and how I run my San Diego short sale business.

When doing a San Diego short sale, as a broker representing a homeowner, you need to be organized with systems, do research about the banks systems, be prepared and be aggressive when it comes time to asking questions and purpose solutions. You need to be efficient in order to the get deal approved quickly, so that the homeowners property does not go to foreclosure. If for example, your broker is not working with mobile emails, and the bank sends an email to your broker representing you in the short sale a question, and that broker does not respond quickly, the bank might close out the short sale file, and you will start from the beginning loosing possibly months of work.

My company www.shortsaleinsandiego.com has been doing short sales for over 5 years now and I know the questions to ask, and have been working with these banks for years. If you do decide this may be an option for you or want a free hour consultation, give me a call. Otherwise you financial future may just be left in the hands of one of the other brokers who is “standing in the DMV line” for hours.

Kurt Wannebo
CEO | Broker | ABR, GRI, e-Pro, CDPE

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San Diego Real Estate and Investments | ShortSaleinSanDiego.com or ShortSaleKurt.com

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