LYNN ARENDS REALTY GROUP
Lynn is going to be on the radio!
Help may be on the way...
The National Mortgage Servicing Settlement that was reached in February has now been finalized by a court order. The Settlement provides direct relief and new protections for Washington consumers.
Washington’s share of the record $25 billion dollar settlement over alleged widespread mortgage fraud is about $648 million, to be used in a few different ways.
Here are the highlights of WA’s settlement share:
More information will be made available as settlement programs are implemented, and consumers may need to wait before seeing any direct benefits from the settlement. The mortgage servicers are required to complete 75% of their consumer relief obligations within two years and 100% within three years.
Borrowers who are currently behind on their monthly mortgage payment, or may soon experience financial trouble, are urged to call their mortgage servicer for more information.
Contact our office to set up a time to talk with Lynn about the options available to you, and how this settlement might affect you!
Short Sale or Foreclosure? Now, Please!
The Mortgage Forgiveness Debt Relief Act is set to sunset on December 31, 2012 and it may not get extended. The law, first enacted in 2007, allows homeowners who have received principal reductions on their mortgages as the result of loan modifications, short sales or foreclosures to avoid income taxation on the amounts forgiven.
Here's a little history and how it works. Before 2007, all cancellations of debt by creditors (i.e., mortgage, personal or auto) were considered taxable events under the federal tax code. If you owed $500,000, but paid off only $350,000 through an agreement with the lender, the $150,000 difference would be treated as ordinary income and taxed at regular rates. The Act was due to expire on December 31, 2010 but was extended through 2012. Under this Act, you can avoid taxation on forgiven mortgage debt amounts up to $1 million for single filers, or $2 million if married filing jointly. To be eligible, the debt must be cancelled by a lender in connection with a mortgage restructuring, short sale, deed-in-lieu of foreclosure or foreclosure. But the transaction must be completed no later than Dec. 31, 2012.
Loss of this tax help will endanger huge numbers of distressed mortgage arrangements in the months (and years) ahead including those qualifying under the recent $25 billion mortgage settlement (see my previous blog post for more details on the settlement). Any borrower receiving any principal reduction or debt forgiveness may face hefty and ill-timed taxable income hits in the event this law is not extended.
The clock is ticking and that impending deadline has real estate and tax professionals on edge. Bottom line - if you are thinking about a short sale or foreclosure, do it now!
And if you are considering a short sale, some benefits to a seller instead of foreclosure might be:
1. A slight benefit in the credit score.
This is especially true if short sale is approved while the borrower is current (it can and does happen and is also a significant benefit in terms of ability to get a new home mortgage (in as little as 2 years).
2. If the seller has two mortgages.
A short sale provides a vehicle for resolving both debts at once, and a quality short sale negotiator will in most instances be able to settle the second for less than if the borrower let the first foreclose and then circled back to negotiate and settle the second.
3. A borrower still has a reasonable shot at getting a short sale completed before 12/31/12, when the principal residence exemption to Cancellation of Debt (COD) income is still in effect, versus a foreclosure, which will probably not happen until 2013 at this point, thus increasing the chances of income tax liability, particularly if there is a second lien that must be settled too.
In conclusion, every situation is unique and your mileage may vary, but short sale can be an excellent alternative to foreclosure, and something you may want to consider.
Come meet with me to discuss if you are a good candidate for a short sale, and how to take advantage of The Mortgage Forgiveness Debt Relief Act while it still exists!
Federal Mortgage Settlement = Good news/Bad news
By now, we all know that federal and state officials have announced a $26 billion foreclosure settlement with five of the largest home lenders (Bank of America, Citigroup, Ally Financial/GMAC, JP Morgan Chase and Wells Fargo).
The deal is supposed to protect consumers from unsound practices in mortgage servicing and foreclosure processing, and requires banks to give money back to borrowers who have been foreclosed on, and principal reduction to homeowners who are currently underwater. It also sets aside funds to help borrowers refinance or modify their loans.
While this sounds like great news for homeowners, there are some caveats…
Bad news: But only by an average of $20,000.
Bad news: This only works if assiduously and tirelessly enforced.
Good news: Eligibility.
Bad news: Borrowers whose loans are held by Fannie Mae or Freddie Mac need not apply.
Already foreclosed on?
Good news: You are eligible for restitution if you lost your home in 2008—2011 due to “robo-signing”.
Bad news: $2,000 max—not much help for families who have lost their homes.
Conclusion? I am cautiously…(un)optimistic about this settlement!
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For more information, check out the Legal Resources page at my website for a summary of the settlement, who is affected by it, and the projected timeline.
All of the details, including FAQs and further links can be found at www.nationalmortgagesettlement.com.
Contact my office today and set up an appointment to discuss your options and how this settlement could affect you.
Foreclosure Mediation - New alternative for homeowners in distress!
The Foreclosure Mediation Program
New alternatives for homeowners in distress
Details
As of Friday, July 22 The Washington State Foreclosure Fairness Act Mediation Program began. Washington is the third non-judicial foreclosure process state in the country with a program designed to help homeowners resolve and find solutions to foreclosure proceedings with their lender or servicer. To read the actual law, click here.
Funding
The Foreclosure Fairness Act requires lenders and servicers conducting more than 250 foreclosures in Washington State in the previous year to pay $250 for each Notice of Default issued. The fee provides funding for free homeownership counseling, attorneys to prosecute violations of the Washington Consumer Protection Act and foreclosure prevention outreach.
Exempt Lenders
Some lender are exempt from The Foreclosure Fairness Act because they have certified under penalty of perjury that they were not the beneficiary of deeds of trust in more than 250 trustee sales of owner-occupied residential real property between January 1, 2010 and December 31, 2010. To see a list of exempt lender click here.
Foreclosure Mediation Timeline
1. Lender must notify homeowner by letter and telephone of the right to a 60-day window of opportunity for an in-person meeting before lender issues a Notice of Default. The notice must also indicate the homeowner�s right to request mediation through a housing counselor or attorney. Mediation may be requested up until the Notice of Trustee Sale is issued.
2. Mediation is requested ONLY by a housing counselor or attorney sending a request for mediation to the Department of Commerce. The homeowner does not have to establish or prove reasons for the request. Once mediation is requested, the foreclosure process stops until mediation is completed.
3.. Within 10 days of receiving the request for mediation, Commerce will notify all parties that mediation has been requested, select a mediator, and notify the parties of documents that are required for the mediation.
4. The mediation will be scheduled no later than 45 days after the mediator is selected, unless otherwise agreed. The mediator will set a time, date and place for the mediation 15 days before the mediation session. The homeowner may be represented by an attorney or other advocate such as a housing counselor. The lender must have a person with authority to modify the loan or negotiate an agreement either at the mediation or available by telephone.
5. At least 10 days prior to mediation session: Homeowner will prepare and exchange with the lender: a financial statement with current and future income information, debts and obligations, and last two years of tax returns. Lender will prepare and exchange with the homeowner: loan balance, an itemized list of fees and charges, payment history, net present value and loan modification inputs, and other required documents.
6. At the mediation, both the homeowner and the lender must participate in good faith. The mediator will encourage the parties to examine all options, including loan modification, to avoid foreclosure. Within seven days after mediation, the mediator will make a written certification of the results of the mediation and whether the parties participated in good faith.
7. The parties either come to an agreement (a loan modification or other alternative) or the parties do not come to an agreement, and the foreclosure process will proceed. If the lender does not mediate in good faith, the homeowner may be able to stop the foreclosure sale in court.
Eligibility
Homeowners who received a Notice of Default on or before July 22, 2011 and their owner occupied house has not yet been sold at foreclosure sale.
Homeowners who received the Notice of Pre-Foreclosure Options and requested mediation before the Notice of Trustee Sale has been recorded.
Cost
The homeowner is responsible to pay a $200 fee and the lender will pay a $200 fee for the mediation. The fee must be paid prior to mediation.
Help is on the Way!
Last Thursday Gov. Chris Gregoire signed into law a new bill giving homeowners the statutory right to sit down with their lenders and discuss modifying their loan.
In an effort to protect WA homeowners from foreclosure, under the new WA Foreclosure Fairness Act, lenders must now send to homeowners in default a letter explaining their right to a sit-down to discuss alternatives to foreclosure. If that letter goes unanswered, the bank must make three attempts by phone, and then send a certified letter before proceeding with the foreclosure process.
Lenders must conduct �a good faith review� of the homeowner�s financial situation and offer loan modifications, if possible. The new law allows a mediator to handle a negotiated agreement between the lender and homeowner.
The problem, as I see it, is that many homeowners will simply ignore these communications. After all, homeowners behind on their payments are already overwhelmed with harassing collection calls and letters and may simply view these as just another collection attempt by their lender and not their statutory right to mediate.
Some parts of the law are effective immediately and the entire House Bill 1362, aka the Foreclosure Fairness Act can be found here.
Click here to find out more about the Second Substitute House Bill 1362
