Jan O'Brien - Real Estate Coach

Negative Equity and Strategic Defaults - Will We Ever See Principle Reduction Loan Mods?

Have you noticed a lot of recent press criticizing the HAMP program as short-sighted and delaying the inevitable onslaught of more foreclosures?  The underlying theme is pointing to "negative equity" as a primary factor for homeowners "strategically defaulting" - ultimately deciding to let their home go to foreclosure or short sale.

In case you missed some of those recent articles and resources:

Amherst Securities testified before the House Financial Services Committee (12-8-09) - Download Amherst Securities Group - HAMP Testimony

Two main points from this report:
1. Single largest problem with housing market is negative equity.
2. Current modification program does not address negative equity and is destined to fail.

WSJ Development Blog (1-4-10) NY Fed: Most Successful Mortgage Modifications Reduce Borrowers’ Principal

Borrowers who receive loan modifications that reduce loan balances and not simply interest rates are far less likely to re-default on their loans, according to a new study from the Federal Reserve Bank of New York.    Modifications that write down loan balances “can double the reduction in re-default rates achieved by payment reductions alone,” the study says.

Negative Equity Report for Q3 (Calculated Risk Blog 11-24-09)

Data Highlights

Nearly 10.7 million, or 23 percent, of all residential properties with mortgages were in negative equity as of September, 2009. An additional 2.3 million mortgages were approaching negative equity, meaning they had less than five percent equity. Together negative equity and near negative equity mortgages account for nearly 28 percent of all residential properties with a mortgage nationwide.

The distribution of negative equity is heavily concentrated in five states: Nevada (65 percent), which had the highest percentage negative equity, followed by Arizona (48 percent), Florida (45 percent), Michigan (37 percent) and California (35 percent).

Other articles/reports/studies:

• White Paper Sees Strategic Defaults Rise with Negative Equity (12-08-09)
• Strategic Default White Paper - Strategic_Default_White_Paper.pdf
• Negative and Equity and Foreclosure - Negative Equity and Foreclosure.pdf
• Moral and Social Constraints to Strategic Default - MoralandSocialConstraintsto_StrategicDefault.pdf
• Subprime Mortgage Modification and Re-Default - Subprime Mortgage Modification and Re-Default.pdf

Become a Certified Short-Sale Professional - get the latest information regarding alternatives to foreclosures and processing short sales from A to Z.

Friday, February 19th, 2010  - 9:00am-5:30pm ~ Doors Open 8:30
Realty Executives 1903 S. Jones Blvd., #100, LV, NV 89146 (N of Sahara Ave.)  MAP
REGISTER NOW for the February 19th Course

2009 Las Vegas Real Estate Market Report - Foreclosure and Short Sale Stats

The Las Vegas real estate market may be showing signs of recovery.  

The Greater Las Vegas Association of Realtors (GLVAR) released its local housing statistics  for December 2009 with some interesting findings for the year. 

According to GLVAR, sales of existing homes in Las Vegas were up 64% in 2009.  GLVAR reported 46,879 local housing sales in 2009. That represents a huge spike from 28,618 total sales in 2008 and trails only the 71,963 homes sold during the record year of 2004. The increasing sales continue to be driven by low prices.   GLVAR reports that the average single family home sold in the area in December 2008 was $204,000 in December 2008. By December of 2009, that number had fallen to $165,000.

To read the full report: PDF file Download 2009_12_Dec (released 1-8-10)

 

Single Family Residential closings for 2009 totaled 38,127 which is a 53% increase over 2008.  Additionally, townhomes and condos saw another 8752 closings which represent a 137% increase over 2008.

Las Vegas Foreclosure Report for 2009

From RealtyTrac's Year-End 2009 Foreclosure Market Report™ :

... a total of 3,957,643 foreclosure filings — default notices, scheduled foreclosure auctions and bank repossessions — were reported on 2,824,674 U.S. properties in 2009, a 21 percent increase in total properties from 2008 and a 120 percent increase in total properties from 2007

More than 10 percent of Nevada housing units received at least one foreclosure filing in 2009, giving it the nation’s highest state foreclosure rate for the third consecutive year. Nevada foreclosure activity in December increased 27 percent from the previous month but was still down 22 percent from December 2008. Fourth quarter foreclosure activity in Nevada was down 37 percent from the previous quarter thanks to substantial decreases in October and November.

2009 foreclosure stats would have been worse but for initiatives to slowdown foreclosures from the Lenders as well as the by the Obama Administration - including HAMP (Home Affordable Modification Program) and alternatives to foreclosures like short sales.

GLVAR reported a total of 33,974 bank-owned residential properties for 2009.

 

Las Vegas Short Sales for 2009

According to the National Association of Realtors, almost 500,000 transactions in 2009 were short sales, representing almost 10 percent of all home sales. 

In Las Vegas, a total of 5,422 residential properties sold and closed in 2009. 

2009 Residential Closings Recap

The GLVAR 2009 report quotes a total of 46,879 local housing sales.  However, the 3 individual graphs of residential closing for 2009 totals 47,084 (a 205 discrepancy - I am not certain why).

REO/Bank-Owned sales = 33,974 (72.2%)

Traditional residential sales = 7,688 (16.3%)

Short Sale Closings = 5,422 (11.5%)

Home Affordable Foreclosure Alternatives Program (HAFA) Guidelines

The following is a re-posting of the recent article from Realtor.org on the newly released guidelines for the Home Affordable Foreclosure Alternatives Program (HAFA) with added commentary from me :)

On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA.  A list of servicers participating in HAMP is available at MakingHomeAffordable.gov.  NOTE: Not All Loan Servicers are participating!

HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks.

HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure.

Download the official document: Download Hampupdate122309

HAFA:

• Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification. This is why it is so important for real estate professionals to understand ALL alternatives to foreclosures!  See my recent posts on Understanding Alternatives...
• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).  Hopefully this will speed up the lengthy process everyone has been experiencing for final short sale approval.  Are you a CSP yet?  Check upcoming course dates.
  
• Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent). Yeah!
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).  A welcomed relief for Nevada homeowners...Deficiency Judgment issues will be the biggest impediment to successful short sale closings as homeowners and real estate agents are better educated.
• Uses standard processes, documents, and timeframes/deadlines. Have not seen the forms / standards as of yet...
• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on December 31, 2012.

Press Release, HAMP Update—New Program Offers Borrowers Foreclosure Alternatives

Supplemental Directive 09-09, Introduction of Home Affordable Foreclosure Alternatives—Short Sale and Deed-in-Lieu of Foreclosure

Understanding Alternatives to Foreclosure... Updates on Loan Modifications under HAMP and the new HAFA guidelines

Real Estate Professionals... are you staying informed and updated on the developments and guidelines regarding all alternatives to foreclosures in order to assist homeowners?

My recommended approach to serving your clients who are dealing with their own housing crisis and/or economic downturn is to be the conduit of information.   Provide options and possible solutions as well as recommendations to other experts and professionals to help each individual make their best decision.

One of your initial qualifying questions is to ask the homeowner... "Do you want to keep/stay in your home?"

If the answer is yes, then consider recommending that the client...

• Contact their loan servicer to see if they qualify for a loan modification under HAMP or another program
• Visit the www.MakingHomeAffordable.gov website to learn more about HAMP (Home Affordable Modification Program)
• Learn about their rights under the new Nevada legislation concerning the Nevada Foreclosure Mediation program (http://www.nevadajudiciary.us/index.php/foreclosuremediation)

If your client is unable to get loan modification, then a short sale may be an option for them.  I encourage you to get educated on the short sale process if you haven't already done so.  Steve Kitnick and I teach the CSP (Certified Short-Sale Professional) designation course in Las Vegas at least monthly.  You can check the schedule and register for an upcoming course right here on this blog or at Steve's site:  NevadaCE.com.

Here are some more resources, recent articles and news regarding Short Sales & Loan Modifications:

A link to an article on the new Treasury Guidelines for Short Sales (HAFA):
Treasury Releases Guidance for Making Home Affordable Short Sales

Great news...read all the details...download the official supplement from the Treasury...Not so good news..

Not effective until April 5, 2010. Unless participating servicers want to opt in early!

MakingHomeAffordable.gov website is a MUST read/review. It's loaded with all the information regarding loan mods under the HAMP program.... Who is eligible, Is the Loan with Fannie or Freddie, How to request the Loan Mod, etc.

Did you know?......(from the site):
A wide array of servicers have agreed to participate in the Home Affordable Modification program and have already engaged borrowers and expanded capacity to begin the modification process for eligible homeowners. In addition, all servicers for loans owned by Fannie Mae and Freddie Mac are required to participate.  The following is a list of servicers who have formalized their commitment to the program through a signed contract:

Search for Your Mortgage Servicer: show all servicers

Other recent articles of interest:
Quarter of HAMP Mods in Default Again
Industry's Mortgage Workouts Exceed Completed Foreclosures, HOPE NO...
Bank of America: 2/3 of Borrowers May Lose Government Mods  ....of the 65 thousand trial modifications set to expire Dec. 31st with B of A, a full two thirds of the borrowers, while current on their payments, have not submitted the full documentation required to turn a trial mod permanent under the HAMP guidelines.

I highly recommend subscribing to...

• DailyDose email from DSNews.com.
• Calculated Risk blog
• Bubble Meter blog
• Dr. Housing Bubble

Short Sales vs. Foreclosures in Nevada - Answers to Common Questions

Become a Certified Short-Sale Professional (CSP) AND receive 8 hrs of Continuing Education credits. 

Last course for 2009:

Friday, December 18th  - 9:00am-5:30pm ~ Doors Open 8:30
Realty Executives 1903 S. Jones Blvd., #100, LV, NV 89146 (N of Sahara Ave.)  MAP

REGISTER NOW for the December 18th Course - Tuition $299

Here is a preview of one of the many topics covered in this full day certification course.  This post compares short sales and foreclosures in the areas of tax consequences, credit impact, and deficiency judgments.

What is a Short Sale?

• A Short Sale is when the home sold for less than the debt against the property and the lender(s) agree to accept a discounted payoff.  The lender agrees to accept less than what is actually owed on the mortgage.
  
• A Foreclosure is when the lender seizes the home that the loan is secured by through the foreclosure process, which is notice of acceleration of note, notice of default, notice of sale, and then actual forced sale of the home known as a ‘trustee sale.’

What are the tax consequences?

• Short Sale & Foreclosure….all debt forgiven results in 1099C debt.  Whether it is a primary or rental property makes a difference as to how much tax you may pay.  Simply stated, if you get released from debt the IRS sees that as income to you, just like you got a pay check.  See this publication from the IRS http://www.irs.gov/pub/irs-pdf/p4681.pdf on “Canceled Debts Foreclosures Repossessions and Abandonments.”
• You may qualify for an exemption under the Mortgage Forgiveness Debt Relief Act - visit this IRS article for more information: http://www.irs.gov/individuals/article/0,,id=179414,00.html
  

What are the Credit Issues?

• Foreclosures and Short Sales will appear on your credit history and affect you for up to 10 years.  This may affect a.) employment or b.) security clearance, etc.  Rumor is that a short sale is better than foreclosure for these items?  There is no evidence to back this up.  Arguments on both sides are out there.  We do know that there is a specific spot on the credit reports for foreclosure, whereas short sales are reported differently.  We have also seen examples of the credit score being impacted based on the total number of missed payments. 
  

What is the liability for the Debt AFTER the foreclosure or short sale?

6 Months

• Foreclosure – The foreclosing lender has the right to sue the home owner after the foreclosure for the difference between the amount gained at the ‘trustee sale’ discussed above and the balance of debt owed.  The lender has only 180 days (six months) from trustee sale to file, after that the owner is no longer liable.
  

6 Years

• Foreclosure 2^nd Deeds – All deeds that are junior to the foreclosing lender have different rights than the foreclosing bank.  These lenders are called ‘sold off junior lien holders’ and they have six (6) years to recoup their debt.  That means you get foreclosed on November 12, 2009, these junior lien holders have until November 12, 2015 to sue you. 
  

Short Sale - All lenders that agree to a discounted payoff and ‘release the lien’ from the property to allow the short sale are no longer ‘secured lenders’ and are now ‘sold off junior lien holders’ as described above and have six (6) years to sue you.  UNLESS, the short sale is negotiated so the lender releases the homeowner from any future liability as to the forgiven debt.  Many lenders are taking a hard stance on this issue and NOT fully releasing and satisfying the forgiven debt. 

Answers to Common Short Sale Questions - Real Estate Trends 2010 in Las Vegas

Darren Welsh, General Counsel for Prudential Americana Group, REALTORS will be one of the panelists at the upcoming REAL ESTATE TRENDS 2010 & Short Sale Market Update on November 5, 2009.

This all-day, special event is packed with updates and answers regarding the current short sale market.  We also have Stefan Swanepoel delivering two powerful keynote addresses. 

Special 2 for 1 pricing - $99 buys two tickets!  Click here for all the details.

Darren has an excellent real estate legal blog at: http://ameglegal.wordpress.com/

Here are links to a series of posts regarding short sales:

TGIF Legal Tip: Short Sale Release Language

7 recent tips  

Demand to Close  

NV Mediation Program and How it Affects Shortsale  

Short sales When Seller Files BK

Click the following for:

IRS publication on how 1099 taxes are calculated, exempt, etc.  

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

Deficiency EXPLANATION

 Taxes EXPLANATION Personal Residence

 One Action Rule EXPLANATION

And for a little comic relief ... check out this video parodying the REO/Short Sale real estate market:

Las Vegas makes the cover of Time Magazine - Uncovering the truth and one more reason to become a CSP

I was in New York City, when this "sensationalized, let's write about the seedier side of life and Las Vegas because that's what sells"... cover story in TIME MAGAZINE hit the news stands.  I read it and have been meaning to comment on it and set the record straight. 

If you missed the article - here is a link to it on Time's website :

Less Vegas: The Casino Town Bets on a Comeback

Today, I read Paul Francis's blog and brilliant review of the story - so I highly recommend checking it out!

Las Vegas Real Estate Agent Creates Brouhaha with Time Magazine Article

I agree with Paul whole-hearted-ly.  He chronicles the fallout from the article with links to the various other newspaper articles. My initial reaction to the Time article was - wow, talk about painting a grim picture and making it appear that the examples the author used were the rule rather than the exception.  Suffice it to say, although there may be a small percentage of foreclosure homes in a "trashed-out" state and one can always find someone who attempts to take advantage of a situation - the reality in Las Vegas is we are moving inventory - from REOs to short sales to traditional resales. 

And the majority of the inventory is in good shape. And, the majority of "struggling" homeowners in Las Vegas are dealing with stress, crisis and serious decisions.  They are looking for real solutions and we, as an industry, can step up now to be part of the solution and not the problem.  Short sales can be a viable answer for homeowners who are doing their best to avoid foreclosure and have a legitimate hardship that is documentable. 

In August 2009, foreclosure (REO) properties accounted for about 70% of all single family residential (SFR) sales.  Another 12% of August sales were short sale transactions.  The average sales prices across the Las Vegas valley is currently about $125,000.   The prediction remains that shorts sales and REO properties will dominate our market for 2-3 years at a minimum.

So, as a Las Vegas real estate professional, what are you doing to focus on the business you want to attract? 

• Have you made the investment is your time and education to learn everything you must know in the current market? 
• Have you made the appropriate adjustment in your business plan to skillfully handle both foreclosure and short sale properties? 
• Do you feel comfortable sitting down with a prospective purchaser or home seller and explain the market and possible options and solutions for their real estate needs?

If the answer is no or not quite - consider seriously attending the Certified Short-Sale Professional designation course that Steve Kitnick and I teach every month in Las Vegas.  Join almost 350 CSP graduates in leveraging the knowledge and power of the most-cutting edge training available for short sales.  This course is ever-evolving and loaded with "how-to" steps and techniques to help you embrace the reality of our short sale market. 

Visit my Training Schedule page for all upcoming training class dates.

CSP Designation Courses for August - Las Vegas

MASTER THE SHORT-SALE PROCESS

The housing market has changed. Gone are the days when anyone could get financing for a home. People who may have over extended themselves now need help. This creates a tremendous opportunity and responsibility for real estate agents who understand the ins and outs of the short sale process.

The biggest problem with short sales transactions is knowing if a deal will be successful. This course is unique because we show you how to pre-screen and select which short sales will be successful before investing a ton of effort. Plus, this course teaches you how to work short sales just like the experts do everyday. Learn to streamline and systemize the process.

At the End of this Course, You Will Be Able to Do the Following:

• Describe to your clients what a short sale is and how it helps them
• Know if a short sale will be successful before signing a listing contract
• Understand what needs to be included for successful short sale submission package
• Learn the best practices for a successful short sale business and more!

Friday, August 7th - 9:00am-5:30pm ~ Doors Open 8:30am
First United Mortgage Building Do not mapquest! The street does not exist!
(215 - between S. Buffalo and S. Durango - off W. Sunset)MAP

Wednesday, August 26th - 9:00am-5:30pm ~ Doors Open 8:30am
Realty Executives 1903 S. Jones Blvd., #100, LV, NV 89146 (N of Sahara Ave.)

ENROLL NOW - $299, Earn the CSP designation and 8 hrs of CE

Certified Short-Sale Designation Course - July Schedule - Las Vegas, NV

Certified Short-Sale Professional Designation Course

CE.4025000-RE 8 Hrs. General

Tuesday, July 14th -  9:00am-5:30pm ~ Doors Open 8:15am
Realty Executives 1903 S. Jones Blvd., #100, LV, NV 89146 (N of Sahara Ave.)
Enroll in the July 14th Course

Friday, July 17th – 9:00am-5:30pm ~ Doors Open 8:15am
Prudential Americana Group, REALTORS, 2140 E. Pebble Rd., #160, LV, NV 89123 (off Eastern)
Enroll in the July 17th Course

Enroll in the CSP designation course for $299 at http://www.NevadaCE.com

Earn the Certified Short-Sale Professional Designation - Next Las Vegas Class is Saturday, June 20th

Certified Short-Sale Professional (CSP)Designation Course

CE.4025000-RE 8 Hrs. General Continuing Education Credits! 

Saturday, June 20th
9am-5:30pm ~ Doors Open 8:15am
Prudential Americana Group, REALTORS
2140 E. Pebble Rd., Suite 160 (Eastern Ave. & 215)
Las Vegas, NV 89123 
Instructors: Jan O'Brien and Steven Kitnick 
Investment:  $299.00 
Pre-Paid Registrations Only!  No COD's ~ No Walk-ins!

Click Here to Register Now!

Why Become a CSP?

There are many advantages to adding short sales in your marketing mix.  Not the least of which are an increased number of listings that will sell faster and reduce the possibility of the seller being forced into foreclosure.  One of the key ways of getting there is by effectively positioning yourself and your product in your market. 

Adding short selling to your skill set is a great tool to assist you in accomplishing both of these objectives.  Being able to offer short selling as a value added service for your clients is an excellent way of “positioning” yourself ahead of the competition.  Sellers are looking for the agent that can show them how to overcome their two greatest fears: 1) Being Foreclosed Upon and 2) Taking forever to sell.

By being able to answer their questions regarding what is involved in a short sale and helping them to develop a short sale plan you have already given them a huge reason to list with you.  And the more you exercise that skill set the greater your reputation will grow along with your referral network.  Nothing generates referrals faster than success and selling your clients home during a difficult time.

With training in the art of short sales comes the ability to view the client’s home through the eyes of the lender.  You will be able to assist the seller in “positioning” their home to quickly sell and to put together a short-sale package that will be more easily approved by the lender.  You will be able to point out the strengths of the offer and assist the lender in making a quick decision.  As a short-sale professional you will be able to set your client’s home above the competing short-sale packages by positioning it to target the lender’s position.