New California Short Sale Deficiency Law
October 6, 2010
As of January 1, 2011, the first position lender will not be permitted to obtain a deficiency judgment against the seller after a short sale. The short sale approval letter and acceptance of the funds will constitute payment in full and discharge of the deficiency. However, these new changes will not apply to refinanced loans. If you are considering a short sale or would like to learn more feel free to call Pat Holkesvig & Your Home Team at 209.471.6516 or complete our Contact Us form. Pat Holkesvig and Your Home Team are The Central Valley’s Short Sale Specialists. We process Stockton Short Sales, Elk Grove Short Sales, Lodi Short Sales, Lathrop Short Sales, Manteca Short Sales, Modesto Short Sales, Mountain House Short Sales and Tracy Short Sales.
Understanding Deficiency Clauses
September 30, 2010
Recently a seller let an approved short sale go to foreclosure over a deficiency clause. This is a situation where everybody loses, the seller, the buyer, their agents, the servicers and the lenders all who spend their time and money to negotiate the approval. All wasted over two little sentences.
“BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above. In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deficiency based on the terms of the mortgage insurance policy.”
Initially the servicer, Bank of America, claimed that if there was Mortgage Insurance (MI) or a second lien on a file they couldn’t remove a deficiency clause. However, there was no MI on the loan and the second lien holder was a different lender who had already accepted the terms of approval. The seller consulted an attorney who advised him that unless the deficiency clause was removed from the approval, that he should go ahead and let the property foreclose. This would protect the seller from owing the deficiency since California is a nonrecourse state. Hoping to salvage the deal, the seller offered to pay a promissory note in lieu of the deficiency clause. This should have been a reasonable offer to Bank of America considering that according to an article by Jason Opland on Aug. 17, 2010
Bank of America’s previous Senior Vice President of Credit Loss and Loss Mitigation, Mr. Jack Schakett, stated that if a borrower proves he can no longer pay the mortgage and has a few or no assets, Bank of America will waive it’s right to a deficiency judgment during the processing of the short sale deal. But, if a borrower can afford to pay or has assets, the bank will try to negotiate a set fee for the borrower to pay at closing. “We want to help customers who legitimately can’t afford to make payments, but we don’t want the one’s who have a bunch of money to just be able to walk away. These individuals will have to share some of our loss.” Mr. Schakett acknowledged that short sales in which the bank agrees to accept less for the home than the balance of the loan are less expensive to process than foreclosures, and thus they want to encourage more homeowners to pursue this course by making it clear they do not intend to pursue homeowners for deficiency judgments.
However Bank of America didn’t get to make that decision because Freddie Mac who held the note would not allow it. The negotiator responded saying the investor would not accept the promissory note and refused to remove the deficiency clause. They pointed out that the approval letter states the deficiency clause can be enforced “unless agreed otherwise or prohibited by law” and that California won’t allow it. This isn’t entirely true. The current statutes prohibiting deficiency judgments only pertain to foreclosures, not short sales. SB 931 which would prevent deficiencies on short sales, has not been signed into law by the governor. He has until September 30, 2010 to do so. Even then, we don’t know when the law will take effect, likely after January 1, 2011. This means if the seller had completed the short sale with the deficiency clause intact he would’ve been at risk of Bank of America coming after him for the deficiency until the statute of limitations had passed (about four years). Based on this information the seller decided to follow the advice of his attorney and let the property foreclose and be protected from the lender pursuing the deficiency judgment.
Posted via email from www.Homes-In-Stockton.com Posterous
California DRE Reports Increased Mortgage Fraud
September 14, 2010
The California Department of Real Estate and the Department of Financial Institutions are warning about increased reports of short-sale mortgage fraud activity. Some of the fraud related activity includes short-sale negotiators requiring buyers to pay their fee, fees being paid outside of escrow and unlicensed negotiators. At Homes In Stockton no buyer is ever asked to pay a short sale negotiation fee and no fees are ever paid “off the HUD”. If you have any questions about California short sales or are a buyer or seller considering purchasing or selling a short sale in the Stockton area feel free to call Pat Holkesvig & Your Home Team at 209.471.6516 or complete our Contact Us form. Pat Holkesvig and Your Home Team are The Central Valley’s Short Sale Specialists. We process Stockton Short Sales, Elk Grove Short Sales, Lodi Short Sales, Lathrop Short Sales, Manteca Short Sales, Modesto Short Sales, Mountain House Short Sales and Tracy Short Sales.
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60% or More Mortgages Underwater in Stanislaus and San Joaquin Counties
September 1, 2010
According to the Modesto Bee, in Stanislaus county underwater mortgages occur at twice the rate of the national average. The rate for San Joaquin county is even more extreme where 62.4% of mortgages are underwater compared to Stanislaus county’s 60%. The national average negative equity rate is 23% and the California state average is 33%. Areas high in negative equity have higher incidence of strategic defaults, short sales and foreclosures contributing to the slower market turn around.
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Legal Chart Quick Reference for California Deficiency Judgments
August 26, 2010
The attached document provides a quick reference to assist distressed sellers in determining if a lender would have the right to collect on a deficiency resulting from foreclosure in the State of California. It is intended only for reference. I recommend strongly that a seller facing foreclosure or pursuing a short sale consult with an attorney and CPA. Pat Holkesvig & Your Home Team specialize in:
Stockton Short Sales,
Lodi Short Sales,
Lathrop Short Sales,
Manteca Short Sales,
Elk Grove Short Sales,
Mountain House Short Sales,
Tracy Short Sales,
Ripon Short Sales and
Tracy Short Sales.
If you have any real estate related questions please contact Pat Holkesvig at (209) 471-6516 or complete our Contact Form.
Stockton, CA, Short Sale Stockton Home for Sale & Stockton Real Estate, 3026 English Oak Cir, Stockton, CA, 95209.
August 23, 2010
For information on this and all the Stockton homes for sale visit www.Homes-In-Stockton.com!
Nice Stockton Short Sale! Well cared for home in gated community. Large corner lot. Priced to sell. Kitchen with tile counters and dining bar. Low maintenance yards.
Could This Be The End of Short Sales?
August 12, 2010
Keep your eyes on the news August 17th when the Treasury will be holding a hearing regarding the future plans for Fannie Mae and Freddie Mac. It is rumored that the Obama administration is about to order the government-controlled lenders to forgive a portion of the mortgage debt for Americans who are underwater. If this were to happen, assumedly the short sale market would dry up and foreclosures would slow to a near stop. In theory, this would force the real estate market to regulate to a new normal. This could have a tremendous local impact considering the large percentage of short sales and foreclosures flooding the greater Stockton real estate market.
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The Impact of HR 5872 & 5891 on the Stockton Real Estate Market
August 12, 2010
HR 5872, which passed the House of Representatives last week, increases FHA’s commitment authority for its multifamily insurance programs by $5 billion for the remainder of the fiscal year. While HR 5891, which passed the House of Representatives July 30, will permit FHA to increase its single family annual premiums, raising the statutory cap from 0.55 percent to 1.55 percent. Essentially, HR 5872 saved the ability for FHA to issue commitments for the remainder of the current fiscal year. Although HR5891 will cost more money to the single family consumer, it is believed this increase will perpetuate FHAs ability to become self sustaining and help to stabilize the housing market. At this time it is unclear what specific impact these changes will have on the Stockton real estate market and the number of future Stockton short sales.
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A Glimmer of Hope
August 5, 2010
According to a recent report on CNBC, Stockton’s luck may be changing. More properties that would have previously been lost to foreclosure are instead becoming short sales. According to the report, San Joaquin County foreclosures have fallen from 85 to 68 percent and defaults fell 43 percent in the second quarter of 2010. However due to the tax breaks expiring, the number of perspective buyers has dwindled. With an unemployment rate hovering around 25 percent, Stockton could take a long time to permanently recover
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Stockton, CA, Short Sale Stockton Home for Sale & Stockton Real Estate, 7309 Camellia Lane, Stockton, CA, 95207
August 3, 2010
For information on this and all the Stockton homes for sale visit www.Homes-In-Stockton.com!
Stockton short sale. Stockton home for sale located in Lincoln School District! Here is the perfect home for a couple starting out or a small family complete with a white picket fence. Hardwood Floors in Living Room and one bedroom. Updated touches throughout. Great buy.!
