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Home Foreclosure Alternatives


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What is a Short Sale?
Have you already defaulted?
What Options are available?
Do you fear defaulting on your Mortgage?
LEARN your options from professionals in the field of lending, real estate, and foreclosure prevention.
UNDERSTAND tax penalties and other consequences of loan default, loan modification, or bankruptcy, the difference between a short sale and a foreclosure, and much more!
Did you know you may be eligible to receive money back from the bank at the close of your Short Sale?

Published in: Business, Economy & Finance
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Home Foreclosure Alternatives

  1. 1. Foreclosure Alternatives
  2. 2. DisclaimerThe content in this presentation is based upon ourresearch, knowledge and experience. In no way is anyinformation contained herein to be interpreted as legalor tax advice. To be assured of sound legal advice withregards to foreclosure, real estate, bankruptcy oragency laws, please employ the use of a competentlegal or tax professional and/or your real estate broker.Please consult your broker, accountant and attorney, asappropriate, for advice specific to your situation.Although every effort is made to keep this presentationcurrent and relevant, it is your responsibility to seekguidance from qualified professionals in order to keepup with rapidly changing market conditions andperiodic changes to the law.
  3. 3. Who We AreBrian L. Woods, Owner/Broker• Broker/Owner of Team Realty and Investment Solutions, LLC• Full time Real Estate Professional currently working with buyers, sellers, and renters• Licensed Broker and active real estate investor• Successful in closing business, working with Clients, and developing long term relationships with clients.• Rental and Sales of Single Family Homes, Condominiums, and Townhomes sales of all price ranges.• Contact Information – Office: (561)459-4361 – E-mail: – Website:
  4. 4. The Foreclosure ProcessThe Foreclosure Process varies by State, and falls into two categories: Judicial, and Non-Judicial.• Non-Judicial – foreclosure process happens without the courts.• Judicial – foreclosure is processed though the courts, as in the state of FL. – Pre-foreclosure Period - A foreclosure in Florida begins when a lender files court action and records a notice of a pending lawsuit (Lis Pendens) against the borrower. The lender notifies the borrower and any other affected parties in person or in some cases by mail or publication. If the borrower does not respond to the court action within a specified amount of time, the county clerk can find the borrower in default and the lender can ask the court to make a final ruling. If the court rules against the borrower, the ruling will include the total amount owed to the lender and the foreclosure sale date. The lender is not required by state law to notify the borrower before initiating the foreclosure process, but individual mortgages or deeds of trust might call for this. The borrower can stop the foreclosure up until the date of the sale by paying the total amount owed to the lender. – Notice of Sale / Auction - The sale date is typically 20-35 days after the court ruling, but this may vary depending on the individual court. The clerk of court issues a notice of sale containing the location, date, and time of the sale. The notice is published once a week for two weeks, with the second notice appearing at least five days before the sale. The clerk usually oversees the sale. After a successful sale, the clerk gives a certificate of sale to the winning bidder. Within 10 days of the sale, the clerk transfers ownership to the winning bidder if no one disputes the sale. In most instances, a borrower has no right of redemption after the certificate of sale is issued.
  5. 5. What is a Short Sale?In a short sale, the borrower is unable to sell the property for a price that will cover the total amount dueon the loan. Your Lender may be willing to accept less than the total payoff due, which is referred to as ashort sale. The decision to accept a lesser amount is usually based on the property value. If the fairmarket value is less than the payoff, an amount closer to the current fair market value of the propertymay be accepted to pay off the loan. Short Sales vs. Foreclosures• Property is sold, lender accepts proceeds as payment in full vs. Lender takes title and forces the sale of the property.• Likely that deficiency judgment will not be filed vs. Lender files deficiency judgment.• Settled for less appears on credit vs. Foreclosure appears on credit.• Short sale reflects on credit for about 2-4 years vs. Foreclosure reflects negatively on credit for about 7 years.• FICO scores drop between 45-65 points vs. FICO scores drop between 85-105 points.• You could stay in your homes until the short sale closes vs. You are evicted from your home
  6. 6. 7 Short Sale Myths1. Short sales are impossible and never get approved – 5. Listing as a short sale is an embarrassment to the seller- Nothing could be further from the truth! While there are no With 40 to 60% of the sales in the US predicted to be short guarantees in any transaction, more and more short sales are sales or foreclosures, homeowners are not alone. being approved monthly. 6. The bank would rather foreclose than bother with a short2. Banks are not accepting short sales; they are waiting on a sale - The reality is that banks do not want to foreclose on bailout - Many have heard this, but the reality is that banks property. Short sales make financial sense to lenders. (and the government) are trying to do anything they can, within reason, to avoid foreclosing on property. 7. There is not enough time to negotiate a short sale before foreclosure - The foreclosing party can stall a foreclosure up3. You must be behind on your mortgage in order to negotiate to the final day of the process. These days many lenders will a short sale – While it is true that initially some lenders stall with as little as a phone call from homeowners letting wanted you to be in default before they were willing to them know that they are trying to sell. consider a short sale, this trend has almost all together reversed. Today lenders are looking for verifiable hardship, monthly cash flow shortfall or pending shortfall and insolvency.4. Buyers are not interested in short sales and avoid them - Short sales and foreclosures have become synonymous –not with issues—but with good deals.
  7. 7. Is a Short Sale My Best Option?• In Palm Beach County, 1 in every 319 homes are in pre-foreclosure. There are 14,793 homes in pre-foreclosure right now!• In Broward County, 1 in every 112 homes are in pre-foreclosure. There are 21,304 homes in pre-foreclosure right now!• In Dade County, 1 in every 187 homes are in pre-foreclosure. There are 16,595 homes in pre-foreclosure right now!Consider the fact that banks DO NOT want to own your home! Lenders are increasingly more willing to work with homeownersfaced with "legitimate" financial hardship to accept a discounted payoff on a mortgage balance. If you are faced with a"legitimate" hardship that makes it likely you will be unable to meet your obligation on your mortgage payments, the lenderwould prefer to settle the matter with you as opposed to taking the property through foreclosure. As you consider the option ofpursuing a Short Sale, keep in mind that your lender is looking to limit any potential loss on the loan. By successfully completing aShort Sale, your lender has arrived at a solution, that is, for them, much better than a foreclosure.*Facts from
  8. 8. Who We AreJeffrey Harrington Esq, Attorney at Law• Jeffrey started his own practice in 2008, at that time the real estate market had just gone into a full tail spin. His client base at that time consisted largely of real estate developers and investors, all of whom were suddenly in need of foreclosure defense or other types of loss mitigation services. At that time, there were virtually no experts on these subjects, so Jeffrey set out to master all matters related to distressed property. His efforts in this regard have been rewarded. His articles on the topic are sought by such publishers as Thomson Reuters, a premier name in the legal arena, and he has been regularly interviewed by members of the media as a leading practitioner in the field. For example, Jeffrey was a primary contributor to the recent 60 Minutes report on foreclosure fraud. As the real estate crisis continued, Jeffreys firm, Harrington Law Associates, quickly established itself as a leader in the industry and enjoyed unprecedented growth. Jeffrey continues to write and speak on the subject of distressed property and remains at the forefront of innovations in the field.• Licensure: Florida Bar Association; Federal Bar (Southern District of Florida); Washington D.C. (pending); Title Agent; Settlement Agent• Memberships: American Bar Association; Florida Bar Association; Palm Beach County Bar Association; International Law Section; Real Estate Section; Business Law Section.• Contact Information: – Office: (561)253-6690 – Website:
  9. 9. Florida Short Sales: Tax ImplicationThe distressed homeowner in Florida, and throughout the country, often has severaloptions to consider, which may include a mortgage adjustment, refinance through agovernment-insured program, deferral, etc. Where those options are not viable, thedistressed homeowner usually has to decide whether to attempt a short sale or gothrough a foreclosure. The bottom line is the homeowner in that situation must weigh thefollowing factors: damaged credit rating, potential tax liability, and likelihood of adeficiency judgment.Short Sales: Tax Implications• A short sale is where the lender agrees to sale the distressed property for less than the borrower owes on the mortgage. Since the lender accepts the short sale net proceeds as full satisfaction of the mortgage, the borrower is “forgiven” the difference between what was owed on the mortgage and the net proceeds of the short sale. That difference will be considered income by the IRS and taxed accordingly unless an exception applies. – Sale price less closing costs – Under the new Fannie Mae guidelines, the waiting period after a foreclosure is five (5) years. – Or partial payments.• Under the Mortgage Forgiveness Debt Relief Act (2007), taxpayers who were forgiven part of their mortgage on their primary residence can likely avoid tax liability by including Form 982 with their tax return. See IRS Form 982 instructions for full explanation of qualifying criteria.
  10. 10. Florida Foreclosures: Tax ImplicationForeclosures: Tax Implications• After a lender goes through the foreclosure process and obtains a final judgment, the next step is usually a “sheriff sale” of the property. In this scenario, the taxpayer is not considered to have been forgiven any portion of the mortgage debt even if the property sells for less than what is owed on the mortgage; therefore, there is no tax liability. The presumed logic behind this difference is that a sheriff sale is a forced sale rather than the result of negotiation with the lender.Deficiency Judgments• Where a home is sold for less than what is owed on the mortgage, there is the potential that the borrower will be liable for the deficient amount. In the case of virtually all Florida foreclosures, the lender is entitled to petition for a deficiency judgment if the sale of the home does not cover the balance due on the mortgage. Since foreclosure in Florida is a judicial process, the lender is already obligated to pay attorney fees and court costs. As a result, the lender may choose to request a deficiency judgment unless the discrepancy is relatively minimal.• In the case of a short sale, the matter is not as clear. Whether the lender is entitled to a deficiency judgment may depend upon the terms negotiated with the borrower. In some cases, the lender will waive its right to a deficiency judgment in exchange for the borrower’s cooperation. If the lender does not waive this entitlement, whether it seeks a deficiency judgment or not will be a business decision based on the amount of the deficiency, costs of litigation, etc.• Because state laws vary and each homeowner’s circumstances are different, it is important that homeowners in distress consult a mortgage broker they trust and a local real estate attorney.
  11. 11. Real Estate Foreclosure DefenseWhen homeowners default on mortgage payments, at some point, the lender begins foreclosureproceedings. In Florida, foreclosures have to be done through the courts, so the lender initiates alawsuit against the homeowner and anyone else who might have any interest in the property(e.g. homeowners association, spouse, tenants).• First, it is important to understand that once the complaint has been served on the homeowner, time is of the essence. In other words, anyone in this situation should contact a real estate attorney as soon as possible in order to preserve their legal rights and available options. Unfortunately, when homeowners delay at this stage, they risk losing options that would otherwise have been available.• Second, please be aware that only an attorney can defend you against foreclosure proceedings (i.e. not loan modification specialists, mortgage brokers, etc.), and taking on the bank by yourself is a bad idea for many reasons.
  12. 12. Real Estate Short SaleGiven today’s real estate market, selling a property short is sometimes thebest option available to homeowners. As everyone knows by now, the lender’sapproval of the short sale is required, and there are many things that cancomplicate the process:• Some lenders are very reluctant to approve short sales;• Some lenders have onerous requirements regarding disclosure of financialinformation;• Some lenders want the owner(s) to be responsible for the deficiency;• Some homeowners associations will not approve the potential purchaser;• Some second lien holders refuse to sign off on the short sale;• Buyers get frustrated and withdraw their offer;There are many things that can go wrong during the process of a short saleand, more often than not, something does go wrong. This is a reality that realestate agents understand, which is why many realtors refuse to do short sales.Unfortunately for the whole country, this dilemma keeps the real estatemarket from recovering.
  13. 13. Real Estate Loan ModificationThe concept of modification has received a lot of attention over the past year and a half. TheObama administration created a program known as Home Affordable Modification Program(HAMP), which has helped homeowners. It may depend on the person you talk to as to whetherthe program has been a success overall but, from our point of view, the program has been veryuseful in helping our homeowners find a long-term solution to their situation. In essence,modification is a non-judicial process that involves negotiating with the lender(s). Thehomeowner needs to demonstrate a hardship and meet certain financial requirements. Theprocess seems straightforward but, in fact, it is usually all but impossible for an individual tosuccessfully negotiate a modification with a lender. Although HAMP does provide lenders withcertain incentives to modify, by and large, lenders are reluctant to do so. There are many reasonsfor that, but the bottom line is that a homeowner who is serious about modification will likelyhave to engage the services of a professional. When it comes to choosing the professional totrust with your modification, you should know that Florida law prohibits loan modificationcompanies from accepting up-front payments for this service. The reason this law exists is theexistence/perception of ongoing problems with fraudulent loan modification companies. Thereare not many law firms that offer loan modification services, and fewer still that really have theexperience and personnel to bring about optimal results. Notwithstanding, with a law firm, theclient has peace of mind in knowing the attorney and firm are regulated by the Bar Association.
  14. 14. Who We AreMari Ormstead, Account Executive at Guarantee Title, Inc.• Before Mari joined Guarantee Title in August 2011, Mari worked for a national underwriter for 12 years. She markets Title services to Real Estate Brokers, Agents, Lenders and Builders. She enjoys serving as a consultant in helping customers grow their business. In addition, she performs purchase and refinance closings.• Guarantee Title, Inc. (GTI) is a privately held, independent title company established in April of 2008 on the principles of integrity, exceptional customer service and low fees. Operating out of Palm Beach Gardens, Florida, Guarantee sells title insurance and facilitates all aspects of the title transaction, from refinances to purchases, short sales and bank-owned properties, with an emphasis on maintaining a personable, friendly staff. In 2010, GTI establish its Short Sale Resource Center, using its short-sale expertise to relieve its clients of burdensome paperwork and to speed transactions. GTI also specializes in clearing title on foreclosed properties.• Contact Information: – Office : (561)296-0904, – E-mail: – Website:
  15. 15. Title InsuranceWhat Is Title Insurance?Title insurance is protection against loss arising from problems connected to the title to your property.Why You Need Title InsuranceWhen you purchase your home, how can you be sure that there are no problems with the homes title and thatthe seller really owns the property? Problems with the title can limit your use and enjoyment of the property,as well as bring financial loss. That is what a title search and title insurance are for.The Title SearchAfter your sales contract has been accepted, a title professional will search the public records to look for anyproblems with the homes title. This search typically involves a review of land records going back many years.More than 1/3 of all title searches reveal a title problem that title professionals fix before you go to closing. Forinstance, a previous owner may have had minor construction done on the property, but never fully paid thecontractor. Or the previous owner may have failed to pay local or state taxes. Title professionals seek to resolveproblems like these before you go to closing.
  16. 16. Title InsuranceThe Owners Title PolicySometimes title problems occur that could not be found in the public records or areinadvertently missed in the title search process. To help protect you in these events, it isrecommended that you obtain an Owners Policy of Title Insurance to insure you againstthe most unforeseen problems. Owners Title Insurance, called an Owners Policy, isusually issued in the amount of the real estate purchase. It is purchased for a one-timefee at closing and lasts for as long as you or your heirs have an interest in the property.Only an Owners Policy fully protects the buyer should a covered title problem arise withthe title that was not found during the title search. Possible hidden title problems caninclude:• Errors or omissions in deeds• Mistakes in examining records• Forgery• Undisclosed heirsAn Owners Policy provides assurance that your title company will stand behind you —monetarily and with legal defense if needed — if a covered title problem arises after youbuy your home. The bottom line is that your title company will be there to help pay validclaims and cover the costs of defending an attack on your title. Receiving an OwnersPolicy isnt always an automatic part of the closing process, and is paid for by differentpeople depending on your state. Be sure you request an Owners Policy and ask how it ispaid for where you live. No matter who pays for the Owners Policy, the fee is a one-timefee paid at closing. The Owners Policy protects you for as long as you or your heirs havean interest in the property.
  17. 17. Title InsuranceThe Loan PolicyThere are two types of title insurance: Owners title insurance, as mentioned above, and Lenders title insurance, also called a LoanPolicy. Most lenders usually require a Loan Policy when they issue you a loan. The Loan Policy is usually based on the dollaramount of your loan. It only protects the lenders interests in the property should a problem with the title arise. It does notprotect the buyer. The policy amount decreases each year and eventually disappears as the loan is paid off.Common Title ProblemsFraud & ForgeryThose involved in real estate fraud and forgery can be clever and persistent, which can spell trouble for your home purchase.Fraud and forgery are examples of hidden title hazards that can remain undetected until after a closing despite the most carefulprecautions. Although emphasizing risk elimination, an Owner’s Policy protects you financially through negotiation by the insurerwith third-parties, payment for defending against an attack on the title as insured, and payment of valid claims.Conflicting WillsConflicts over a will from a deceased former owner may suggest a study topic for law school. But the subject can take on a realitydimension and all too quickly your home ownership is at stake.Missing HeirsWhen buying a home, its important to remember what you dont know can cost you.An Owners Policy is necessary to fully protect a home buyer. Lenders title insurance, which is usually required by the mortgagelender, serves as protection only for the lending institution.
  18. 18. Title InsuranceIm refinancing, why do I need title insurance?When you refinance you are obtaining a new loan, even if you stay with your original lender. Your lender willusually require a new title search and Loan Policy to protect their investment in the property. You will not needto purchase a new Owners Policy; the one you bought at closing is good for as long as you and your heirs havean interest in the property. Even if you recently purchased or refinanced your home, there are some problemsthat could arise with the title. For instance, you might have incurred a mechanics lien from a contractor whoclaims he/she has not been paid. Or you might have a judgment placed on your house due to unpaid taxes,homeowner dues, or child support for instance. The lender needs reassurance that the title to the propertythey are financing is clear.Im buying a newly built home, do I need title insurance?Construction of a new home raises special title problems for the lender and owner. You may think you are thefirst owner when constructing a home on a purchased lot. However, there were most likely many prior ownersof the unimproved land. A title search will uncover any existing liens and a survey will determine theboundaries of the property being purchased. In addition, a builder may have failed to pay subcontractors andsuppliers. This could result in the subcontractor or supplier placing a lien on your property. Again, lenders wantto be sure the property has clear title, and they are insuring the correct property. Purchasing an Owners Policywill protect you against these potential problems and pay for any legal fees involved in defending a claim.
  19. 19. Who We AreKen Choy, Mortgage Loan Originator at Fidelity Funding Mortgage Corp• As a seasoned 20 year real estate investor and a residential & commercial loan professional, we are keenly aware that financing is a key factor in your decision to purchase an investment or a primary residence. Our network of lenders puts us at a distinct advantage that makes available the best loan products to suit your circumstances. Purchasing your home or investment is an important financial decision. Your transaction is a priority and we are here to assist you in any way that we can.• Fidelity Funding Mortgage Corp is a mortgage lending Company serving the entire State of Florida. We are a direct lender originating, processing, underwriting, and funding our home loans.• Contact Information: – Office: (772)288.1771 – E-mail:
  20. 20. The Truth About Getting a New Mortgage After a Short SaleThere is a lot of misinformation going around about what the impact of a Short Sale is on your credit andwhether you can get a new mortgage after short selling a home. Below are the current Guidelines forFHA, and Fannie Mae.• FHA has recently changed their rule so that if a short sale occurred and all of the borrowers payments were made on time (no late payments) then they may be eligible for a new mortgage as long as the short sale was due to extenuating circumstances. Otherwise, if any payments were made late or you cannot demonstrate extenuating circumstances, then it is a 3 year period before new FHA financing can be considered.• Fannie Mae policy is pretty straight forward – It is a minimum of 2 years to re-establish credit after a short sale.• Borrowers Current at the time of Short Sale Borrowers are considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and all installment debt payments for the same time period were also made within the month due.• Borrowers in Default at the time of Short Sale Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Note: Borrowers who sold their property under FHA’s pre-foreclosure sale program are not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre- foreclosure sale.• This is Fannie Mae’s Guideline: Pre-foreclosure Sale - A two-year period is required to re-establish credit, measured from the completion date.
  21. 21. When Can You Get a Mortgage Again?Experiencing a damaging credit event like a foreclosure, short sale or bankruptcy doesn’t mean you will never be eligible for amortgage again.
  22. 22. Contact InformationTeam Realty and Investment Guarantee Title, Inc.Solutions, LLC Office: (561)296-0904Office: (561)459-4361 E-mail: MariO@mygti.comE-mail: Website: www.MyGTI.comWebsite: www.TeamrealtyDelivers.comHarrington Law Associates Fidelity Funding Mortgage Corp. (KenOffice: (561)253-6690 Choy)Website: Office: (772)288-1771 E-mail: