of America, LLC

People Helping People Sell A House
 

A short sale is when a lender agrees to accept less than the full balance of a mortgage to help the home owner sell the property.

It happened to all kinds of good people. Without warning, they found the value of their home had deteriorated.  Their mortgage payment became more than they could afford. A change in employment, job loss, underemployment, sickness and other hardships depleted their reserves forced them to sell.  Transferring to a distant job became a nightmare.  With the value of the house less than the mortgage, most people could not sell.   They found themselves in the middle of the worst financial storm in the history of our country.

A short sale makes a possible for people to sell a house if they owe more for the house than the present market value for the house. For many people with a hardship, a short sale is a good way to resolve a difficult problem when faced with an upside down mortgage and a need to sell. A short sale allows you to sell a property for less than you owe. It is a way to:

• sell a property

• not pay the full balance of the mortgage

• avoid foreclose

• not have a trailing deficiency judgment

• have the mortgage report ‘paid as agreed’ on credit reports

Short sales are available to property owners for their primary residence, for second homes and for owners of rental properties.
 

Using All Your Available Options

As a Florida correspondent lender, we are licensed to negotiate mortgages. Generally, our company is already a correspondent lender with the seller’s lender. This relationship makes it easier for us to communicate effectively with your lender. Negotiating effectively means using all the appropriate options which are available to you and found in:

• Freddie Mac Loss Mitigation Guidelines
• Fannie Mae Loss Mitigation Guidelines
• RESPA Section 6
• Fair Debt Collections Practices Act
• Home Affordable Mortgage Program

Recognizing your hardship as one of the nine regulatory hardships is a powerful tool requiring lenders to respond quickly. A regulatory hardship combined with a ‘qualified written request’ means:

• The lender must respond in 20 business days
• The seller’s file gets faster focus

Loss Mitigation Guidelines require lenders to engage in meaningful loss mitigation activity before initiating a foreclosure. Generally, guidelines require foreclosure be initiated only when all loss mitigation options have been exhausted and the borrower does not want to remain in the home. For a lender to not engage in meaningful loss mitigation is for the lender to participate in an unfair trade practice.

Aside from relieving you from the time to maintain contact with lenders you can count on our support to let you know:

• the mortgage and property will qualify for a short sale
• the mortgage restrictions for the short sale
• our estimate of the ‘lender’s bottom line’ for the short sale

Generally, a mortgage can qualify for a short sale only if it is delinquent. A loan is delinquent if the payments have not been made or if partial payments were made. If the loan is not paid on time it is delinquent.  It is possible for some mortgages to qualify for a short sale and still remain current.  It is important to know the guidelines before acting.
 

Step 1 Determine available options
 

Getting your lender to communicate and negotiate with us is the first step. Your authorization will allow the lender to communicate with us. It will let us get the name of the investor for your mortgage and the available loss mitigation options. Once we know your lender is open to a short sale we will help you prepare a loan modification application. Generally, it takes 2 to 4 business days from the day we fax your authorization to your lenders before your lender can communicate with us about your mortgage.

Step 2 Prepare Application and Submit Application
 

The non-refundable $500 short sale mortgage application fee is due only when your Lender confirms they are open to a short sale for your mortgage. At that point we will begin helping you to prepare a loan modification application. It generally takes 30 business days from the time a Lender receives a complete application, to assign your application to a negotiator for review.

Application Preparation
An application must meet both regulatory requirements and lender loss mitigation guidelines. The guidelines vary from lender to lender and for individual mortgages. Lenders modify mortgages on a case by case basis and we will assist you in preparing a:

• detailed personal financial statement.
• hardship letter
• arms length sale certification
• short sale request
• seller’s estimate of value

Hardship Letter
There must be a hardship to qualify for a short sale. A Borrower is considered to have an involuntary inability to pay if he or she does not have the ability to make the monthly payments because of an involuntary reduction of income due to:

• Business Failure
• Casualty Loss
• Unemployment
• Curtailment of Income
• Distant Employment Transfer
• Death in Family
• Death of Mortgagor
• Illness in Family
• Illness of Mortgagor
• Divorce
• Military Service
• Interest Rate and Payment Adjustment
• Fraud

Feedback is important. You can count on us to give you useful feedback in reviewing your hardship letter.
Application Submission
Once your application has been prepared, it will be sent to your lender. Every page on the application will be identified with your loan number and name. Two important tasks remain after the application package has been sent to your lender.

Confirm receipt of the application
Lenders often lose or misplace documentation. Follow up calls are made to the Lender requesting verification they have received the documentation and have included the documentation in their file. Missing documentation is resubmitted and reconfirmed. Often, several calls must be made until we get confirmation your documentation was received.
Verify completeness
As loan modifications are approved on a case by case basis we will confirm the completeness of the application with your Lender. Should additional documentation be required, we will help assemble it, transmit it and verify it has been received.
Transaction log
Every interaction with the lender is logged into our system. A detailed record of the date, time and contact person is maintained for application. The log prevents your lender from fostering misinformation while allowing us to enforce the lender’s commitments. It prevents lost time from conflicting directives and information by individual lender employees.

Step 3 Getting your Lender to focus on your file
 

Lenders are overwhelmed with short sale and loan modification requests. Lenders are dealing with almost 8,000 foreclosures a day. The total number of requests for loan modifications is much higher. Many loss mitigation departments have to deal with more than 10,000 fax messages a day. Getting the lender to focus on your specific file is a vital part of the short sale process. Two techniques to get your lender to focus on your file are the Qualified Written Request and a forensic audit of the mortgage.

Qualified Written Request
The Real Estate Settlement Procedures Act provides for a privileged communication between you and your lender. It requires the lender to respond within 20 days of the receipt of your request. Used in conjunction with a regulatory hardship, a qualified written request can:

• Force the lender to accept an application for a short sale
• Force the lender to focus on a short sale application
• Suspend, delay or stop foreclosure activity
• Suspend the requirement of the seller to make mortgage payments

Forensic Audit
Often, there are TILA and RESPA violations in your closing documents. Making the lender aware of the violations helps to create focus for a short sale application.
Step 4 Short Sale Application Acceptance
The next step in the process is to get the Lender to accept the application for a short sale. Depending on the loss mitigation guidelines for the mortgage, gaining acceptance generally also requires either:

• Listing agreement
• Valid purchase agreement

It mostly takes up to 20 business days from the time the application is accepted for review for the Lender to decide if a seller and mortgage qualify for a short sale. Often, with the acceptance of a short sale application, a lender is required to suspend foreclosure activities. This removes the threat of foreclosure and allows the realtor adequate time to find you a buyer and close the sale.
 

Preliminary HUD1 Settlement Statement
A preliminary HUD1 Settlement Statement is prepared and submitted along with each valid offer.
 

Short Sale Contract Addenda
With each offer, the Listing Agent is given a contract addendum to help protect you from a deficiency judgment. Protecting you from a deficiency judgment is a big part of the short sale process. The addendum is an agreement between the buyer and you to make the contract contingent on the Lender agreeing not to seek a deficiency judgment. It can help you avoid a deficiency judgment from the Lender. The addendum also includes a provision to help you get the Lender to report the mortgage to the credit bureaus as “paid as agreed”. This is a more positive method of reporting the transaction and can help you repair your credit.
 

Step 4 Property Value
 

Determining property value has always been an integral part of the mortgage process. Most lenders use a BPO, Broker Price Opinion, to determine property value. Your lender will order a BPO when a valid offer is presented for the property. We will coordinate scheduling the BPO inspection with your listing agent.

Competitive BPO
In a short sale, the lender’s objective is to get the highest possible value for the property. The lender’s estimate of value will usually be higher than your or listing agent’s estimate of value. A competitive BPO is a useful tool for negotiating property value with a lender.

The loss mitigation process requires a fair market estimate of value for a property. Freddie Mac, Fannie Mae, Federal Trade Commission regulations require the mortgage service company to determine fair market value for property when a borrower is seeking a short sale to resolve a mortgage default. Using a competitive BPO is a valid and useful technique to negotiate property value and close the sale.

Step 5 The Close

Everyone knows ‘it’s not over ‘until it’s over’. Expect our support to continue until the sale closes. Lenders are plagued with confusion and mismanagement even at the close. Count on our help to be certain the lender payoff and the final HUD1 are consistent with prior agreement and understanding.
Payoff Verification
Hidden, new and additional lender fees sometimes find their way to a payoff. Making certain the payoff is consistent with the commitment the lender has given us protects you and the listing agent.
HUD1 Review
The final HUD1 will be prepared by the title company and not us. Reviewing the HUD1 before closing will make certain you and the listing agent are protected at the close.

Mortgage Note Satisfaction

At the closing, the mortgage service company will provide the property with a satisfaction of the mortgage note. The satisfaction is a document signed by a mortgage note owner acknowledging the mortgage note has been fully paid. It must be recorded with the Clerk of the Court. It will clear the title to the real property owned by the person who paid off the debt. Without a mortgage satisfaction the buyer cannot get a clear title to the property and the sale cannot be completed. A satisfaction mean the mortgage note was paid in full. Recording it makes the payment in full a matter of public record.

1099C - Amount realized from a short sale
If the outstanding loan balance was more than the Fair Market Value of the property and the lender cancels all or part of the remaining loan balance, you also may realize ordinary income from the cancellation of debt. The Fair Market Value is the price at which a willing seller and a willing buyer will trade. You must report this income on your return unless certain exceptions or exclusions apply.

Deficiency
The short sale can create an unpaid balance in a 1st mortgage loan or in a 2nd mortgage loan. Mortgage service companies respond differently to the unpaid balance on a case by case basis.
Balance Discharge
In this situation, the mortgage note holder decides to take a loss on the unpaid balance. The mortgage service company will issue a 1099C to the property owner after the closing.
Acknowledging the Unpaid Balance
To complete a short sale the mortgage note owner must give the property owner a satisfaction of mortgage. They must even record the satisfaction of mortgage. The mortgage note owner has now made permanently public the has been paid in full. Generally, it is not possible to collect on a loan that has been paid in full. The dilemma for the mortgage note owner now, is how to keep their options open for possibly attempting to collect on the balance some time in the future.
At the very end of the short sale process, a mortgage service company may ask the property owner to sign an acknowledgment of the deficiency and the mortgage note owner's right to collect the deficiency balance. The acknowledgment is not the same as a loan. It is written admission of liability for a debt by a debtor. Generally, however, an acknowledgment must not be accompanied by a statement by the debtor that disputes the validity of the debt, challenges the legality of the acknowledgement and states a refusal to make payments.
 

We are not lawyers and we are not giving you legal advice. The information here is intended to be only illustrative and not intended for your specific individual needs. We recommend you consult a lawyer if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.

There is a fee for our work.  It is in two parts. An initial $500 application fee plus 1% mortgage brokerage fee. The fees are fully defined in a Mortgage Modification Fee Agreement that is Florida Statue 494 compliant.
Application Fee
The application fee is due only after we have communicated with your Lender and let you know the mortgage and the property will qualify for a short sale. The $500 application fee is not refundable.
Mortgage Brokerage Fee
The mortgage brokerage fee is 1% of the existing mortgage. It is payable at closing. Your purchase contract will be structured so your Lender will pay our fee. A purchase contract addendum will require your Lender to pay our fee at closing.  

Your Realtor can you help you establish the most advantageous present market value for your property.   Establishing a favorable present market value can help you negotiate stronger with your Lender.  Your estimate of present market value may differ from your Lender's estimate.   A professional Realtor with successful short sale experience can be the significant difference in making your short sale successful for you.

Choosing a professional Realtor that can bring experience and objectivity to the short sale is major part of having a successful outcome.  While friends and relatives may have experience selling real estate, they may not have the objectivity and emotional distance necessary to do what is required.  It is the same reason surgeons do not operate on family and attorneys do not represent themselves.   Your friends and family members will understand your extreme need for a real estate specialist with short sale experience. 

The best choice you can make is to work with a Realtor with the experience to get the job done the best way for you.