It is now headline news that 56% of past Loan Modifications are in “re-default”. I am not even sure that is a proper word. Can you imagine more than half of all Loan Modifications are going into default again and the homeowner is once again facing affordability issues and foreclosure? Now, lets all be honest. If this was sixth grade and the lenders were to get a report card for achievement they would all be getting an “F” for complete failure. Of course, I am sure in a perfect world the lenders would be asking to be graded on a curve against other lenders so they don’t appear to be a bunch of complete losers. The lenders have failed miserably. Should we call Congress for another bill or should we seek a free market solution?

The fact of the matter is that Loan Modifications and general workouts are by design established to keep homeowners in their homes so the lender can then avoid the costly burden of a foreclosure. Foreclosures cost lender lots of money. The lenders have not felt enough pain if they are not willing to modify eligible loans to a point of affordability that will provide the homeowner a long term solution. Why tell someone you are going to reduce their payment $300 per month after the arm loan just took it up $1200 per month? This makes absolutely no sense.

Loan Modifications are simple and could be rationed out in scale if the lenders would determine who is categorically eligible and establish the new payments based on a pre-determined level of gross income. As an example, your new PITI payment for you house is now reset to 35% of your gross income for the next three years and it will adjust 8.0% per year for two consecutive years after that. You can make this stuff up. Just make it possible for the person that owes 100-300K+ more on their home, and wants to stay, to actually stay. The alternative is a Short Sale or Foreclosure or more lies and sleepless nights begging your lender for help. I don’t like the word beggar because it sound so helpless. I prefer the word “taker”.

As a ‘taker”, I am an advocate of the free market solution with a Short Sale. We will charge you much more money if you force us to help you with a Loan Modification. The Short Sale exposes the incentives for your lender to cooperation and the disincentives if they don’t. It effectively levels the playing field so both parties can win. The problem with a Short Sale is you! You are the whole problem. You got yourself into a bad situation or a bad decision and you have to continue making payments you clearly cannot afford and your ego is on the line. Every single day of the week I hear the nonsense over why my lender just won’t forgive 200-300K and let me stay in the home. It doesn’t work that way dummy! Most of you have great jobs and made stupid decisions. Without the free market solution you are stuck. If you want to be a sucker then go to sleep thinking your lender has your best interest at heart. I am sure they will modify your loan so you are happy.

The statistics don’t lie. 56% are in “re-default” and guess what…90% of Loan Modifications don’t provide affordable loan term solutions for homeowners. Do you still want a Loan Modification? Call up Sheila Blair, Head of the FDIC. Ask her what she thinks of modifications and how conscientious the lenders have been to the people. If anyone knows it is certainly the Head of the FDIC. Also ask her how many calls she is getting on behalf of “The Negotiated Solution” complaining about homeowners unhappy with the free market solution. That phone has been the quiet one.

The sooner you wake up and realize you have to find a fair way to negotiate with your lender, and that you owe all the money, the sooner you will find your way to the Short Sale. You can get out of the bad situation, get the debt forgiven, and move to the house across the street for half the money in the majority of scenarios. Now that is what I can a Modification. You have to have a plan to succeed. Capitalism does not reward failure. Why are you allowing your lender to hold all the cards as miserably as they have performed? Just a thought.

In my opinion, the best Short Sale clients are those that have already been beaten by there lenders. These people are frankly indifferent. They know the cunning niceties from the collection department were just part of the game. You lender does love you and they will take every nickel from you as long as you let them. Once you catch on, well…, then you will have to deal with your lender’s B team and they are not so nice. The answer is the free market solution of a Short Sale to Stop Foreclosure, Avoid it altogether and to address significant affordability issues.

GHunter

The Plan: 3 Key Elements:

• Credit Strategy (2 part)

A) Day 1 Credit Strategy: How to make the right decision regarding the mortgage payment (If you ask your realtor what you should do with the December 1 payment, please keep an eye on them because they are going to cringe, and they don’t know nor do they ethically or from a liability standpoint want that question). Learn the mechanics of the lien structure, the legalities of the situation, and the logic as it pertains to how future lenders will look at you when considering you for a new loan. You will make the right decision for yourself that night and you will not second guess it. That is the empowering beauty of it. Fact and logic enable you to cut through the emotion of the decision.

B) Life After the Short Sale: How to mend your credit and navigate your way back to a new mortgage in 12-24 months. This is critical to understand and focus on from the beginning. How are you going to be in a position to recover or are you going to have to wait six years before you can get a new loan.

• The Short Sale

How to get out from under the burden of the home
without allowing it wrecking you financially.

Here is an excerpt from part of my seminars to realtors. Do you see yourself anywhere in this below?

Here is what your clients do to themselves with no
solution for the impending mortgage problem:

1. Run up credit cards to pay the mortgage.
2. Borrow money from family members to pay the
mortgage.
3. Hardship withdraws from retirement accounts.
4. Advances from employers.
5. Utilize other loans or home equity lines to pay the
mortgage.

When all of their resources are depleted and there is still
no solution to the impending problem, people find
themselves in real trouble. Do you want to help your
client be in a position to buy again in the short to
intermediate term or do you just want to get them out
from under the home and earn a commission? It’s a
personal choice. Repeat business and referrals may
depend on your chosen course of action.

• The Mortgage Deficiency

How to address the deficiency and quantify your personal liability as it pertains to your current mortgages. Right now you are personally liable based on the mortgage note you signed at settlement when you purchased your home. There is a way to mitigate it and be free from the burden.

Why do you need a plan? You can’t minimize the adverse affects on your credit and overall financial profile without one.

My advice to anyone facing a mortgage problem, look for credible advice and don’t rely on your buddy or some tid bit of free hearsay for a solution. Lots of people honestly do not know what the hell they are doing. Be careful and take care of business and your family.

GHunter

Once you decide to pursue a Real Estate Short Sale you will, also at a certain point, need to focus on finding a new place to live.  Everyone needs a roof over their head.  I know this is not a happy subject but it is part of the Short Sale Solution.  You will be selling your present home and eventually you will have to move out.  If you follow our course program you will be completely prepared for this and it will not get you down.  Stick to the plan.

 

Due to the emotional nature of having to move out of your present home it is easy to stray from the plan and become overly emotional and distressed.  If this occurs you have to pick yourself up and understand that this is temporary and part of the process that is going to allow you to solve the problem for both you and your lender and obtain a significant amount of forgiven mortgage debt.  Just try to understand that your actions of addressing the problem constructively, with a solution for your lender, are going to allow you to minimize the overall adverse affects of losing your home.  In other words, you will recover much faster.

 

When you finally do face the task of finding a new home to rent you will have to deal with the rental agents.  It is not uncommon for them to simply reject you due to your credit report.  If you were delinquent or became delinquent they may simply reject your application.  This initially will be devastating.  Here is where you need to follow our credit strategy with an emphasis on “Life After The Short Sale-How to mend your credit and navigate your way back to a new mortgage in 12-24 months”.  Explain to the rental agent your plan and that you are providing a solution to your lender in the midst of a major housing crisis.  You will be fine if you follow the plan and think clearly.  This is no time to panic.

 

I recently had a client spend several weeks looking for a place to rent only to be rejected three times.  He finally called me one evening in a bit of a panic.  He asked how he was going to find any place to live.  I went back over the credit strategy and told him to call back the rental agent for the property that he liked the most.  I reiterated how to explain the solution he was providing to his lender to avoid foreclosure.  I then told him to give it a try and stop freaking out.  I am not losing my home but I do have a family and I take it very seriously when one of our clients is worried like this.  Just before we ended the call I told him if he needed my help I would be happy to call the rental agent for him.

 

I have spoken with him since and he is fine. He was able to rent the place he liked.  It is all about having a plan and sticking to it.  A short sale is a solution for your lender in a time of crisis.  It is not a deliberate means of violating your social responsibility.  This crisis will pass and our economy will recover.  Capitalism will not die and you, as you stick to the plan, will be ok.   

 

“Helping homeowners level the playing field with their lenders” is our mission statement. Blogging from the front line of the housing crisis. 

 

GHunter

It is very important for all real estate professionals to work as a team and exercise certain elements of control if they want to be successful with Short Sales.

What some people preach, but fail to practice, is that repeat business from happy customers is earned. In order to earn the opportunity of a renewed client in as little as 12-24 months the client must follow our credit strategy and the team must execute on a plan together.

I am going to offer you an example that will help everyone understand what is at stake and what can happen when even small elements of teamwork are not present.

On September 10th a Short Sale for one of our Full Service clients was due to settle after four hard months of negotiations with two lenders had been completed. This was a particularly grueling negotiation because both lenders had taken the position that they were insulated from the housing crisis and didn’t have to agree to anything. Let’s just call this laughable and belligerent. After four months both lenders took a more realistic and constructive approach and both Short Sale Proposals were finally approved.

Each lender had a different agreement with mandatory deadlines to receive the approved figures and funds before agreeing to release the liens. The second trust agreement was particularly onerous and our team strongly suggested that all parties use our affiliate settlement company, New Era Title. We knew that if the deadlines were not met that this transaction could suffer. Further, our affiliate title company guaranteed competitive fees with a fee match program so the purchasers were treated fairly. The only issue at stake was the necessary level of control and experience to satisfy all variables required by the lenders to successfully complete this transaction.

In spite of our argument and suggestions, the purchasing realtor demanded that we use their title company to represent the purchaser, and they assured everyone that their title company was experience with short sales. Well that apparently was not the case.

The contract went to settlement and everyone showed up with their money. Our title company represented the seller and played traffic cop in an attempt to help the other title company complete the transaction. After settlement the other title company demanded an agreement by the second trust lender be changed before they would fund. Some of the agreements are vague, and at time ambiguous, and always subject to interpretation based on the previously approved numbers. We were not able to get the agreement changed. After significant efforts from all other participants the purchasers’ title company finally agreed to fund the transaction. However, there was only one problem. The deadline for the second trust has passed by three full business days. The entire transaction was now potentially in jeopardy.

From this point, when the title company finally sent the money, the second trust lender rejected it and decided to take $4200 out of our seller’s bank account with no notice. The seller had already put up the necessary funds required to close and was only left with $10.29 in his bank account after the seizure of funds. The homeowner now didn’t have money to pay his bills, which for all intensive purposes left him short of funds to reclose the transaction. The 2nd lender went on to make it clear that the seller had missed the deadline and that they really didn’t care to hear arguments of fairness. The second trust lender dictated that they were owned the money and that it would not be returned and that any agreement would have to be reworked for approval.

Due to the delays, the next thing that happened was that the purchaser got cold feet and withdrew from the transaction. In a period of 12 days, a solution for a distressed homeowner and his family, came completely apart because of a greedy self righteous realtor demanded that they use their inexperienced title company.

Everybody lost in this scenario. The client recently called me and asked what was going to happen to him and his family. I told him that the first trust lender was restarting foreclosure immediately because their deadline had now also passed. I explained that the lender has this legal right to foreclosure and that we have a very small window to get a new contract and resurrect the transaction.

Personally, I have a difficult time understanding why some people are so against the team concept. When you know the risks ahead of time, and you still chose to force a rookie paralegal on a short sale when they have no experience, I think that is just selfish. I was told it came down to the purchasing realtor having a limited partnership or controlled business arrangement financial interest in the title company that was chosen for the purchaser.

If you are so against teamwork, and you have no room for compassion for the distressed homeowner that is trying to provide a solution for their lender, maybe you should reconsider participating in Short Sales.

The Short Sale Solution, done properly, is an excellent means of avoiding foreclosure and everyone can win if we keep the “I” out of Team.

GHunter.

Elizabeth,

Thank you for mentioning me and providing a site link in the Sunday business section.

I have two items that I would like to address. One is the credit side issue where you feel a short sale and foreclosure are congruently bad, the other is Short Sale vs. Foreclosure.

Credit and score:

As quoted in your article, a short sale and a foreclosure equally adversely affect your credit. By definition in the eyes of a credit agency’s score rating and a lender without any mentioned context you are absolutely correct. Score rating is short term phenomena and credit profile is a journey. However, as soon as the view point shifts into the context of the homeowner requesting a new loan (the journey) with a benefit of a plan you are absolutely incorrect. Our solution provides a “Day 1” credit strategy and “Life After the Short Sale”, how to mend your credit and navigate your way back to a new mortgage in as little as 12-24 months plan.

Short Sale vs. Foreclosure:

You obviously were not swayed in any way by our conversation last Thursday so I am not going to spar with you in an attempt to change your mind. However, I would like to give you a real life example of another successful transaction that I just got approved. I am going to outline the proposal and then explain the alternative the homeowner/borrower faced without the benefit of the short sale. Please keep in mind that the financial incentive was gone and the homeowner wanted out. Regardless of your view that the lenders should modify terms and everything will be fine, most people are looking for a way out. Please also understand that we provide a definitive solution for the lenders involved that exposes the incentives for them to avoid foreclosure and do not simply ask them what they will do for our clients.

1) Successful Short Sale proposal: Ironically Last Thursday afternoon after our call I completed another short sale proposal with a major lender. The borrower was gainfully employed with Fannie Mae but did not have the approx. $100,000 after home selling expenses to pay the lender. This was another homeowner that was not financially destitute but has a real affordability problem with the home .The property was sold for $305,000 and lender agreed to accept our proposal with no further recourse on the forgiven $100,000 in mortgage debt. Our program helped obtain a contract in this market within the first 30 days. Our proposal allowed the homeowner to get out from under the financial burden of the home and also walk away from a significant sum of unpaid mortgage debt. Foreclosure was averted and the majority of the borrower’s credit was saved with the implementation of our credit plan. The forward liability has been quantified and in this real life example it is zero. This is now merely a speed bump in this individual’s journey and future financial history.

2) Foreclosure: Alternatively, let’s assume this borrower advocated your position from our Thursday phone call and simply let the home go into foreclosure. The lender would have eventually taken the property back through the legal means of foreclosure mandated by separate state law. Within 30-60 days the lender would then submit to the state court a deficiency amount within the state allowances. The court would approve the deficiency and the homeowner/borrower would have a judgment for this amount on their credit for up to 20 years. This judgment would earn the legal limit, usually 9.0%, until satisfied. The approximate $100,000, or specifically what the state allows and the court approves, will be subject to collection activities by the lender. The lender would have the right to go after this money by all legal means available to them under the law. The liability is clearly present and the emotional pain of collection agents, wage garnishments, and administrators will soon begin. Keep in mind the lenders did in fact lend the people the money and they have a right to legal remedy. Given the after tax income required to settle such a large sum many borrowers seek the refuge of bankruptcy. Please ask any attorney if you question my statements.

In summary, it’s all about personal choice. A distressed homeowner currently has two choices to address your mortgage problem:

• One – they can pay all the expenses of selling their home and make up the difference you
owed to the lenders.
• Two – they can choose to do nothing and allow the property to go to foreclosure.

I am giving them a third choice. They can choose to take the positive proactive path and propose a comprehensive solution to the lenders in the form of a short sale proposal. With our solution they will save the majority of their credit and minimize the negative financial impact of the mortgage problem. The choice between the current two options and our suggested third alternative is completely up to the homeowner.

Now you can decide if a short sale or a foreclosure is the path to take. The short sale quantifies the personal liability and represents cooperation and a comprehensive solution that addresses all four major items in my “dear homeowner” letter on my site. A foreclosure is the result of a homeowner that is simply dumping their problem on the lender. Foreclosures carry liability unless deficiency judgments are preempted by state law as they are in only a few states. Such liability can drive many to bankruptcy. As far as the credit strategy goes well you certainly do not have to take my word for it. I provide both elements listed above for all our clients as part of a plan.
One final issue:

The second to last paragraph of your article says “you have to convince your lender …” This is a very daunting task you are suggesting to families without experience that may be in need of real help. You have a lot of power in your position. People take what you write in the newspaper many times as gospel. In my opinion your viewpoint and comment conveys a cavalier attitude that the waters are safe and the lenders are kind and cooperative. Respectfully, this is simply not the case and you are giving people false hope. You also may be sending them to the slaughter house as in the example I gave you with a client’s recent loan modification experience. If you recall this is where “The Great American Shake Down” continued and the lender robbed them of $10K only to increase the payment by $1,000 per month.

The Short Sale Negotiator in conjunction with Tucker & Assoc. PLLC battle with lenders everyday for our clients. If it were so easy we would have no purpose. It is not easy even for the experienced professionals.

Note: We have added several new additional items to our site to try to help skeptics better understand the solution (thenegotiatedsolution.com).

Thank you for your time and again for the honorable mention and link in Sunday’s paper. George

The mortgage market has been in trouble for well over a year now.  We are all aware of the mortgage defaults within subprime, alternative A, and now the beginnings of what was once considered prime loans defaulting.  No one ever expected that Fannie Mae and Freddie Mac would be nationalized in our lifetime.  The worst case scenario actually came to pass.  At first glance it is rather impressive that Congress and the entire leadership hierarchy seem appalled that Secretary Paulson used the “bazooka”.  Did everybody forget about Franklin Raines the former Fannie Mae CEO and the 11 billion in missing funds or covered up losses (fraud)?

As I recall, we sent our brother Raines packing with a tidy sum of severance.  Congress looked the other way and continued to push their affordable housing programs and no one looked very closely at the GSE’s books. The GSE Punch Bowl was such an unpopular subject because Congress has been mingling their hands in the GSE’s for quite some time.  Of course nobody wanted to find out that it was a house of cards and that the capital was gone.  Then The Treasury Department, headed by Secretary Paulson, hired Morgan Stanley to investigate and low and behold approx 35 billion of the supposed capital was tax credits and a ball of you know what.

It took a man formally from the private sector to do the dirty work.  Conservatorship sounds nice but eventually the government will nationalize these firms.  For now it’s a nice Band-Aid unless you were a stockholder.  The good news is that the FHA program that is run by the government has never cost taxpayers.  Maybe the government is the ideal foundation as a cornerstone for a stable nationwide mortgage platform.  History is a good guide that Fannie and Freddie are in safe hands and we will have mortgage money available for qualified applicants to buy homes.

At this juncture, we have a reasonable level of stability with the government backing both Fannie Mae and Freddie Mac.  These institutions will continue to play a significant role in the backbone of mortgage availability and they will set the pace as the guidelines that protect both lenders and borrowers revert to the old school ideology.  The reversion is well underway and it is prudent that you listen to the market and interpret important messages.  A recent very positive message can be drawn by changes regarding foreclosure at Fannie Mae.  Both GSE’s used to require any perspective borrower seeking a loan that had a prior foreclosure to have a minimum of three years reestablished and/or re-affirmed credit.

A comfortable old school guideline was 3 years with a minimum of 5 traditional trades reestablished and/or reaffirmed over a period of not less than 24 months.  This was considered reasonable given foreclosure was considered the kiss of death in the mortgage arena.  Today I am told that the guidelines for foreclosure at Fannie Mae recently went to 5 years with some consideration from Fannie and many secondary market lenders going to 7 years before borrowers would be eligible for a new mortgage after a foreclosure.

However, there is a very interesting catch.  Fannie stated that if you, as a distressed homeowner, successfully completed a short sale with your lender then you would be eligible for a new mortgage in a little as 2 years.  What is the message the market is conveying to you?  The market is telling you that responsible homeowners that do not dump their problems on their lenders, but rather provide their lenders a solution, will be rewarded.  Regardless of your situation the potential for gain is significant when you use the weapon of choice, the Short Sale.  Fear not, for you have everything to gain and when the dust settles no one will be able to deny that there was a housing crisis that affected millions.  Those that took the positive productive path towards a solution with their lenders will be rewarded by the market.

The essence of a Short Sale is that it is a solution for both you and your lender.  Allow me to be blunt. The lender gets rid of you, and you lose the headache and the majority, and many times all, of the unpaid residual mortgage debt. This sounds very enticing given that your current options are limited. I would like to touch on where most people are mentally regarding the current housing crisis and the current options that are available.

Let’s face it, people are stuck with property all over the country that they cannot afford and they don’t have the money to sell the houses. When the tide went out, everybody was affected. Today the majority of the people simply focus on the problem and they are angry and obsessive about it.  Often I hear things like, “can you help me sue my lender”, or,” my builder hustled me to close”, or “my lender switched the loan program on me at the last minute”.  It’s ok to be angry and I know these type of things happened to many people.  Other people may have simply made a bad decision and are now financially stuck and can’t afford to sell the house and they are looking for a way out.  Regardless of where you are physiologically and emotionally, it is very important to put the problem behind you, and strictly focus on the realistic options you now have. That leads us to the solution.

Today you have two options.  First, you can pay the lender everything that is owed and cover all of the expenses of selling the property.  Secondly, you can choose to do nothing, waffle around for a bit longer, and then eventually allow the property to go into foreclosure.  Both of these options are not very attractive. The first is usually not financially feasible and the second will hurt you immensely for many years.  This brings us to the solution which is a new third option that many people may not be aware of or trust due to lack of knowledge.  The Short Sale Solution is a wonderful option because it is the only positive proactive path you can take where both you and your lender have the opportunity to win.

How does the Short Sale Option benefit both the distressed homeowner and the lender?  To avoid confusion, let me be very clear and tell you that you are going to sell your house for whatever the real bid of the current market may be and you will be moving out at some future date. The solution hinges on your cooperation. With a Short Sale you are offering the lender the opportunity to sign on the dotted line for less than what is owed to them and frankly get rid of you, your problems, the property, and all other financial risk associated with the property.  In return, you minimize the negative affects to your credit by avoiding foreclosure, you get out from under the burden of the home thereby not allowing it to wreck you financially, and you have the opportunity to have a significant amount of mortgage debt forgiven with no further recourse.

Many people simply do not understand or trust when the statement is made that debt can be forgiven with no further recourse. It almost sounds too good to be true. However, it is very true that the current macro environment in real estate lends the opportunity to just about anyone who is underwater on their home relative to equity and losing sleep over it. If you are at this very moment beginning to obsess over what you paid for the property and what you owe on it that is very natural. You are caught up in an emotional web and stranded like a deer in the headlights. It’s time for you to take a time out and investigate if a Short Sale Solution is an attractive viable option for you. Deadbeats walk away from their accountability while productive people strive to find solutions. It’s a personal choice. Make the right choice!