Time to Get Your Head Out of the Sand and Pursue that Short Sale

Most everyone is familiar with the terms “strategic default” and “deficiency balance.”  In fact, over the years Berlin Patten has repeatedly addressed the importance of getting legal representation in foreclosure actions, short sales, and debt negotiation.  However, we have seen countless instances of people choosing to essentially bury their heads in the sand and ignore their foreclosure action.  Most of the time, this is under the false assumption that lenders would not seek a deficiency balance after the foreclosure action. 

Significantly, the Federal Housing Finance Agency recently posted an advisory bulletin to establish supervisory expectations for deficiency balance management at Fannie Mae and Freddie Mac.  The recent advisory bulletin should serve as a strong wake-up call as Fannie Mae and Freddie Mac are being advised to start collecting on deficiency judgments from borrowers that walked away from their homes. In fact, the advisory bulletin specifically states that “recovery of a deficiency balance may act as a deterrent to so-called “strategic defaulters.”

Once a deficiency judgment is obtained, the judgment can last for up to 20 years.  Additionally, the judgment may result in the garnishment of wages, attachment of bank accounts, and the forced sale of personal property. 

As always, if you have any questions regarding a deficiency judgment, we strongly recommend you to consult with your real estate attorney.  Please see the below link for more information on the Federal Housing Finance Agency advisory bulletin.

http://www.fhfa.gov/webfiles/25513/Deficiency_Balance_Management.pdf

Sincerely,

Berlin-Patten, PLLC

  

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com 

SARASOTA

3700 S. Tamiami Tr, Suite 200, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 S. Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024  

Did you find this real estate law content useful, but need actual legal council?

Speak to a real estate attorney!

, , , ,

Follow Up To “New Catch-22 In Short Sale Negotiation”

We have received tremendous feedback to our recent blog concerning lender(s) who are now forcing sellers to use auction companies to further market their property as a precondition to short sale approval.  Our previous suggestions to attempt to address the situation were (a) encourage the seller to incorporate language in their contracts to permit the…

Tips on Inspection Periods for Short Sale Transactions

As most of you have likely seen, the demand in today’s market for short sale properties is very high, with decreasing inventory and a large pool of buyers.  In fact, property prices are increasing in many areas because of this high demand, and short sale sellers are often receiving many offers – some possibly even…

Substituting Contract Pages

We have noticed an increase in a practice, that if not done with full and proper disclosure, could lead to substantial trouble for the parties involved, including civil liability, license forfeiture, or worse yet, criminal sanctions.  The practice involves changing and/or substituting pages to a fully executed contract.   While we recognize the reality that…

Dealing With Entities As Buyers In Investment Properties

As most of you are aware, more and more investors are coming to this area to invest in distressed properties. The result is an increasing number of short sale contracts in which the buyers are entities (such as LLCs) rather than individuals. Typically, short sale lenders require the seller to provide a slew of documentation,…

Navigating a Short Sale – Tips & Reminders

With the extension of deficiency waiver tax relief, we have seen no slowdown with respect to short sales, and do not anticipate a slowdown in the foreseeable future.  With that in mind, we wanted to remind anyone who routinely handles short sales to consider the following: Do not forget about how critical it is to…

Bankruptcy Follow-up: Short Sales Post Bankruptcy

Originally Published by Berlin Patten on October 12, 2012 With the proliferation of bankruptcy filings over the last several years, we have received a number of inquiries regarding the completion of a short sale following a bankruptcy.  Yes, there are lawyers who may suggest that a homeowner who has been discharged from a bankruptcy (and…

Removal of Second Mortgages in Chapter 7 Bankruptcy Cases

Previously, the general rule in bankruptcy was that if a homeowner wanted to “strip off” or remove a second mortgage, he or she could only do so in a Chapter 13 bankruptcy.  However, that has now changed. In McNeal v. GMAC Mortg., LLC (In re McNeal), 2012 U.S. App. LEXIS 9589 (11th Cir. 2012), the…

FHFA Announces New Standard Short Sale Guidelines for Fannie and Freddie

Originally Published: 8/22/2012 The Federal Housing Finance Agency has directed Freddie Mac and Fannie Mae to align current short sale programs into one standard short sale program and issue clear guidelines to service providers.  These changes will become effective on November 1, 2012. Per the FHFA, the programs being aligned are: Fannie Mae’s Home Affordable…

Home Affordable Foreclosure Alternatives (HAFA) Short Sale Update

Originally Published: 6/19/2012 Effective June 1, 2012, the following changes were implemented in the HAFA Program: TIME FRAME EXTENDED: The program has been extended to Dec. 31, 2013. The HAFA short sale can be initiated up to Dec. 31, 2013; however, the transaction must have a closing date on or before Sept. 30, 2014. ELIGIBILITY…

Cancellation of Foreclosure Sale by Filing Bankruptcy

Originally Published: 6/13/2012 In many cases, during the process of negotiating a short sale, the lender may have already begun foreclosure proceedings. When that happens, a race begins between the seller and the bank: either the lender forecloses first, thus preventing the short sale, or the seller completes a short sale before foreclosure. Many sellers,…

Fannie Mae and Freddie Mac Set New Short Sale Timelines

Originally Published: 5/26/2012 Please note that we have been advised that starting June 15, the Federal Housing Finance Agency has indicated that it will require Fannie Mae and Freddie Mac to give a final short sale decision within 60 days. Fannie and Freddie must also respond to initial requests for a short sale within 30…

SHORT SALE CONTRACT DEPOSIT DEADLINES – EFFECTIVE DATE OR UPON SHORT SALE APPROVAL?

Originally Published: 5/4/2012 With 2012 being the year of the Short Sale, you need to be familiar with differences in the contract forms being used in the marketplace. Typically, in a short sale transaction, we are seeing the Florida Realtors/Florida Bar (“FR/BAR”) As Is Residential Contract form (“As-Is Contract”) being used along with either the…

Deficiency – What is it and How Much Time Does My Bank Have to Sue?

Originally Published: 3/27/2012 When an underwater home is sold in a short sale or a foreclosure, the greatest concern is almost always over the remaining mortgage balance owed by the homeowner (known as a “deficiency balance”) and how long the lender has to try to collect it.  When a property is sold in short sale,…

How Bankruptcy Can Backfire on Homeowners in Foreclosure

Originally Published: 3/12/2012 Many homeowners resort to filing bankruptcy in order to stop an imminent foreclosure on homestead property when no other legal options are available.  While, in most cases, the mortgage holder can still foreclose on the property, it cannot do so until the property is released from the bankruptcy estate.  This can take…

Backup Offers

Originally Published: 2/22/2012 Most short sale addenda have provisions for backup offers if you check the appropriate box. It is our opinion that, generally speaking, you should not check the box permitting backup offers when dealing with a short sale. It creates too many unnecessary legal and practical issues. Most importantly, many lenders and their…

BOA’s Florida Enhanced Short Sale Relocation Assistance Extended to Dec. 12

Published December 2, 2011 Bank of America is still encouraging distressed homeowners to consider a short sale as a viable option for avoiding foreclosure, as the Florida Enhanced Short Sale Relocation Assistance Program has been extended to Dec. 12, 2011. This program offers enhanced relocation assistance to help encourage homeowners to engage with Bank of America on…

Cautionary Tale Regarding Wells Fargo

The Sarasota Herald Tribune recently published an article that stated that Wells Fargo had a short sale incentive/fast track program in place. The article, which is consistent with other published articles we have seen, suggested that Wells Fargo would be willing to fast track short sale approvals and even make payments to short sale sellers…

Bank of America Short Sale Seminar Summary

The Berlin Patten short sale negotiating team recently attended a Bank of America Short Sale Seminar.  The following is a brief summary of what Bank of America advised its seminar’s attendees:  Short sales are about two primary things to Bank of America:  Hardship and net proceeds Investors are reluctant to postpone foreclosures as the buyer…

Response to Anonymous Blog Entry: Title Agents should still not be conducting short sale negotiations

On or about September 30, 2011, an anonymous reader provided a response to a blog Berlin Patten had sent to its readers regarding who can or should be engaged in the negotiation of short sales. While we debated whether or not to further comment on the subject (as the blog response did not really specifically…

Short Sale Negotiations

We have been asked by several real estate agents to investigate whether or not a title company or title agent can conduct short sale negotiations. One of Berlin Patten’s contacts at the Florida Department of Financial Services, Bureau of Investigation, Title Services, responded to our inquiry as follows: “The license for a title insurance agent does not…

Fraud Investigation – A Top Priority for Freddie Mac

In previous blogs, we have discussed our concerns about short sale fraud and the warning signals to watch for.  According to Freddie Mac’s Mortgage Fraud Officer, Short sale fraud has also become the top priority for Freddie Mac’s fraud investigation unit as well. Per the attached article, recent trends that Freddie has been alerting Real…

Assignable Contracts & Specific Buyers

Please be advised that short sale lenders are getting very strict about approving the specific buyer identified on the contract. As such, lenders are carefully scrutinizing assignment provisions in contracts. Short sale lenders who are reviewing contracts (that permit the contract to be assigned) are kicking back the contracts more and more frequently.) Lenders are…

Berlin Patten’s Short Sale and Bankruptcy Services

Real Estate professionals are frequently confronted with listing a short sale property encumbered by two or more mortgages and a seller who is strongly considering bankruptcy as its “exit strategy.” We have struggled with that same scenario… working on a short sale for months, and then the seller decides to file for bankruptcy. At that…

HAFA Policy Changes for Servicers

Lenders’ inconsistent eligibility requirements seem to be the most consistent thing we have seen with respect to the Federal Government’s HAFA (Home Affordable Foreclosure Alternatives) Program.  The Federal Government seems to have taken notice. On August 9, 2011, the Home Affordable Foreclosure Alternatives Program adopted certain policy guideline changes.  The changes, we presume, are in…

The Importance of a Municipal Lien Search

Performing a municipal lien search is crucial when purchasing property in this day and age. In many cases there are unknown or undisclosed fees, costs or other issues that will impact a buyer post-closing. In addition a municipal lien search generally will assist a seller in complying with contractual terms to avoid a default. Examples…

Short Sales – Working with Second Lenders

Anyone who works with short sales knows that it can be very difficult to get short sales approved when there is a second (or even third lender). To successfully complete a short sale, ALL lenders (among others) must agree. The problem is that in many instances, they do not. In fact, we have seen situations…

A New Buyer Can Be Substituted for One Who Walked

We have learned of a very interesting development with respect to Bank of America. Bank of America has advised that it will permit a new buyer to step into the shoes of a buyer who has walked away from a transaction.  Furthermore, Bank of America has advised that the process will not have to begin…

Deficiencies and Deficiency Judgements

We spend a great deal of time counseling prospective short sale sellers regarding the advantages of attempting to pursue a short sale rather than allowing their property to go through the foreclosure process. Many people do not realize that the foreclosure process is a two step process. The first step is the sale of the…

Bank of America Realtor/Broker Listing Agent Certification – Questions and Answers

The new Bank of America Realtor/Broker Listing Agent Certification (the “Certification”) has fostered some significant concern among real estate agents. The most common questions and our comments/responses are as follows: 1. Question: Does paragraph 1 of the Certification mean that Bank of America will not pay a commission. Answer: No! Bank of America never paid…

Wells Fargo Short Sale Addendum

As expected, Wells Fargo has followed suit with Bank of America and has put out a new Short Sale Affidavit (attached hereto). Similar to the agreements recently published by Bank of America, Wells Fargo appears to be getting more aggressive in trying to curb flips and low offers and is now requiring realtors and closing…

Bank of America Document Warning

Please be advised that Bank of America is now requiring the parties to a short sale transaction to execute certain form documents before they will consider your short sale for approval. The buyer and seller will be required to execute a new addendum, and somewhat interestingly, the agents involved in the transaction will also need…

Nonlawyer Assisting the Short Sale Seller: Ministerial Acts or UPL?

As you know, short sale negotiations (and negotiators) are coming under great scrutiny by local and federal authorities. There are significant new disclosures for non-attorneys, and now the Florida Bar is weighing in on the subject. In essence, various proposals under consideration by the Florida Bar suggest that a great deal of the short sale…

FTC Issues New Rules for MARS

The Federal Trade Commission (FTC) has issued new rules that might impact real estate practitioners who represent clients involved in short sale transactions. The Mortgage Assistance Relief Services (“MARS”) regulations define anyone providing services which assist or attempt to assist the consumer in negotiating a short sale as a “MARS” provider. Depending on certain factors,…

“No Cost” Short Sales

You may have seen solicitations from companies announcing “NO COST” Short Sales that can be closed quickly, sometimes as quickly as 45 days. We suggest that you use great caution when engaging these companies or recommending these companies to short sale sellers. First, there is no such thing as a free ride. In most cases,…
Menu