The Mortgage Forgiveness Debt Relief Act of 2007 is Expiring

So what are other homeowners doing? Many homeowners that are considering a short sale or a loan modification have decided that instead of waiting for the market to come back they are opting to sell their house now and get out while the getting is good!  If you owe more than your house is worth, it will take years to break even. If you decide to sell your house BEFORE you break even, there will be debt that is settled by the lender. Pursuit of a short sale AFTER this deadline expires will be subject to additional tax liability.

 

 

Owners opt to walk and leave mortgages behind

The article below could be written about any major city in the United States today.  Many people feel frustrated and angry about the entire Real Estate market that we now find ourselves in.  Some people walk away form their mortgages, because they can't pay anymore.  Increasingly, other people are walking away and they can afford it.  This is know as Strategic Default.  But if you read up and educate yourself, you will find nothing strategic about the mortgage default.   Consider using a short sale to liquidate your home and not have a foreclosure on your credit.  Lenders are becoming more flexible and the qualifications to get into a Short Sale Program have changed.

by Catherine Reagor - Mar. 17, 2010 The Arizona Republic

More Phoenix-area homeowners are walking away from their mortgage payments, and many more are likely considering it.

These are not people losing homes due to severe financial problems. "Walking away" now also describes people who can make their payments but don't want to because they owe much more than their home is worth.

Metro Phoenix's 50 percent drop in home values has left tens of thousands of homeowners here underwater, owing more than the market value of their house. Many people who bought houses during the market peak are paying mortgages double their home's current worth. Most can't sell now and will have to wait years before values rise enough for them to sell without taking a loss.

So, many walk away. Many of them are angry about federal bailouts for lenders who seem reluctant to work with homeowners on loan modifications. Frustration and anger increasingly outweighs the social stigma of foreclosure. In a populist twist, some homeowners are even proud of stiffing lenders.

Circumstances are also on their side. Lenders are overwhelmed and slow to foreclose, allowing mortgage defaulters to stay in their homes for months without paying anything. Many homeowners who walk away can rent comparable houses for half their current mortgage payment. And laws in Arizona prevent lenders from going after the personal assets of those who default on a mortgage.

There are no hard figures on the number of Phoenix homeowners who have walked away from their mortgages. Nationally, one recent study found at least 25 percent of all foreclosures are driven by "strategy," not necessity. And there are fewer penalties for walking away in Arizona than most other states. Foreclosures in the Valley continue to hover around record levels.  What worries housing-market experts is that if more people walk away, then even more foreclosure properties will continue to depress the market and delay any recovery.  

By the numbers

Joe Giovale paid $390,000 for a north Phoenix home in 2006. He knew home prices wouldn't keep climbing at the same brisk pace, but he expected steady appreciation of about 2 percent a year.

Giovale's home is surrounded by foreclosure properties. He owes at least 50 percent more than his house is worth. Giovale can rent a similar house in his neighborhood for $1,000 less a month than his mortgage payment.  "My lender won't cut my principal, despite the federal help it's getting," Giovale said. "I can afford the payments. But I have done the calculations. It's going to take 18 years until the value of my home rebounds to what I paid for it. Why shouldn't I walk away and rent? I can probably buy again in a few years."

Strategic default

Walking away is almost as easy as it sounds.

Homeowners stop paying their mortgages and wait for the notice that their lender has started to foreclose. Lenders call this a strategic default. Lenders used to foreclose on a home after three missed mortgage payments. But the record number of foreclosures in Phoenix has significantly slowed that process. Now, some lenders do not get around to filing to foreclose until the homeowner misses six or more payments, which can mean half a year of free housing for someone who plans to walk away. Once homeowners receive a notice of a foreclosure, they usually have three months until their home is sold through a foreclosure auction or trustee sale. But, again, because of the backlog of foreclosures, auctions are often delayed by several more months. Many homeowners who plan to walk away will try to find a rental home before the black mark of a foreclosure is on their credit report.

Given the housing-market crisis, some landlords care less about a foreclosure on a credit record than proof of steady income.

Angry at lenders

Patrick Brennan thinks about walking away from his Laveen home. Not because he is underwater but because he's so angry at lenders.

"I'm in a unique position of wanting to walk away from my mortgage based on principle, not principal," Brennan said. But he is going to stay put and continue paying his mortgage because he says his family does not stand to gain much from walking away. Brennan has become a prolific blogger on the topic, frustrated with lenders blaming homeowners and making them pay the price for the housing crash. He advises people to feel no remorse for walking away and not to worry about what their friends and family will think.

"Why should we insist that there be a false moral obligation on the part of the downtrodden homeowner to help the bank that refuses to renegotiate a bad loan?" he said. "Whether to walk away or not is a conversation we must have in society now, mainly so that the average consumer can become better armed with information and make the best choice."

Penalties and credit

The impact on personal credit histories varies when it comes to homeowners and their mortgages. Currently, homeowners who walk away from a mortgage receive a black mark on their credit that stays there for at least seven years. Brent White, a University of Arizona associate law professor, believes the nation's credit-reporting system should be changed in the wake of the housing crash. He doesn't think foreclosures should be a black mark on people's credit records when many can't avoid the financial catastrophe due to the weak economy and depressed home values.  

He wrote a controversial paper about his views that continues to draw national attention. White believes more homeowners should walk away until a fairer situation is created between lenders and borrowers.  

"It is time to put to rest the assumption that a borrower who exercises the option to default is somehow immoral or irresponsible," White said. "Lenders walk away from bad deals all the time, and they don't have to pay a price as heavy as a homeowner with a foreclosure on their credit score." Critics say homeowners who walk away should face bigger credit penalties than homeowners who cannot obtain a loan modification and lose their home to foreclosure. People who walk away, critics say, further damage the market by depressing prices and creating more foreclosures, and they should not be rewarded.

"If people walk away, they should not be able to do so without a cost," homeowner Pete Taggatz said. "No chance should exist for them to obtain any home loan until a mandatory waiting period has passed, seven to 10 years. Anyone that obtains a home loan and subsequently walks away from their loan should be charged with mortgage fraud."  

The nation's biggest mortgage lenders, Fannie Mae and Freddie Mac, won't fund a mortgage for five years for any borrower who walks away. More lenders are trying to track down homeowners who walk away, even in Arizona. But Arizona is a so-called anti- deficiency state, which means that, in most cases, lenders that take back a borrower's primary residence through foreclosure can't go after that borrower's other assets.  

State legislation passed last year would have allowed lenders to go after assets of homeowners who lost houses to foreclosure and couldn't show they lived in a home for six months straight. The law was aimed at housing speculators but would have affected many retirees and second-home owners.  

The law was repealed in December, but its backers, including the state's banking industry, have been looking at ways to help lenders recoup their losses from borrowers who purposefully default on mortgages. Not every Arizona homeowner is protected when it comes to personal assets. When people refinance in Arizona, some new loan documents don't offer anti-deficiency cover for the difference between the sale price and outstanding mortgage balance.  

There could be tax implications for people who walk away, particularly on second homes. The money a lender loses on a foreclosure home can usually be considered income for the former homeowner, according to the Internal Revenue Service. But because of the national foreclosure crisis, some home-loan debt canceled through loan modifications, short sales or foreclosures are exempt from being treated as income by the IRS until 2012.

Homeowners lose hefty tax deductions from the interest on their mortgage when they stop paying.  

Marcel Thierot is an investor who would rather take a tax hit than keep paying on his Scottsdale winter home. He bought a new home in 2005 for more than $500,000 and estimates the current value at about $200,000.

"I am not paying for this housing bubble," he said. "The bank won't do anything to cut my payments, but I know they will very happily sell my home at a foreclosure auction as soon as they take it."

by Catherine Reagor - Mar. 17, 2010 The Arizona Republic

 

Questions about your home, your mortgage and options that you may have?  Give us a call or fill out the form below.  We are professional, respectful people more than willing to help and share our knowledge.

 

The Denver Short Sale Experts

Are you considering a short sale? Or are you working on a loan modification and not getting where you need to be? Or do you feel like foreclosure is your only option? It might be time to think through and understand how a short sale can benefit you. This is a big decision that need s agreat deal of consideration, but the rewards may be exactly what you are looking for. Success with a short sale can mean avoiding foreclosure and the damage it can do to your credit record.

What is a short sale?

When the proceeds from the sale of your home do not cover the balance of your home loan your current lender may agree to a short sale. Doing a short sale would prevent you from foreclosure proceedings. Your current lender (bank) may choose to accept less than what is owed during a short sale if it believes that the loss in the short sale will be less than the loss it will take if the home is foreclosed and resold. For you as the homowner benefits from the short sale as well. Choosing to do a short sale means avoiding a foreclosure and having it on your credit record. In summary, a short sale is negotiating with lien holders a payoff that is less than what is owed.

How do you choose a Realtor for your short sale?

Choosing a Realtor to represent you during a short sale is more important than just choosing a Realtor. Experience with short sales is more critical than any other criteria you might have in selecting a Realtor. You need a Real Estate agent who knows the short sale process, has successfully closed many short sale transactions and knows the rules, laws and intricacies of a short sale. Real Estate agent's who aren't short sale experts just don't have the skill set, the knowledge or the expertise to educate a distressed homeowner, walk them through the short sale process or negotiate the terms of the short sale with your current lender. What education do they have, have they successfully completed any short sales and can they guide you through the process. If not, you really need to seek out a more experienced Realtor.

Hiring the right short sale Real Estate Agent

If you are facing foreclosure and need to do a short sale in order to sell your home, then choosing the right Real Estate Agent is more important than ever. You have so much more at stake then a traditional seller and therefore should use more caution when hiring an agent. Hiring the wrong agent is the worst thing that can happen because most likely it will send your home into foreclosure and put a major dent in your credit. Time is so important and you only have a small window of time to sell before your home gets foreclosed - that's why it is so imperative that you choose the right Realtor.

Finding a Realtor that is an experienced short sale expert

Be careful of the agents that claim to be short sale experts or specialists. Quality experience is so importa in determining a pro from someone with less-than-desirable experience. Negotiating with the bank is a full-time job and then some. If an agent is trying to do the full-time job of negotiating with banks and the full-time job of marketing homes you can be sure that both jobs will suffer and neither will be done as well as they should. You don't want either to suffer.

Here are a few of our recent experience and sucess with short sales, all areas, all price ranges

Sold Date	Address	Mortgage Debt Owed	Short Sale Sold Price	Difference
4/21/2011	8th, Denver	$239,000	$160,000	$79,000
6/23/2011	Scarlet, Morrison	1,200,000	$840,000	$360,000
6/23/2011	York, Denver	$345,000	$310,000	$35,000
6/27/2011	Gaylord, Denver	$425,000	$267,000	$158,000
5/05/2011	Merchant, Parker	$586,000	$340,000	$246,000
7/28/2011	Raleigh, Castle Rock	$176,000	$140,000	$36,000
7/22/2011	Appleton, Castle Rock	$511,000	$390,000	$121,000
7/12/2011	Ida, Centennial	$377,000	$275,000	$102,000
7/08/2011	University, Denver	$540,000	$330,000	$210,000
6/03/2011	92nd, Thornton	$145,000	$88,000	$57,000
5/31/2011	Morgan, Elizabeth	$272,000	$205,000	$67,000
5/10/2011	Forest Hill, Littleton	$251,000	$149,900	$101,000
5/03/2011	Oakwood, Castle Rock	$98,000	$38,000	$60,000
5/3/2011	1211-1203 23rd, Denver	$922,000	$560,000	$362,000
4/29/2011	Perry Park, Sedalia	$375,000	$534,000	$159,000
4/28/2011	Rita, Castle Rock	$492,000	$347,000	$145,000
4/19/2011	Vassar, Aurora	$225,000	$145,000	$80,000
4/12/2011	Long, Littleton	$404,000	$271,268	$132,732
3/30/2011	Wewatta, Denver	$841,000	$705,000	$136,000
03/25/2011	Gould, Castle Rock	$505,000	$350,000	$155,000
02/18/2011	Saybrook, Denver	$239,000	$180,000	$59,000
2/10/2011	Topaz Vista, Castle Rock	$643,000	$390,000	$253,000
1/24/2011	Brushwood, Castle Rock	$331,000	$243,000	$88,000
12/15/2010	Grant, Denver	$625,000	$305,000	$320,000
12/03/2010	Quemoy Way, Aurora	$245,000	$183,000	$62,000
11/24/2010	Caddy Ct, Colorado Springs	$380,000	$289,000	$91,000
11/18/2010	Hoover Ct, Grand Junction	$270,000	$189,000	$81,000
11/2/2010	Empire St, Aurora	$175,000	$83,000	$92,000
10/22/2010	Las Animas, Colorado Springs	$385,000	$242,000	$143,000
9/29/2010	Mineral Pl, Centennial	$390,000	$253,000	$137,000
8/5/2010	Woodmont Way, Castle Rock	$1,139,000	$645,000	$494,000
7/15/2010	Hurd Ln, Avon	$471,000	$262,000	$209,000
7/13/2010	Abilene Cir, Aurora	$328,000	$220,000	$108,000
7/6/2010	Jessica Ct, Colorado Springs	$251,000	$200,000	$51,000
6/10/2010	Pebble Creek Way, Littleton	$188,000	$140,000	$48,000
6/9/2010	Danube Ct, Aurora	$269,000	$195,000	$74,000
5/20/2010	Shadecrest Pl, Highlands Ranch	$557,000	$352,000	$205,000
5/6/2010	Coal Mine St, Firestone	$405,000	$235,000	$170,000
4/20/2010	Chesterfield Rd, Castle Rock	$306,000	$219,000	$87,000

So, what makes an experienced short sale specialist an expert? It's an agent that will focus on marketing your home and has a team of negotiators focusing on negotiating with the bank to get your short sale approved and reduce the damage to your credit. You want an entire team at work for you with members that specialize in each facet.

Do you need a short sale team?

We believe you do and here are the reasons:

1. Contacts at the banks: We have negotiators who are accustomed to negotiating with the banks all the time. We have established contacts that individual Realtors do not have. It's like having an associate or partner to contact at every bank. That contact is key in getting your short sale negotiated quickly.
2. Your home SOLD quicker: Banks may cut commissions making your home less attractive to the buyer's agent who no longer has as large of an incentive to sell your home. Our professional negotiators are better able to preserve the commissions so that Realtors will want to sell your home. This is key in getting your home sold faster. You won't be able to compete with other homes if you are offering the buyer's agent a smaller commission.
3. Dedicated to investing the time it takes to negotiate your short sale: Our time is not limited like the Realtor who is trying to do marketing and short sale negotiating. Our team of specialits invests the time it takes to negotiate your short sale quickly. This is so important when you only have a limited amount of time before your home goes to foreclosure sale or auction. If an individual agent is handling it they may not get the negotiations done before the home goes into foreclosure.
   

Will a short sale affect your credit?

Both short sales and foreclosures will impact your credit, there's just no avoiding that. However, the damage done can be minimized with a short sale, more so than the damage done in a foreclosure.

You repeat the benefit of the short sale in the future when you buy your next home. With a foreclosure you have to wait 2-5 years to buy another home, but with a short sale the wait is only about two years.

We suggest that you consult a tax accountant (CPA) or a lawyer to discuss the advantages and disadvantages of your current situation.

Will you be sent a 1099 after a short sale?

Federal law generally requires that any debt that is canceled or forgiven by a lender be included as income on a borrower's tax return. The amount of forgiven debt is identified on a 1099. When you are considering a short sale to avoid foreclosure, it is best to speak with a CPA or lawyer to determine whether the income identified on the 1099 is taxable.

Deficiencies and the short sale process

Those conditions differ based upon the method of execution pursued by the lender. If the lender forecloses with a trustee's sale, then the lender cannot come after the borrower for a deficiency if the specific conditions are satisfied. However, those conditions do not make a distinction between owner occupied, home improvements or cash out. The only risk of a deficiency judgment exists if the lender pursues a judicial foreclosure, in which case the lender can get a deficiency judgment against the borrower if the debt is not purchase money. Home improvements and cash out are not protected. Again, we recommend you get expert advice from a lawyer when considering selling your home as a short sale.

 

Metro Brokers Realty Oasis  - Your Metro Denver Short Sale Experts

There is no question that Metro Brokers Realty Oasis is your Short Sale Success Team.

This is very typical of many of our Short Sale Clients

As their property value continued to decline and the amount of properties for sale in their neighborhood continue to increase, this Castle Pines homeowner decided it was time to dive into the short sale waters.

Even though this homeowner's situation was very unique, our agent knew this was a property that could be sold. Great location, great neighborhood, great value and a great house.

In a matter of 14 days, our agent was able to successfully sell the property. The short sale was completed in 54 days, and the lender took a reduced payoff of $573,650 to avoid taking the property back through the REO process.

The seller was able to have over $100,000 of mortgage debt fully released and in this case a $5,000 personal note was executed. There was no foreclosure and the seller moved on their terms.

Since every situation is unique, our agents handle each file with great attention, great security, and great confidence. Isn't it time you picked the short sale experts to handle your situation properly?

The Short Sale Team of agents and negotiators at Metro Brokers Realty Oasis has successfully closed over 500 short sale transactions since January 2009.  This number is more than any other single group in the Metro Denver area.

It's never to early or too late find out about how we can successfully work a short sale for you. Fill out the form below or give us a call.

 

"How's that Loan Mod Going?"  More Than 520,000 Trial Loan Modifications Cancelled

Over 520,000 trial loan modifications have been cancelled, including the 90,000 this month of June 2010. Only 364,000 borrowers remain in active trial modifications.

More than 40 percent of the trial loan modifications started under HAMP, Home Affordable Modification Program, were cancelled as of the end of last month, but permanent modifications totaled nearly 400,000, according to the latest Treasury report.

Of the 1,282,912 trials started, 520,814 have been cancelled, 364,077 are active, 389,198 are permanent, and the remaining 8,823 were permanent but subsequently cancelled.

The most common causes of trial cancellations included missing documentation, trial plan default, and ineligibility due to debt-to-income ratios already being below 31 percent.

Most who were cancelled were put in an alternative modification.

Bank of America now leads all servicers with 72,232 permanent modifications, followed by Chase with 54,722 and Wells Fargo with 44,628.

However, smaller loan servicers have been converting a larger share of their eligible 60+ day delinquent borrowers, thanks in part to the use of verified documentation.

Performance of Permanent Modifications

Delinquency data included in the latest report revealed that 4.1 percent of the 126,527 loan modifications made permanent in the first quarter of 2010 were already 60+ days late.

Another 1.3 percent are 90+ days late.

The numbers are 5.4 percent and 1.5 percent for modifications completed in the fourth quarter of 2009, and 10.5 percent and 4.4 percent for the third quarter of 2009, respectively.

While it's too early to really tell, the re-default numbers look lower than those tied to other modification programs.

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