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Vol. 04: PALM—Practical Applications of Loss Mitigation
 

Vol. 04: PALM—Practical Applications of Loss Mitigation

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It’s hard to make a choice about what to do if you don’t clearly know what your choices are. We want help by providing you with some basic information on the possibilities....

It’s hard to make a choice about what to do if you don’t clearly know what your choices are. We want help by providing you with some basic information on the possibilities.

This one hour webinar is designed to give you clarity on the options you might consider if you are in default. Options for retention will be discussed as well the options if you are no longer able to afford your home and need to transition into other housing.

This webinar gives an overview of the most common options. For more details once you think you know which route you wish o take, we suggest you view one of the Intros about that specific option.

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    Vol. 04: PALM—Practical Applications of Loss Mitigation Vol. 04: PALM—Practical Applications of Loss Mitigation Presentation Transcript

    • PALM— Practical Application of Loss Mitigation With: Mildred Wilkins Foreclosure Intervention Specialist Brought to You By: Home Ownership Matters Training Institute
    • Objectives:
      • Will have clarity on their revised role in helping defaulted borrowers
      • Be familiar with the processes behind the scenes which impact the ability to complete a workout whether for retention or disposition
      • Will have a starting place for getting additional information and/or training to help them be prepared to perform well in this arena
      Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • What Exactly Is Loss Mitigation?
      • Role
      • Responsibilities
      • Guidelines
      • Accountability
      Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Becoming Familiar with the Bank Departments Retail: Loan Generation Customer Service Loss Mitigation Disposition Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Inner Workings of the Bank
      • Escrow Department
      • Collections Department
      • Customer Service Department
      • Default (Loss Mitigation) Department
      • Bankruptcy Department
      • Real Estate Owned Department
      Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Loan Moves from Customer Service to Loss Mitigation When: Varies by loan type and servicer Influenced by type of foreclosure in your state Government and Government-Backed — 90 Days Non-Conforming — As Soon As 31 Days Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • REALTOR’s Role Understand the foreclosure intervention process well enough to know: *What? *When? *Why? *How? *Who? Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Foreclosure Specifics Judicial or Non-Judicial Resources: Realty Trac — www.RealtyTrac.com National Consumer Law Center — “ Foreclosure Prevention for Housing Counselors” HOM’s Website — www.HomeOwnershipMatters.com Foreclosure & Loss Mitigation Section Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Mortgage Document Securing the Collateral
      • Mortgage
      • Mortgage with a “Power of Sale” Clause
      • Deed-in-Trust
      Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved. Foreclosure Intervention is a TEAM Sport
    • Juggling Your Hats as Today’s “ New” Real Estate Professional Education/Advisor Budget Counselor Social Worker Valuation Expert (BPO) Salesperson Extraordinaire Loss Mitigation Go-Between Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • You Must Avoid... Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved. Legal Counsel Tax Accounting Family Therapy Recommendation Strongly encourage the use of disclosure forms which refer customers/clients to other service providers who are outside your area of expertise
    • General Warnings
      • Bankruptcy
      • Abandonment
      • Operating in Good Faith
      • Deficiency Judgment
      • Tax Implications
      Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Workout Options Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved. an O P P O R T U N I T Y not a R I G H T **Borrower must qualify AND cooperate in “good faith”
    • Does the Borrower Q U A L I F Y for a Workout? Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
      • Universal Hardship Test
      •  
      • Was the default caused by something beyond the borrower’s control?
      • Did the default lead to either “a reduction in income or an increase in expenses?” Documentation?
      • Is the borrower still in residency in a property mortgaged as ‘owner-occupied”?
      • Does the borrower have any money in a 401K or other retirement account?
      • Are there other resources available to cover or offset the loss?
      • Will consumer put together the required hardship package and provide any requested supporting documentation?
      • Is the borrower committed to remaining in the house and completing this workout?
    • Is the Borrower Willing to Follow Through? Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
      • Completion of Hardship Package?
      • Preparation of House if Short Sale is the Option?
      • Commitment to Cooperate with the Leadership of the Agent?
      • Refrain From: Abandonment, Bankruptcy or Deed-in-Lieu Without Notifying the Agent First?
    • T I M E is of the ESSENCE Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved. Use of the QWR to Buy T I M E Federal Law Provides Protection (Google QWR) NCLC — www.ConsumerLaw.org HOM’s Blog — HomeOwnershipMatters.blogspot.com HOM’s Site — www.HomeOwnershipMatters.com (Foreclosure & Loss Mitigation Section) Recommendation: HOM INtro #28: Demand Your Note: a Foreclosure Intervention Strategy HOM INtro #29: QWR: A Powerful Consumer Foreclosure Intervention Tool
      • In order to determine if you are entitled to participate in certain loss mitigation options, the lender usually will require that you complete a hardship package. It is critical that you do this in a timely fashion and that you include all the items which they request. In order to give you a jump start on being prepared, We have compiled this list of items which are most commonly requested. It is recommended that you begin collecting these items immediately, especially since some of them may not currently be in your possession and may take you awhile to get your hands on. GOOD LUCK!
      • Documents/Paper
      • A hardship letter - provide a complete explanation of the hardship which led to your default, including a specific request for assistance.
      • Supporting Documentation - Any documentation to support hardship (i.e. letter from employer, medical records, notification of changes in disability or other income)
      • Federal Income Tax returns - Copy of the two most recent years' returns, COMPLETE WITH SCHEDULES and W-2’s.
      • Bank statements- Copy of 3 most recent months’ statements, checking, savings, mutual funds, etc.
      • Paycheck stubs - Copy of three most recent stubs for each borrower. Self-employed borrower three months Business Checking account statements and year-to-date Profit and Loss Statement required.
      • Disability, Unemployment, Retirement and/or Social Security - Copy of any benefits applied for or received. Include copy of check stubs for any and all that apply.
      What’s a Hardship Package Anyway? Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
      • Junior lien holders - (may be a 2nd mortgage, tax lien or other obligation attached to the property). Either get a release and/or negotiate any junior lien balance outside the sales process, on your own.
      • Property taxes and insurance - Copy of either proof of PAID property taxes or property tax redemption calculation statement AND copy of the declaration page of the mortgaged property’s homeowners’ insurance policy.
      • Bankruptcy - If the borrower is in Chapter 7 or 13 bankruptcy proceedings, a letter from the Federal Bankruptcy Trustee allowing the sale or re-finance of the property is MANDATORY. If the borrower is discharged under Chapter 7 liquidation, a copy of the Discharge letter is MANDATORY. Borrower should also provide lender with the correct contact information for the attorney, including name, address and telephone number.
      • Other - Any other documentation which might be relevant to your current situation i.e.
        • Expenses associated with the care of an elderly parent whom you have had to assume some responsibility for would be an example. Any increase in expenses (beyond your control) is as important as changes in your income.
        • Asset and Income Information
      • *** The lender cannot complete due diligence without ALL the documentation which they have requested. After receipt of ALL they need from you (the borrower) as well as any other parties involved (i.e. the appraiser), the Loss Mitigation will complete the analysis necessary to render its decision regarding any acceptance of a repayment workout/short sale.
      Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
      • Determining Factors
      • Details in the hardship package
      • Acceptability of the ‘Trigger event”
      • Household income has stabilized
      • Current budget will support a housing payment
      • Property condition is acceptable
      But I Want to Keep my House... Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
      • No Lender Approval Required
      • What is It?
      • A mortgage which GIVES you money rather than expect it from you.
      • * available to seniors over 62, living in their homes
      • * can provide funds as
      • One time lump sum b. Monthly Income
      • c. Line of credit (assessed as needed) d. Combination of the above
      • Pros: • Is a great alternative to taking out a loan
        • • Allows for gradual use of equity, as needed
      • • Can help someone to avoid foreclosure
      • Cons: • Interest rate and processing fees can be high
      • • Must be repaid when the borrower is no longer residing
      • in the home (heirs may have to deal with this
      • as part of an estate which can be emotional)
      Reverse Mortgage Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
      • Short Term Workouts:
      • Customer Service Approves
      • Forbearance
      • Long Term Workouts:
      • Require Lender Approval Through Loss Mitigation
      • Special Forbearance
      • Modification
      • Partial Claim or Claim Advance
      BANK APPROVAL REQUIRED Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • What Is It? An option which allows the borrower to stop making payments— with permission—for a period of time PROS: • This workout is handled by Customer Service • Does not require an extensive paperwork • Is verbal and can be instituted immediately CONS: • It is verbal, less concrete • Increased chance of misunderstanding between borrower and lender (because it is verbal) • May be rescinded or changed (because it is verbal) Forbearance Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • What Is It? A long term, written agreement which allows the consumer who is in default to delay payments for a stated period of time. PROS: • Can offer a better long term solution • May allow a time with NO payments, based on circumstances • May extend for a year or more, based on circumstances CONS: • Can be problematic—IF the lender does not record the new, modified loan Special Forbearance Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
      • What Is It?
      • Is a change to the mortgage which is designed to be permanent
      • ** Modification processed as part of the current administration plan include a 3 month trial period
      • The change may be :
      • A change in interest rate
      • A change in the term of the loan
      • A change to the principal balance
      • PROS: • Excellent way to get a mortgage payment which is affordable and hopefully sustainable
      • CONS: • Lenders have the responsibility of recording the new loan:
      • they frequently fail to do so
      •   • Problem can arise if your loan is transferred to a new servicer AND it was never recorded
      Modification Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • What Is It? Payment made to the lender, by the insurer on the loan, which allows a borrower to become ‘current’ after they have been in default. PROS: • Can make all the difference in helping you to get back on track with your mortgage   • Removes the need to come up with a substantial past due amount in order to retain your home   • Usually carry an interest rate of 0% • Usually are repaid once the main mortgage has been repaid CONS: • Has to be repaid when the borrower leaves the home (even if there is a short sale approved)   • Are not used nearly as broadly as they might be • Not advertised as available from the Private Mortgage Insurance companies nor government providers Partial Claim Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
      • Options for Disposition
      • Pre-foreclosure Sale
      • Short Sale
      • Assumption
      • Deed-in-Lieu
      When Staying is Not Feasible Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • What Is It? Is an opportunity to list and sell a home when the borrower is in default BUT has equity in the home Lender Approval NOT Required PROS: • Does NOT require lender approval or participation • Needs an aggressive REALTOR and a client willing to list the home at an amount which will generate an offer—N O W CONS: • Must be completed rather quickly Pre-foreclosure Sale Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • What Is It? Sale of the home when a borrower is in default AND upside down which must be approved by the lender since less than full mortgage payoff will be covered by the new buyer’s loan . Lender Approval Required PROS: • Positive option to avoid foreclosure • Requires lender approval AND a REALTOR competent in the process of short sales CONS: • May leave borrow to face a deficiency judgment • Could require borrower to sign an unsecured note for the amount of the deficiency • Could leave borrow to face tax consequences due to shortage being treated as ‘gift income” Short Sale Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • What Is It? Intervention option which allows a new borrower to take over your payments Lender Approval Required PROS: • May be possible even when the mortgage is coded as “unassumable” • Could be your last ditch effort to avoid foreclosure • Might work for a potential purchaser who does not a sufficient down payment CONS: • Will require approval of the new buyer by the lender • Does not relieve you of the obligation UNLESS the lender signs a “release of liability” form • Should be utilized only with the help of a competent attorney Assumption Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • What Is It? An option for walking away from your home which means you work with the lender to get them to voluntarily accept the property instead of foreclosing against you. Lender Approval Required PROS: • Slightly better than being foreclosed upon • Avoid the ‘foreclosure’ tag being added to your credit • May allow an opportunity to reduce a possible deficiency CONS: • Requires lender approval • Cooperation from a 2 nd lien holder is mandatory • Should be completed with the help of a competent attorney because of deficiency and insurance issues Deed-in-Lieu Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • When you are not the RIGHT professional   that means anything other than   PRE-FORECLOSURE SALE   or   SHORT SALE When Should REALTORs Refer? Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
      • I will NOT operate outside of my area of expertise
      •  
      •  
      • In this session we have given you references to a substantial number of HOM Intros..
      •  
      • Intros are…
      •  
      • Produced by HOM Training Institute
      • I am the instructor for all sessions
      • Available on the HOM website
      • Best of all—ALL are FREE
      •  
      • It is my pleasure to be your Foreclosure Intervention Resource
      •  
      • “ Together, We CAN make a difference”
      NAR Code of Ethics Commitment: Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Resources
      • HUD — www.HUD.gov
      • Federal Trade Commission — www.FTC.gov
      • Default Servicing News — www.DSNews.com
      • Center for Responsible Lending — www.ResponsibleLending.org
      • HOM’s Blog — HomeOwnershipMatters.blogspot.com
      • HOM’s Site — www.HomeOwnershipMatters.com
      • Inman News — www.inmannews.com
      Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Mildred Wilkins, President Home Ownership Matters, LLC 7399 N Shadeland Ave. #164 Indianapolis, IN 46250 Toll Free: (866) 507-5105 Fax: (877) 587-4507 For More Information About the Author: [email_address] http://www.HomeOwnershipMatters.com http://HomeOwnershipMatters.blogspot.com For a copy of HOM’s FREE Article Archives Service, E-mail Heather at: HomeOwnershipMatters@gmail.com THANK YOU! Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved.
    • Copyright © 2008. Home Ownership Matter, LLC. All Rights Reserved. You can take the survey online at: http://www.surveymonkey.com/s.aspx?sm=2M63rhnWI80dBfs72fg_2f_2fQ_3d_3d Or fax this to (Toll Free): (877) 587-4507 Name: _________________________________ Phone: _____________________ Firm Name (If Applicable): ______________________________________________ Address: _____________________________________________________________ City: ____________________ State: ____________ Zip: ______________________ E-Mail Address: _______________________________________________________ I would like to be added to the HOM Distribution List: ___ Yes ___ No I understand that my information will not be sold or shared with anyone other than HOM ---------------------------------------------------------------------------------------------------------- Please let us know if you have any questions or comments: ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ What would you like to see HOM do in the future? (Webinars, courses, e-mails, articles, etc): ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ Thanks for your input, we really appreciate it! Survey