How current events impact your business and real estate holdings

Showing posts with label Short Sales. Show all posts
Showing posts with label Short Sales. Show all posts

Monday, October 29, 2018

Attention Brokers - What should you do if your prospective seller has a Lis Pendens on their property with public records?

Most importantly, a Lis Pendens does not necessarily mean that there is a foreclosure on the property. Instead, a Lis Pendens simply means that a lawsuit has been filed against the property. This lawsuit could be a foreclosure, but it could also be a lawsuit for partition, adverse possession, prescriptive easement, constructive trust, specific performance, as well as many other topics.

So, first and foremost don't assume that there is a foreclosure on the property, but instead make inquiry as to the Lis Pendens.

  • Step 1 - Ask the homeowner the nature of the lawsuit on the property.
  • Step 2 - Inquire if you can talk to the homeowner's attorney to learn whether the lawsuit will be an impediment to selling the property (e.g., a specific performance lawsuit by a prior purchaser can make it impossible to sell the house whereas a foreclosure lawsuit with a house with equity remains a viable sale and a foreclosure lawsuit with a house without equity can be sold as a short sale).
  • Step 3 - Assuming the lawsuit is a foreclosure, determine when the lawsuit was filed with the county clerk because if it was years ago its going to be very hard to sell the house before the auction (i.e., you can sell up until the auction as long as the seller can payoff the loan or if the lender takes a short payoff) and the homeowner likely defaulted on the lawsuit (i.e., they lost for inaction).
  • Step 4 - If it is a foreclosure, help the homeowner to order payoff letters from their lenders in order to ascertain the precise amount owed (i.e., its not just the loan, but also the penalties, interest and attorneys' fees that are owed when the property is in foreclosure).  
  • Step 5 - Workup a brokers' price opinion for the house as a distressed sale.
  • Step 6 - Calculate closing costs for your seller.
  • Step 7 - Determine if the seller has enough equity to close without dipping into their own pocketbook (i.e., compare the BPO with the payoffs and the closing costs). 
  • Step 8 - If there is enough equity, list the house fast; if not, advise the seller that you can only list the property as a short sale (i.e., subject to bank approval with a short payoff).
REMEMBER - the bank doesn't stop the foreclosure process when a short sale is being sought, so you must insist that your listing is subject to the seller fighting the foreclosure with a competent foreclosure defense attorney - otherwise you will likely waste your time / money on this listing.

The advantage of a short sale over a foreclosure is #1 avoiding a deficiency judgment (i.e., judgment that can be enforced for 20 years for the amount the property is underwater). 

To learn about foreclosure / short sales / Lis Pendens and more - take our CE course, Foreclosure & Short Sales ONLINE.

Friday, January 02, 2015


Terrific news is here with a tax break for those who sold or lost their underwater homes to foreclosure in 2014.

The Mortgage Forgiveness Debt Relief Act (MFDRA) was extended through 2014 by the Tax Increase Prevention Act of 2014 on December 19, 2014.

Homeowners who were forgiven debt a/k/a “cancellation of debt income” (difference between the total amount of the mortgage still owed at closing and the sale price or fair market value of the property) resulting from a short sale, deed in lieu of foreclosure or foreclosure sale, will have the forgiven debt excluded from their taxable income for transactions completed through 12/31/2014. 
The MDFA previously expired on December 31, 2013.

So, for those who lost a home to foreclosure or a short sale in 2014, you will receive a nice holiday tax break when you file your taxes in the new year.  

Friday, October 31, 2014

Short Sales Incentivized

On October 30, 2014, Supplemental Directive 14-04 was issued by Treasury.

2 major changes for those considering a short sale or deed-in-lieu are offered by this Directive.

FIRST - Relocation assistance available to the property owner, who occupies the property as a principal residence and is required to vacate as a condition of the short sale or deed-in-lieu, will be eligible for $10,000 as opposed to $3,000 for transactions that close on or after February 1, 2015.

SECOND - Perhaps most importantly, for transactions closing on or after February 1, 2015, the gross sales proceeds that may be paid to a subordinate mortgage lien holder (e.g. 2nd mortgage) used to be capped at $8,500, but now there is no cap requirement. Instead, servicers can create their own cap provided its not less than $12,000.

To explain the second change above, a first mortgagee may approve a short sale, but the second mortgagee may deny it because there is no fair market value to support a payment to the mortgagee (i.e. the house is underwater as to the second mortgage). This change permits the first mortgagee to pay the second mortgagee (out of their monies from the short sale) to approve the short sale and extends what was a cap of $8,500 in payment to a minimum new cap of $12,000 and potentially no cap at all.

Many deals die because of the second lienholder - this Supplemental Directive should save a lot of deals.

Friday, August 23, 2013

Short Sales & Deeds in Lieu added to Hope LoanPort

In offering their organized and systematic portal from modifications to Deeds in Lieu and Short Sales hopefully homeowners will realize increased success.

Today, our firm received this email:

Hello Hope LoanPort Partners,
We have responded to request from portal users by adding a robust processing platform for liquidation workouts, intended to match our existing functionality for retention workouts.  Such a liquidation portal requires significant development to not only allow for short sales and deeds in lieu as workout types, but also include system availability for liquidation-specific documents, statuses, and data fields.

We released a pilot program of the liquidation case type back in the spring.  We are now proceeding with a release of the Liquidation functionality for all registered housing counselors and authorized third-party representatives.  Effective with our upcoming system release on August 30, all counselors registered with the portal will have access to submit Liquidation cases.  This functionality will be limited to those select servicers who will be accepting these cases.

Participating Servicers: Select Portfolio Services; Nationstar; M&T Bank; Caliber; LoanCare; RCS; HSBC; Ocwen; Resurgent; Bayview

When processing a Liquidations case, users will need to be familiar with the enhancements to HLP, such as:

New Case Type: Liquidation
New Case Statuses: Property Listed, Offer Tendered, Short Sale Approved, Short Sale Denied, Offer Rejected, etc. (See PDF for full list*)
New Document Types: Listing Agreement, Appraisal, BPO, etc. (See PDF for full list*)
New Data Fields: Seller Realtor Name, List Price, Closing Date, Title Company, etc. (See PDF for full list*)
*A PDF overview of all items and can be viewed from this link.

We will be issuing system Release Notes in advance of the anticipated go-live date of August 30.

If you would like to request additional training on the liquidation case type, please contact Nora Conklin, Hope LoanPort Project Coordinator, at
Samantha Sue Friedman - Director of Product Development & Delivery