These transactions – with a lender allowing a sale for less than the amount owed on the mortgage– can take several months to close and sometimes fail, with the eventual outcome a foreclosure.
HAFA provides incentives to borrowers and lenders alike to work together and speed up short sales as an alternative to repossessing the home.
To be eligible for HAFA, homeowners must first apply for a loan modification through the Home Affordable Modification Program. Those who do not qualify for a loan mod or miss payments during the trial period qualify for HAFA.
Under HAFA, borrowers get preapproved short sale terms from the lender before putting their homes on the market. Sellers are supposed to get at least 120 days to market the home, or even up to a year, and can’t be foreclosed on during that time.
When a buyer makes an offer, borrowers must submit the sales contract to the lender within three days, along with the buyers’ mortgage preapproval and the status of negotiations with other lien holders on the seller’s property. Lenders must approve or deny the contract within 10 days.
HAFA requirements:
Property is the principal residence.
Mortgage originated before Jan. 1, 2009.
Loan is owned or guaranteed by Fannie Mae or Freddie Mac.
Borrower is delinquent or default is likely.
Homeowner shows financial hardship.
Borrower’s total monthly housing payment exceeds 31% of gross income.
Unpaid principal is not more than $729,750.
HAFA financial incentives include $1,000 to mortgage servicers, up to $1,000 for mortgage holders who share short sale proceeds with second lien holders and a payment of up to $3,000 for second mortgage holders.
Homeowners also can get $1,500 for relocation, to encourage them to stay in the home until the short sale closes, because an owner-occupied home is usually in better shape than a vacant one.
Monday, April 19, 2010
no more state taxes for 1099 income on shortsales!
FINALLY! now at least when you shortsale your house, you won't lose your house AND have to pay state taxes!
With just seven days until Tax Day on April 15, the State Legislature and governor finally have an agreement on a bill to provide tax relief for short sales.
Both houses of the Legislature today passed Senate Bill 401 by Sen. Lois Wolk, D-Davis, which provides tax relief for mortgage debt forgiveness for tax years 2009 through 2013. Just moments ago, Gov. Arnold Schwarzenegger’s staff told the Orange County Register that he will sign the legislation.
“This is a great example of what we can accomplish when we work together to solve problems for Californians,” said Aaron McLear, the governor’s spokesman, in an email. “This bill will protect homeowners from unfair taxes.”
For weeks now, Schwarzenegger and the Legislature have been arguing over what to do about mortgage debt forgiveness.
If you’re one of the thousands of Californians who sold your home at a loss in what is commonly known as a short sale, that would have put you on the hook for a big tax bill come April 15 — even though you no longer own your home.
Anyway, twice before the Democrat-controlled Legislature had approved a bill that would have offered such tax relief, but the governor vetoed both of them because the bills included a provision that created penalties for businesses and wealthy taxpayers who claim higher tax refunds than they know they’re actually entitled to.
Finally, this week, the Legislature put forward the bill by Wolk, which included the mortgage debt relief but excluded the provision Schwarzenegger opposed alongside the California Chamber of Commerce and the California Manufacturers and Technology Association.
But even without that provision, the bill only passed with two Republican votes (by State Sens. Dave Cox of Fair Oaks and Roy Ashburn of Bakersfield) because it included some new provisions that increase penalty and interest payments for individual taxpayers. This new version of the bill, which gained the support of the chamber and the association, is opposed by the Howard Jarvis Taxpayers Association.
“We’ve contaminated this bill with some sort of compromise between some sort of parties who decided that tax increases should be part of this bill,” said Assemblyman Kevin Jeffries, R-Riverside. “It has taken a very good bill … and ruined it, killed it, with tax increases. I urge a no vote.”
In the end only one Orange County lawmaker voted for the bill, Assemblyman Jose Solorio, D-Santa Ana, although many others expressed support for the mortgage debt forgiveness piece. Californians who sold their home in a short sale will now not be on the hook for additional taxes.
With just seven days until Tax Day on April 15, the State Legislature and governor finally have an agreement on a bill to provide tax relief for short sales.
Both houses of the Legislature today passed Senate Bill 401 by Sen. Lois Wolk, D-Davis, which provides tax relief for mortgage debt forgiveness for tax years 2009 through 2013. Just moments ago, Gov. Arnold Schwarzenegger’s staff told the Orange County Register that he will sign the legislation.
“This is a great example of what we can accomplish when we work together to solve problems for Californians,” said Aaron McLear, the governor’s spokesman, in an email. “This bill will protect homeowners from unfair taxes.”
For weeks now, Schwarzenegger and the Legislature have been arguing over what to do about mortgage debt forgiveness.
If you’re one of the thousands of Californians who sold your home at a loss in what is commonly known as a short sale, that would have put you on the hook for a big tax bill come April 15 — even though you no longer own your home.
Anyway, twice before the Democrat-controlled Legislature had approved a bill that would have offered such tax relief, but the governor vetoed both of them because the bills included a provision that created penalties for businesses and wealthy taxpayers who claim higher tax refunds than they know they’re actually entitled to.
Finally, this week, the Legislature put forward the bill by Wolk, which included the mortgage debt relief but excluded the provision Schwarzenegger opposed alongside the California Chamber of Commerce and the California Manufacturers and Technology Association.
But even without that provision, the bill only passed with two Republican votes (by State Sens. Dave Cox of Fair Oaks and Roy Ashburn of Bakersfield) because it included some new provisions that increase penalty and interest payments for individual taxpayers. This new version of the bill, which gained the support of the chamber and the association, is opposed by the Howard Jarvis Taxpayers Association.
“We’ve contaminated this bill with some sort of compromise between some sort of parties who decided that tax increases should be part of this bill,” said Assemblyman Kevin Jeffries, R-Riverside. “It has taken a very good bill … and ruined it, killed it, with tax increases. I urge a no vote.”
In the end only one Orange County lawmaker voted for the bill, Assemblyman Jose Solorio, D-Santa Ana, although many others expressed support for the mortgage debt forgiveness piece. Californians who sold their home in a short sale will now not be on the hook for additional taxes.
Big Mistake Homebuyer's make #6=No Lawyer!--CNN
Think about this one. when you buy a house, hire a lawyer. it's a flat fee, and not commission based (so we actually have your best interest in mind!)
Nearly everyone involved in a real estate transaction -- the seller, the buyer's real estate agent, the seller's agent and the mortgage broker -- has a vested interest in getting the deal done because they only get paid when the house is sold. So they may push a deal even if it's not in the best interest of the buyer.
One of the best defenses against making am expensive purchase you'll regret is to hire a real estate attorney -- even in cities where it's not standard practice. These professionals charge flat fees and their advice is objective.
It's nice to have someone on your side.
Nearly everyone involved in a real estate transaction -- the seller, the buyer's real estate agent, the seller's agent and the mortgage broker -- has a vested interest in getting the deal done because they only get paid when the house is sold. So they may push a deal even if it's not in the best interest of the buyer.
One of the best defenses against making am expensive purchase you'll regret is to hire a real estate attorney -- even in cities where it's not standard practice. These professionals charge flat fees and their advice is objective.
It's nice to have someone on your side.
BofA plan: No job? No house payment
sorry it's been so long since I posted (too much work). Now, this is only an idea right now, but if regulators approve it, AND banks actually implement it, it would be a good thing.......
Bank of America wants to give struggling mortgage customers who are collecting unemployment benefits up to nine months with no mortgage payment.
That's right. Zero payment.
Customers would have to agree that, if they haven't found a job within the nine months, they will sign over their house to the bank. The Charlotte bank would give them at least $2,000 to help with moving expenses.
The proposal needs regulatory approval, and the bank doesn't know when, or if, that will happen.
Some experts say the plan could become an industry model and is the most substantial, creative approach yet to addressing the fallout from stubbornly high unemployment, which is driving mortgage delinquencies and foreclosures.
The plan also could provide families with faster relief, allow them to save money and provide a timetable for making decisions. The bank could avoid millions in collection and foreclosure expenses.
"It's an innovative way for Bank of America to demonstrate it's working with its customers," said Mark Williams, a former Federal Reserve bank examiner. "Regulators should view this as a positive step as well."
The $75 billion federal mortgage-aid program, announced in February 2009, has struggled to fulfill President Barack Obama's estimate of helping millions. Through March, only 230,000 families had received final mortgage modifications under the Home Affordable Modification Program, called HAMP.
The program holds few options for the jobless, even as the U.S. unemployment rate hovers around 10 percent. The Charlotte area's rate is near 13 percent. And more than 6.3 million people nationwide have been out of work longer than six months.
"It's something I would have done," said Bill Sagy, a Bank of America mortgage customer laid off last June from his management consultant position. "That would definitely have worked."
Instead, he spent months working with the bank for reduced payments that he thought would become a long-term modification. But that didn't happen, making him one of a growing group of homeowners who spent scarce resources that didn't ultimately save their homes.
Sagy's Huntersville home, which he bought for $253,000 in 2006, has shed value and is unlikely to sell for what he owes. Without a modification, he's behind on payments and says the bank wants to foreclose.
"It's so frustrating," said Sagy, who with his wife is considering relocating.
Mark Pearce, a leader in national foreclosure prevention efforts, called the plan a step forward.
"This seems like a new idea that offers a lot of positives for both the homeowners and the bank," said Pearce, an N.C. deputy banking commissioner. "There's a nice balance, giving people more breathing space but with a date certain for moving to the next step if things don't work out."
In addition to reducing worries, the program could, for example, mean families are able to keep current with a car payment and avoid repossession. Losing a car makes it harder to find or keep a job. Borrowers also might be better able to afford expenses such as child care, freeing them to attend job fairs and interviews.
Steve Obendorf, who works in the credit-counseling unit of Family Services, a Gastonia nonprofit, likes the idea of giving people "a breather." But the bank also needs to make sure people understand they're agreeing to sign over their homes if they can't get a job. Otherwise, he speculates, there could be a wave of homeowners begging for a reprieve.
Obendorf, who works with people facing foreclosure, said unemployment is the key reason people come in for the counseling services, which are free. He recommends people save as much money as they can during any grace period, so they have a cushion.
Guy Cecala, publisher of Inside Mortgage Finance, said the bank "deserves high marks" for the effort but questions how many people the program could actually help. The self-employed, for example, don't qualify for unemployment benefits. Homeowners with a lot of equity aren't likely to sign up because they would not want to risk losing their home in nine months.
The bank has 1.44 million customers who are 60 days or more past due, nearly 14 percent of the 10.4 million mortgages it services. But it hasn't broken out how many of those might be helped by the proposed plan. Many details, such as eligibility and the application process, also haven't been finalized because the bank can't go ahead without regulators' approval.
Also unclear is whether zero would really mean no payment at all.
That's the goal for Jack Schakett, who is leading negotiations for the bank. That would mean the bank pays bills such as property taxes and insurance during the nine-month break. That's what happens now when a customer is delinquent.
Bank of America, like most servicers, has faced criticism for inept handling of the modification process. Several lawsuits allege the bank hasn't delivered on mortgage modifications. More broadly, the industry is under pressure from lawmakers and the public, angered by financial firms' role in the national meltdown.
Amid the outcry, Bank of America has been scrambling to improve service, including a recent pledge to speed response time for modification customers. Last week, the bank outlined other proposals, including more mortgage help for poor borrowers.
The federal HAMP plan was intended to avoid foreclosure for people with exotic mortgages, by lowering interest rates and otherwise making the loans more stable. But unemployment quickly became the bigger and more challenging issue.
Changes to HAMP announced last month would give people receiving unemployment benefits a three-month reprieve with a lower payment. That's widely seen as too little time. A potential extension to six months also would likely be difficult.
That's because accounting and regulatory guidelines could require lenders to write down the value of a loan if a modified payment plan lasts more than three months. That's bad for the bottom line and, if a lot of loans go sour, banks go out of business.
Bank of America believes its proposed program won't trigger the three-month loss of value. Schakett hopes regulators will endorse the combination of no payments - not technically a mortgage modification - and the upfront customer agreement to give up their house if they can't land a job within nine months.
The bank is betting that giving up nine months of income will pay off by enabling customers to find jobs and restart payments. Nine months is also roughly the length of time it would take for delinquent borrowers to lose their home. So, if customers in the new program can't find jobs, the bank could end up in about the same position as it would have been. And, in theory, the bank and customers will have avoided the draining collection and foreclosure process.
Customers who get a job during the nine months would have the unmade payments added to their mortgage, spread over the length of the contract. If the new job is at lower pay, they'd be eligible to apply for a mortgage modification to reduce payments.
"If they don't get a job, it's not going to work out to save their home, they will at least have built up some cash," said Schakett, the bank's credit loss mitigation strategies executive, in an interview last week. "It's not as good as staying in their home, but they at least will be financially able to settle themselves in another home, to make the transition more dignified."
Most lenders provide short-term, usually three-month, payment reduction plans, called a forbearance. Bank of America's would be the first wide-scale, zero-payment plan, and it would last longer and be more streamlined.
"It gives them wiggle room to limp along with their customers until the economy comes back," said Williams, the former bank examiner who has just released a book on the financial crisis, "Uncontrolled Risk."
There are signs of economic recovery, including big stock market gains, but the housing market and job growth remain weak.
"There is a bet here, that the economy will be stronger ... but there's still looming uncertainty," Williams said. Still, he said, the bank is "setting a potential standard. If it works, it will be imitated by other large banks."
Bank of America wants to give struggling mortgage customers who are collecting unemployment benefits up to nine months with no mortgage payment.
That's right. Zero payment.
Customers would have to agree that, if they haven't found a job within the nine months, they will sign over their house to the bank. The Charlotte bank would give them at least $2,000 to help with moving expenses.
The proposal needs regulatory approval, and the bank doesn't know when, or if, that will happen.
Some experts say the plan could become an industry model and is the most substantial, creative approach yet to addressing the fallout from stubbornly high unemployment, which is driving mortgage delinquencies and foreclosures.
The plan also could provide families with faster relief, allow them to save money and provide a timetable for making decisions. The bank could avoid millions in collection and foreclosure expenses.
"It's an innovative way for Bank of America to demonstrate it's working with its customers," said Mark Williams, a former Federal Reserve bank examiner. "Regulators should view this as a positive step as well."
The $75 billion federal mortgage-aid program, announced in February 2009, has struggled to fulfill President Barack Obama's estimate of helping millions. Through March, only 230,000 families had received final mortgage modifications under the Home Affordable Modification Program, called HAMP.
The program holds few options for the jobless, even as the U.S. unemployment rate hovers around 10 percent. The Charlotte area's rate is near 13 percent. And more than 6.3 million people nationwide have been out of work longer than six months.
"It's something I would have done," said Bill Sagy, a Bank of America mortgage customer laid off last June from his management consultant position. "That would definitely have worked."
Instead, he spent months working with the bank for reduced payments that he thought would become a long-term modification. But that didn't happen, making him one of a growing group of homeowners who spent scarce resources that didn't ultimately save their homes.
Sagy's Huntersville home, which he bought for $253,000 in 2006, has shed value and is unlikely to sell for what he owes. Without a modification, he's behind on payments and says the bank wants to foreclose.
"It's so frustrating," said Sagy, who with his wife is considering relocating.
Mark Pearce, a leader in national foreclosure prevention efforts, called the plan a step forward.
"This seems like a new idea that offers a lot of positives for both the homeowners and the bank," said Pearce, an N.C. deputy banking commissioner. "There's a nice balance, giving people more breathing space but with a date certain for moving to the next step if things don't work out."
In addition to reducing worries, the program could, for example, mean families are able to keep current with a car payment and avoid repossession. Losing a car makes it harder to find or keep a job. Borrowers also might be better able to afford expenses such as child care, freeing them to attend job fairs and interviews.
Steve Obendorf, who works in the credit-counseling unit of Family Services, a Gastonia nonprofit, likes the idea of giving people "a breather." But the bank also needs to make sure people understand they're agreeing to sign over their homes if they can't get a job. Otherwise, he speculates, there could be a wave of homeowners begging for a reprieve.
Obendorf, who works with people facing foreclosure, said unemployment is the key reason people come in for the counseling services, which are free. He recommends people save as much money as they can during any grace period, so they have a cushion.
Guy Cecala, publisher of Inside Mortgage Finance, said the bank "deserves high marks" for the effort but questions how many people the program could actually help. The self-employed, for example, don't qualify for unemployment benefits. Homeowners with a lot of equity aren't likely to sign up because they would not want to risk losing their home in nine months.
The bank has 1.44 million customers who are 60 days or more past due, nearly 14 percent of the 10.4 million mortgages it services. But it hasn't broken out how many of those might be helped by the proposed plan. Many details, such as eligibility and the application process, also haven't been finalized because the bank can't go ahead without regulators' approval.
Also unclear is whether zero would really mean no payment at all.
That's the goal for Jack Schakett, who is leading negotiations for the bank. That would mean the bank pays bills such as property taxes and insurance during the nine-month break. That's what happens now when a customer is delinquent.
Bank of America, like most servicers, has faced criticism for inept handling of the modification process. Several lawsuits allege the bank hasn't delivered on mortgage modifications. More broadly, the industry is under pressure from lawmakers and the public, angered by financial firms' role in the national meltdown.
Amid the outcry, Bank of America has been scrambling to improve service, including a recent pledge to speed response time for modification customers. Last week, the bank outlined other proposals, including more mortgage help for poor borrowers.
The federal HAMP plan was intended to avoid foreclosure for people with exotic mortgages, by lowering interest rates and otherwise making the loans more stable. But unemployment quickly became the bigger and more challenging issue.
Changes to HAMP announced last month would give people receiving unemployment benefits a three-month reprieve with a lower payment. That's widely seen as too little time. A potential extension to six months also would likely be difficult.
That's because accounting and regulatory guidelines could require lenders to write down the value of a loan if a modified payment plan lasts more than three months. That's bad for the bottom line and, if a lot of loans go sour, banks go out of business.
Bank of America believes its proposed program won't trigger the three-month loss of value. Schakett hopes regulators will endorse the combination of no payments - not technically a mortgage modification - and the upfront customer agreement to give up their house if they can't land a job within nine months.
The bank is betting that giving up nine months of income will pay off by enabling customers to find jobs and restart payments. Nine months is also roughly the length of time it would take for delinquent borrowers to lose their home. So, if customers in the new program can't find jobs, the bank could end up in about the same position as it would have been. And, in theory, the bank and customers will have avoided the draining collection and foreclosure process.
Customers who get a job during the nine months would have the unmade payments added to their mortgage, spread over the length of the contract. If the new job is at lower pay, they'd be eligible to apply for a mortgage modification to reduce payments.
"If they don't get a job, it's not going to work out to save their home, they will at least have built up some cash," said Schakett, the bank's credit loss mitigation strategies executive, in an interview last week. "It's not as good as staying in their home, but they at least will be financially able to settle themselves in another home, to make the transition more dignified."
Most lenders provide short-term, usually three-month, payment reduction plans, called a forbearance. Bank of America's would be the first wide-scale, zero-payment plan, and it would last longer and be more streamlined.
"It gives them wiggle room to limp along with their customers until the economy comes back," said Williams, the former bank examiner who has just released a book on the financial crisis, "Uncontrolled Risk."
There are signs of economic recovery, including big stock market gains, but the housing market and job growth remain weak.
"There is a bet here, that the economy will be stronger ... but there's still looming uncertainty," Williams said. Still, he said, the bank is "setting a potential standard. If it works, it will be imitated by other large banks."
Friday, February 12, 2010
Indymac is horribly, terribly horrible
If you have an indymac loan, do NOT go into foreclosure. they will NOT postpone sale dates. They demand that you pay them most (if not all) of the money that you owe them in order to stop the sale date. And they will do underhanded, crooked things like deny you just before the sale date, knowing that you won't be able to resubmit a package for loan mod before they sell your house.
And here's another tip. when you pay them, make sure you FOLLOW DIRECTIONS TO A "T". failure to do so will mean that you paid your money to the bank, and your house will still sell.
Please listen to your attorney when we say things are getting serious, because it means that things are getting serious!
We might initiate our first suit against Indymac this week on behalf of a client that is getting royally screwed around by Indymac. I'll keep you posted.
And here's another tip. when you pay them, make sure you FOLLOW DIRECTIONS TO A "T". failure to do so will mean that you paid your money to the bank, and your house will still sell.
Please listen to your attorney when we say things are getting serious, because it means that things are getting serious!
We might initiate our first suit against Indymac this week on behalf of a client that is getting royally screwed around by Indymac. I'll keep you posted.
great Mod on 2nd mortgage
Got a great Mod on a 2nd mortgage. negotiated $168,000 2nd down to cash settlement of $16,000. Now just to fully disclose, the client was very late, there was no equity on the house, and we've been working on it for a year and a half. But, what the heck....10 cents on the dollar isn't bad!
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