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The Pre-Foreclosure Niche How to Grow A Pre-Foreclosure Focused Business Strategy
Agenda <ul><li>What is the definition of Pre-Foreclosure? </li></ul><ul><li>Why Should I Care? </li></ul><ul><li>How Does ...
What is Pre-Foreclosure? <ul><li>When a seller is in financial distress and a lender approves a sale even though the prope...
Why Should I Care? <ul><li>Defaults are up 47% nationwide </li></ul><ul><li>Up 54% in Florida </li></ul><ul><li>National d...
Why Should I Care? <ul><li>Fully 1/3 of all loans made in 2006 in the US were considered subprime  (USA Today) </li></ul><...
Why Should I Care? <ul><li>The Mortgage Bankers Association predicts that “adjustable-rate subprime foreclosures, already ...
Pre-foreclosure Might Be an Option When… <ul><li>A home is worth less than is owed </li></ul><ul><li>A potential seller ha...
PFS Isn’t Typically an Option When… <ul><li>The seller is an investor (unless significant financial hardship is documented...
PFS Benefits to Seller <ul><li>Credit rating can be preserved </li></ul><ul><li>Less stressful than foreclosure </li></ul>...
PFS Potential Pitfalls <ul><li>Tax implication to the seller (debt “forgiveness” can result in 1099 income – consult tax p...
PFS Approval Process  <ul><li>General Process </li></ul><ul><ul><li>Identify the property and seller as short sale candida...
Third Party Form (Sample) <ul><li>NOTE:  If you would like IndyMac Bank to discuss your loan with a 3rd party such as a sp...
PFS Approval Process <ul><li>Borrower to call loss mitigation and talk to a Workout Specialist. </li></ul><ul><ul><li>Info...
PFS Approval Process <ul><li>Borrower/Seller Approval : </li></ul><ul><li>Submit financial information (varies by lender) ...
PFS Approval Process <ul><li>Property Approval : </li></ul><ul><li>A signed and ratified listing agreement </li></ul><ul><...
PFS Opportunities for Real Estate Agents <ul><li>Conduct educational seminars for distressed borrowers </li></ul><ul><ul><...
IMPORTANT! <ul><li>Do  NOT  contact lenders to get distressed borrower referrals </li></ul><ul><ul><li>Privacy laws preven...
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The Pre Foreclosure Niche Presentation For Real Estate Agent

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  • As of April 2007 according to realty trac.
  • Transcript of "The Pre Foreclosure Niche Presentation For Real Estate Agent"

    1. 1. The Pre-Foreclosure Niche How to Grow A Pre-Foreclosure Focused Business Strategy
    2. 2. Agenda <ul><li>What is the definition of Pre-Foreclosure? </li></ul><ul><li>Why Should I Care? </li></ul><ul><li>How Does the Process Work? </li></ul><ul><li>What Opportunities Exist for Real Estate Professionals? </li></ul>
    3. 3. What is Pre-Foreclosure? <ul><li>When a seller is in financial distress and a lender approves a sale even though the property will sell for a price less than what is owed to the lender. </li></ul><ul><li>Short sale and Pre-foreclosure sale are synonymous – Pre-foreclosure (PFS for short) is more correct. </li></ul>
    4. 4. Why Should I Care? <ul><li>Defaults are up 47% nationwide </li></ul><ul><li>Up 54% in Florida </li></ul><ul><li>National delinquency rate in Q2, 07 = 4.84% of all residential loans (MBA, June 14, 2007) </li></ul><ul><li>National foreclosure rate an additional 1.28% of all loans (MBA) </li></ul><ul><li>In some areas, as many as one in five homes are in some stage of default/foreclosure </li></ul>
    5. 5. Why Should I Care? <ul><li>Fully 1/3 of all loans made in 2006 in the US were considered subprime (USA Today) </li></ul><ul><li>Subprime foreclosure rates (650 FICO or below): </li></ul><ul><ul><li>Florida rate of loans made in 2006 = 17% </li></ul></ul><ul><ul><li>National rate anticipated to be approximately 15% (Center for Responsible Lending, 2007) </li></ul></ul><ul><li>“ The number of homes entering foreclosure is expected to top 1 million this year, with 60% of those being subprime mortgages,” says mortgage giant Freddie Mac. </li></ul>
    6. 6. Why Should I Care? <ul><li>The Mortgage Bankers Association predicts that “adjustable-rate subprime foreclosures, already at a record, will rise into 2008, affecting borrowers, lenders and such Wall Street firms as Goldman Sachs and Bear Stearns, which packaged subprime loans into bonds.” (USA Today, 6/14/07) </li></ul>
    7. 7. Pre-foreclosure Might Be an Option When… <ul><li>A home is worth less than is owed </li></ul><ul><li>A potential seller has a demonstrated financial hardship (definition later) </li></ul><ul><li>The potential seller submits all required verification and documentation to their lender within timeframes </li></ul><ul><li>Junior (HELOC) lenders are willing to accept little or nothing </li></ul>
    8. 8. PFS Isn’t Typically an Option When… <ul><li>The seller is an investor (unless significant financial hardship is documented) </li></ul><ul><li>The seller has financial ability to pay, supply funds to close or can refinance </li></ul><ul><li>The seller has filed for bankruptcy protection (consult a legal professional) </li></ul><ul><li>Seller isn’t willing to actively participate in providing documentation according to timeframes </li></ul>
    9. 9. PFS Benefits to Seller <ul><li>Credit rating can be preserved </li></ul><ul><li>Less stressful than foreclosure </li></ul><ul><li>Preserves other assets (non-judicial) </li></ul>
    10. 10. PFS Potential Pitfalls <ul><li>Tax implication to the seller (debt “forgiveness” can result in 1099 income – consult tax professional) </li></ul><ul><li>It can take up to 60 days to get approval from some lenders </li></ul><ul><li>Meeting all lender timeframes is paramount </li></ul><ul><li>Typically requires seller to continue to make mortgage payments (workouts and payment plans are possible) </li></ul>
    11. 11. PFS Approval Process <ul><li>General Process </li></ul><ul><ul><li>Identify the property and seller as short sale candidate (hardship, loan to value etc.) </li></ul></ul><ul><ul><li>Borrowers (sellers) fill out “third party” authorization form </li></ul></ul>
    12. 12. Third Party Form (Sample) <ul><li>NOTE: If you would like IndyMac Bank to discuss your loan with a 3rd party such as a spouse, relative, friend, realtor, attorney, or lender, etc… you MUST complete and return this form to us first. </li></ul><ul><li>THIRD PARTY AUTHORIZATION FORM </li></ul><ul><li>I hereby authorize IndyMac Bank to discuss my request for payment assistance with the individual(s) that I have identified below as my designated agent(s) (hereinafter the “Designated Agent”). Further, IndyMac Bank is hereby authorized to negotiate the terms of a workout agreement with my Designated Agent and to deliver documents to my Designated Agent which concern my request for payment assistance. I understand that I will be fully responsible for reviewing any information that is sent by IndyMac Bank to my Designated Agent. This Authorization will remain effective until I specifically notify IndyMac Bank’ Workout Department in writing that this Authorization is of no further force and effect. </li></ul><ul><li>My Designated Agents are: </li></ul><ul><li>_______________________________ _________________ </li></ul><ul><li>(Insert name of 3rd party) Phone # </li></ul><ul><li>_______________________________ _________________ </li></ul><ul><li>(Insert name of 3rd party) Phone # </li></ul><ul><li>Date: / / </li></ul><ul><li>Borrower </li></ul><ul><li>Date: / / </li></ul><ul><li>Co-Borrower </li></ul><ul><li>Loan # _______________________ </li></ul>
    13. 13. PFS Approval Process <ul><li>Borrower to call loss mitigation and talk to a Workout Specialist. </li></ul><ul><ul><li>Inform of intention and commitment to timeframes. </li></ul></ul><ul><ul><li>Ask about current turnarounds. </li></ul></ul><ul><li>Prepare and submit Borrower Approval Package </li></ul>
    14. 14. PFS Approval Process <ul><li>Borrower/Seller Approval : </li></ul><ul><li>Submit financial information (varies by lender) but includes: </li></ul><ul><ul><li>Financial Statement (basically a detailed 1003, see example) </li></ul></ul><ul><ul><li>Hardship explanation form and/or letter </li></ul></ul><ul><ul><li>Most recent checking and savings account statements for all borrowers. Some lenders require 6 months. </li></ul></ul><ul><ul><li>Proof of all sources of monthly household income, such as pay stubs for the last 30 days, or if self-employed, profit and loss statements for the last two quarters along with the most recent federal tax return. Leases and social security, pension, or disability statements are required if applicable. </li></ul></ul><ul><ul><li>Any other documentation or information you feel may be relevant to the situation </li></ul></ul>
    15. 15. PFS Approval Process <ul><li>Property Approval : </li></ul><ul><li>A signed and ratified listing agreement </li></ul><ul><li>A sales contract signed by buyer & seller, subject to Lender Approval . </li></ul><ul><li>An estimated settlement statement showing all proposed seller paid closing costs. </li></ul><ul><li>Proof of Buyer’s financing (i.e. pre-approval letter, etc…) </li></ul><ul><li>Broker’s Price Opinion (BPO). </li></ul><ul><ul><li>Some lenders require up to three different BPO’s. </li></ul></ul><ul><li>Title report </li></ul><ul><li>Junior lien holder release agreement </li></ul>
    16. 16. PFS Opportunities for Real Estate Agents <ul><li>Conduct educational seminars for distressed borrowers </li></ul><ul><ul><li>Partner with a lender and credit repair company </li></ul></ul><ul><li>Aggressively seek listings armed with a competitive advantage </li></ul><ul><ul><li>Very few agents know how to do these deals </li></ul></ul><ul><li>Market expertise as the PFS expert </li></ul><ul><li>Call on owner-occupied borrowers in default </li></ul><ul><ul><li>Review and pre-qual for PFS opportunity </li></ul></ul>
    17. 17. IMPORTANT! <ul><li>Do NOT contact lenders to get distressed borrower referrals </li></ul><ul><ul><li>Privacy laws prevent lenders from referring borrowers in distress to others </li></ul></ul>
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