Short SalesAs Easy As A B C

Foreclosure Process

•Collections 1st 90 Days Delinquent•Pre-Foreclosure 90 days -12 months

(short sale potential stage)•Trustee Sale – Foreclosure Auction•REO Department – Until Liquidated

Time to respond• Foreclosing party must serve notice of sale on

homeowner by mail or publication. • Homeowner has 14 days to respond if service is

by mail. • If foreclosing party uses publication, generally

notice must be published in a local newspaper of general circulation once a week for 4 consecutive weeks unless deed of trust provides for a different interval.

• Sale can be held eight to 30 days after last publication.

Foreclosure Statutes Va Code 55-59 to 55-66.6•No reinstatement of loan before sale•No redemption after sale•No Special protections for foreclosures of

high-cost mortgages•Special state protections for service members•Deficiency judgments may be obtained in a

separate law suit after the sale (Changing April 5, 2010.

•New owner does not have to give former owner notice before filing eviction notice

Homeowner Options

•Refinance•Loan Modification•Forbearance/Repayment Plan•Partial Claim•Bankruptcy

Short Sale Benefits to Seller

•Avoid Foreclosure on credit history•Fannie Mae Guidelines for buying home

after foreclosure is 5-7 years•Foreclosure with extenuating

circumstances 3-7 years•Deed in Lieu 4-7 years•Deed in Lieu with extenuating

circumstances 2-7 years•Short Sale 2 years

Short Sale Process

•Market & Obtain Contract•Assemble Short Sale Package•Support Short Sale Package with

Supporting Documentation•Follow Up With Your Short Sale

Coordinator

Short Sale Time Line

Can take 45-90 days from the date offer is received.

Day 1: Receive a legitimate offerDay 2-15 Order appraisalDay 15-25 AnalyzeDay 25-40 Negotiate Delegated Decisions.Day 40-75 Approval or DeclineDay 75-90 Final Decision Communication

HAMP(Home Affordable Modification Program)• HAMP is a loan modification program

designed to reduce delinquent and at-risk borrowers' monthly mortgage payments.

• HAMP is effective immediately for mortgages originated on or prior to January 1, 2009, and will expire on December 31, 2012. Servicers must solicit eligible borrowers who are 31 or more days delinquent for a modification under HAMP, but cannot solicit borrowers for this program who are current or less than 31 days delinquent.

HAFA (Home Affordable Foreclosure Alternatives)• Complements HAMP eligible but nevertheless unable to keep their home.• Uses borrower financial and hardship information already collected under HAMP• Allows borrowers to receive pre-approved short sales terms before listing the property

including the minimum acceptable net proceeds.• Prohibits the servers from requiring a reduction in the real estate commission agreed

upon in the listing agreement up to 6%• Requires borrowers to be fully released from future liability for the first mortgage debt

and if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note or deficiency judgment is allowed)

• Uses a standard process , uniform documents and time frames/deadlines.• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for

servicers to cover administrative and processing costs and up to a $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders.

• Requires all service participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions and borrower motivation and cooperation.

• Does not take affect until April 5, 2010, but servicers may implement it before then and the program sunsets on Dec 31, 2010.

Who is eligible for HAFA?Borrower must meet the basic eligibility criteria

for HAMPPrincipal residenceFirst lien originated before 2009Mortgage delinquent or default is reasonably

foreseeableUnpaid principal balance no more than

$729,750 (higher limits for two to four unit dwellings)

Borrowers total monthly payment exceeds 31% of gross income

Notification• If a servicer has not already discussed a short sale or DIL

with the borrower, it must notify the borrower in writing of these options and give the borrower 14 calendar days to respond, orally or in writing. If the borrower does not respond, that ends the servicer’s duty to give a HAFA offer.

• Servicers must consider HAMP eligible borrowers for HAFA within 30 days after the borrower does at least one of the following:

• Does not qualify for a HAMP trial period plan• Does not successfully complete a HAMP trial period plan• Is delinquent on a HAMP modification (misses at least• two consecutive payments)• Requests a short sale

Short Sale Agreement

The borrower has 14 calendar days from the date of the Short Sale Agreement to sign and return it to the servicer. The SSA must give the borrower an initial period of 120 days to sell the house with extensions permitted up to a total of 12 months.

Purchase OfferWithin three business days of receiving an executed

purchase offer the borrower or agent) must submit a complete request for Approval of Short Sale. (RASS) to the servicer, including:

1. Copy of the sales contract and all addendums2. Buyer documentation of funds or pre-approval letter3. All information on the status of subordinate liens

and/or negotiations with subordinate lien holdersWithin 10 business days after the servicer receives the

RASS and all required attachments, the servicer must approve or deny the request and advise the borrower.

Closing• The servicer may require the closing to take

place within a reasonable period after it approves the RASS, but not sooner than 45 days from the date of the sales contract unless the borrower agrees.

• The servicer must release its first mortgage lien within 10 business days after receipt of sales proceed from a short sale or delivery of the deed in the case of a DIL. Investor must waive rights to seek deficiency judgments and may not require a promissory note for any deficiency.

Document Check List• Two months most recent pay stubs• Retirement statement• Yearly/Quarterly SSI• Schedule C (self employed)• Hardship Letter• Financial Statement• Most Recent Mortgage Statement• Demand Letters from Foreclosing

Attorney/Mortgage Company• All Checking/Saving Statements• Tax Return 2009 (or extension) 2008 & 2007

Short Sale Package

•Authorization to Release Information•Purchase Contract•Buyer’s Pre-Approval Letter•Proposed HUD-1 or Net Sheet•Hardship Letter•Financial Statement•Neighbor In Need •Affidavit of Ownership

Hardship Letter

•Explain the situation and WHY•Explain what seller tried to do to maintain•Seller needs to state they can no longer

afford property

Service Members Civil Relief Act•If you or a family member is on active

military duty, you have some extra protections, including the right to demand that a judge pass on the merits of the foreclosure EVEN if you are living in a state that does nonjudicial foreclosures.

Special Protections for Service Members on Active DutyIf you took the mortgage out prior to active

duty:1. Judicial Foreclosure is REQUIRED2. Default Judgments Can Be Reopened3. Interest Rates Must Be Reduced

Chapter 13 Can Delay or Stop Foreclosure• Gives you time to make up your missed

payments.• Benefits start the minute you file• www.nolo.com explains bankruptcy & options• No Lender Reinstatement Fees• Trustee Fee 10%• Ask the court to decide whether the facts upon

which a proposed foreclosure is based in erroneous.

• Turn a Second or Third Mortgage into an Unsecured Debt.

Chapter 7

•You must be current when you file•Equity in the house is adequately

protected by the exemption laws available in Virginia

•If you are not current or can’t get current Chapter 7 is only temporary, lender can still foreclose.

Caution

Don’t file for bankruptcy unless you do it in good faith.

Keys To Your Success

•Your ability to valuate the property•Your ability to manage the emotions of the

homeowners and buyers agent•Your ability to influence the

BPO/Appraisal•Your ability to market and sell the

property