The biggest complaint most real estate agents, buyers and sellers have about short sales is how long lenders take to approve them. As it pertains to Bank of America, the implementation of the Equator system played a big role in decreasing short sale processing times. While those of us who consistently list and negotiate short sales appreciate BofA’s efforts, currently short sale approvals are still taking anywhere from two to six months to finally show up in our inboxes (love those Equator emails with attachments!).

In an effort to streamline the process, Bank of America will implement some significant changes to their short sale process beginning on April 14, 2012. The intention behind the changes is for BofA negotiators to render short sale decisions within three weeks of the day a real estate professional initiates a short sale in the Equator system. In order to implement the changes, BofA’s Equator portal will be unavailable beginning on the night of Friday, April 13, 2012 until early morning on Saturday, April 14, 2012.

Once BofA’s Equator opens for business on Saturday, the changes will be as follows:

1.     Short Sale Initiation- Real estate professionals will be required to upload all of the following documents when initiating a short sale:

• Bank of America Third Party Authorization –This form was created specifically for Bank of America. BofA will no longer accept third party authorizations in other formats.
• Bank of America Short Sale Addendum –The form must be signed by buyer and seller and includes a separate Agent Certification form.
• Buyer’s Acknowledgment and Disclosure
• Form 4506-T
• HUD-1

2.     Simultaneous Tasks- Presently, tasks in Equator such as document collection, appraisals (or BPOs) and offer analysis are assigned and performed consecutively. This practice often means days or even weeks of inactivity between the assigning and completing of tasks. When the change is implemented on Saturday, all of these tasks will be performed simultaneously, which will translate into reduced short sale processing times and agents getting their short sales approved in 20 days or less. This is HUGE!!

3.     5 Days to Upload Backup Offers- When a buyer cancels a sale in the middle of short sale negotiations Bank of America will only allow five days for listing agents to upload a backup offer. This is significantly less than the 14 days agents have had to work with until now. Agents are going to have to do everything they can to keep a strong backup buyer ready to jump in if the initial buyer falls out.

That’s it. Now you know. Since short sales are expected to increase in the years ahead, the changes implemented by BofA can only mean a more efficient short sale process. And that may be just the thing we need to compel more homeowners to sell instead of foreclose; to compel more real estate agents to work with homeowners in short sale situations as opposed to avoid them as many still do; and to compel buyers to not only submit offers on short sale listings but stick around to get the keys. All in all, Friday the 13^th will be a good day, I think.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!

Please read The Awesome Loan Modification Checklist for Part 1 of this post

Here’s your list of 12 things to do for a smooth(er) loan modification process:

1. Write a cover letter letting your lender know you are submitting a loan modification request and how many pages are in your package. Include your lender’s name, your name, your property address, and loan number at the top of the page.
2. Create a table of contents to make it easier for bank representatives to find your documents. If you want to be really cool, include the page numbers where they will be able to find each item.
3. Write your name and loan number clearly on every page. Try to avoid the areas that could get cut off when faxing your package- I usually recommend writing your name and loan number along the length of each page. I would also recommend numbering the bottom of every page. I know it sounds like a bit much but underwriters and negotiators love it.
4. Stack your package in the order on the awesome checklist, placing your cover letter at the very top and with your table of contents immediately following.
5. Call your lender, get the correct fax number and let them know you are going to fax your package.
6. Call your lender the next day, ask for the correct fax number(don’t be surprised if it’s different) and let them know you are going to fax your package, and then fax it AGAIN.
7. Once you fax your package, call your lender to confirm receipt. Do this every two days or so for a week or until you confirm your package was received. If the lender hasn’t received your package by the end of the first week, repeat steps 5 and 6 (you’ll thank me later).
8. Once your package is received, call your lender every week to check status. Ask for their timelines. If your file is not getting enough attention, ask that it be escalated. This usually helps a bit. And if you still feel your file is not getting enough attention, call every day or every other day until it does.
9. If your lender requests documents, fax them in within twenty-four hours. If you have to fax them later than that, call your lender and let them know. The time window to fax requested documents before files get cancelled varies from lender to lender.
10. Maintain a conversation log. Document the important details of every conversation, every time you faxed documents, every time you received documents. I always write in the lender information –like loan numbers, phone numbers, fax numbers and contact names- at the top of my conversation log.  This makes the information easily accessible.
11. In instances where you can reach your negotiator or underwriter via email to forward documents, I recommend faxing the documents to your lender’s loss mitigation department fax as well. That way, when you call to check status and speak to someone other than your negotiator or underwriter, the representative on the phone will have access to your paperwork (sometimes emailed documents are not uploaded in the general file).
12. Once you receive your modification agreement, read it thoroughly. If you feel comfortable with the terms your lender is offering, sign the agreement and return it to your lender before the dated specified. If the paperwork is even one day late, your modification can get cancelled.

That’s it. Following the steps above will help make the process of modifying your loan a little bit easier. If you get stuck, feel free to drop me line. I’ll be happy to point you in the right direction.

Please read The Awesome Loan Modification Checklist for a list of required documents.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!

Per my fantastic webmaster, I really should mention  Orange County and Los Angeles County in all of my blog posts (to keep the Google Gods happy). I think I just did. Now that we have that out of the way, let’s move on to the list!

Here we go:

I am not a big fan of the ole loan mod. Mainly because I feel that loan modifications usually offer homeowners more drawbacks than benefits in the long run. With that said, I do have some clients who got what they needed as a result of loan modifications and were able to stay in their homes. So, if you’re looking to work on your own loan modification and are looking for a list of required documents, look no further and read on!

The following is a general loan modification document list for the Home Affordable Modification Program(HAMP). Your lender will most likely want to see if you qualify for HAMP before exploring any other modification  programs that may be available to you. Keep in mind that although HAMP  guidelines are general in nature, the process often varies from lender to lender. Before you get started, ask your lender if there are specific items they expect in your loan modification package.

General HAMP Loan Modification Document List:

• First things first- Complete your HAMP paperwork. You will need the following:
• Request for Modification and Affidavit (RMA)
• Dodd-Frank Certification
• Form 4506-T - Complete the information at the top of the page. On line item 6 write in “1040″, check box 6a, and on line item 9 write in the two most recent tax years.
• A detailed financial statement- A list documenting your monthly expenses will suffice. Do this only if the one in the RMA is not sufficient for all of your liabilities.
• A detailed hardship letter: no more than one page in length. Give details of the initial hardship, if your situation has improved or become worse, and why you believe you will be able to make the modified payments once your loan modification is approved.
• Most recent federal income tax returns: two years- Sign and date page 2 in form 1040 and include all schedules in your tax return. Do not include state tax returns. If you have not filed your income taxes, provide a letter of explanation and a copy of your extension if you have filed for one.
• Most recent W-2 or 1099 forms: two years
• Most recent pay stubs: two months, consecutive.
• Profit and loss statement (if self-employed): two months sample P&L here
• Most recent bank statements: two months- all accounts, every page. Account histories are not acceptable.
• Mortgage statement: every mortgage
• Most recent property tax bill- for every property you own
• Most recent homeowners’ insurance declarations page(if your homeowners’ insurance is not lender-imposed)
• Most recent homeowners’ association(HOA) Statement
• A recent utility bill: Preferably electricity or gas. A utility bill in your name will prove occupancy. However,  recent  HAMP guideline changes allow loan modifications on rental property. If you don’t have utilities in your name, you can still enroll in the program.

Verify all information and double check all signature lines. Keep a clear copy of everything you fax to your lender. Your lender will expect you to fax your paperwork. I recommend you ask for a mailing address so that you can mail a copy of your documents as well.

Please read The Awesome Loan Modification To-Do List for a smooth(er) loan modification process.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!

I remember the days of yesteryear( early 2000’s to be exact) when one of the joys of being a real estate agent was handing a seller a big, fat, juicy check at the end of a transaction. Back then (can’t believe I’m saying “back then”) equity was a sure thing. Cashing in and cashing out was the norm.

Today, we find ourselves in the fifth year of what was supposed to be a two-to-three-year downturn. The sellers in our current market are often in precarious situations. Instead of getting a nice check at close of escrow, sellers with overleveraged properties are getting stuck with tax bills, deficiency judgments and seller contributions. What’s left of the American dream has turned on them.

This is a tough market to say the least. And yes, there are those homeowners and agents who aren’t behaving ethically and in doing so, causing more harm to our already fragile real estate market and overall economy. However, the vast majority of homeowners are  doing the best they can to find solutions and the vast majority of real estate agents are doing their best to help them.

For me, the words “qualify, qualify, qualify” took a whole new meaning when I shifted my focus to the distressed market. Besides the typical listing work, qualifying a short sale seller includes much more than determining a hardship, getting financials and doing the customary pre-listing work involved in the short sale process. I soon realized that digging deep to find out where the seller was emotionally as it pertained to the short sale was the most important part of my pre-listing work.

Before making the decision to sell, most homeowners with overleveraged properties are caught up in the loan modification versus short sale versus foreclosure fog. And although what they want is clarity, most homeowners have no idea where to turn for sound advice and guidance. So, well-meaning people like us knock on their door and with the bestest of sales skills, talk our way into their heads long enough for them to see the logic of selling at this time when there are so many breaks for homeowners in need of a fresh start.

The thing with short sale sellers is that just because they sign a listing agreement and allow their agent to post a “for sale” sign on their front lawn doesn’t mean they have made peace with selling. To many of these homeowners, selling means defeat. It means the lender won and they lost; the system won and they lost; the agent won and they lost. So, they list their home and probably mean it. But in the interim, they keep looking for something in the search engines or in late night infomercials or in radio and newspaper ads that will help them keep their property. And nobody can blame them when there’s always somebody promising something they usually can’t deliver.

This is why before taking the listing, I find it is vital to get the story behind the listing. I ask lots of questions about what got my sellers in trouble to begin with. I always ask what exactly they did to save their home and who helped them. I also ask if they are truly ready to sell.  If their answer is a “maybe” or a “no”, I continue probing. If it warrants it, I will put these homeowners in contact with their lender to explore a loan modification. I do whatever I can to help them explore every option. During this time, they usually figure out that I am on their side and begin to really trust me. Once they have explored every option and are ready to let go and move on, securing the listing is the next logical step.

This may seem like a lot of work. And it is. However, emotionally qualifying a seller prior to taking the listing saves more time than taking the listing, uploading it in the mls, marketing it, finding a buyer and presenting an offer only to figure out the seller is just buying time or doesn’t want to sell after all.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!

It’s a happy day in Orange County, California! And everywhere else where there are struggling homeowners in need of some relief!

The Home Affordable Modification Program (HAMP), which was due to expire at the end of 2012 has been extended through December 31, 2013. This is welcoming news for homeowners having difficulty making their mortgage payments and possibly facing foreclosure.   The additional year will also give lenders more time to make a dent on the HAMP program goal of 4 million families helped. This is rather ambitious since to date less than 1 million HAMP loan modifications have been awarded.

Along with the time extension, the HAMP program is incorporating the following changes effective immediately:

• Tenant-occupied property is now eligible for HAMP loan modifications. Until this change to the program guidelines, only owner-occupied properties qualified for HAMP.
• The administration tripled the Treasury-paid incentives for lenders who modify loans under the program.
• HAMP will now include incentives for Fannie Mae and Freddie Mac when they agree to principal reductions on home loans backed by the government-sponsored enterprises (GSEs). Before the change, HAMP only allowed supported principal reductions on non-GSE mortgages.

There are no provisions to the Making Home Affordable Program (MHA) that include an extension for the Home Affordable Foreclosure Alternatives (HAFA) short sale program. But since the Obama Administration seems to support the notion that our housing market recovery is going to take significantly longer than previously anticipated, I expect a HAFA extension is right around the corner. Well, I hope so anyway. Stay tuned.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!

The Home Affordable Modification Program (HAMP) uses the term “waterfall” to describe the four sequential action steps a lender must take to arrive at a monthly mortgage payment for homeowners attempting to modify their loans.  The target payment is one that supports a 31% “front-end” debt-to-income ratio. Lenders will initiate the modification waterfall once they determine that a loan meets the HAMP eligibility criteria. In order to arrive at the magic number (31%), lenders must rule out or exhaust the possibilities in each tier before moving down the waterfall to the next tier.

First things first: How do lenders arrive at debt-to-income ratios?

A debt-to-Income ratio (DTI) is the percentage of gross income that is applied toward paying a borrower’s recurring (monthly) debt. HAMP uses two different types of ratios: Front-end and Back-end.

A front-end DTI is considered a “housing ratio”. It includes a borrower’s monthly principal and interest payment, along with 1/12 of yearly property taxes and insurance (PITI) and any Homeowners Association dues if applicable.

A back-end DTI includes the front-end ratio liabilities plus any other recurring debt, such as second mortgages, car payments and credit card payments. Lenders arrive at each corresponding ratio by dividing the sum total of a borrower’s monthly payments by the borrower’s gross monthly income.

Here is an example of how a lender would determine front and back end ratios

Front-end Debt-to-Income Ratio (DTI):

-       Monthly Gross Income- $4000

Minus:

-       First lien (principal & interest)- $1500

-       Property Taxes- $200 

-       Homeowner Insurance- $75

-       HOA dues- $200

Total- $1975

$1975 / $4000 = 49.38% (front-end DTI)

Back-end Debt-to-Income Ratio (DTI):

-       Monthly Gross Income- $4000

Minus:

-       Front-end DTI- $1975

-       2nd mortgage- $300

-       Car loan- $350

-       Credit cards: $300

Total- $2925

$2925 / $4000 = 73.13% (back-end DTI)

In order for borrowers to qualify for HAMP, their front-end ratios prior to the modification must be greater than 31%. Each lender’s objective will be to find a payment that will maintain front-end ratios at 31%. HAMP doesn’t have a cap on back-end ratios, which means that borrowers can get approved for a loan modification even when they have a significant amount of debt. To safeguard against delinquent modification payments, borrowers with back-end ratios of 55% or higher must agree in writing to obtain HUD approved credit counseling as a condition of receiving permanent modification

The HAMP Modification Waterfall

The following are the steps every lender participating in the HAMP program must take in order to arrive at a modified loan payment.

Step 1- Capitalization- A lender will calculate the sum total of any mortgage payments due (principal and interest); any property taxes and insurance (escrow advances); and any out-of-pocket servicing expenses during the time a borrower’s mortgage loan is in default. The sum total of these figures will be added (capitalized) to the outstanding principal balance. Late fees and servicing charges cannot be included in the capitalization amount. The new loan balance will be used in steps 2-4 of the modification waterfall.

Step 2- Interest Rate Reduction- In step 2 of the modification waterfall, a lender will reduce the interest rate on a borrower’s mortgage in increments of 0.125 percent (1/8 percent). The goal is to get the monthly payment as close to the 31% front-end DTI while staying at or above 2.0 percent interest, which is the lowest possible rate allowed for HAMP modifications.

The varying combinations in the amount of income and liabilities is the reason behind some borrowers qualifying for that coveted 2% initial rate and others ending up with higher initial interest rates.

Step 3- Term Extension- If the 31% front-end ratio is not accomplished with step 2, a lender will proceed to extend the term of a borrower’s loan. HAMP program guidelines allow a lender to re-amortize a borrower’s mortgage loan by up to 40 years.

In order to arrive at the 31% front-end DTI, a lender can only increase the term of a borrower’s loan by one-month increments. A lender will add one month to the term of your loan and see if that additional month will yield the target payment. If the ratios are still too high after adding one month to the term, the lender will add another, and then another, and so on until the target payment is reached or the term is maxed out at 40 years.

The new amortization period would begin on the “modification effective date”, which is the day the first permanent modification payment is due. Therefore, if a loan is re-amortized to forty years, the modified loan would have a term of forty years beginning on the date a borrower’s loan modification becomes permanent. If a borrower made payments on his mortgage loan for ten years and then modified with a term extension to forty years, that borrower would be paying on his loan for a total of fifty years.   

If step lowering the interest rate to 2 percent and extending the term of the loan by 40 years doesn’t yield the 31% targeted housing ratio, a lender can proceed to step 4 of the modification waterfall.  

Step 4- Principal Forbearance- If a lender still cannot arrive at the target mortgage payment after applying steps 2 and 3, your, that lender will provide a principal forbearance. The amount of the principal forbearance will result in a balloon payment due at the time a borrower sells his property, pays off his loan or at the end of the modified loan term.  Principal forbearances are interest-free and are not subject to amortization.

In conclusion

It’s important to keep in mind that lenders are not obligated to modify loans. Lenders will use the Net Present Value testing results to determine if the modification terms a borrower qualifies for under HAMP are acceptable and meet the lender’s specific criteria.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!

For many homeowners, the decision to sell via a short sale comes only after a stressful period of concern, confusion and sometimes even fear. Once the research is done and options are weighed, homeowners will proceed to list their properties. And even though homeowners whose only viable option to avoid foreclosure is selling are definitely eager to sell, the process takes an emotional toll.

There is more uncertainty that comes along with short sales. A lot can happen from the time the initial short sale package is turned in to the seller’s lender to the time the seller receives the written short sale approval: Among other things, a buyer can get impatient and walk away; the lender’s loss mitigation department can lose or misplace important paperwork even after it’s been faxed repeatedly; the lender can deny the short sale altogether.

With so much out the seller’s hands, many feel they have no control of the transaction. But they do. Short sale sellers may not be able to do anything about what their lenders and buyers do, but they have complete control of many aspects of the sale. One of the aspects in which sellers can impact the short sale process is in determining how their property listings are managed and how much leeway they will give their listing agents to do their jobs efficiently.

Taking care of their responsibilities to the best of their ability is the most short sale sellers can do to ensure successful closings and move on to those fresh starts. Furthermore, mishandling any of those could easily lead to short sale denials and eventual foreclosures.

Top 5 Seller Property Must-Do’s For Successful Short Sales

1. Include the property in the Multiple Listing Service (MLS)- The MLS is the most powerful tool used by real estate agents today to connect buyers and sellers. It is a database that holds the information regarding available real estate inventory. For sellers, having their property listed in the MLS means significantly more exposure to a pool of buyers, which creates demand. Increased demand leads to quality offers from qualified buyers and, as a result, faster closings. Sometimes, homeowners feel exposed by allowing their agents to include their property in the MLS, especially when selling through short sales. However, in the interest of a quick sale, it is usually best to add the property to the system as soon as possible. Including the property in the MLS is also a great way to show good faith to a seller’s lender keeping in mind that the lender will (hopefully) be granting a significant mortgage discount to accommodate the sale.
2. Have a For Sale sign on the property- Not having a For Sale sign on display is probably the number one request I get from my short sale sellers. Oftentimes, they feel embarrassed and are concerned with what their neighbors will think without realizing they have plenty of neighbors who -in that moment- are going through the same experience. While it is not absolutely necessary for a successful sale, a prominent For Sale sign will enable potential buyers driving through the neighborhood to spot the property and submit offers. I always advise my sellers who are reluctant to allow me to put one up if they can bear it.
3. Give plenty of access to the property- It’s very important for listing agents and selling agents to have access to a property. After all, the property is the product we’re selling. Serious buyers will want to see the place for themselves to determine if it is a fit. If a property cannot be available for showings all day, then a consistent showing schedule that includes some mornings, some evenings and at least one weekend day would be very helpful to allow agents to schedule appointments around the seller’s desired showing times.
4. Prep the property for showing- Presentation and curb appeal are very important. A dry or uncut lawn, a messy kitchen and last week’s laundry scattered about will take away from your property’s appeal. I urge my sellers to tidy up on showing days if they can make the time. Clearing living areas of as much clutter as possible, putting dishes away, taking out the trash and watering the lawn are all great ways to make a property inviting without going too much out of your way. The ultimate goal is to make a buyer feel at home… literally.
5. List with an experienced short sale listing agent- Short sales are no joke. They are complicated transactions. And while it’s true that everybody either knows a real estate agent or is related to one, it is in every seller’s best interest to find one who specializes in listing and negotiating short sales. Chances are their short sale approval depends on it.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!

I want to help homeowners facing foreclosure. I really do. I knock on doors, send out mailers and hold seminars. Although my office is in Orange County, I will drive almost anywhere to provide information to homeowners in need. My commitment to this work runs so deep that I even wrote a book about it.

I am very fortunate to have mostly receptive clients who keep an open mind and heart as I give them my professional opinion, even when what I have to say is not what they want to hear. I find that most homeowners struggling with their mortgages just want clarity. They want to know what will really work for them. The problem is that they are usually bombarded by offers from attorneys, loan modification companies, and real estate agents, offering our unsolicited two cents. It’s no wonder homeowners are often so confused.

I have been working with one particular client for almost two years. It has taken that long for him to decide to sell his home instead of taking a loan modification offer from Chase that would drop his mortgage payment by $200. I took the listing in late December and submitted the initial paperwork to Chase loss mitigation. My client hasn’t made his mortgage payment in 21 months. Chase was about to file a notice of default but since I submitted my listing paperwork, the NOD was put on hold.

After it was clear that Chase wasn’t going to file the notice of default, my client stopped returning my calls promptly, requested I didn’t include his property in the MLS, didn’t grant me access to the property to meet Chase’s appraiser and refused to provide updated financials. I communicated in every way I could the importance of honoring Chase’s timeline to keep our short sale request from getting cancelled.

After two weeks of getting nowhere, my client confessed that he was trying to buy time and that he wasn’t going to make a final decision to sell for at least another 60 to 90 days. He asked me to continue working with him until then. He’s been speaking to an attorney who assured him that his lender would postpone a trustee sale as long as there was a viable offer on the table. And so I was hired to list the property and stall the lender. After finally getting to the truth, I made a decision to fire my client.

Unfortunately, some homeowners facing foreclosure feel as if they have all the time in the world and play a game of chicken with their lenders. What they often don’t think about is that in the process they are wasting time and resources that could be used on homeowners who truly want the help. In this instance, besides a big waste of my time, I had a negotiator, an appraiser and Chase’s customer service department spend more time on this file than they would on others because of the lack of seller cooperation.

Short sales are a team effort. They require more work and more follow-through from everybody involved, including the seller. On lots of my listings, I’ve earned my commission many times over before the close of escrow, but sometimes that’s what it takes.  And short sales take an emotional toll, especially on the families having to leave their homes. The tradeoff for homeowners, however, is being able to get out from under that debt without owing anything to their lenders and without having any tax liability. In California, those two figures could amount to hundreds of thousands of dollars.

All of the work involved requires a great level of commitment. I know that I am always ready to do my job to the very best of my ability. And for the sake of the greater good, I only work with homeowners who are willing to do their part.

Firing my homeowner didn’t feel good. Especially because I know that he is misinformed and could use my help. His attorney didn’t mention that lenders are no longer postponing trustee sales at the last minute just because as they have in the past. The number of foreclosures is rising. Sadly, my client may have to find out the hard way.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!

For real estate agents like me who work in the distressed market, it is common to cross paths with homeowners who haven’t made their mortgage payments in one or two years and sometimes even longer. And yet, many of these homeowners still live in their homes. This is no surprise since over the past two years lenders have been sluggishly slow to file foreclosure notices and actually follow through with foreclosing on these properties. Until now, many homeowners have little incentive to look for real solutions to avoid foreclosure.

In the beginning of the housing crisis, the situation for homeowners in trouble was drastically different. Lenders were so quick to foreclose that the only thing homeowners could do was to find another place to live before the sheriff arrived with an eviction notice. As reality began to set in, lenders understood the value behind working together with homeowners to find solutions to avoid foreclosure. This opened the door to loan modification companies, attorneys and anybody else who -for a fee- could delay the foreclosure process by any means necessary, buying homeowners extra time to accomplish whatever they had in mind.

It goes without saying that for some of these families where a breadwinner may be unemployed or underemployed, not having to make a mortgage payment has been a saving grace. However, there are many others who are simply taking advantage of a flawed, gridlocked and inconsistent mortgage servicing system. Some of these homeowners feel entitled to remain in their properties as long as they can; others feel their lenders have taken advantage of them and therefore are uncooperative; and others are caught up in the topsy-turvy world of loan modifications. Still, there are countless homeowners struggling with their mortgages who take preemptive action by applying for loan modifications and quickly selling their property if their loan modification requests are denied. The ones who try to hang on for as long as they can are contributing to the ever-growing ‘shadow inventory’ of properties that sooner or later are bound to hit our market.

What’s ahead for 2012?

The number of foreclosures decreased drastically in 2011. But since the decrease in filings was largely due to the robo-signing scandal and subsequent investigation, it’s fair to say that the current foreclosure filing numbers are artificially low. And while the argument as to which is best for the economy  -making every attempt to keep delinquent homeowners in their homes or foreclosing and getting them out to sell their foreclosed properties at a loss- will never be settled, things appear to be changing.

The robo-signing scandal has certainly compelled lenders to do a better job at following the legal protocol when processing foreclosures. This is very good for homeowners. And even though the investigation only found a small number of wrongfully foreclosed homes, no one can argue that lenders weren’t short sighted when they decided to take shortcuts thus shortchanging American homeowners (every pun intended).

Foreclosure notices increased dramatically again in the month of January. This is evidence that lenders are finally beginning to push through the backlog of foreclosures and preforeclosures. Experts believe our massive shadow inventory will make its presence known in the form of available listings during the first part of this year, which may -and probably will- cause another decline in housing prices.

Based on conversations I have with homeowners who are behind on their mortgages and on the dealings I have with lenders as I negotiate on behalf of my clients, it is clear to me that some lenders are becoming more aggressive when it comes to filing foreclosure notices and foreclosing. More and more lenders are following foreclosure timelines. Lenders are still making every attempt to contact homeowners and offer solutions as they are required to do.  However, I and other agents working in the field are seeing lenders not as willing to postpone foreclosure sales as they have in the past. I can think of a few homeowners who were shocked to find out they were out of time and now have a foreclosure in their hands.

Is this a glimpse of what’s ahead? It’s too soon to tell but the recovery of our real estate market depends on taking action. Homeowners and lenders stalling or delaying the inevitable haven’t proven beneficial to the housing market. Maybe less time to get things done will be enough of a wake-up call for all of us involved in the distressed market to look for solutions and move quickly to implement them.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!

Every successful loan modification begins with a complete loan modification package, and no loan modification package is complete without a detailed hardship letter. The hardshipletter is the only place within your loan modification package where you, the homeowner, get to share your story, your perspective and your desires. The hardship letter is your voice. How well you write it may determine how much you’re heard.

Below are the 5 key components of an effective loan modification hardship letter:

1.     The Basics

Too often, homeowners take the time and energy to write fantastic hardship letters only to leave out important information like their name or loan number. I always advise my clients to write the following on the top left hand corner of their hardship letters:

• Date
• To: [Lender name]
• Attn: [Usually Loss Mitigation or the name of your negotiator/ underwriter]
• From: [Your name]
• Address: [Subject property address]
• Loan Number: [Loan number]
• RE: Loan Modification Request

Be sure to leave plenty of room at the top of the page for faxing mishaps that may cut off on conceal your information.

2.     Your Hardship

This is where you will explain to your lender exactly what led to your mortgage troubles. Explain in four or five sentences what changed in your life that forced you to default on your mortgage or is making default imminent. It’s important to let your lender know that until this unforeseen event, you paid your mortgage on time.

Some common hardships are:

• Loss of employment
• Loss of income
• Divorce or separation
• Illness or injury
• Death of a spouse
• Excessive debt
• Adjustable rate mortgage (ARM) that has adjusted or is due to adjust making mortgage payments unaffordable

3.     What You Have Done to Improve Your Situation

It is important to make your lender aware of everything you are doing to remedy your financial troubles. Mention any attempts you made to refinance your mortgage and why you didn’t qualify. Describe any changes to your budget to curtail spending, if you have taken a part-time job or have eliminated any credit card debt. Provide any relevant information that shows your lender you are doing everything you can to honor your financial obligations.

4.     Your Intentions

The most important point you must make to your lender is that you want to keep your home and explain the reasons why. Don’t be afraid to tap into your emotions here. If this is the home in which you raised your children, let your lender know that. If this is the home you intended to retire in, let them know that as well.  Take the opportunity to respectfully make suggestions as to what your lender can do to help you stay in your home. Explain your ideal mortgage payment (approximately 30% of your gross income). Ask your lender to forbear any delinquent mortgage payments so that you don’t have to reinstate your loan with cash money. Ask if they will consider reducing your outstanding loan balance if you owe significantly more than your home is worth. This is where you give your lender your wish list, so ask away.

5.     The “B” Word

“Bankruptcy” is not a word lenders like to hear. However, the mere mention of the “B” word oftentimes is one of the ways to get lenders to be more receptive to loan modification requests. If you were to file bankruptcy, foreclosure proceedings would stop, at least temporarily. Your lender would have to invest time and money to move the foreclosure process along. Sometimes mentioning to your lender that you are seriously considering filing bankruptcy but would rather modify your loan may be enough to redirect the process to your benefit. For honesty’s sake, if you decide to use the “B” word, I suggest you meet with a bankruptcy attorney for one of those free consultations.

One more thing:

Keep your hardship letter to one page in length if possible. If your hardship letter is two pages in length, then include the information on the top left hand corner on both pages along with page numbers to indicate there are two pages in your letter.

Just so you know:

I list and negotiate short sales in Orange and Los Angeles Counties in the beautiful state of  California. However, I am happy to answer any questions regarding anything having to do with saving your home. So, feel free to drop me a line!