The L.A. Times recently reported that the Fed is now looking to find ways to dispose of the 248,000 homes it owns (through bank REOs) by either selling them in bulk to investors who will be required to rent them, or to sell them on rent-to-own basis.

“One idea could be to create pools of foreclosed properties that would be sold in bulk to private investors, who would then rent them out, helping reduce taxpayer losses on the bailouts of Fannie and Freddie. Another idea could be for investors to buy homes and then rent them on a rent-to-own basis.”

http://latimesblogs.latimes.com/money_co/2011/08/foreclosure-obama-housing-market-rent-fannie-mae-freddie-mac.html

Who is kidding whom here? “Rent-to-Own”? What are we – a mattress store?

The Fed will give a new buyer a break by allowing them to rent, then buy at a price (presumably) fixed at the time they enter into this agreement (thus allowing the buyer to get some upside?) Or, is the program designed to let the Renter buy it at market value several years from now, if they qualify? (That way, the Fed gets the upside, and the rental value. It beats having an empty house…)

Why not just take the mark-down to market value today, and reform the existing loan – and allow the current owner to keep it?

Either way, there is going to be a loss.

Last year the Legislature passed Senate Bill 931 adding Section 580e to the California Code of Civil Procedure.  This new Section established that the beneficiary on a loan secured by a first deed of trust on 1 to 4 unit residential property could not pursue a deficiency judgment after a short sale which they had approved.  The law applies equally to purchase money, hard money and refinance loans.

 This year the Legislature passed Senate Bill 458 which amended Section 580e by making it applicable to junior liens as well.  It also applied additional limitations to the loans subject to the section. In addition to not being able to get a deficiency judgment it provides at Section (a)(1) that after a short sale no deficiency shall be owed or collected and no deficiency judgment shall be requested or rendered provided the short sale closed escrow and the lender was paid the amount they agreed to accept.

 Although the law does not specifically say so it is likely the courts will interpret that section to mean that it applies to a short sale closing either before or after July 15, 2011, the effective date of the new section.  That analysis is based on the provision that the short money cannot be collected and no deficiency can be requested.  It also will bar lenders from turning these loans over to a collection company which some lenders were doing even though the earlier section barred a deficiency judgment.

 The amended law provides at Section (b) that the holder of a note shall not require the seller to pay any additional compensation, aside from the proceeds of the sale, in exchange for their consent to the short sale.

 Some people have taken the position that, since only the seller is prohibited from providing additional compensation, the 2^nd lender can request the buyer or real estate brokers to pay them additional money above that the 1^st has agreed they can receive from the sale. 

 That might be true if only this code section applied.  But if the 1^st lender has based their approval on their consent to the 2^nd only receiving a specified amount then any attempt to pay the 2^nd more without the consent of the 1^st would likely be considered loan fraud.  If the 1^st finds there is more money available in the transaction they will rightly feel it should go to them rather than to the 2^nd.  That is the purpose of being in 1^st position.

Section 580e (c) provides that if the borrower commits loan fraud the limitations of the section would not apply.  The lender would then be able to pursue the entire unpaid balance. If you are the broker in a transaction where the 2^nd lender requests the broker or buyer to pay them some additional money either within or outside escrow you need to make sure that either the 1^st lender specifically approves the additional money being paid to the 2^nd or you run away from that transaction as quickly as possible.  Participating in a fraudulent transaction can expose you to monetary liability to the lender, revocation of your license by DRE and criminal prosecution.

The real question remaining to be answered is whether this new law will be a great protection of the seller from liability after a short sale or whether it will lead to lenders denying short sales in favor of pursuing foreclosure where a deficiency by a junior lien holder may be possible.

If you have any questions on this article or any other aspect of real estate law please contact the Hanson Law Firm at 916 447-9181 or log on to our website at www.HansonLawFirm.com.

Calling a Bank about a loan is THE most frustrating experience … even more so than sending in a loan mod request package — for the 15th time.

From a legal perspective, it gets worse, especially when “Joy” or “Nancy” tells you one thing (like, “You’re approved for our internal Loan Modification Program…”) but refuses to put it in writing. Or the letter you get says something different than the Bank’s representative said on the phone.

What do you do to protect yourself?

Try this:

When someone from the Bank calls, tell them: “I am recording this call for LEGAL purposes. Please state your full name and your birthdate – for identification purposes.”

How much you wanna bet the call will end – right there?

It will. And that’s OK.

If the Bank representative won’t agree to be recorded – END THE CALL. Nothing that is said in it will will matter anyway. The Bank will change its position. And you won’t be able to prove a thing. (And having the Bank’s representative refuse to be recorded, can work to your advantage later in court…)

Oh, and when Joy or Nancy balks, remind her that the Bank is recording the call already. For “training purposes.”

In July, the California legislature passed SB 458, which revised Ca Code Civ Procedure 580e to prevent “short sale” deficiencies on second position loans.

So, here’s the rub. No one knows for certain if it is retroactive.

If you closed a deal in 2010, and the Bank has not yet sued for a deficiency on that second loan, can it do so now? What if it HAS filed suit, can you get out of the lawsuit now based on CCP 580e?

There are arguments – pro and con.

HLF can represent borrowers who have been subjected to these kinds of claims – and brokers/agents who are being brought in for indemnity cross complaints because a borrower is being sued by a Bank for a deficiency.

SB 458 – effective July 11, states no liability will inure to sellers of short sale 1-4 unit properties in California with respect to second position loans. (Recall that first position loans sold short lost recourse liability becasue of SB 931 in 2010).

Good news? Or bad?

Some say it will actually hurt sales in California, becasue banks won’t have any incentive to deal and will just foreclose. Maybe.

I’d bet neither law stays on the books very long. Huh? Why not?

The US and State Constitutions have Ex Post Facto laws. Fancy words that mean, in essence, “Thou shalt not pass a law that interferes with a preexisting contractual relationship.”

Isn’t that just what these laws did? Change the preexisting contractual relationship between a bank and a borrower?

With hundreds of BILLIONS of dollars at risk, don’t you think the banks will challenge the laws? I would.

We’ll all find out in about three years. That’s how long it takes for a trial, and then an appeal. (Longer if it goes to either of the Supreme Courts – state or federal.)

It’s all so much fluff and bother.

A “great victory” is achieved by the “National real estate interests.”
The FTC announces it won’t seek redress for MARS violations against real estate professional s doing ‘short sales.’

HELLO….. ANYBODY OUT THERE?

The FTC lost jurisdiction to enforce when the Consumer Financial Protection Agency took over.
The FTC can’t enforce!

Government speak – at it’s worst.

And don’t forget ladies and gentlemen:

The DRE, the State AG and those loving types called “plaintiff’s attorneys” still can (and will, I’d bet) enforce.

So, let’s not all get our happy faces on just yet.

(I’m just sayin’ … )

Lance Churchull writes:
“One thing I have wondered about in the past is why the two government-sponsored entities, Fannie Mae and Freddie Mac, found it necessary to have different rules for short sales, but then I remembered that the “G” in GSE stood for government and, of course, the government usually makes things more complicated than they should be. Well, on April 28, 2011, the Federal Housing Financing Agency (FHFA), which has been overseeing Fannie Mae and Freddie Mac since their near financial collapse, decided it would be better if they had uniform rules for delinquent mortgages. The FHFA has directed that Fannie Mae and Freddie Mac align their guidelines for servicing delinquent mortgages they own or guarantee with the stated purpose of creating an updated framework that will establish uniform servicing requirements for how delinquent mortgages are handled, including the short sale process. The director of FHFA said, “Once fully implemented, the enterprises’ aligned policies will require earlier contact, more frequent communication and prompt decisions.”

The aligned guidelines will also govern the “dual track” foreclosure process by requiring the servicers to immediately contact delinquent borrowers in an effort to resolve a delinquency. The foreclosure process may not commence if the borrower and the servicer are engaged in a good faith effort to solve the delinquency. In the event that the property is referred to foreclosure, financial incentives would be provided to encourage the servicers to help continue the borrowers pursue a foreclosure alternative such as a short sale.

Freddie Mac and Fannie Mae must issue the new guidelines to their servicers on or before September 30, 2011. Having reviewed the actual and very detailed servicing announcements by both Fannie Mae and Freddie Mac that seems like an awfully long time to implement the new rules. However, given the fact it took Fannie Mae and Freddie Mac eight months to implement a HAFA program that was nearly the same as the Treasury Department’s program, I guess it is reasonable for them to take five months to align their loss mitigation rules.

One of the new policies that agents will like is that Fannie Mae and Freddie Mac will have the same borrower package for borrowers to be considered for all workout and foreclosure avoidance solutions, including HAMP modifications and short sales. When the borrower’s package is received, it is required that at the beginning of the process there be a simultaneous evaluation of borrowers for both the HAMP and HAFA programs. An additional new standard that agents will applaud is that there will be a uniform case escalation process which requires acknowledgement of an escalation request within three business days after receipt and adherence to a 30-day maximum total time to resolve an escalated case.

Since Fannie Mae and Freddie Mac short sales constitute a large portion of the short sale market, new uniform short sale guidelines and procedures for non-HAFA short sales would certainly be welcomed by the real estate industry. Let’s hope that the new guidelines, when they are issued, will actually simplify and expedite the process, and that the servicers will effectively implement the new rules. Stay tuned for updates on this topic, but don’t hold your breath in anticipation of seeing the newly aligned Fannie Mae and Freddie Mac short sale rules very soon.”

I couldn’t agree more.

Big words – pure Bullshit.

Here’s what one lawyer is peddeling in Southern Califirnia.

“Here is some info that we send out to brokers. Our fundamental principal under which we work is the “educated supposition” that a preponderance of real estate loans having been originated by the banking industry in the last several years were, at least in part, predatory in nature and fraught with myriad blatant illegalities, errors and omissions in their construction and execution. We find as well that many of the documents which purport to secure these alleged loans with ownership in your real estate, have been lost or destroyed in favor of creating the more convenient and legally protective electronic mortgage recording system (MERS): thereby rending certain of the documents largely unavailable and unenforceable under the law. Our primary contention is that a copy of a negotiable instrument is not a valid instrument. Irrespective of the production of such items as “Certified Copies” or “Affidavits of Lost Document”, a certified copy of a dollar-bill will obviously not buy you a dollar’s worth of anything: as well, an affidavit saying your dog ate your dollar-bill won’t buy anything either.
During the examination (forensic auditing) phase of your transaction, we generally discover that your “lender” never made you a “loan.” We find instead that your signature and averred obligation to pay was in fact sold for a large profit well before your “loan” documents were presented to you. We find that in fact no money was ever expended by your “lender” on your behalf: thereby inferring that your negotiable and highly valued signature did in effect retire your so-called mortgage obligation well before your payment-stream was established.

Since its inception, your alleged loan has most likely been sold and re-sold several times before it was purchase by a Wall Street stock brokerage and fractionalized to securitize international stock market purchases (mostly by foreign investors, who, at the time, had an exaggerated faith in the US tock and real estate market, but who long-since have accepted their losses). For the most part, these unfortunate folks have moved on and have no expectation of recompense of any kind. Ergo, one might ask: “So where does all the money go when I am evicted for non-payment and my bank sells the property for top dollar?” The answer lies with each party in the line succession: i.e., those who purchased, re-sold and fractionated your loan by including it in a multi-million (or billion) dollar bundle of other mortgages. Each party in the queue have long since been paid far more from their acquisition of your loan than they paid for it, and in effect will have lost virtually nothing as a result of a homeowner’s inability to pay.”

Ya just gotta wonder where teh State Bar is in shutting these types down. They are as bad as the banks that started this in the first place.

RISMEDIA reported today (April 15, 2011) that a new bill to improve the process for approving short sales might soon bring relief to distressed homeowners who are unable to keep their homes and hope to avoid foreclosure. The bill, recently introduced in the U.S. House and strongly supported by the National Association of REALTORS®, would impose a deadline of 45 days on lenders to respond to short sale requests.

The legislation, the “Prompt Decision for Qualification for Short Sale Act of 2011,” was offered in Congress by U.S. Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-N.J.).

“The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a homeowner from foreclosure,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I.

“REALTORS® and consumers continue to raise issues about delays in the short sale process, because lenders are unable to decide whether to approve a short sale. After many months of delays, and with no response from lenders, potential buyers are losing patience and cancelling their contracts, often resulting in the property entering foreclosure. A short sale minimizes the negative impact on sellers and generally costs the lender less than a foreclosure,” said Phipps.

NAR has been actively pushing the lending industry to improve the process for approving short sales, which represent about 13% of recent home sales, according to NAR data. Phipps praised Reps. Rooney and Andrews for their efforts on the bill and urged Congress to pass the bill quickly.

I say that’s so much wishful thinking.

The Wall Street Journal recently reported that the oprices of houses are Up, and Down. Depending on where.

Seems like everyone jusst wants to ad their own shpin on a story that has no right, wrong, left or middle.

“With the National Association of Realtors reporting that home prices rose in about half of U.S. metropolitan areas in the last three months of 2010, it’s easy to think that that the housing market is showing some signs of recovery. “Home sales clearly recovered in the latter part of 2010,” Lawrence Yun, the NAR’s ever-optimistic economist says in a statement.

But the proverbial grain of salt is in order, given many other sources report prices continue falling. The Journal recently reported that home values declined in all of the 28 major metropolitan areas tracked during the fourth quarter when compared to a year earlier, and repeat-sales indexes such as the S&P/Case Shiller index have shown that prices declined in October and November.

The Realtors are looking at a different measure, median prices, which show that prices for home resales rose in about half of the nation’s 152 metro areas during the October-December quarter. Prices rose in 78 cities, fell in 71 and were unchanged in three. The group says the national median price for single-family homes was $170,600 in the fourth quarter of 2010, up 0.2% from $170,300 a year earlier.
The Washington, DC, area gained 8.1%. There were decliners: Portland, Ore., came in down 3.8% and Seattle dipped 3.9%.
Data from Zillow, however, show bigger declines in those three markets. Washington fell 5.8%, Portland declined 12.1% and Seattle tumbled 11.9%.

Why the difference? When comparing the fourth quarter of 2010 to the prior-year period, the Realtors use median price, the point where half of sales fall above and half fall below. Last year’s data still include buyers tapping a tax credit of up to $8,000. Many of those sales were first-time buyers, who typically buy lower-priced houses. The expired credit isn’t in this year’s numbers, so median prices in some markets could be higher from a year ago because the more higher-priced sales were added to the “mix” of sales.

Most industry watchers agree that the housing market must endure more pain before it can fully recover. Lending standards are tight, preventing would-be buyers from inking deals. The foreclosure crisis, meanwhile, continues with no end in sight. Many economists and housing analysts expect home prices to fall an additional 5% to 10% before prices hit the long-awaited bottom later this year or early next year.

By Alan Zibel, WSJ.com; Dawn Wotapka and Nick Timiraos contributed to this article.