WHAT YOU NEED TO KNOW ABOUT THE NATIONAL MORTGAGE SETTLEMENT

On Monday, March 12th, the proposed Settlement documents were filed in Federal Court revealing what each of the Lenders is required to do. You can read the details at http://nationalmortgagesettlement.com/. How they’ll meet those obligations is critical to upside down homeowners. Those details are slowly emerging through analysis, press-releases, and side deals.  Here’s what you need to know so far:

1.  The Lenders - the Settlement ends lawsuits by the Federal Government and State Attorney Generals against: Bank of America, Wells Fargo, JP Morgan Chase, Citigroup, and GMAC/Ally.

2.  The Settlement - requires the 5 Lenders to collectively provide up to $25 Billion in relief to distressed borrowers and payments to government agencies.  This will be provided through a combination of direct cash payments and credits for debt reduction and other loan adjustments.  The individual lender shares are:   BofA: $11.82 Billion; Wells Fargo: $5.35 Billion; Chase: $5.29 Billion; Citigroup: $2.21 Billion; and Ally:  $610 Million.

3.  The Allocations - The Settlement requires the Lenders to provide the relief through three broad categories:

             (1) Foreclosure Assistance Payments - paid to State and Federal Govenerment agencies;

             (2) Consumer Relief Programs - credits for principal reduction of 1st and 2nd loans;

             (3) Loan Refinancing - provides interest rate and principal reduction

4.  The Side Deals - The Settlement is very complex and the devil will be in the details since each lender can map out exactly how it plans to satisfy its allocations.  See my recent Blog on the Wells Fargo roadmap.  However, already participating lenders are cutting “side-deals” to obtain a better result by offering even better settlement options:

          a.  Bank of America - announced deeper principal reductions for about 200,000 homeowners, up to $100,000 each.  In exchange, they will avoid up to $850 Million in penalties.  BofA has also announced that it is temporarily halting foreclosures while it identifies and solicits the potential beneficiaries of these reductions.

          b.  Ally - announced possible principal reductions to current market value.  Further, some borrowers in extreme financial distress may get reductions to 85% of their home’s value.

5.  What to Do Now - Although the Settlement terms must still be approved by a Federal Judge, if you are in financial distress and in danger of losing your home, contact your State Attorney General’s office for information and contact links with the specific lenders.  The California AG’s website for the National Settlement is at http://oag.ca.gov/nationalmortgagesettlement and has internet and/or phone contacts for each of the participating lenders.  Don’t expect immediate relief.  The Settlement is a process that still requires Court approval, will take several months to get organized, and will take up to three years to fully provide benefits.  But, it does promise substantial relief for those who qualify and diligently pursue the available benefits.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan, especially if you’re facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.

Article was written by Steve Beede.

WILL YOUR LENDER PAY YOU TO SHORT SALE YOUR HOME?

By Steve Beede.

As reported in DSNews.com, a Massachusetts real estate company, McGeough LaMachia Realtors, conducted a nationwide study which indicated that short sales bring a 24% greater return to lenders than foreclosures. This study by compared sale prices of short sales vs REOs in multiple states including California. The average difference was $43,000! And that likely did not take into consideration the cost of foreclosure including many months more of non-payment plus carrying costs as an REO. It therefore is no surprise that some lenders have actively sought to promote short sales by offering incentives to upside down owners to not just walk away.

 Chase has been offering incentives of up to $35,000; BofA: up to $25,000; Wells Fargo: up to $20,000; and Citibank: up to $12,000. With many more foreclosures likely coming in 2012, these programs may very well expand especially in states like Florida where foreclosures require a legal action in the courts. According to a Chase spokesman: “When a modification is not possible, a short sale produces a better and faster result for the homeowner, the investor and the community than a foreclosure.”

 According to market analyst Realty Trac, a mountain of pending repossessions is holding back a recovery in the housing market, where prices have fallen for six straight years, and damping economic growth. Owners of more than 14 million homes are in foreclosure, behind on their mortgages or owe more than their properties are worth. Short sales represented only 9% of all residential transactions last year with many owners holding out for a Loan Modification or otherwise staying in their property payment free for over a year while their home moves to foreclosure. Lenders are realizing that they can dramatically cut their losses by paying owners to sell the property now.

 Unfortunately, the government agencies which hold at least 60% of the delinquent loans have not gotten the message. FHA offers only $1,500 in incentives. Fannie Mae and Freddie Mac offer incentives up to $3,000 but only through the HAFA program. Perhaps this government resistance to economic logic explains why lenders are returning to profitability while the government languishes in a Budget mess.

 For some commentators however, any such payment is viewed as a reward for defaulting on obligations and sets a precident which might encourage others to also default. While indeed there is a “moral hazard” involved in any perceived bailout – whether it be government helping the banks or anyone helping the homeowners – the reality is that our economic recovery requires that we resolve the housing crisis as soon as possible regardless of whom is to blame.

 From my vantage point, having now advised over 4,000 upside down property owners over the past 3 years, this is not about deadbeat borrowers trying to avoid their debts. Many people still fail to appreciate the impact that this housing crisis has had on upside-down owners. For most, it is not a choice whether to pay or lose their home. Job losses and escalating loan costs have made many loans unaffordable for the average person. Almost all Loan Modification programs including the government’s HAMP program start with a threshhold that people should not be paying more than 31% of their income on their loan. However, a recent study by the Center for Housing Policy indicates that nearly 1/4 of all homeowners are paying over 50% of their income for housing costs. The Report indicates a similar payment ratio for renters.

 With high unemployment and increasing costs for everything from gas to groceries, it is likely that more and more struggling homeowners will lose the battle to keep their homes leaving short sale or foreclosure as their only alternatives. Look for even more Lenders to offer incentives to move these properties faster and reduce their losses. Whether the government agencies will get on board will remain questionable especially in an election year when the granting of any payment to a defaulted borrower will be considered by some to be a waste of taxpayer dollars.

 The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan, especially if youre facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.

Proposed Bill to Speed Up Short Sale Process and Prevent Foreclosure

To avoid losing homes to foreclosure due to long response times for short sale transactions, three senators introduced legislation to speed up the short sale process.

Senators Lisa Murkowski (R-Alaska), Scott Brown (R-Massachusetts), and Sherrod Brown (D-Ohio) proposed the bill addressing the issue of short sales timelines on February 17. A short sale is a real estate transaction where the homeowner sells the property for less than the unpaid balance with the lender’s approval.

“There are neighborhoods across the country full of empty homes and underwater owners that have legitimate offers, but unresponsive banks,” said Murkowski. “What we have here is a failure to communicate. Why don’t we make it easier for Americans trying to participate in the housing market, regardless of whether the answer is ‘yes,’ ‘no’ or ‘maybe?’”

The legislation, also known as the Prompt Notification of Short Sale Act, will require a written response from a lender no later than 75 days after receipt of the written request from the buyer.

The lender’s response to the buyer must specify acceptance, rejection, a counter offer, need for extension, and an estimation for when a decision will be reached. The servicer

will be limited to one extension of no more than 21 days.

The bill will also allow the buyer to be awarded $1000, plus “reasonable” attorney fees if the Act is violated.

According to a release from Short Sale New England, short sale homes do not bring down neighboring home values like foreclosed homes do, and 83 percent of short sale buyers are satisfied with their purchase, according to a 2012 Home Ownership Satisfaction Survey conducted by HomeGain.

“The current short sale process can be time consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a homeowner from foreclosure,” said Moe Veissi, president of the National Association of Realtors. “As the leading advocate for homeownership, realtors are supportive of any effort to improve the process for approving short sales.”

Equi-Trax released a survey last year on the issues real estate agents face when completing short sales. Guy Taylor, CEO at Equi-Trax, said 71.9 percent of respondents reported that a short sale can take four to nine months to complete, and they think that is simply too long.”

The survey also found that 18.2 percent of deals require less than three months to complete, with 10 percent requiring more than 10 months.

When agents in the survey were asked to how the short sale process can be improved, 57.6 percent said lenders should take less time to close transactions, 14 percent said borrowers should be better educated about short sales, and 40.4 percent said both of these changes are necessary to improve the process.

In April 2011, a similar bill was introduced by Reps. Tom Rooney (R-Florida) and Robert Andrews (D-New Jersey), but this version requested a response deadline of 45 days instead of 75 from lenders. The legislation never came up for debate before a House committee.

California to Receive $18 Billion in Mortgage Settlement

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®.

On February 9, Attorney General Kamala D. Harris announced that California secured up to $18 billion for its distressed homeowners as part of a $25 billion national multistate settlement with the country's five largest loan servicers. More than $12 billion will be used to offer short sales or write down loans over the next three years for about 250,000 underwater homeowners in California, according to the attorney general. Relief will go to areas hardest hit by the foreclosure crisis within the first year of the settlement.

Although the actual settlement has not yet been released, the attorney general has stated that other financial benefits for California include $849 million for refinancing 28,000 borrowers who are underwater but current on their payments; $279 million restitution for 140,000 homeowners who were foreclosed upon between 2008 and 2011; $1.1 billion for unemployed homeowners, transitional assistance, and repairing blight; $3.5 billion to extinguish unpaid loans that remain after foreclosure for 32,000 homeowners; and $430 million to the state attorney general's office for costs and fees. As part of a California guarantee, if the lenders fail to reduce principal balances by a minimum of $12 billion, they will be required to pay fines up to $800 million to the state.

The loans involved in this settlement are those owned or serviced by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial Inc. The settlement releases the five named lenders from certain federal and state claims pertaining to robo-signing and other foreclosure misconduct by the lenders. It does not affect any individual's rights to bring legal action against a lender. It also does not apply to the majority of mortgage loans, which are those owned by Fannie Mae or Freddie Mac.

This mortgage settlement does not change any homeowner's existing financial relationship with a settling lender. It does not relieve homeowners from any obligation. It does not require a settling lender to stop any foreclosure.

Homeowners seeking relief under the settlement agreement should contact their loan servicer or a HUD-approved housing counselor. More information including detailed FAQs is also available from the California Attorney General's website, or visit the National Mortgage Settlement website.