Foreclosure And Short Sale Seminar

Real Estate Solutionsof South Florida, [email protected]

How to Get Your Home Sold with a Short Sale

Presented By:

Russell Irizarry Jeanette Hernandez-SuarezShort Sale Specialist Attorney at Law

www.ShortSaleClinic.com

Jeanette Hernandez-Suarez, [email protected]

Disclaimer

The content in this presentation is based upon our research, knowledge and experience. In no way is any information contained herein to be interpreted as legal or tax advice. To be assured of sound legal advice with regards to foreclosure, real estate, bankruptcy or agency laws, please employ the use of a competent legal or tax professional and/or your real estate broker.

Please consult your broker, accountant and attorney, as appropriate, for advice specific to your situation. Although every effort is made to keep this presentation current and relevant, it is your responsibility to seek guidance from qualified professionals in order to keep up with rapidly changing market conditions and periodic changes to the law.



Who We AreWho We Are

Russell Irizarry• Full time Real Estate Professional currently working Short Sales full

time and exclusively. Licensed Realtor, active real estate investor and former CPA.

• Have been involved in over 250+ real estate transactions ranging from $20,000 to $1M+ since 1998

Jeanette Hernandez-Suarez, Attorney• Attorney with over 16 years of experience specializing in all real

estate matters including closings, short sales, and foreclosure defense

• Currently representing homeowners in short sales, foreclosure defense, and all matters pertaining to real estate.

The Foreclosure ProcessThe Foreclosure Process

The Foreclosure Process varies by State, and falls into two categories: Judicial, and Non-Judicial.

Non-Judicial – foreclosure process happens without the courts. (full discussion is beyond the scope of this presentation)

Judicial – foreclosure is processed though the courts, as in the state of FL.

(For detailed information on the foreclosure process in Miami-Dade County, go to: www.miamidade.gov/foreclosure)

3 Stages of Foreclosure3 Stages of Foreclosure

Pre-Foreclosure Public AuctionReal Estate Owned (REO)

(Private) (Public) (Private)

• Pre-Foreclosure is the period between the Bank’s Notice of Default (Lis Pendens) to the Borrower, and the property going to a foreclosure sale.





• Public Auction (the actual Foreclosure) is the 2nd phase. This is where the property is sold on the ‘courthouse steps’. (In Dade County at 140 W. Flagler room 908 daily at 11am)





• Public Auction (the actual Foreclosure) is the 2nd phase. This is where the property is sold on the ‘courthouse steps’. (In Dade County at 140 W. Flagler room 908 daily at 11am)

• REO is the final phase of the cycle. Here, the Bank has foreclosed and owns the property, and will eventually put the property on market.

3 Stages of Foreclosure3 Stages of Foreclosure3 Stages of Foreclosure3 Stages of Foreclosure



We will be discussing the Pre-Foreclosure stage.

In the Pre-Foreclosure stage, the homeowner has several options prior to the property going to Public Auction. Options can be categorized as follows:1. Staying in house (slowing or stopping foreclosure)2. Moving from house

NOTE: The above timeline is a general approximation and will vary by bank

1st Missed payment

30 Days Late

60 Days Late

90 Days Late

120 Days Late

Bank hires an

Attorney

150 Days Late

180 Days Late

240 Days Late

Bank Auctions

property at Courthouse!!

210 Days Late

Notice of

Default Filed at County Court

Final Summary Judgment

Pre-Foreclosure TimelinePre-Foreclosure Timeline

Step 1 Step 2

Homeowner has more options (loan modification or re-finance)

Homeowner has less options

Foreclosures –Foreclosures – Did you Know? Did you Know?

• A homeowner who goes through foreclosure is ineligible for a Fannie Mae backed loan for 5 years thereafter, and an investor-owner is ineligible for 7 years.


• A homeowner who goes through foreclosure is ineligible for a Fannie Mae backed loan for 5 years thereafter, and an investor owner is ineligible for 7 years.

• Future mortgage loans and interest % rates will be affected because the foreclosed homeowner must answer “Yes” to the Form 1003 Uniform Residential Loan Application question “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?”


• A homeowner who goes through foreclosure is ineligible for a Fannie Mae backed loan for 5 years thereafter, and an investor owner is ineligible for 7 years.

• Future mortgage loans and interest % rates will be affected because the foreclosed homeowner must answer “Yes” to the Form 1003 Uniform Residential Loan Application question “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?”

• A foreclosure affects credit scores downward by 200-300 points, typical for over 3 years

Foreclosures – Did you Foreclosures – Did you Know?Know?

• Foreclosure stays on credit history for 10 years

Foreclosures – Did you Foreclosures – Did you Know?Know?

• Foreclosure stays on credit history for 10 years• Current and future employment may be affected as many

employers now require credit checks, particularly for employees in financial or sensitive positions.

Pre-Foreclosure OptionsPre-Foreclosure Options

Two Categories of Options:

1. Staying in House

2. Moving from House


1. STAYING IN THE HOUSE Refinance: The borrower pays off the existing mortgage

loan with proceeds from a new loan with more favorable terms. (must do before missing payments)




Repayment Plan: The borrower is allowed to catch up on missed payments by making more than the monthly payment until the amount is brought current. (very difficult to do if the financial problem is not temporary)




Repayment Plan: The borrower is allowed to catch up on missed payments by making more than the monthly payment until the amount is brought current. (very difficult to do if the financial problem is not temporary)

Forbearance Plan: Bank allows you to skip monthly payments temporarily, or make partial payments for a specified time. Missed payments may be added to principal or become part of a repayment plan or loan mod. (can only do if financial problem is temporary)


1. STAYING IN THE HOUSE Loan Modification: Allows for changes to the original

terms of a borrower’s promissory note, which may include an adjustment to the interest rate %, an extension of the loan term, or adding missed payments to principal.



Short Refinance: Allows for the forgiveness or ‘write-off’ of a certain amount of the principal balance, and a refinance of the remaining amount.




Short Refinance: Allows for the forgiveness or ‘write-off’ of a certain amount of the principal balance, and a refinance of the remaining amount.

Bankruptcy: A borrower’s loan may be changed from the original terms based on a Loan Modification as part of a court-approved reorganization plan. Chapter 7, Chapter 13, Chapter 11. (Speak to an attorney, do your research!!)



1. STAYING IN THE HOUSE

A Final Note: All the above options for staying in the house have one thing in common – the homeowner MUST be in a position to make some sort of reasonable payment that is agreeable to the Bank, and make it on time every month.


1. STAYING IN THE HOUSE

On Feb 18, 2009 the Obama Administration announced the Making Home Affordable (MHA) Program, a plan to stabilize the housing market and offer FREE assistance to homeowners by reducing mortgage payments to affordable levels and preventing foreclosures.

You can find out if you qualify by going to www.makinghomeaffordable.gov. Also, your local HUD office will also review your loan mod options with you at no charge. Go to www.hud.gov.

2. MOVING FROM THE HOUSE Deed-In-Lieu of Foreclosure:

Allows for the owner to voluntarily transfer a property to the bank without going through the full foreclosure process. Essentially, the owner gives the deed back to the bank. Shortens the process for the bank, with less costs. Same negative impact on credit as a foreclosure, black mark for 7 years. Court not involved. Not an option if there is more than 1 mortgage or lien on the house.


2. MOVING FROM THE HOUSE The Short Sale:

Bank agrees to accept less than what is owed to settle the mortgage in full (a discounted pay-off), and release its lien upon the sale. For example:

Home Sold Price: $300,000Mortgage Balance: $450,000

Short: ($150,000)

There are clear advantages to a Short Sale versus a Foreclosure for both the homeowner and Bank in virtually all situations.


What is a Short Sale?What is a Short Sale?

• A Short Sale occurs when the proceeds of a real estate sale fall short of the mortgage balance owed on the property.



• In 2008, Short Sales accounted for about 11% of U.S. homes sales.




• In Miami-Dade county, Short Sales make up about 35%* of all homes on the market.




• In Miami-Dade county, Short Sales make up about 35%* of all homes on the market.

• In Miami-Dade county over 1,200 Short Sales have closed successfully from Jan 1 – Jun 30 2009.* Those homeowners avoided foreclosure.

* source: Southeast Florida MLS


Two conditions must exist for the lender to consider a Short Sale:

1. There must be little or no equity in the property.

2. Homeowner must prove a legitimate hardship.

Why do Lenders Consider Why do Lenders Consider Short Sales?Short Sales?

• Lenders are in the business of making loans, not owning real estate.


• Lenders are in the business of making loans, not owning real estate.

• If the lender forecloses, the value of the loan increases their liabilities, reduces their ability to make loans, and contributes to their insolvency.


• Lenders are in the business of making loans, not owning real estate

• If the lender forecloses, the value of the loan increases their liabilities, reduces their ability to make loans, and contributes to their insolvency.

• Foreclosures cost lenders time and money. An estimated $60,000+ cost to foreclose.

• The Short Sale offer is equal to or less than what a lender can expect to lose by foreclosing and selling the property (especially in a market where prices are depreciating).


• The Short Sale offer is equal to or less than what a lender can expect to lose by foreclosing and selling the property (especially in a market where prices are depreciating)

• Property is in less “sellable condition” at time of foreclosure


• The Short Sale offer is equal to or less than what a lender can expect to lose by foreclosing and selling the property (especially in a market where prices are depreciating)

• Property is in less “sellable condition” at time of foreclosure

• Lenders created the Short Sale option as an alternative to foreclosure


Obama Administration Obama Administration offers incentives for short offers incentives for short

salessales

• On May 14, 2009, the Obama Administration announced incentives and uniform procedures for Short Sales under its new Foreclosure Alternatives, as part of the Making Home Affordable Program


salessales

• On May 14, 2009, the Obama Administration announced incentives and uniform procedures for Short Sales under its new Foreclosure Alternatives, as part of the Making Home Affordable Program.

• Incentives: Incentives include: (1) $1,000 for mortgage servicers for successful completion of a short sale or deed-in-lieu of foreclosure; (2) $1,500 for borrowers/homeowners to help with relocation expenses; and (3) up to $1,000 toward the cost of paying junior lien holders to release their liens


salessales

• Standardized Documents: The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the Short Sale option.

The Seller’s Lender will require the following documentation from the Seller to consider the Short Sale:

Purchase and Sale Agreement Hardship Letter Authorization to Release Information HUD1 Listing Agreement Financial Statement 2 most recent Bank Statements 2 most recent Federal Tax Returns 2 most recent pay-stubs

What Documents Are What Documents Are Required for a short sale?Required for a short sale?

Financial Effects of Short Financial Effects of Short SaleSale

• Affects credit ‘FICO’ score downward by 100-200 points. However, will show as ‘account settled’ on credit report. Compare to a Foreclosure which can affect credit score by 200-300 points.


• Affects credit ‘FICO’ score downward by 100-200 points. However, will show as ‘account settled’ on credit report. Compare to a Foreclosure which can affect credit score by 200-300 points.

• Deficiency Judgment – Risk that the bank can pursue a judgment for the shortage (difference b/w total mortgage owed and sale amount). However, if there is no money to be recovered a deficiency judgment may not be enforced. (NOTE: A lender can still pursue a deficiency judgment even if the home goes to foreclosure for the difference b/w the REO sale price and the total mortgage judgment.)


• Deficiency Judgment (continued) NOTE: In the state of Florida, certain assets are protected from a deficiency judgment. These include your homestead (primary residence), life insurance policies and annuity contracts, pension and profit sharing plans, IRAs, disability income and prepaid college plans. (see your local attorney for details, do your own research)


• Deficiency Judgment (continued) NOTE: In the state of Florida, certain assets are protected from a deficiency judgment. These include your homestead (primary residence), life insurance policies and annuity contracts, pension and profit sharing plans, IRAs, disability income and prepaid college plans. (see your local attorney for details, do your own research)

• One of the things we ask for when negotiating a Short Sale is a full ‘Satisfaction of Lien’ or that the lender waive its right to pursue a deficiency


• Bank will most likely issue 1099 for amount of debt forgiven.

Example: Mortgage balance: $450,000 Approved Short Sale payoff: $300,000

Shortage/Deficiency: <$150,000>

In this example, the bank may send the seller a 1099C showing $150,000 as income. Debt relief = income to seller.

However…..


• In 2007, Congress passed the “Mortgage Forgiveness Debt Relief Act of 2007” which eliminates taxation on debt forgiveness on owner-occupied homes. Applies to debt forgiven between 2007 and 2012.

So in the above example, if the bank sends you a 1099 for $150,000, you would not have to pay income tax on it if the property was your primary residence. (see your accountant for details, do

your own research)

Short Sale Case Study 1Short Sale Case Study 1

22161 SW 94 AveCutler Bay, FL 33190

Lien Amount Negotiated Payoff

1st Mortgage (Saxon) $519,750 $215,990

Saxon Mortgage

Short Sale payoff approval letter

21470 SW 86 PlMiami, FL 33189

Lien Amount Negotiated Payoff1st Mortgage (WaMu) $198,000 $128,9002nd Mortgage (WaMu)$49,000 $ 2,000

$247,000 $130,900


Totals

Washington Mutual

Short Sale payoff approval letter for 1st and 2nd mortgages

4737 SW 135 PlMiami, FL 33175

Lien Amount Negotiated Payoff1st Mortgage (Saxon) $212,000 $164,8082nd Mortgage $ 53,000 $ 4,800

$265,000 $169,608 (Loan Resolution Corp)


Totals

Saxon Mortgage

1st Mortgage Short Sale payoff approval letter

Loan Resolution Corp

2nd Mortgage Short Sale payoff approval letter

22101 SW 92 PlCutler Bay, FL 33190

Lien Amount Negotiated Payoff1st Mortgage (GMAC) $213,800 $100,2902nd Mortgage (EMC) $26,000 $ 4,000

$239,800 $104,290


Totals

GMAC Mortgage


EMC Mortgage

2nd Mortgage Short Sale payoff approval letter

3355 NE 13 Cir Dr, #104Homestead, FL 33033

Lien Amount Negotiated Payoff1st Mortgage (Chase) $169,306 $41,219


Chase Mortgage


Short Sale BenefitsShort Sale Benefits

• Sellers gets home sold, removes a major burden, and allows them to move on with their lives.



• Credit ratings are not as damaged as compared to a Deed-In-Lieu, or a Foreclosure Action. Sellers can regain their financial stability much sooner, and qualify for a new mortgage easier and quicker at some time in the future. Credit will ‘heal’ faster.



• Credit ratings are not as damaged as compared to a Deed-In-Lieu, or a Foreclosure Action. Sellers can regain their financial stability much sooner, and qualify for a new mortgage easier and quicker at some time in the future. Credit will ‘heal’ faster.

• Short Sale can be negotiated so there is no deficiency judgment. Mortgage lien will be satisfied (per lender’s approval).


• Sellers have a greater sense of personal dignity by having their home sold, versus losing the property to foreclosure.



• The 1099-C received by the sellers for the amount of debt relieved by the lender is non-taxable if the home is their primary residence. The Mortgage Forgiveness Debt Relief Act of 2007 eliminates taxation on debit forgiveness if the residence was owner-occupied. (See your accountant for details.)



• The 1099-C received by the sellers for the amount of debt relieved by the lender is non-taxable if the home is their primary residence. The Mortgage Forgiveness Debt Relief Act of 2007 eliminates taxation on debit forgiveness if the residence was owner-occupied. (See your accountant for details.)

• Per Fannie Mae guidelines, you can be eligible for a new home mortgage only after 2 years, versus 5 years with a Foreclosure

What We DoWhat We Do

• Initial phone consultation with you to make sure you’ve explored all of your options (ie. loan modification)


• Initial phone consultation with you to make sure you’ve explored all of your options (ie. loan modification)

• Set an appointment with you to discuss the Short Sale process in detail. We take care of all of the paperwork.


• Initial phone consultation with you to make sure you’ve explored all of your options (ie. loan mod)


• We submit a cash purchase offer to the lender(s) with a completed Short Sale package.





• We negotiate a settlement with your lender(s)





• We negotiate a settlement with your lender(s)• We continue to market the property and secure a buyer

while we are negotiating. You cooperate by making the house available to show.





• We negotiate a settlement with your lender(s)• We continue to market the property and secure a buyer

while we are negotiating. You cooperate by making the house available to show.

• We pay off lender(s) and close with the end buyer.

Why Work With Us?Why Work With Us?

• You get an immediate cash purchase offer on the property allowing us to get the Short Sale started NOW



• The closing will be handled by an Attorney owned Title Company


• You get an immediate cash purchase offer on the property allowing us to get the Short Sale started NOW.

• The closing will be handled by an Attorney owned Title Company, Jeanette Hernandez-Suarez PA

• We are Professional Loss Mitigators. Negotiating Short Sales is what we do exclusively and full time.





• WE DON’T CHARGE ANY FEES, AND YOU DON’T PAY ANY COMMISSIONS.






• We are a local company, located in Miami-Dade County, FL


• You get an immediate cash purchase offer on the property allowing us to get the Short Sale started NOW.




• We are a local company, located in Miami-Dade County, FL• We are an ‘A’ rated company with the Better Business

Bureau

• Our Goal is to create a WIN-WIN-WIN for all parties involved:

Homeowner – Avoids Foreclosure!Lender – Gets a bad loan off their books!Buyer – Gets a home they want at a great price!Buyer’s lender – creates a new performing loan!Realtors – get paid $$ on the sale!Neighborhood – avoids a vacant house!Economy – stimulated by all of the above!!!


How Do We Get Paid?How Do We Get Paid?

• We purchase the property for the negotiated debt from all lien holders and then sell the property to an end-buyer for a higher price.

• We earn our money upon the resale of the house, or by receiving a commission by the lender.

Contact Us today to discuss your options and for further information on the Short Sale Process

www.ShortSaleClinic.com


Russell Irizarry Jeanette Hernandez-SuarezShort Sale Specialist Attorney at Law1-866-412-5269 [email protected] [email protected]


Foreclosure And Short Sale Seminar

Documents

Transcript of Foreclosure And Short Sale Seminar