FHA Home ownership Rules After FHA Short Sale

Following FHA’s Short Sale Program allows homeowners to purchase immediately after a short sale.  Read the FHA Short Sale Guidelines and FHA repurchase program that affects short sales on All HUD Properties.

December 24, 2008                                                                Mortgagee Letter 2008-43

TO:                             ALL HUD-APPROVED MORTGAGEES

ATTENTION:           Single Family Servicing Managers

SUBJECT:                             Pre-Foreclosure Sale (PFS) Program – Utilizing the PFS Loss Mitigation Option to Assist Families Facing Foreclosure

High foreclosure rates continue to have devastating effects on families and neighborhoods. The Federal Housing Administration (FHA) remains committed to taking actions to help families avoid foreclosure.  Since being introduced as a national program in 1994[1], the PFS Program has helped thousands of mortgagors in default to avoid foreclosure and transition to more affordable housing. The Pre-Foreclosure Sale can help many families who today are facing foreclosure.  The PFS loss mitigation option allows a mortgagor in default to sell his or her home and use the sale proceeds in satisfaction of the mortgage debt when the proceeds are less than the amount owed.

This Mortgagee Letter (ML) serves to remind mortgagees of the relief that the PFS Program can bring to borrowers with FHA-insured mortgages. To facilitate greater use of this program, FHA has consolidated in this ML the requirements of the PFS Program that have been issued over the years, and has updated and clarified those requirements where needed, to better address the problems faced by mortgagors today and provide greater flexibility in considering a mortgagor’s candidacy for participation in this program.

Key Features of the PFS Program

• Establishing Market Value –Mortgagees are reminded to ensure that properties in the PFS program are sold at or near fair market value as established by an independent appraisal, prepared by an appraiser on the FHA Appraisal Roster.

• Minimum List Price Requirements – Properties offered for sale under the PFS program are to be listed for sale at no less than the “as-is” appraised value as determined by a current FHA appraisal, obtained and reviewed by the mortgagee.

• Negative Equity – The ratio of 63% for the fair market value (FMV) to the outstanding mortgage balance (including unpaid principal and accrued interest) has been updated to address events in the current housing market, and replaced with tiered net sales proceeds.

• Tiered Net Proceeds Requirement – This ML incorporates guidelines for varying minimum net sales proceeds based on the length of time a property has been competitively marketed for sale.

• Marketing Documentation – Prior to accepting a discounted offer, evidence of competitive marketing from the selling broker is to be presented and mortgagees are to retain this documentation in the claim review file.

• Non-owner Occupant Exceptions – Mortgagees are authorized to grant reasonable exceptions to non-occupant mortgagors when documentation indicates a property was not purchased as a rental or used as a rental for more than 18 months, immediately preceding the approval into the PFS program.

• Removal of Repair Limitations –With prior approval from HUD, properties with surchargeable damage (i.e., damage caused by fire, flood, earthquake, hurricane, boiler explosion or mortgagee neglect) may be eligible for the PFS program if funds – sufficient to cover the government’s estimated repair costs – are applied to reduce the outstanding debt when a claim is filed.

• Increase in Funds Available for Discharge of Subordinate Liens – In instances where a mortgagor has made an initial contribution/incentive of $750 or $1,000, the amount that can be used from sales proceeds for the discharge of liens or encumbrances (which represent an impediment to conveyance of marketable title) has been raised from $2,000 to $2,500.

• Change in Allowable Closing Costs – Subject to the stated ratios, HUD allows up to 1% of the buyer’s mortgage amount for closing costs to be included in the “Seller’s Costs” on the HUD-1 for all transactions that involve a new FHA-insured mortgage.

Superseded and Updated Mortgagee Letters and Forms

This ML supersedes in its entirety ML 1994-45, “HUD’s Nationwide Pre-Foreclosure Sale (PFS) Procedure”.  It also supersedes the section (pages 29-35) of ML 2000-05, “Loss Mitigation Program-Comprehensive Clarification of Policy and Notice of Procedural Changes” that describes Pre-Foreclosure Sale requirements.

Additionally, this ML updates, consolidates and/or eliminates the following HUD forms:

Form HUD-90035 (Information Sheet) and Form HUD-90036 (Application to Participate) have been consolidated to reflect updates made to the program and to delete any reference to HUD’s former Assignment Program.  The new Form HUD-90035 (Information/Disclosure) no longer requires the signature of the party providing homeownership counseling to the mortgagor.  Form HUD-90036, Application to Participate is obsolete and no longer required.

Form HUD-90038 (Homeownership Counseling Certificate) is now obsolete.  Form HUD-90054 (Pre-Foreclosure Sale Data Reporting) and Form HUD-92068-F (Mortgage Assignment Program Request for Financials) were both previously declared obsolete.

Form HUD-90041 (Request for Variance) has been slightly modified to reflect the new minimum net sales proceeds of 84%.

            Form HUD-90045 (Approval to Participate) has been modified to provide a signature block for the mortgagor’s signature(s) and new language describing HUD’s current PFS Program.

Monitoring of Appraisals

Mortgagees are reminded that HUD performs monitoring reviews of appraisals and holds mortgagees accountable for the quality of appraisals on properties securing FHA-insured mortgages. As such, HUD may request electronically-formatted appraisals to review and ensure their accuracy. Mortgagees who submit appraisals that do not meet HUD’s requirements are subject to the imposition of sanctions by the HUD Mortgagee Review Board in accordance with 24 CFR Part § 25.9 (ee) and Part § 203.5 (e)(3).

Information Collection Requirements

Paperwork reduction information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB Control Number 2502-0464.  In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB Control Number.

Mortgagees may direct questions or concerns regarding the Department’s PFS procedures to the Customer Call Center for HUD’s National Servicing Center (NSC).  The toll free number is (888) 297-8685.  Persons with hearing or speech impairments may reach this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

Sincerely,

__________________________________

Brian D. Montgomery

Assistant Secretary for Housing-

Federal Housing Commissioner

Table of Contents                                                                       Page

Pre-foreclosure Sale Introduction                                                                              5

1. Loan Default                                                                                      5
2. Mortgagor Qualifications                                                                  6
3. PFS Program Participation                                                                6
4. Financial Analysis                                                                             7
5. Property Value                                                                                               8
6. Property Condition                                                                              8
7. Condition of Title                                                                                9
8. Approval to Participate                                                                     10
9. Participation Requirements                                                               10
10. Contract Approval                                                                             11
11. Duration of the Pre-Foreclosure Sale Period                                    13
12. Property Inspections                                                                          14
13. Early Termination                                                                             14
14. Failure to Complete a PFS                                                                14
15. Mortgagee Incentive                                                                         14
16. Mortgagor Consideration                                                                  15
17. Closing and Post Responsibilities                                                     15
18. Claim Filing                                                                                       16
19. Reporting Requirements                                                                   17
20. Erroneous Termination of Mortgage Insurance                                17

Pre-Foreclosure Sale Introduction

The Pre-Foreclosure Sale (PFS) option allows mortgagors in default (resulting from an adverse and unavoidable financial situation) to sell their home at FMV and use the sale proceeds to satisfy the mortgage debt even if the proceeds are less than the amount owed.  This option is appropriate for mortgagors whose financial situation requires that they sell their home, but they are unable to do so without FHA relief because the gross recovery on the sale of their property (i.e., sales price minus sales expenses) is less than the amount owed on the mortgage.  HUD’s home retention alternatives such as Special Forbearance, Mortgage Modification, or Partial Claim must first be considered and determined unlikely to succeed due to the mortgagor’s financial situation.  Mortgagees must maintain supporting documentation to demonstrate that a comprehensive review of the mortgagor’s financial records was completed, and that the mortgagor did not have sufficient income to sustain the mortgage.  Under no circumstances shall the PFS option be made available to mortgagors who have abandoned their mortgage obligation despite their continued ability to pay.

To participate in the program, mortgagors must be willing to make a commitment to actively market their property for a period of 3 months, during which time the mortgagee delays foreclosure action.  Mortgagors who successfully sell to a third party within the required time may receive a cash consideration of up to $1,000.  Mortgagees also receive a $1,000 incentive for successfully avoiding the foreclosure and complying with all the requirements of this ML.  If the property does not sell, mortgagors are encouraged to use the deed-in-lieu of foreclosure (DIL) option, providing the title on the property is marketable.  By following procedures and time frames included in this ML, a mortgagee may submit a FHA insurance claim and be compensated for the difference between the sale proceeds and the amount owed on the mortgage (including accrued interest and reimbursable costs).

A PFS sale must be an outright sale of the property.  If a foreclosure occurs after the mortgagor unsuccessfully participated in the PFS process in good faith, neither the mortgagee nor HUD will pursue the mortgagor for a deficiency judgment.

Home Equity Conversion Mortgages (HECM) are not eligible for the PFS Program.  The Code of Federal Regulations (CFR) provides special provisions for HECM short sales.  Mortgagees should refer to 24 CFR Part § 206.125 (c) or contact HUD’s NSC at the address below (Attention:  HECM Housing Specialist) or email hecmhelp@hud.gov.

1. A.             Loan Default

At the time the PFS closes, the loan must be in default (i.e., delinquent more than 30 days). Mortgagees may exercise their discretion to accept applications from mortgagors who are current but facing imminent default.  However, by the date the PFS settlement occurs, the loan must be in default.  Mortgagees should document this decision in the claim review file.

1. B.             Mortgagor Qualifications

The PFS option may be extended to mortgagors who:

• Are in default as a result of an adverse and unavoidable financial situation.  Adverse and unavoidable financial situations may include but are not limited to loss of job or verifiable income reduction and extensive medical expenses;

• Have negative equity as determined by an “as-is” FHA appraisal that indicates a property value less than 100% of the outstanding mortgage balance (including unpaid principal and accrued note rate interest) and any outstanding Partial Claim amounts, which are secured by a subordinate lien and/or a note.  A PFS may be considered if the property’s “as-is” appraised FMV slightly exceeds the mortgage payoff figure, but gross sales proceeds fall short of the amount needed to discharge the mortgage by more than $1,000;

• Are owner-occupants of a one-to-four unit single-family dwelling with a FHA-insured mortgage under Title II of the National Housing Act.  Mortgagees are authorized to grant reasonable exceptions to non-occupant borrowers when it can be demonstrated that the need to vacate was related to the cause of default (e.g., job loss, transfer, divorce, death), and the subject property was not purchased as a rental or used as a rental for more than 18 months prior to the mortgagor’s acceptance into the PFS Program;

• Have only one FHA-insured loan.  Mortgagees are authorized to make reasonable exceptions for mortgagors who have acquired an FHA-insured property through inheritance or co-signed a FHA-insured loan to further enhance the credit of another mortgagor; or

• Are not a corporation or partnership (i.e., unless a written request to utilize the PFS has been approved by HUD’s National Servicing Center (NSC)).  Requests for such approvals should be submitted to:

U.S. Department of Housing and Urban Development

National Servicing Center

ATTENTION:  Branch Chief

301 NW 6^th Street, Suite 200

Oklahoma, OK  73102

Phone Number:  (888) 297-8685

Fax Number:  (405) 609-8405

C.             PFS Program Participation

On the 32^nd day but, no later than the 60^th day of delinquency, the mortgagee shall send the delinquent borrower a pamphlet (HUD-PA-426, How to Avoid Foreclosure) about foreclosure avoidance.  This pamphlet provides mortgagors with important information about loss mitigation alternatives, which include the pre-foreclosure sale option.

Mortgagees must inform mortgagors of the full spectrum of foreclosure-avoidance options prior to mortgagors’ participation in the PFS Program.  The mortgagee shall also advise that default counseling is available and highly recommended, though not required.

A mortgagor who has expressed an interest in the PFS option or who has been identified by the mortgagee as a qualified candidate for the PFS Program must be mailed a copy of the revised Form HUD-90035 (Information/Disclosure).  Prior to mailing Form HUD-90035, the mortgagee must add its toll-free or collect telephone number to the form.  Form HUD-90035 provides the mortgagor with appropriate PFS disclosures, information on housing counseling, and information about tax consequences.  This disclosure form, the aforementioned pamphlet, and other HUD forms can be found on HUDclips at: http://www.hudclips.org.

1. D.             Financial Analysis

Prior to signing Form HUD-90045 (Approval to Participate), the mortgagee must request financial documentation to evaluate the mortgagor’s ability to support the mortgage debt.  The PFS option may not be offered to mortgagors who have sufficient personal resources to pay off their mortgage commitment.

The mortgagee may prescribe the form that the mortgagor must use to submit its financial information.  Mortgagors may provide financial information during a telephone interview, electronically, via the regular mail, or in person.  Regardless of how the mortgagor’s financial information is obtained, the mortgagee must independently verify the financial information.  Mortgagors with surplus income and/or other assets are required to re-pay the indebtedness through the use of a repayment plan.

The mortgagee must analyze the mortgagor’s ability to meet the monthly mortgage obligation by:

• Estimating the borrower’s fixed monthly expenses (e.g., mortgage payment, food, utilities, car payment, outstanding obligations, etc.);

• Estimating the borrower’s anticipated monthly net income (making necessary adjustments for income fluctuations); and

• Subtracting expenses from income to determine the amount of surplus income available each month.

If the mortgagee’s evaluation indicates that the mortgagor is not eligible for a PFS or another loss mitigation option, the mortgagee must immediately advise the mortgagor of this decision in writing, explaining the reason for denial and giving the mortgagor at least seven calendar days to respond.  In the servicing or claim review file, the mortgagee must maintain all evidence (i.e., supporting documentation, including all communication logs) of compliance with HUD’s Loss Mitigation Program requirements.

1. E.             Property Value

Properties offered for sale through the PFS Program are to be listed at no less than the “As Is” value as determined by an appraisal completed in accordance with the requirements of HUD Handbook 4150.2 (Valuation Analysis for Single Family One-to Four-Unit Dwellings).  To this end, mortgagees must:

• Obtain a standard electronically-formatted appraisal from an appraiser on FHA’s Appraiser Roster.  The selected appraiser must not share any business interest with the mortgagor or the mortgagor’s agent.  Appraisals obtained by the buyer, seller, real estate agent, or other interested parties may not be used to establish the FMV of the property for the PFS Program.  It also important to note that:

1. The appraisal must contain an “as-is” FMV for the subject property;

1. The appraisal will be valid for six months; and

1. Distress sales may not be used by the appraiser to establish comparable values unless they represent the only comparables within reasonable proximity of the subject property.

• Provide a copy of the appraisal to the homeowner, sales agent, or HUD, upon request.

• Mortgagees are reminded that in accordance with HUD regulations at 24 CFR Part § 203.365 (c) they are responsible for the accuracy of all documentation used in the PFS decision, including accurate and complete appraisal information.

In an effort to ensure that the most current FMV is used for the PFS, a mortgagee may obtain a new FHA appraisal, even if the property was appraised by an FHA Roster Appraiser within the preceding 6 months.

To be reimbursed through HUD’s claim filing process, the cost of the appraisal must be reasonable and customary for the market area where the appraisal is performed.  The appraisal must be retained in the claim/servicing file, even if the PFS is not approved or completed.

1. F.             Property Condition  

Properties that have sustained damage may be eligible for the PFS option.  If the cause of the damage is fire, flood, earthquake, tornado, boiler explosion (for condominium’s only) or mortgagee neglect (i.e., surchargeable damages as defined in 24 CFR Part § 203.378) mortgagees must obtain prior approval from the NSC at the address above.  Prior to seeking this approval, the mortgagee must obtain the government’s estimate of the cost to repair the surchargeable damage by contacting the HUD Management and Marketing (M&M) Contractor with jurisdiction for the geographic area where the property is located.  A list of M&M Contractors can be found on the Internet at: http://www.hud.gov/offices/hsg/sfh/reo/mm/mmingo.cfm.

Upon receipt of the government’s repair estimate, the mortgagee must submit a Form HUD-90041 (Request for Variance) to the NSC to obtain the approval needed to enter into a PFS Agreement with the mortgagor.

In accordance with 24 CFR Part § 203.379 mortgagees are responsible for the cost of surchargeable property damage.  If the property is being sold “As Is” subject to the damage, the mortgagee will be required to deduct the government’s estimate of the cost of the damage from its PFS claim (See Appendix A – Claim Filing Instructions for Item 109).

If the property is being sold “As Repaired” and funds for surchargeable repairs will be escrowed or provided as a credit to the borrower at closing, the amount of the repair escrow or repair credit is not an allowable settlement cost as defined in Section J of this ML and may not be included in the net sales proceeds calculation.

If the damage is not surchargeable it is not necessary to obtain approval from NSC prior to approving the PFS Agreement.  Regardless of the cause of the damage, the mortgagee must work with the mortgagor to file a hazard insurance claim and either use the proceeds to repair the property or adjust the claim by the amount of the insurance settlement (non-surchargeable damage) or the government’s repair cost estimate.

Mortgagors are required to disclose any property damage to the mortgagee during the application or after the PFS approval.  In the event a property sustains significant damage after a mortgagor has received approval to participate in the PFS program, the mortgagee must re-evaluate the property to determine if it continues to qualify for the PFS Program and terminate participation if the extent of the damage changes the property’s FMV.  .

1. G.            Condition of Title

All properties sold under the PFS Program must have marketable title.  Prior to execution of Form HUD-90045 ( Approval to Participate) the mortgagee must obtain a title search or preliminary report verifying that the title is not impaired with un-resolvable title problems or with junior liens that cannot be discharged as permitted by HUD.  If the mortgagee determines that these issues can be resolved, the mortgagor may be accepted into the PFS Program and resolution of said issues may be pursued while the property is being marketed.

Frequently, it is in the interest of all parties to facilitate the discharge of secondary liens in order to clear title.  In some cases, junior lien holders will release a lien for a partial cash payment or a promissory note from the mortgagor.  Mortgagors who have the financial ability to do so must be required to satisfy or obtain release of liens.  Additionally, any incentive consideration payable to the mortgagor ($750 to $1,000) may be applied toward discharging liens.

If no other source of funds is available after applying the mortgagor’s incentive amount, the mortgagee may obligate up to an additional $1,500 – for a total of $2,500 – from sale proceeds towards discharging liens or encumbrances to meet all required ratios. 

• Title I Liens – If the first mortgagee discovers that a mortgagor has a HUD Title I (property improvement) loan secured by the property, the first mortgage holder must contact the Title I subordinate lien holder to advise of the mortgagor’s participation in a PFS.  The first mortgagee may be required to negotiate the release of the lien in order to proceed with a PFS.

If the Title I loan has been assigned to HUD, the first mortgagee should contact HUD’s Financial Operations Center for guidance.  The Center’s contact information is as follows:

U.S. Department of Housing and Urban Development

Financial Operations Center

52 Corporate Circle

Albany, New York 12203.

1-800-669-5152/ fax (518) 862-2806

• Section 235 Recapture – Mortgagors with Section 235 mortgages may be eligible to participate in the PFS Program.  However, the mortgagee must first determine if the loan is subject to recapture as referenced in Chapter 11 of HUD Handbook 4330.1, Rev. 4 (Administration of Insured Home Mortgages).  Generally, if the mortgagor has no equity in the property, there will be no recapture amount owed to HUD under the subsidy provisions of the 235 mortgage.  If a recapture amount is owed to HUD after completing the calculation, the mortgagee should contact HUD’s NSC prior to approving the PFS.

• Partial Claim – The partial claim (unpaid subordinate mortgage) amount must be included in the total delinquency when calculations are made.  Any outstanding balance on a partial claim note must be deducted from the net sale proceeds based on the tiered structure of 88%, 86% or the minimum of 84% of “as-is” appraised FMV.

1. H.            Approval to Participate

After determining that a mortgagor and property meet the participation requirements herein, the mortgagee must notify the mortgagor using Form HUD-90045 (Approval to Participate).  The form shall include the date by which the mortgagor’s sales contract must be executed.

1. I.               Participation Requirements

A mortgagor must acknowledge their decision to participate in the PFS program by signing and returning Form HUD-90045 (Approval to Participate) to the mortgagee within 7 days of receiving the form.  The mortgagor’s signature on Form HUD-90045 confirms their agreement to comply with the PFS Program requirements listed below.  Mortgagees must monitor the PFS transaction in its entirety to ensure the mortgagors’ compliance with these requirements and, should terminate a mortgagor’s participation in the PFS Program in the event of noncompliance.

• Use of Real Estate Broker – The services of a real estate broker/agent must be retained to market a property within 7 days of the date the approval to participate is granted.  The broker/agent must market the property within the pre-established time frame and list the property for the established sales price.  The broker/agent selected should have no conflict of interest with the mortgagor, the mortgagee, the appraiser or the purchaser associated with the PFS transaction.  Any conflict of interest, appearance of a conflict, or self-dealing by any of the parties to the transaction is strictly prohibited. A broker/agent shall never be permitted to claim a sales commission on a PFS of his or her own property or that of an immediate family member (e.g., spouse, sibling, parent, or child).

• Pre-Existing Purchasers – The requirement to engage a real estate professional does not apply if a mortgagor located a buyer for the property prior to being approved to participate in the PFS Program, providing all PFS requirements are met concerning appraisal requirements and minimum ratios for net sales proceeds.

·       Required Listing Disclosure – The Listing Agreement must include the cancellation clause which reads as follows: "Seller may cancel this Agreement prior to the ending date of the listing period without advance notice to the Broker, and without payment of a commission or any other consideration if the property is conveyed to the mortgage insurer or the mortgage holder.  The sale completion is subject to approval by the mortgagee.”

• Property Maintenance – Until the PFS transaction has closed, the mortgagor must maintain the property in “ready to show” condition, make basic property repairs, and perform all normal property maintenance activities (e.g., interior cleaning, lawn maintenance, etc.).

• Arms-Length Transaction – Mortgagors and mortgagees must adhere to ethical standards of conduct in their dealings with all parties involved in a PFS transaction.  The PFS must be between two unrelated parties and be characterized by a selling price and other conditions that would prevail in a typical real estate sales transaction.

• Relocation Services – A relocation service affiliated with the mortgagor’s employer may contribute a fixed sum towards the proceeds of the PFS, without altering the arms- length nature of the sale.  This contribution simply reduces the shortfall between the proceeds and the amount owed on the mortgage note.  As with any other PFS, such a transaction must result in the outright sale of the property and cancellation of the FHA mortgage insurance.

J.              Contract Approval

The mortgagee will have 5 working days from receipt of an executed Contract for Sale to respond back to the mortgagor using the Form HUD-90051 (Sales Contract Review).  The PFS transaction must be an outright sale of the premises.

No sale by assumption, regardless of provisions for release of liability, may be considered.  The contract must not include contingencies that might delay or jeopardize a timely settlement.

Before approving any sales contract, the mortgagee must review the sales documentation to determine that there are no hidden terms or special agreements existing between any of the parties involved in the transaction.  Additionally, the mortgagee must determine if the property was marketed at the gross offering price (close to FMV) and the minimum net sales proceeds’ requirements (described herein) have been met.  The mortgagee will be liable for any insurance claim overpayment on a PFS transaction that closes with net sales proceeds less than the percentages indicated below.

• Net Sale Proceeds – Regardless of the property’s sale price, a mortgagee may not approve a PFS contract if the net sale proceeds fall below the minimum allowable thresholds stated herein.  HUD has established guidelines for varying minimum net sales proceeds based on the length of time a property has been competitively marketed for sale.

1. For the first 30 days of marketing, mortgagees may only approve offers that will result in minimum net sale proceeds of 88% of the “as-is” appraised FMV.

1. During the next 30 days of marketing, mortgagees may only approve offers that will result in minimum net sale proceeds of 86% of the “as-is” appraised FMV.

1. For the duration of the PFS marketing period, mortgagees may only approve offers that will result in minimum net sale proceeds of 84% of the “as-is” appraised FMV.

1. Mortgagees have the discretion to deny or delay sales where an offer may meet or exceed the 84%, if it is presumed that continued marketing would likely produce a higher sale amount.  However, the mortgagee is still limited to 4 to 6 months after the date of the mortgagor’s approval to participate in the PFS Program.

• Allowable Settlement Costs – The term “Net Sale Proceeds” is defined as the sales price minus closing/settlement costs (i.e., reasonable and customary costs per jurisdiction that are deducted at settlement).  Allowable settlement costs include:

1. Sales commission consistent with the prevailing rate but, not to exceed 6%;

1. Real estate taxes prorated to the date of closing;

1. Local/state transfer tax stamps and other closing costs customarily paid by the seller including the seller’s costs for a title search and owner’s title insurance;

1. Consideration payable to seller of $750 or $1,000 (i.e., if such consideration is not used to discharge junior liens);

1. Up to $2,500 to be used for the discharge of junior liens if closing occurs within 90 days.  Within 90 days, the first $1,000 represents the mortgagor’s consideration and the additional $1,500 represents FHA’s consideration for a total of $2,500.  If settlement occurs after 90 days, the first $750 represents the mortgagor’s consideration and the additional $1,500 represents FHA’s consideration for a total of $2,250;

1. Outstanding partial claim amount.  This entire amount must be paid when calculating the net sales proceeds.  The seller, buyer, or other interested party may contribute the difference if the net sales proceeds’ amount falls below the allowable threshold; and

1. Up to 1% of the buyer’s first mortgage amount if the sale includes FHA financing.

• Unacceptable Settlement Costs – The following costs may not be included in the net sales proceeds calculation, however, the seller may use their consideration of $750 or $1,000 for these settlement costs.

1. Repair reimbursements or allowances;

1. Home Warranty fees;

1. Discount points or loan fees for non FHA-financing; and

1. Lender’s Title Insurance fee.

K.        Duration of the Pre-Foreclosure Sale Period

Unless an extension has been approved by NSC, mortgagees have 4 months from the date of the mortgagor’s approval to participate in the PFS Program.  Mortgagees have a pre-approved extension of 2 additional months to complete the PFS if one of the following exists:

• The mortgagee is in the Tier 1 category under the Department’s Tier Ranking System (TRS); or

• There is a signed Contract of Sale, but settlement has not occurred by the end of the fourth month following the date of the mortgagor’s approval to participate in the PFS Program.

Mortgagees are reminded that, on a monthly basis, they must review a property’s marketing status with the mortgagor and/or real estate broker.

L.        Property Inspections 

Mortgagees have a responsibility to ensure that insured properties are not subject to abandonment or waste, and are required to conduct property inspections on the 45^th day following default if there has been no contact with the mortgagor.  Property preservation and protection (P&P) inspections are not required during the PFS period if contact with the mortgagor is maintained, unless there is reason to suspect that the property has become vacant.  Inspections to verify occupancy are reimbursable using Part C of the Form HUD-27011 (Single Family Application for Insurance Benefits).  However, funds expended for P&P work on an occupied property are not reimbursable.

M.       Early Termination                                                                      

A mortgagor may voluntarily terminate participation in the PFS Program at any time.  PFS Program participation may also be terminated at the discretion of the mortgagee, for any of the following reasons:

• Un-resolvable title problems;

• Determination that the mortgagor is not acting in good faith to market the property;

• Significant change in property condition or value; and

• Re-evaluation of the information provided by the mortgagor indicates that the case does not qualify for the PFS option.

The mortgagee must forward the mortgagor a date-stamped written explanation for terminating his/her program participation.  This letter shall also include the “end-of-participation” date for the mortgagor.   The mortgagee must then resume appropriate servicing actions.

N.        Failure to Complete a PFS

At the expiration of the PFS period, the mortgagee must re-evaluate available loss mitigation options.  If the mortgagor’s financial condition has improved to the point that reinstatement is a viable option, the mortgagee may undertake one of the home retention loss mitigation tools.  If reinstatement is not feasible, the mortgagee should try to obtain a DIL of foreclosure before commencing foreclosure.  An alternate loss mitigation option or first legal action to initiate foreclosure must be completed within 90 days of the expiration of the PFS period.  If more than 90 days are needed to complete a DIL or initiate foreclosure or resume foreclosure, mortgagees must follow HUD’s standard extension procedures and request an extension from the NSC.

O.        Mortgagee Incentive

FHA will pay mortgagees an incentive fee of $1,000 for each completed PFS transaction that complies with all of the requirements in this ML.  This fee may be claimed on line 129, Part B of Form HUD-27011.

P.    Mortgagor Consideration

Mortgagors, acting in good faith, who successfully sell their properties using this option are relieved of their mortgage obligation and are entitled to a consideration of $750.  If the closing occurs within 3 months of the approval to participate, the mortgagor will be entitled to $1,000. Unless the mortgagor’s consideration is required to release junior liens, the mortgagor may elect to accept cash paid at closing.  The mortgagor may also apply a portion of or the entire amount of consideration to offset sales costs not paid by HUD; including a home warranty plan fee, costs of optional repairs, and buyer’s closing expenses.  If the PFS is unsuccessful and foreclosure occurs, mortgagors who participate in the PFS Program in good faith will not be pursued for deficiency judgments by the mortgagee or HUD.

Q.   Closing and Post Closing Responsibilities

Prior to closing, the mortgagee will provide the closing agent with a Form HUD-90052 (Closing Worksheet) which lists all amounts payable from sale proceeds.  The closing agent will calculate the actual net sale proceeds and provide a copy of the Form HUD-1 (Settlement Statement) to the mortgagee.  The mortgagee must review the actual terms of the transaction to ensure that they are in accordance with the earlier estimates prior to granting final approval of the PFS.  The mortgagee is required to ensure that:

• The final terms of sale are consistent with the purchase contract;

• Only allowable settlement costs have been deducted from the seller’s proceeds;

• The net sales proceeds will be equal to or greater than the allowable thresholds; and

• The Form HUD-90052 is included in the claim/servicing file.

Once the mortgagee gives final approval for the PFS and the settlement occurs, the closing agent must pay the expenses out of the proceeds, and must forward the net sales proceeds to the mortgagee.  The closing agent must also forward a copy of the Form HUD-1 to the mortgagee to be included in the claim/servicing file.

A PFS must be reported to national credit bureaus as a “short sale”.  Mortgagees will be responsible for filing a Form 1099-A (Acquisition or Abandonment of Secured Property) with the Internal Revenue Service and reporting any discharge of indebtedness, in accordance with the Internal Revenue Code.

1. R.    Claim Filing

HUD will reimburse the mortgagee for reasonable and customary costs of the appraisal, title search (if not included in the settlement statement), and the allowable percentage of legal fees for a postponed foreclosure, pending completion of the PFS.

Disbursements for taxes, assessments, hazard insurance and other allowable items payable before the date of the PFS closing are reimbursable only if they are not satisfied at closing.  HUD will not pay property-related costs which were incurred after the PFS closing date.

HUD will monitor mortgagees by selecting and reviewing appraisals for risk assessment purposes.  Electronic appraisals will be reviewed for accuracy and to ensure that FMVs were used in lieu of distressed sale values.  HUD is now requiring mortgagees to enter the FMV in Block 30 on Part A of Form HUD-27011.

The consideration paid to the mortgagor and allowable amounts (i.e., which do not exceed $2,500) paid to release all junior liens must be reflected on the Form HUD-1 and must not be included on the Form HUD-27011.  The mortgagee’s incentive fee must be entered on line 129 of Part B of the Form HUD-27011.

Upon receipt of the portion of the sales proceeds designated for mortgage satisfaction, the mortgagee will satisfy the mortgage obligation and file a PFS claim for FHA insurance benefits via Form HUD-27011.  The mortgagee must not submit an FHA insurance termination to the Department if a PFS claim will be filed.

If the mortgagee began the PFS process timely, then HUD will grant the mortgagee an automatic extension of 90 days after termination of the PFS to initiate another loss mitigation action or undertake the first legal action to institute foreclosure as described in Section “N” of this ML.  To receive the extension, the ending date of the terminated or failed PFS transaction must be entered in Block 21 of Part A of the Form HUD-27011.  A date that is no more than 90 days after the date listed in Block 21 must be entered in Block 19, to receive this extension.  The claim for insurance benefits, (Parts A and B of Form HUD-27011), should be received by HUD within 30 days after the settlement date of the PFS transaction.  If the sale proceeds have not been received from the closing agent, an extension must be requested from the NSC.  The expiration date of the approved extension must be recorded in Block 20 on Part A of Form HUD-27011.

HUD will hold mortgagees, submitting excessive claims that do not meet the aforementioned required minimum allowable tiered-thresholds of 88%, 86%, or 84%, liable for excessive claim amounts.  Claim filing instructions are located in Appendix A and these instructions supersede those found in Chapter 8 of HUD Handbook 4330.1 rev 1 (FHA Single Family Claims)  For questions about filing a claim, please send an email to FHA_SFClaims@hud.gov.  Mortgagees must include their Servicer Number, FHA Case Number, and a keyword phrase, such as “claim filing,” “claims status,” etc., in the e-mail subject line.

1. S.     Reporting Requirements

Mortgagees are required to update HUD’s Single Family Default Monitoring System (SFDMS) with 2 default status codes when utilizing the PFS Program.  These codes are as follows:

• Status Code 15 to indicate that the mortgagor has been accepted into the PFS Program; and

• Status Code 17 to indicate that the PFS transaction has been completed.

Mortgagees must update SFDMS with Status Code 15 in the month that the mortgagor is approved to participate in the PFS Program.  Mortgagees must continue to report the account under Status Code 15 during the entire time that the mortgagor is participating in the PFS Program.  Once a PFS is complete (i.e., settlement has occurred and all funds have been received), mortgagees must report the account as Status Code 17 within 30 days of the PFS closing date.  However, if no successful PFS transaction occurs and a DIL is obtained, the account should be reported as Status Code 47 in the month the DIL is recorded.  Information on additional status codes along with instructions referring to bankruptcy, foreclosure, etc. are included in Mortgagee Letter 2006-15.

Mortgagees will be in compliance with HUD’s reporting requirements when reporting codes are entered into the SFDMS within the above-prescribed timeframes.  If reporting codes are not provided within the prescribed timeframes, the mortgagee will be subject to interest curtailment.  Mortgagees are subject to interest curtailment if they do not initiate the PFS transaction or report the initiation of the PFS transaction to HUD via SFDMS timely.

T.    Erroneous Termination of Mortgage Insurance

A mortgagee must not submit a Mortgage Insurance Termination in situations where the mortgagee has filed or intends to file a claim for FHA insurance benefits.  HUD can only pay FHA mortgage insurance benefits when the mortgage insurance is in an “active” status.  Mortgagees may direct questions or concerns regarding the Department’s PFS procedures to the NSC’s Customer Service Call Center.  The center’s toll free number is 1-888-297-8685.

Attachment:

Appendix A – Claim Instructions

Active Forms:

Form HUD-90035 Information/Disclosure

Form HUD-90041 Request for Variance

Form HUD-90045 Approval to Participate. Property Sale Information/ Property Occupancy and        

                                Maintenance

Form HUD-90051 Sales Contract Review

Form HUD-90052 Closing Worksheet

Form HUD-27011 Single Family Application for Insurance Benefits

·       Required Listing Disclosure – The Listing Agreement must include the cancellation clause which reads as follows: "Seller may cancel this Agreement prior to the ending date of the listing period without advance notice to the Broker, and without payment of a commission or any other consideration if the property is conveyed to the mortgage insurer or the mortgage holder.  The sale completion is subject to approval by the mortgagee.”

How-To Loan Mod Kit and Successful Loan Modification Report

You’re Guide to a Successful Loan Modification-

Getting Your Lender to Say “YES”

Provided by Folsom’s HAFA Certified Short Sale Specialist And

Experienced Sacramento Area Short Sale Negotiator

Table of Contents

Section 1- You, Your Family and Your Mortgage

Section 2- Loan Modification Programs

Section 3- Options other than a Loan Modification

Section 4- If You have a 2^nd Mortgage

Section 5- Keep An Eye Out For Scams

Section 6- Seven Things NOT TO DO

Section 7- Where To Get Good Information

Section 8- Getting Your Lender To Say “YES”

Section 9- Glossary of Terms

Blank Conversation Log
 

Section l – You, Your Family and Your Mortgage

lf you are dealing with a mortgage that makes it difficult for you remain current on all of your financial obligations, you know the strain it puts on you and your family. Your family is forced to deal with the uncertainty of not knowing for sure if you will be able to stay in your home, and over time many begin to wonder if they even want to stay in their home. lf you are like most homeowners you quickly come to the realization that-

• This is not about your mortgage

• This is not about your house

• This is about your life

The primary goal of this guide is to provide some help and guidance to those homeowners who are faced with a mortgage they can no longer afford. The weight of a mortgage that is dragging you down can seem overwhelming, and sometimes that first step is a tough one. So, let’s look at how to get started on the road to a solution.

This is a Business Decision   Remember:  “…It’s Just Business!”

Just as a corporate CEO justifies difficult decisions by claiming his responsibility to act in the interest of his shareholders, you have every right to treat all decisions related to your mortgage as business decisions that must be made to protect your shareholders — your family. Any solution for your mortgage problem, to have real hope for long term success, must be one that truly works for you and your family.

Begin With The End In Mind

What is your goal? What’s the target? What exactly do you want/need in order for you to make it? Take a hard, realistic look at your situation and ask yourself what changes your bank would need to make in order for you to manage your payment. Keep in mind that if you can get the changes you need in the form of an affordable payment, the duration of the payment adjustment must provide you enough time to get back on firm financial footing. Otherwise, you will be right back in a bad situation before you know it. So you must have a goal: what changes do you need and how long do you need them?

Win-Win or No Deal

These decisions and clearly defined expectations of your outcome are not easy to make, but they are necessary. By knowing the minimum modification, the minimum amount of time you will settle for, you can move forward knowing that anything less is a waste of time. When you what you want and need you are on your way towards recovery. Just remember, treat it like a business decision. Be realistic, know what you need, and don’t settle for a solution that is not really a solution.

You are NOT the Villain Here

American families are facing more economic difficulty than at any time in the past 70 years. Not since the Great Depression have there been so many families facing serious many financial obstacles.

A large part of the problem was brought on by the financial market excesses of the first six years of the 21st century (2001 thru 2006). Real estate values reached dizzying levels, leading American families to feel intoxicated by the “wealth effect.” And, everyone wanted in.

As prices went up, the mortgage industry came up with new and creative loan programs that made it possible to buy homes that people really couldn’t afford. Make no mistake, these programs were not designed for the common good, these creative loan products were not driven by the desire to increase homeownership for the benefit of society. No, the loans were originated, packaged, sold, chopped up, repackaged and sold again with one thing in mind — quick and substantial profit.

It’s true, many American families may have made choices that were not as responsible as they should have been.  However if the go-go loans had never been created and the call centers and telemarketers pushing the toxic loans never existed, most of those same American families would have continued to live within their means. But instead, the entire mortgage, real estate and banking and investing industries pushed these programs: from loan officers, appraisers, real estate agents and brokers, mortgage bankers, underwriters, Wall Street entrepreneurs and many others all played their parts.

Much of the mortgage mess we are dealing with now is a direct result of a mortgage industry that during those first several years of this century to completely abdicated their responsibility to verify a borrower’s ability to pay when making a mortgage loan.

Traditional mortgage lending, the kind of loans our parents and grandparents got from the local bank, involved a banker working with a borrower to settle on a loan that the borrower could afford. When a borrower wanted to borrow more than they could afford, the local banker would refuse to loan the money. We are now facing a severe mortgage crisis in America. There is plenty of blame to go around. But, you are not the villain here. You have every right to ask your lender for help, and not feel guilty about it.You should not feel uneasy about telling your lender exactly what you and your family need. And, if the lender won’t work with you, consider your options, free of guilt.

Sustainable Homeownership — Slightly Redefined

There is now near universal agreement among policy makers, mortgage industry executives and community leaders that borrowers who cannot afford them should “not be put in an unsustainable loan.” (quote from John Taylor, president and chief executive of National Community Reinvestment Coalition)

…Which begs the question, was it at some point acceptable to extend loans to borrowers who could not afford them?

Let’s look at the real Sustainable Homeownership issue facing America today. What is the best way to help the millions of American families who are in a mortgage they cannot afford? The answer is simple, (not easy, but simple) help those families work with their lender to either adjust the terms of their loan so they can keep their home, or allow them to sell the property through a short sale without putting them through a meat grinder.

Loan modifications work for many borrowers. Loan modification programs, both private programs and government sponsored programs, have allowed well over a million American families to stay in their home. For those borrowers who have identified what they need from their lender in order to manage their housing costs, the right loan modification can be a real blessing.

Unfortunately not all loan modifications are created equal. The failure rate, often described as the “‘re-default rate”, on loan modifications continues to be very high. Depending on what source you want to believe, loan modifications fail somewhere between 30% and 50% of the time. Now, the positive side of that is it does mean that between 50% and 70% of the time an American family is able to save their home. But, the re-default issue should not be ignored.

So, what is our re-definition of ‘Sustainable Homeownership’ for homeowners with a problem mortgage?

lf you decide a loan modification is right for you and your families’ situation, do your homework! Make sure you know what you need and don’t accept a non-solution loan modification from your lender. You need a loan modification that will allow you to sustain the payment and a new agreement that allows you to pay off your home.

ANYTHING LESS IS A WASTE OF TIME AND IS NOT A REAL SOLUTION!

If your lender will not offer a loan modification on terms that are sustainable, ‘Sustainable Homeownership’ means getting out of the bad mortgage you are in with a minimum amount of damage, by way of a short sale, so you can re-enter the housing market as quickly as possible at a price point that is sustainable, and a payment that is comfortable.  This new definition of ‘sustainable homeownership’ means you will own a home at a price that will allow you to build wealth, not hold you back.

Section 2 — Loan Modification Programs and Variations

Loan modifications can take several different forms, and the type of loan modification that your lender is willing to offer will go a long way towards determining if it represents a solution or simply has you kicking the bad mortgage can down the road. The key thing to focus on when considering whether or not a particular loan modification program will work for you is realistic affordability — short term and long term? D0 the terms of the loan modification offered get your payment to a level that you and your family can manage, now and into the future?

Let’s take a look at some of the most common types of loan modifications:

Section 3 — Options other than a Loan Modification

You may try to get your lender to modify your loan and find that your lender simply won’t work with you. Or, you may decide from the beginning that you don’t see value in getting a loan modification if you are seriously underwater on your property. However you arrive at the conclusion that a Loan Modification is not the route you will be going, you want to be sure to consider your options so you can get the best possible outcome for you and your family.

So, what are your options if your mortgage is a problem and aren’t going to modify?

Here are some possibilities to consider:

Bankruptcy is absolutely not the right choice for every homeowner facing mortgage difficulty. Bankruptcy is, however, an option that should be considered by those homeowners who are having difficulty with their mortgage and with consumer debt. Bankruptcy can also be helpful if you have a 2^nd mortgage or a HELOC that is threatening legal action to collect their debt. California is considered to be an anti—deficiency state, and with the new Senate Bill 458 and addition to Civil Code of Procedure 580(e), there can be no judgment or recourse or collection of either a first or second mortgage after a short sale.  However, in many cases holders of 2nd mortgages and HELOCs do have the ability to sue for a deficiency after a [foreclosure. Your real estate agent can provide you with information on this subject.

Section 4 — If you have a 2nd Mortgage

If you are trying to find a solution to mortgage payments you can no longer afford, and if you have a 2^nd mortgage on your property, you know that what you need to do is reduce you total mortgage related costs to a level you can manage. That means either the payment on the 1st mortgage needs to be reduced to a level that allows you to pay the entire monthly amount due on the 2nd, or you need to get the payments on both loans adjusted to a combined number you can handle every month. Here are some things to consider if you want a loan modification and you have a 2nd mortgage:

l.          If both the 1st and the 2nd are with the same lender you may find that the lender has more flexibility in finding a solution that works for you. Clearly, there should be advantages to having both your mortgages handled by the same lender. Now, let’s insert an important piece of information that you should know about your 1st, your 2nd and your lender. The 1st mortgage and the 2nd mortgage in most cases are not owned by your lender. In fact it is likely your lender services, but does not own your 1st mortgage, but does own your 2nd mortgage. In other words your 1^st mortgage is not really their money, but the 2nd is their money. And yes, that does represent an inherent conflict of interest.

2.         An experienced real estate agent can help arrange a settlement with the 2nd mortgage holder. There have been efforts to address the 2nd mortgage issue, because uncooperative 2nd mortgage holders have stood in the way of loan modification solutions way too often. lf you qualify for a HAMP modification, (and your lender should be able to tell you over the phone whether or not your 1st mortgage is HAMP eligible), there is a specific program to address 2nd mortgages attached to properties that are receiving a HAMP mod on the 1st. The program name is ‘2MP’ and it outlines how a 2nd mortgage is to be modified or, in some cases paid off (called the extinguishment option).

3.         You will want to know if your 2nd mortgage is a recourse, or a non-recourse loan. The reason is it may impact the willingness of the lender on your 2″d mortgage to negotiate. If the 2nd is a recourse mortgage the lender may have recourse against you if the 1st mortgage holder forecloses. In other words, the 2nd mortgage lender may feel they are better off taking their chances trying to collect from you later than to agree to modify your 2nd at terms that reduce the value of their loan.

Note: a real estate agent can give you guidance on whether your 2nd mortgage is recourse, or non-recourse.

Section 5 – Keep an Eye Out For Scams

History is littered with examples of how a misguided few in our society identify the misfortune of some as an opportunity to take advantage of those they view as vulnerable. The mortgage crisis has provided a breeding ground for those who do such things. It is wise to keep a lookout for people presenting “solutions” that are nothing more than scams designed to separate you from your money and/or your property.

A great rule of thumb: if it sounds too good to be true, it probably is.

Here are some things to avoid when it comes to your property and your mortgage:

Short Sale Option Agreement

Signing an ‘Option Agreement’ that gives a real estate investor or an unscrupulous agent the “option” to purchase your property is nearly always the first step in a process designed to give an investor the right, but not the obligation, to purchase your property at a below market price. Once you sign the ‘Option Agreement’ you may have given up control of your property.

Section 6 — Seven Things Not To D0

Section 7 — How to get Good Information

When it comes to making decisions about your mortgage and your home, you want to get it right. Arriving at a solution that you can pursue with confidence is not always easy. There is lots of conflicting information floating around, and then you have the horror stories along with the “that sure sounds too good to be true” stories. What is a confused homeowner to do? Do your research, speak with people you consider to be reliable and knowledgeable, and then listen to yourself — trust your instincts. After you have gotten enough input from reliable sources, sort through the information and the options, then make the decision that is best for you and your family.

So, who might you want to speak with as you go about collecting information? Here are a few suggestions for you to consider:

Mortgage Help Agencies – Public and Private.

There are a number of non—profit groups that have either been formed to respond to the needs of troubled homeowners or that have grown in prominence as a direct result of the mortgage crisis. Many of these groups accept calls from homeowners looking for help with their mortgage.

Here is a couple that you might find helpful:

HopeNow

You can contact HopeNow either by phone (toll free 888-995—HOPE) or through their website at www.HopeNow.com. The HopeNow Alliance was formed to provide a place for homeowner to go to get reliable help and information regarding their mortgage. Be advised, however, that the HopeNow effort is funded primarily by lenders and mortgage servicers.

Center For Responsible Lending

The Center for Responsible Lending was formed in 2002, well before the mortgage crisis arrived, and has a mission of helping consumers with all types credit and loan related issues. Basically, the Center for Responsible Lending is a watchdog for lending practices that they feel are not fair for consumers. Obviously they have found much to deal with when it comes to mortgages and lender behavior towards borrowers. In California you can reach the Center for Responsible Lending at (510) 379-5500, or go to their website www.responsiblelending.org.

Section 8 — Getting the Loan Mod you want, Getting Your Lender to say “YES”

OK, you have done all your research and you have spoken with the different professionals (real estate, legal and tax) who could help you understand your situation and the loan modification process, and now you are ready to move forward. lt is a loan modification you want, and you are ready to put forth the effort to get your lender to see the wisdom in modifying your loan and allowing you and your family to stay and continue to pay on the mortgage.

What is the best way to get your lender to YES? Here are some tips:

Tip #1 — Adjust your mindset

Go into the loan modification process with a clear focus on your goal — getting a loan modification that represents a time solution for you and your family. Your mindset needs to be one of a homeowner who l is facing a legitimate hardship, but 2) will be able to follow through and remain current on the mortgage if your lender does agree to modify your loan.

Tip #2 — Give Your Lender a Great Hardship Package

Your lender will expect you to submit a hardship package to demonstrate your hardship and to verify your current ability to pay. In most cases your lender will provide you with a package to complete and return to them. Your lender will also ask you to provide documents like tax returns, bank statements and pay stubs to support your hardship. Send the lender a complete, well organized file, and be sure all the documents you send are legible.

Tip #3 — Write a Good Hardship Letter

Your hardship letter is your opportunity to tell the lender your story, to bring your situation to life. Do not minimize the human angle in this process, but don’t go overboard on the letter either. Your hardship letter should be kept to one page, be typed and easy to read. The letter should contain three parts.

• Part one — an apology: I am sorry to have to ask for help.

• Part two — the situation: information on what has led to your hardship.

• Part three – a firm statement:  Your options are exhausted. lf the mod does not work you have no options left but short sale or foreclosure

Tip #4 — Make Contact and Verify Receipt

After sending in your hardship package, follow-up and make contact with your lender to verify they received your package. Do not assume that because you sent it that they received it.

Tip #5 — Stay in Contact

Stay in contact, and this includes the period before you submit your loan modification package. lt won’t be long after you begin having trouble with your mortgage that your lender will be calling you to attempt to find out what is happening. If your lender calls, take the call. lf your lender leaves a message, return it. Making progress with your lender will require communication.

Important Note: In an effort led by the U.S. Treasury Department, rules are being put in place as we go to press with this guide that will require most lenders to provide to each homeowner attempting to resolve a mortgage difficulty, a single point of contact that is to be available to the homeowner throughout the mortgage resolution process. When you make contact with your lender to begin working on your loan medication (or alternate solution) ask your lender to identify exactly who will be your single point of contact. While it is likely that each lender will take a slightly different approach to the single point of contact requirement, the new rule set to take effect in the fall of 2011 requires the single point of contact to provide the homeowner at least two methods of contact (i.e. phone, fax, email etc.)

Tip #6 — Be a Good Listener

When you begin speaking with your lender remain friendly and helpful always, and listen carefully. Getting a loan modification is about a business arrangement, treat it accordingly. Answer the questions you are asked, but avoid the temptation to embellish …. stick to the point.

Careful listening is important for two reasons:

1. By listening you will know what your lender wants from you. Give them what they require in terms of documents and information, but do not send things they don’t ask for. Sending information and documents beyond what your lender asks for probably won’t help, and it could hurt.

2. You may find that your lender is so anxious to avoid a foreclosure that they will offer very attractive terms in a modification agreement. Don’t offer solutions until you learn what your lender has in mind. Ask your lender for an outline of what might be possible and STOP SPEAKING.

Tip #7 — Stay Upbeat

As you work through the process of providing your lender with the documents and information they need, maintain a positive attitude. Your lender will be listening to what you say and how you say it. In the end, someone working for your lender is going to have to recommend the approval of your application for a loan modification. You want that person to believe in your file and to believe in you.

Tip #8 — Take Careful Notes…Lots of Them

Whenever you are speaking with your lender take care to note the details of the conversation. Note the date and time of the call, as well as the name of the person with whom you spoke. lf you can’t keep up with the conversation when taking notes, don’t be afraid to ask the representative to repeat information. Get the details. Your notes should include as many specific points as possible. The more detailed your notes, the more effective you will be recreating the conversation later. Good notes from a previous conversation could give you the leverage you need to get your lender to honor an offer that was made previously.

Tip #9 — Be Nice

Be nice! In most cases you will be working with a representative of your lender who is handling a high volume of loan files — all similar to yours. So, what can you do to get the attention you and your loan modification request need for success? Make yourself easy to work with, be a good project partner. Be nice! And, respond quickly to requests from the lender representative. Sometimes things won’t move forward as quickly as you would like, and your patience may be tested. Before you make an angry call out of frustration, stop and consider the position of the lender representative with whom you are working. They have too many files, not enough time to work them and as a result lots of the folks they talk to are unhappy — and often angry. Don’t get mad, try a different approach. Do your homework and get the representative’s mailing address. Send him or her a nice card or letter to let them know that you appreciate how hard they are working and that you are grateful for their help. How many of those types of cards do you think they receive? Think they might remember you, and be inclined to give you some extra attention?

Tip # 10 — Don’t be Too Nice

Be nice, until it’s time not to be nice. (Note: some of you may recognize the line from an old Patrick Swayze movie ‘Road House’) be pleasant, helpful and cooperative until you feel your lender is turning you into a doormat. At that point, it’s time to escalate. If you are being treated with disrespect, and it goes on for a couple of calls, you need to speak with someone else — and that probably means a supervisor.

Tip #11 — If you Escalate, Have a Plan

Most homeowners seeking a loan modification who reach the point where it is time to ask for help from the lender representative’s supervisor are frustrated and angry. They want to lash out, they want to vent. That impulse is entirely justified, and if all you are looking for is someone to berate your lender representative’s supervisor will be happy to accommodate you. That’s what they expect, that is what they are trained for, and that is exactly what they have a plan for. Don’t go that route. lt will not help you get a loan modification.

Here is a better plan;

A. Do your homework, know your rights. The loan modification process is technically a debt collection activity — your lender is trying to collect money from you. Period. Debt collection activity; or what your lender can do and what your lender can say, is HIGHLY regulated. The Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) are both very consumer friendly federal laws that significantly restrict what your lender can do when working to collect a debt. FDCPA and FCRA violations are serious business. If your lender is found to have violated either the repercussions for them can be very damaging. This may sound sneaky, but it’s really just being smart. Learn a little about the FDCPA and the FCRA (To access copies of each, just Google ‘FDCPA’ and ‘FCRA’) and listen very carefully to what your lender says, what actions you are threatened with, what assurances you are given, and note each very carefully. If you are threatened with something you know is out of bounds, ask the lender representative to please confirm what they just said.

B. In most cases your conversations with your lender will be recorded by your lender. Knowing that and using that can be a powerful tool to help you get the loan modification you want. By noting all your conversations carefully, and in detail, you gain an advantage when you speak with a supervisor.

In most cases the supervisor is talking to an unprepared borrower, who does not have a plan. That won’t be you, and the supervisor will know that right away. Further, the supervisor will fear that your facts will likely be supported by the recorded version of the conversation. A reminder or two to a supervisor that they might want to go ahead and check the recording will drive that fear home.

C. Take time to collect yourself before you begin talking to the supervisor. If you are angry, ask for a moment to settle yourself down. You will be much more effective and you will be far more likely to aid the cause for your loan modification if you are not about to erupt like a volcano.

D. Stick to the facts when you speak with the supervisor. Don’t turn the conversation into a venting session. Because, as mentioned earlier, the supervisor is prepared for that. Don’t hesitate to mention the parts of the process (if there have been any) that have gone smoothly. You want the supervisor viewing you as a reasonable person prepared to calmly outline your concerns and a person who is fully prepared to support your view with the facts.

E. Be prepared to put it all in writing; and make sure the supervisor is aware of your intention to put it in writing. Say it nicely, but say it firmly and with conviction. There are very few places left for lenders to take cover if they behave badly or fail to deliver when they make a promise to a borrower. It is a fact that lenders have trampled on the rights of borrowers throughout the mortgage crisis, and as much as they don’t like it and seem willing to argue about it, THEY KNOW IT. The last thing a lender wants, and believe me the supervisor knows this, is to have a reasonable, under control, well prepared borrower, with the facts on their side, writing letters. To anyone! Ask for the supervisors address because you want to send a copy directly to them. If the supervisor will not provide an address, ask for the address they recommend for a letter aimed to resolve a dispute.

When you write the letter, keep it as short as possible while still capturing all the facts. You may want to provide your detailed conversation log as an attachment. (By the way, your conversation log should note every attempt you have made to contact your lender that was unsuccessful) Send the letter certified, return receipt requested and copy your state assemblyman, your state senator, your congressman and both senators.

Tip #12 — Don’t Get Frustrated

When faced with the stress and the pressure that a delinquent mortgage can create, it’s easy to get frustrated. No one wants to lose a home to foreclosure, and until you get approval for the loan modification you need, the threat of foreclosure lingers. Getting your loan modification will require patience. The lender representative you will be working with will be processing many files simultaneously. There will be times that it seems your file is not getting the attention it deserves. TAKE A DEEP BREATH, this is the point at which many loans modifications fall apart. A frustrated borrower loses patience and makes a decision at an emotional moment that undermines their entire loan modification effort.

 Tip #13 — “Can I get a direct number?”

 At times it will be a struggle to get through the automated phone system your lender almost certainly uses. Frequently it’s possible to avoid this aggravation by getting a direct phone number for the lender representative with whom you will be working. A second benefit of getting a direct phone number is that it may make it more likely that you get to work with the same person throughout the process. lt’s no fun recounting your situation, time and again, each time a new person is inserted into the process by your lender.

Tip #14 — Always be Prepared

When you do get on the phone with your lender be prepared, and have a game plan. Know what you want to achieve always be aware of what you are working towards; and once you achieve it shift to your closing plan. Verify the lender has everything they need to move forward on your modification and ask when you can expect to receive formal approval on your loan modification request. But, don’t forget the ‘be prepared’ part. Have your file open and ready to go. If you have to occasionally make calls from your place of employment, have your file with you. Don’t rely on your memory. Have everything written down and ready to go.

Tip #15 — Review the Agreement Carefully

When you do finally receive formal approval for your loan modification, review all the documents that contain loan modification terms carefully. Your lender is handling a very high volume of loan modification transactions, and mistakes can happen.

Pay particular attention to the following parts of the agreement:

l.  Interest rate and payment calculation, as well as the amortization schedule.

2. The duration of the agreement and any specific points in time at which the terms of the agreement change.

3. Provisions for the Iender’s recovery of delinquent interest and the calculation of the total amount to be recovered — which could include lender charged fees.

4. Look for penalties that could take effect if you are not able to make all the payments outlined in the loan modification agreement. In some cases the lender may attempt to keep the foreclosure door open, thereby allowing for an accelerated foreclosure if the loan becomes delinquent again.

When reviewing the agreement consult with your notes taken throughout the process to verify the agreement the lender is offering is consistent with what was discussed. lf you see something in the agreement that is not consistent with your understanding give the lender the benefit of the doubt when resolving the “misunderstanding.” lt is likely any discrepancy is a result of miscommunication and this is another case where your careful, detailed notes will come in handy.

Tip #16 — Get Legal Advice

Before signing your loan modification paperwork it is a good idea to get the paperwork reviewed by an attorney. Keep in mind that the agreement is more than just an agreement to modify the terms of your loan, it is also an attempt to collect a debt. The paperwork provided by your lender may ask you to waive certain legal rights to which you would otherwise be entitled. The paperwork could contain other provisions, the consequences of which you may not understand.

Tip #l7 — Know the Terminology

As you go about trying to get your lender to give you the loan modification you need the conversations will sometimes include words and phrases that are unique to the mortgage and/or loan modification process. It helps to understand the meaning of these terms, so for a list of many of the mortgage speak terms you might run into as you pursue your loan modification go to the ‘Glossary of Terms’ section below.

Section 9 – Glossary of Terms- Loan Modification, Short Sale and Foreclosure Terms

Advertising- (or Publishing)

A copy of the Notice of Trustee Sale must be published once a week for three weeks.

Authorization Letter

The letter signed by a homeowner authorizing others to act on their behalf. The letter normally limits what the authorized party can do. Lenders require Authorization Letters before they will speak with an outside party about a mortgage.

Bankruptcy-Chapter 7

Often called a straight bankruptcy-involves the liquidation of all non—exempt by the bankruptcy trustee, who in turn distributes the proceeds to qualified creditors. All dischargeable debts are discharged and the person(s) tiling receive a ‘fresh start’.

Bankruptcy-Chapter 13

Often called a debt reorganization. A Chapter 13 Bankruptcy is generally appropriate for those individuals who have non-exempt property they wish to retain and who have enough income to reasonably pay the reorganized debt after covering reasonable living expenses.

Beneficiary

The beneficiary in a foreclosure context is generally the mortgage lender. Frequently referred to as the ‘Benny’.

Broker Price Opinion

A formal opinion of value prepared by a real estate Broker or agent, typically for a modest fee, on a piece of real estate. BPOs are a commonly used, but marginally reliable, tool utilized by the mortgage industry to establish value on properties that are in default. Much cheaper than an Appraisal.

Credit Counseling

Under the new bankruptcy law which took effect in October of 2005, those wishing to file bankruptcy must complete an approved credit counseling course within the six (6) months prior to filing.

Debt-to—lncome Ratio – DTI

That percentage of a borrower‘s income that is needed to make regular payments to cover debts and certain other expenses. The ‘Front-end Debt Ratio’ is that percentage of a borrowers income that is needed to pay housing expenses — principal, interest, taxes, insurance and association dues, if any.

Deed in Lieu of Foreclosure

The voluntary surrender of property by an owner/borrower to a lien holder that eliminates the need to continue foreclosure action by the lien holder. The lien holder can refuse to accept the Deed in Lieu and file a Notice of Non Acceptance with the County Recorder.

Discounted Payoff

The payoff of a mortgage loan where the lender accepts an amount less than the actual amount owed to payoff the loan.

Equity Deficient

A property is Equity Deficient when, if sold, sales proceeds would not fully pay off existing mortgage debt. Same as “Upside-down” or “Underwater”.

Fair Credit Reporting Act- FCRA

Federal law that regulates they way consumer credit information is collected and reported, enacted to protect consumers from unfair practices by creditors and credit reporting bureaus. Fair Debt Collection Practices Act- FDCPA Federal statute enacted to protect consumers from abusive and/or unreasonable practices by creditors and debt collectors.

Fannie Mae – FNMA

The Federal National Mortgage Association was formed in 1938 as a quasi governmental agency to provide liquidity in mortgage markets by securitizing loans into mortgage backed securities.

Fiduciary Duty

The duty to look out for the interests of a specific party to a transaction, often a principal in a financial transaction. The duty may be based on ethics, or the duty could be established by law.

Forbearance Agreement

An agreement between a mortgage holder and a borrower that lays out a specific loan payment plan and stops foreclosure action so long as the borrower meets the terms of the agreement. The payment plan includes provisions for repayment to the mortgage holder of all delinquent interest and fees and could include extending the life of the mortgage beyond it’s original term. A Forbearance Agreement is a tool that allows the borrower to keep the property.

Freddie Mac – FHLMC

Like Fannie Mae, Freddie Mac (Federal Home Loan Mortgage Corporation) provides mortgage originator with an established channel for the packaging and securitizing of mortgages.

Hardship Package

The package sent to the lender to demonstrate the homeowners hardship.

Home Affordable Foreclosure Alternatives – HAFA

Part of the HAMP program, HAFA was developed by U.S. Treasury to streamline the short sale process. The program targets, but is not necessarily limited to, those borrowers who have attempted a HAMP loan modification and were either declined for a HAMP loan modification or were approved for a loan mod but unable to remain current on the mod.

Home Affordable Modification Program — HAMP

Part of the Obaa administration‘s larger Making Home Affordable program, the HAMP program was announced as to bring uniformity to the loan modification process. When the program was introduced by the U.S. Treasury the goal was to help 3 to 4 million at-risk homeowners by adjusting their payments to sustainable levels.

Judicial Foreclosure

A foreclosure action conducted through the courts instead of through a foreclosure trustee. Judicial Foreclosures are very uncommon in California, particularly on residential properties. California is a Deed of Trust State and a Non Judicial Foreclosure State.  However, should a lender elect to pursue a deficiency judgment, it would have to be through a Judicial Foreclosure.

Junior Liens

A lien, usually a mortgage loan, which is subordinate to a Senior Lien; usually a first mortgage. Lien priority is generally established by order of recordation . NOTE: if you refinance a 1st mortgage on a property with a 2nd mortgage already in place the new 1st mortgage holder will require a subordination agreement from Junior Lien holders to legally establish the new mortgage holder as 1st or Senior Position.

LIBOR (London lnterbank Offered Rate)

The interest rate charged among banks for short-term Eurodollars loans – LIBOR is a very common index for adjustable rate mortgages (ARM).

Loan Modification

An adjustment to the terms of a mortgage, generally done to help a homeowner who is having trouble, or expects to have trouble remaining current on the mortgage.

Loss Mitigation

Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through their Loss Mitigation Departments.

Mailing

A copy of the Notice of Trustee’s Sale must be mailed (certified and first class) at least 20 days before the foreclosure sale to the borrower and to anyone who was entitled to receive a copy of the Notice of Default and Secretary of State and IRS, if applicable.

NOD acronym for Notice of Default

An official notice filed and recorded by a designated trustee at the request of a lender indicating lender has commenced foreclosure action.

Notice of Trustee Sale

An official notice that is posted, mailed, published/advertised and recorded by trustee at the direction of lender indicating lenders intention to sell the property at public auction. The notice includes a specific date, time and location.

Posting

A copy of the notice of sale must be posted in a conspicuous place on the property to be sold at least twenty days before the sale. Also, a copy of the notice must be posted at one public place in the city where the property is to be sold at least twenty days before the sale.

Postponement

Trustee Sales may be postponed by the first at the direction of the lien holder. Notice may be given in advance or at the time and location specified for the intended sale.

Private Mortgage Insurance (PMI}

A policy of insurance paid for by the borrower to protect the lender in the event the borrower defaults on the mortgage. Typically PMI is required by the mortgage holder when the down payment is less than 20% of the purchase price.

Qualifying Funds

ln order to bid at a Trustee Sale bidder must have qualifying funds available at the sale. Qualifying funds are cash or a cashier’s check(s) drawn by a State or National Bank, a check(s) drawn by a State or Federal Credit Union or check drawn by a State or Federal Savings and Loan Association, savings association or savings bank specified in section 5102 or the Financial Code and authorized to do business in the State of California.

REO

Short for Real Estate Owned. When a mortgage lender acquires a property, typically through foreclosure, it becomes real estate owned — or REO.

Reinstatement

To bring the loan current. Borrower may reinstate up to five (5) business days before foreclosure sale.

Strategic Default

The decision by a payment capable homeowner to discontinue mortgage payments on a property to gain a financial advantage or get a strategic edge.

1099-C

IRS Form 1099-c is issued by those cancelling all of part of a debt to the person receiving debt relief. Note: The cancelled debt may not need to be reported as income.

Trustee (Foreclosure Trustee)

A Foreclosure Trustee is appointed by the mortgage company when a mortgage reaches the default status for the purpose of processing the foreclosure.

Trustee Deed

The deed given to the highest bidder at auction or the foreclosing lender upon completion of the foreclosure.

Trustee Sale

Conducted by the Trustee. The property is sold at auction to the highest bidder, or taken back by a foreclosing lender.

The Mortgage Assistance Relief Services Act

The Federal Trade Commission has issued a set of rules that apply to those offering to provide assistance to distressed homeowners. The Mortgage Assistance Relief Services act (‘MARS’) prohibits the collection of advance fees by MARS providers and requires that all homeowners receive the following disclosure:

This publisher and/or provider of this guide is not a part of, affiliated with, or endorsed by the government. It is possible that your lender will not agree to provide the mortgage relief you seek. lf you stop making your mortgage payment, you could lose your home and your credit could be damaged.

As a Certified Short Sale Agent, I specialize in helping homeowners weather the mortgage storm. Those of us who bought a home over the past five years or so, had no idea about the kind of economic upheaval that was going to follow. In fact, it appears that no one actually anticipated what was in store.

But here we are. An estimated one fourth of the mortgage holders in the country owe more on their home than its current market value. One out of seven are in some state of default or foreclosure. And possibly the most troubling statistic of all: the vast majority of homeowners who end up foreclosing on their home, do so without ever reaching out for help to try to mofify their loan or even attempt a short sale.

I am a Certified Short Sale Agent; my many Foreclosure Options and Home Retention designations include SFR, PFC, and I am a Certified Distressed Property Expert (CDPE), and Certified HAFA Specialist. So it is my personal mission to help as many homeowners as possible to stay in their home, or at least avoid foreclosure and get their lives on a positive path. If you or anyone you care about is faced with an unmanageable mortgage, please know that I am here to help. I invite you to visit my website at http://www.howtokeepmyhome.info/for a copy of my most recent report.

More help is available for financially distressed homeowners than ever before. This is no time to go it alone, and the time to contact me about getting on path toward financial stability is NOW!

I have been asked several times; Who can help me with my Sacramento loan modification?

Finally! Sacramento Loan Modification Help!

Sacramento Short Sale Expert Forth Hoyt; Folsom’s Multi-Certified Pre-Foreclosure Expert and Home Retention Advocate, along with Foreclosure Options Experts At Wereheretohelp.org and Folsom Keller Williams have written and recently compiled an in-depth loan modification packet to help Sacramento Area Homeowners keep their homes.

This is a brand new report that includes step by step loan modification instructions and “do it yourself Loan Mod Kit”  available for free!

Read The Entire Story And Order Your Loan Mod Kit Today!

Foreclosure Options Experts At Wereheretohelp.org and Folsom Keller Williams have a new report and that includes step by step loan modification instructions and “do it yourself Loan Mod Kit”  available for free!

Folsom Short Sale Expert Forth Hoyt; Folsom’s Very Own CRS, CDPE, HAFA Certified, Pre-Foreclosure Expert and Home Retention Advocate has written and recently compiled an in-depth loan modification packet to help Folsom Homeowners keep their homes.

This Loan mod for Folsom, CA homeowners packet is actually two parts:

The First one is the do-it yourself loan modification checklist and includes all the specific forms you will need for a loan Modification from most servicers and mortgage investors; including Fannie-Mae and Freddie Mac loan modification forms This first packet includes a Loan Mod Checklist (also included below) and a Loan Mod Guide;  a How-to, step-by step guide to a Loan Modification.

The Second part of he Packet is actually an in-depth study of the loan modification process entitled Your Guide to a Successful Loan Medication – Getting Your Lender to “Yes“

Order This In-Depth Do It Yourself Loan Modification Guide and Loan Modification Toolkit Today!!

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CDPE's are trained to know the options designed to keep clients in their homes and out of foreclosure.

Does your agent specialize in Short Sales? Why would he? To understand the short Sale Process at a very high level!

By Forth Hoyt CDPE, CRS, Certified HAFA Specialist,Dave Ramsey ELP, PFC, RDCPro, A-REO, SFR,SRES, e-PRO, And Master’s Club Life Member.

How did this happen? How did our housing sector get so messed up?

Those of us who bought a home over the past five years or so, had no idea about the kind of economic upheaval that was going to follow. In fact, it appears that no one actually anticipated what was in store.

But here we are. Nationwide, an estimated one fourth of the mortgage holders in the country owe more on their home than its current market value. One out of seven are in some state of default or foreclosure. And possibly the most troubling statistic of all: the vast majority of homeowners who end up foreclosing on their home, do so without ever reaching out for help or attempt a short sale. Closer to home, the numbers here in California are even worse; An estimated one in three in some neighborhoods are underwater.

As a Certified Residential Specialist (CRS), a Certified Distressed Property Expert (CDPE) and a Dave Ramsey ELP,with many other Foreclosure Alternatives Designations and Certifications, it is my personal mission to help as many homeowners as possible Stay in their home, or avoid foreclosure, and get their lives on a positive path. I take my role as a Short sale Specialist and Expert Short Sale negotiator very seriously; in a traditional real estatesale,   sale if you are unsuccessful for your client, the worse thing that can happen is the home does not sell.   For Short Sale sellers, the stakes are much higher.

If you or anyone you care about is faced with an unmanageable mortgage, please know that I am here to help. I invite you to visit my website or forward this link (insert web address) for a copy of my most recent report entitled, “Need a Helping Hand? If your Mortgage and the Market Have Tossed You a Curve, You’re Not Alone.”

More help is available for financially distressed homeowners than ever before. This is no time to go it alone, and the time to contact me about getting on path toward financial stability is NOW!

More Questions on your particular situation? Need someone to talk to about your options?  Contact us today at Forth Hoyt’s Sacramento Short Sale Center

Short Sale Expert and Certified Distressed Property Expert Designation

Need to ease the pain of an unstable and confusing real estate market?

A Certified Distressed Property Expert® (CDPE) has a thorough understanding of complex issues in today’s turbulent real estate industry and knowledge of foreclosure avoidance options available to homeowners. CDPEs can provide solutions, specifically short sales, for homeowners facing market hardships.

Homeowners regularly proceed without guidance of any kind through the often financially and emotionally devastating prospect of foreclosure. Speaking with a well-informed, Experienced licensed real estate professional is the best course of action for a homeowner in distress. Through comprehensive training and experience, CDPEs have the tools to help homeowners find the best solutions for their unique situations and to avoid foreclosure through the efficient execution of a short sale.

Living through financial difficulties poses a challenge for any family, so why make the process of finding a qualified real estate professional difficult too? Select an agent with the CDPE Designation to ensure you have a trained professional to address your specific needs. For more information, contact a CDPE in your area.

CDPEs don’t merely assist in selling properties, they serve and help save their clients in need.

As a Folsom Short Sale Specialist, Folsom CDPE, Folsom and El Dorado Hills Area Experienced  Short Sale Agent and Homeowner advocate, I love helping families either stay in their home or exit with their dignity and their credit score intact!

Less Than 2% of Loan Modifications Applied For receive Any Type Of Principle Reduction!

Underwater and payment too high? There are several  options available to homeowners who are underwater, and with a mortgage payment that is uncomfortably high- Sacramento Homeowner Options Expert Forth Hoyt Reports on Government Options To Help Homeowners

Some of the most misunderstood Government Programs For Underwater Homeowners:

( A )     FHA’s Short Refinance Program

Launch date: September, 2010

The FHA Short Refinance Program is for borrowers who have remained current on their mortgage payments. It only works IF your bank agrees to write off at least 10% of the principal. If the bank agrees, underwater borrowers can refinance into a new FHA-insured loan.

The refinance will put you back in the black on your 1st mortgage: The debt-to-value ratio has to exceed 97.75%. With any second mortgage factored in, it can’t exceed 115%.

Track record: This got off to a very slow start, with only about 15 refinances done by early 2011. The House Financial Service Committee voted to kill this program in March. It’s future is in doubt.

( B )     Home Affordable Foreclosure Alternatives Program(HAFA)

Launch date: April, 2010

Aimed at borrowers who are underwater on their mortgages and who’ve been denied a modification via HAMP( the government loan modification program ), HAFA is supposed to help homeowners avoid foreclosure. The program pays cash to both the borrower and lender to encourage a short sale, a deal in which the bank accepts the proceeds of the home sale as full repayment of the mortgage debt, forgiving any loss.

Track record: HAFA has become a success and by mid 2012 HUD expects to have over 1 million homeowners in HAFA. Most who were not eligible for the government’s $3,000 assistance was due to the “debt-to-income” ratio, HUD has removed that criteria allowing even more homeowners to qualify.

( C ) Second Lien Modification Program (2MP)

Launch date: April 2009

The Second Lien Modification Program (or 2MP) provides assistance to homeowners who have a second mortgage or a home equity line of credit in addition to their primary mortgage.

Many potential mortgage modifications have run into roadblocks because lenders of home equity loans and lines of credit refuse to cooperate. Second lien holders have to agree to a mortgage modification — and to take a loss — before a loan can be refinanced.

Under 2MP, the government pays cash incentives to the lenders of the second loans so they will allow the refinancing to proceed.

Track record: So far, only 3,516 borrowers have had their second mortgages reduced. That’s a far cry from the estimated one million or more that the program was created to help.

There are more Government Programs Here:

What is HAFA? Can I do HAFA? What is the HAMP/HAFA Program? What’s the Second Lien Modification Program (2MP) Or Home Affordable Refinance Program (HARP)?

CHECK YOUR ELIGIBILITY

There are many government programs to help homeowners, questions on your particular situation?

Contact us today at Forth Hoyt’s Sacramento Short Sale Center

Or find out here about New Government Foreclosure Prevention Program Eligibility- Which Programs Do You Qualify For

I am not an attorney, and you should talk to one!! Call for a referral!

Foreclosure Time Frames - Sacramento County, CA -or- Time To Foreclose In Sacramento County. This Chart Answers The Question "How Long Can I Stay In My Home If I Do Foreclosure?"

Time to Foreclose in Sacramento County; This Chart shows Three Graphs:

Time to foreclose: The average number of days between the filing of the California Notice of Default – the beginning of the California foreclosure Process) and the final sale at auction in Sacramento County.

Time to Resell—The average number of days between the final sale at auction and when the property was resold by the bank or 3rd party. (This amount of time has been steadily increasing for the banks, as more and more foreclosed properties are now still occupied; and banks are much more lenient than private investors when it comes to evictions and aggressively getting the property vacant and ready to sell again).

What this means to you…

As a Short Sale Specialist here in the Sacramento, El Dorado And Placer County areas, I am constantly being asked about the benefits of a short sale and why a short sale is better for your credit. What are the short sale and foreclosure credit score differences?

Being in control of the timelines is one of the biggest advantages of a short sale over foreclosure- short sales  take about half the time as a foreclosure.

This advantage of a short sale time is where the differences between a foreclosure and a short sale on your credit rating comes from.  You see biggest destruction to your credit rating  is from missing  payments every month.  The time it takes for that damage to stop its monthly havoc to your score, is the benefit of a short sale over foreclosure.

Every month that you miss a mortgage payment, your credit score is hit- the higher the score, the bigger the monthly hit.  It is not uncommon to have 15 or 18 points per month if you have a high score to begin with-

Our typical short sale takes 2 to 4 months before we get third party approval, (the bank says yes) – add another 30 to 45 days for escrow and getting the transaction closed.  So that’s usually less than 6 months of missed payments total all the way to closing the transaction and the bank reporting “paid as agreed” on the credit report…

Contrast that 6 months to the typical homeowner who decides to just let the bank take the home back and goes through with the foreclosure process.  That homeowner typically has to miss 4 consecutive payments or more before the bank even files the Notice Of Default; add to that the average time to foreclose in Sacramento County 262 days (as of last month) and you are looking at well over a year of missed payments. Twice the amount of a short sale- And then the homeowner gets the punctuation mark of a foreclosure on their credit report instead of the “paid as agreed” from a short sale…

Questions on your particular situation?

Can My Second Loan Sue Me? Whats The New Law In California Regarding Short Sales?

Or do you have an Unaffordable Mortgage? How To Start A Loan Modification.

Contact us today at Forth Hoyt’s Sacramento Short Sale Center

Or find out here about New Government Foreclosure Prevention Program Eligibility- Which Programs Do You Qualify For?

I am not an attorney, and you should talk to one!! Call me today for a referral!

Loan Modification Help In Sacramento

Has your mortgage payment become unaffordable? Considering a loan modification in Folsom, El DorAdo Hills, Roseville, Natomas, Elk Grove or West Sacramento? Need someone to help with your Sacramento area Loan Modification?

Read more and check Government Foreclosure Prevention Program Eligibility here.

Homeowners never want to lose their home.  And it’s never an easy decision for an underwater homeowner or investor to do a short sale or strategic default.

As a Certified Short Sale Specialist and an experienced short sale agent, I spend much of my time talking to homeowners in Folsom, El Dorado Hills, Shingle Springs, Cameron Park, and even West Sacramento, Roseville, Rocklin, Natomas and Elk Grove and the entire Sacramento area who are struggling with mortgage payments that are way too big…  Monthly payments that are now too high to afford.  sure, they were do-able when the economy was thriving; when the homeowners had plenty of overtime and two stable incomes supporting the family. But now, after layoffs, furloughs, pay reductions and business failures, a mortgage that is twice or three times as high as rent on a home that is “equity deficient” is just not sustainable for many, many people.

With an uncertain future and an economy still struggling here in the Sacramento area,  I am talking to lots of people who are right on the verge…

And most have tried to contact their bank about a loan modification and have had very little success;

What to do now?

Keep trying!

And study loan mods! Read everything you can get your hands on about successful loan modification strategies! order every report you can, and get ready for the fight of your life!

A friend on mine has written a great report entitled; Your Guide To a successful Loan Modification; Getting your Lender To “Yes”.

I have tweaked it, updated it and added some additional Loan Modification information especially about the new Government Loan Modification Programs, and I am  including the first section of this great report here in this post, but to order your ow printable PDF of this great Loan Mod How-to report:

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Here is the first section of this great Loan Modification Guide and Step By Step Loan Modification Directions :

A Successful Loan Modification That Provides A long Term Solution Will Free You

Section l – You, Your Family and Your Mortgage

lf you are dealing with a mortgage that makes it difficult for you remain current on all of your financial obligations, you know the strain it puts on you and your family. Your family is forced to deal with the uncertainty of not knowing for sure if you will be able to stay in your home, and over time many begin to wonder if they even want to stay in their home. lf you are like most homeowners you quickly come to the realization that-

• This is not about your mortgage
• This is not about your house
• This is about your life

The primary goal of this loan modification guide is to provide some help and guidance to those homeowners who are faced with a mortgage they can no longer afford. The weight of a mortgage that is dragging you down can seem overwhelming, and sometimes that first step is a tough one. So, let’s look at how to get started on the road to a solution.

This is a Business Decision   Remember:  “…It’s Just Business!”
Just as a corporate CEO justifies difficult decisions by claiming his responsibility to act in the interest of his shareholders, you have every right to treat all decisions related to your mortgage as business decisions that must be made to protect your shareholders — your family. Any solution for your mortgage problem, to have real hope for long term success, must be one that truly works for you and your family. LONG TERM and SUSTAINABLE!

Begin With The End In Mind
What is your goal? What’s the target? What exactly do you want/need in order for you to make it?

What is your successful loan modification going to look like?

Take a hard, realistic look at your situation and ask yourself  what changes your bank would need to make in order for you to manage your payment. Keep in mind that if you can get the changes you
need in the form of an affordable payment, the duration of the payment adjustment must provide you enough time to get back on firm financial footing. Otherwise, you will be right back in a bad situation before you know it. So you must have a goal: what changes do you need and how long do you need them?

Win-Win or No Deal
These decisions and clearly defined expectations of your outcome are not easy to make, but they are necessary. By knowing the minimum modification, the minimum amount of time you will settle for, you can move forward knowing that anything less is a waste of time. When you what you want and need you are on your way towards recovery. Just remember, treat it like a business decision. Be realistic, know what you need, and don’t settle for a solution that is not really a solution.

You are NOT the Villain Here
American families are facing more economic difficulty than at any time in the past 70 years. Not since the Great Depression have there been so many families facing serious many financial obstacles.

A large part of the problem was brought on by the financial market excesses of the first six years of the 21st century (2001 thru 2006). Real estate values reached dizzying levels, leading American Families to feel intoxicated by the “wealth effect.” And, everyone wanted in. As prices went up, the mortgage industry came up with new and creative loan programs that made it possible to buy homes that people really couldn’t afford. Make no mistake, these programs were not designed for the common good, these creative loan products were not driven by the desire to increase homeownership for the benefit of society. No, the loans were originated, packaged, sold, chopped up, repackaged and sold again with one thing in mind — quick and substantial profit.

It’s true, many American families may have made choices that were not as responsible as they should have been.  However if the go-go loans had never been created and the call centers and telemarketers pushing the toxic loans never existed, most of those same American families would have continued to live within their means. But instead, the entire mortgage, real estate and banking and investing industries pushed these programs: from loan officers, appraisers, real estate agents and brokers, mortgage bankers, underwriters, Wall Street entrepreneurs and many others all played their parts.

Much of the mortgage mess we are dealing with now is a direct result of a mortgage industry that during those first several years of this century to completely abdicated their responsibility to verify a borrower’s ability to pay when making a mortgage loan.

Traditional mortgage lending, the kind of loans our parents and grandparents got from the local bank, involved a banker working with a borrower to settle on a loan that the borrower could afford. When a borrower wanted to borrow more than they could afford, the local banker would refuse to loan the money.

We are now facing a severe mortgage crisis in America. There is plenty of blame to go around. But, you are not the villain here. You have every right to ask your lender for help, and not feel guilty about it. You should not feel uneasy about telling your lender exactly what you and your family need. And, if the lender won’t work with you, consider your options, free of guilt.

Sustainable Homeownership — Slightly Redefined

There is now near universal agreement among policy makers, mortgage industry executives and community leaders that borrowers who cannot afford them should “not be put in an unsustainable loan.” (quote from John Taylor, president and chief executive of National Community Reinvestment Coalition)

…Which begs the question, was it at some point acceptable to extend loans to borrowers who could not afford them?

Let’s look at the real Sustainable Homeownership issue facing America today. What is the best way to help the millions of American families who are in a mortgage they cannot afford? The answer is simple, (not easy, but simple) help those families work with their lender to either adjust the terms of their loan so they can keep their home, or allow them to sell the property through a short sale without putting them through a meat grinder.

Loan modifications work for many borrowers. Loan modification programs, both private programs and government sponsored programs, have allowed well over a million American families to stay in their home. For those borrowers who have identified what they need from their lender in order to manage their housing costs, the right loan modification can be a real blessing.

Unfortunately not all loan modifications are created equal. The failure rate, often described as the “‘re-default rate”, on loan modifications continues to be very high. Depending on what source you want to believe, loan modifications fail somewhere between 30% and 50% of the time. Now, the positive side of that is it does mean that between 50% and 70% of the time an American family is able to save their home. But, the re-default issue should not be ignored.

So, what is our re-definition of ‘Sustainable Homeownership’ for homeowners with a problem
mortgage?

lf you decide a loan modification is right for you and your families’ situation, do your homework! Make sure you know what you need and don’t accept a non-solution loan modification from your lender. You need a loan modification that will allow you to sustain the payment and a new agreement that allows you to pay off your home. ANYTHING LESS IS A WASTE OF TIME AND IS NOT A REAL SOLUTION!

If your lender will not offer a loan modification on terms that are sustainable, ‘Sustainable Homeownership’ means getting out of the bad mortgage you are in with a minimum amount of damage, by way of a short sale, so you can re-enter the housing market as quickly as possible at a price point that is sustainable, and a payment that is comfortable.  This new definition of ‘sustainable homeownership means you will own an home at a price that will allow you to build wealth, not hold you back.

…to continue reading : Please order a copy of the full 9 section, over twenty page report that includes over 9 sections that include Section 2: Loan Modification Programs, Section 4: What To Do If you Have A Second Mortgage, Section 6: Seven Short Sale Mistakes and Section 9: Step-By-Step Tips for your Loan Mod.

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More Questions on your Particular Situation?

Contact us today at Forth Hoyt’s Sacramento Short Sale Center

Or find out here about New Government Foreclosure Prevention Program Eligibility- Which Programs Do You Qualify For?

I am not an attorney, and you should talk to one!! Call for a referral!