Joe Capote

January 18, 2011 • 3:24 pm 0

HAFA’s Short Sale Changes

The Treasury Department has recently changed the rules regarding a short sale and the HAFA program.  You can read complete details on the HAFA program on our HAFA resource page.

Currently short sales are taking many months with many of them not being approved or loosing buyers that finally wander off.  No one would call them short. The HAFA program has attempted to put timelines and accountability on the short sale process, with some success.

Short-sales still make up a large percentage of the north San Mateo County real estate market. In San Bruno, Daly City and South San Francisco short sales account for nearly 40% of the available market, including multi-unit investments.

In a nutshell here are some of the changes:

  • Those seeking a short sale must get an answer within 30 days.
  • Servicers will no longer be required to verify a borrower’s financial information.
  • Servicers are no longer required to determine if the debt-to-ratio incomes exceeds 31%.
  • Second lein holders no longer must accept 6% of the unpaid balance.

The Government is clearly focused on making short sales a viable option.  However, the question is whether or not the lenders follow suit. Certain banks are much easier to work with on a short sale transaction. Others not so much.

Below are some of the basics of the HAFA program for short sales.

HAFA Basic Eligibility Requirements For Short Sales

The home must be owner-occupied principle residence.

  • It must have a first trust deed mortgage(loan) in place prior to January 1, 2009.
  • The mortgage must be delinquent or delinquency is likely.
  • The unpaid loan balance is no more than $729,750 for a single family home.
  • Your monthly payment is more than 31 percent of your gross income.

HAFA short sale advantages.

  • Buyer’s will know where they stand in the purchase.
  • Seller’s will walk away from the property more dignity.
  • Fewer deals with fall through at the last minute.
  • Uniformity of forms used in the process.
  • 10 day business response from lender upon presentation of executed offer.
  • If Seller not approved for HAFA may be considered for deed-in-lieu of foreclosure.
  • Mandatory deficiency release.
  • $3,000 in moving expenses.

Short sales continue to make up a large chunk of the real estate market. Though the federal government is attempting to make them a viable option to save borrower credit and avoid foreclosure, lenders vary with regards to short sale negotiation.

Stay tuned for more updates as they become available.

For more information regarding short sales, please visit me on the web at www.JosephCapote.com or contact me directly.

Filed under: Buyer's Blog, Seller's Blog, , ,

December 6, 2010 • 3:19 pm 0

Homeowners Beware: Foreclosure Rescue Scams

With the recent rise in foreclosures, foreclosure-related scams have exploded onto the real estate scene. These so-called “foreclosure rescue companies” claim they will help save your home, but in reality are out to make a profit – at your expense.

If you are at risk of or in foreclosure, here are some of the red flags to watch out for:

  • Asks for money upfront before providing any service.
  • Instructs ou not to contact your lender, lawyer, housing counselor, family, friends, or others.
  • Asks for mortgage payments to be made directly to his or her company or a bank account set up by that person rather than your lender.
  • Requires payment only in the form of cash, cashier’s check or wire transfer.
  • Promises to stop the foreclosure process, no matter what the circumstances.
  • Advises you to transfer your property deed or title to his or her company.
  • Offers to fill out paperwork for you.
  • Encourages you to lease your house and back it back over time.
  • Asks for something to be done immediately and without delay. This includes pressuring you into signing paperwork that you have not had to read thoroughly or not not fully understand.
  • Offers to buy your house for a fixed price that is not set by the housing market at the time of sale.
  • Asks for you to give a power of attorney.
  • Asks for signatures on a grant deed or deed of trust.
  • Asks for signatures on a document that has lines left blank.
  • Fails to provide copies of signed documents.
  • Refuses or fails to put an oral promise in writing.

Report Fraud

If you have been a victim of a foreclosure-related scam or approached by a scam artist, you may report the incident to the following organizations and government enforcement agencies:

For even more information regarding foreclosure rescue scams and foreclosure avoidance, contact me or visit my website at www.JosephCapote.com.

Filed under: Buyer's Blog, Foreclosure Avoidance, Seller's Blog, , ,

November 29, 2010 • 3:30 pm 0

What is HAFA?

WHAT IS HAFA?

The Home Affordable Foreclosure Alternatives (HAFA) Program is a government‐sponsored initiative overseen by the US Treasury Department and administered by Fannie Mae assisting all Home Affordable Modification Program (HAMP)‐eligible homeowners in avoiding foreclosure, specifically through short sales or deeds‐in‐lieu of foreclosure. HAFA was announced on November 30, 2009 in a HAMP Update titled Introducing the Home Affordable Foreclosure Alternatives Program.

 HAFA directs lenders to assist eligible homeowners in quickly and effectively implementing short sales or deeds‐in‐lieu by providing financial incentives to lenders that carry out foreclosure alternatives through the program’s guidelines set forth in Supplemental Directive 09‐09 Revised (revised March 26, 2010). The program was introduced in part with the intent to remove the stigma from short sales and help keep communities from being destroyed through massive foreclosures. HAFA in its current state is only applicable to conventional‐type, non‐Governmental Serviced Enterprises (non‐GSE) mortgages and therefore does not apply to loans owned or guaranteed by Fannie Mae or Freddie Mac. These organizations may have plans to release their own versions of HAFA.

 DETAILS OF HAFA

 HAFA was introduced to simplify and streamline the short sale process. HAFA accomplishes this in the following ways:

  • Compliments HAMP by providing viable alternatives for borrowers who are HAMP eligible
  • Uses standard processes, documents and timeframes
  • Provides financial incentives to borrowers, servicers and investors
  • Requires that borrowers be fully released from future liability for the debt
  • Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis
  • Allows the borrower to receive pre‐approved short sale terms prior to the property listing
  • Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement

HAFA provides financial incentives as follows:

  • Homeowners qualify for $3,000 (updated March 26, 2010; was previously $1,500) in Borrower
  • Relocation Assistance after a short sale or deed‐in‐lieu has been completed (may classify as taxable income in some cases)
  • Financial incentives for servicers participating in the program include up to $1,500 (updated
  • March 26, 2010; was previously $1,000) servicing bonus upon completion of a short sale or deed‐in‐lieu
  • Financial incentives for investors include up to $2,000 (updated March 26, 2010; was previously
  • $1,000) for those who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders. This reimbursement will be earned on a one‐for‐three matching basis
  • Lenders pay all servicing fees — homeowners have no out‐of‐pocket expenses

For more information regarding foreclosure avoidance, please visit my foreclosure avoidance resources online or email me at JCapote@apr.com.

Filed under: Buyer's Blog, Foreclosure Avoidance, Seller's Blog, , ,

February 3, 2010 • 9:59 am 0

Navigating Short Sales: What to Do When the Sale Price Leaves You Short

If you’re thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won’t cover your total mortgage obligation and closing costs, and you don’t have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.

 1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as:

When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if

  • Your property is worth less than the total mortgage you owe on it.
  • You have a financial hardship, such as a job loss or major medical bills.
  • You have contacted your lender and it is willing to entertain a short sale.

2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional* and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won’t try to take advantage of your situation or pressure you to do something that isn’t in your best interest. 

A qualified real estate professional can:

  • Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
  • Help you set an appropriate listing price for your home, market the home, and get it sold.
  • Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
  • Ease the process of working with your lender or lenders.
  • Negotiate the contract with the buyers.
  • Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.

3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include

  • A hardship letter detailing your financial situation and why you need the short sale
  • A copy of the purchase contract and listing agreement
  • Proof of your income and assets
  • Copies of your federal income tax returns for the past two years

4. Prepare buyers for a lengthy waiting period. Even if you’re well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:

  • If you have only one mortgage, the review can take about two months.
  • With a first and second mortgage with the same lender, the review can take about three months.
  • With two or more mortgages with different lenders, it can take four months or longer.

When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)

5. Don’t expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:

  • You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
  • Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
  • Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.

To find out how I can help you save your credit by coordinating your short sale, call Joseph Capote at (650) 269-3000 or visit my website at www.JosephCapote.com.

Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA. 

Filed under: Buyer's Blog, Seller's Blog, , ,

October 1, 2009 • 10:42 am 1

Loan Modification Attorneys Under Investigation

In a recent newsletter courtesy of the California Association of Realtors, the California state bar has launched numerous investigations into the practices of a number of attorneys with regards to loan modification practices. The attorneys have taken fees for loan modification services, but have failed to perform any services to date. Worse, they have failed to communicate with their clients who face the possible loss of their homes.

Not all attorneys that offer loan modification services are unscrupulous. However, it is good to see that the C.A.R and the California state bar is taking this matter seriously. It also serves as a reminder to me (as it should to all Realtors) that we should be careful when dealing with and advising our clients regarding loan modification. Additionally, scam artists have been known to align themselves with attorneys to lend credence to their fraudulent schemes. The list of attorneys under investigation can be found HERE.

I recently published a post on the five steps to help avoid loan modification schemes. That post can be found HERE. The number one tip is NEVER pay upfront fees. Go figure.

For more information on this and other exciting topics, visit my site at http://www.JosephCapote.com.

Filed under: Seller's Blog, , ,

September 18, 2009 • 11:37 am 0

5 Tips to Avoid a Loan Modification Scam

There has been a lot of talk about loan modifications and loan mod scams in the news lately. Recently, law firms as well as credit specialists have jumped headfirst into the fray, working with (or possibly preying) on good people in bad situations. While loan modifications are possible and can help many borrowers make it through these tough times, here are five tips to help you avoid a possible loan modification scam.

1. DON’T pay up-front fees. Foreclosure consultants are prohibited by law from collecting money before services are performed.
2. DON’T ignore letters from your lender or loan servicer. Responding to those letters is your best bet for saving your house.
3. DON’T transfer title or sell your house to a “foreclosure rescuer.” Beware! This is a scam to convince homeowners they can stay in the home as renters and buy their home back later. It might also be part of a fraudulent bankruptcy filing. Either way, a scammer can then evict the victim and take the home.
4. DON’T pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants often keep the money for themselves.
5. NEVER sign any documents without reading them first. Many homeowners think that they are signing documents for a loan modification or for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them.

Courtesy of the State of California’s Attorney General, Department of Justice.

For more information, visit the Short Sales Center my website at http://www.JosephCapote.com.

Filed under: Seller's Blog, , ,

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