Mortgage Education Short Sales

The following is provided for information purposes only and is not intended as legal advice.

State Laws May Vary You May Have Other RightsYou May Have Other Duties

If you have questions regarding how mortgage loan delinquency and foreclosure may affect you, please consult legal and/or tax professionals.

Bad Things Happen to Good Homeowners

Hardship has no regard for social or financial status.

Foreclosure is a Lose-Lose Situation Mortgage company loses revenue Mortgage insurance loses premiums Mortgage insurance pays a claim Mortgage investor doesn’t collect principal Mortgage investor doesn’t collect interest Potential damage to property during foreclosure Foreclosure’s negative stigma results in lower value Lower property values have negative effect on real

estate market

Homeowner Loses the Most Foreclosure reported to credit agencies Late Payments reported to credit agencies Remains on credit report for at least 7 years Viewed negatively by credit lender, employers and insurance

companies Adverse credit rating may limit ability to get credit cards, mortgage

loans, consumer loans and other forms of credit Foreclosure may NOT relieve you of responsibility Insurer could bring suits against you

-Court order to pay balance-Reasonable attorney fees-Interest on judgment amount

Reportable income or loss to the IRS via 1099-A

Sample Foreclosure Timelines(amount of time it takes to foreclose on a property in each state)

Texas – 27 days Georgia – 37 days Florida – 135 days California – 117 days New Jersey – 270 days New York – 445 days

Turn It Into A Win-Win with a Short Sale Minimize the effects of foreclosure Mortgage company reduces time and work Mortgage insurer reduces time and work Mortgage insurer minimizes claim payment Mortgage investor saves time, work and money Additional potential damage to property during foreclosure

avoided No foreclosure’s negative stigma resulting in lower value No lower property values to have negative effect on the real

estate market

What is a Short Sale? A short sale is when a bank or mortgage lender

agrees to discount a loan balance due to an economic or financial hardship on the part of the homeowner. The homeowner negotiates with the bank’s loss mitigation department to sell the property for less than is owed on the mortgage. The lender has the right to approve or decline the proposed sale. If approved, the loan will be recorded as “paid in full” and will allow the homeowner to avoid foreclosure.

Your first step:

Call Customer Service

Get to the person who can help!

To Get to Loss Mitigation: Call 800 customer service number on your current

mortgage statement Do NOT enter loan # Do NOT give loan # Request “Loss Mitigation” from main Customer

Service Representative Loss Mitigation’s #1 goal is to return the loan to

current status and produce revenue. They are paid $500 per workout and $1,000 for successful short sales. It’s in their interest to help you!

Documentation Needed for the Lender*send copies, not originals!*

Hardship Letter – include all the details! Use this letter to win their sympathy. Go back to the very first instance where you had trouble paying your monthly obligations and start your story.

Hardship Documentation - It you have medical problems, include copies of hospital documents. If you’re getting divorced, include copies of separation papers, etc. Financial Form - It’s okay to show bad credit. You need to show that you have more expenses than money coming in – don’t leave anything out.

2 months bank statements – all accounts, checking and savings 2 years tax returns 2 months pay stubs Credit Report

How to Write a Hardship LetterThe hardship letter to the mortgage company written by

the homeowner should describe: Everything that has happened which has resulted in

their inability to make the payments or pay off the loan

Everything they have done to try to rectify the situation

The desired outcome of the homeowner (to stay in the home with a better mortgage or to move out)

Documentation continued: Appraisal, Broker Price Opinion, Market Analysis Repairs bids & photos – bank will require three bids

for each repair. Listing Agreement- synopsis from your Realtor if

already on the market; beginning list price, reasons why the home isn’t selling, etc.

Homeowner Authorization Letter (see next slides) Sales Contract Buyers Loan Approval Letter

What is a Homeowner Authorization Letter?

The Homeowner Authorization letter is a letter written by the homeowner to the mortgage servicer that gives the mortgage servicer approval to speak directly with a specific third party (i.e. your Realtor) about that particular loan.

Homeowner Authorization Sample

January 1, 2008

My Mortgage Servicer123 Main StreetBig City, NJ 12345

To Whom It May Concern:

I am working with Mr. E. Z. Sale who is a real estate agent with W.E. Sell Homes Realty to sell my property. I give My Mortgage Servicer permission to share information related to my property and its sale with Mr. E. Z. Sale. My property address is: 1 Nice Street, My Town, NJ 12345 and my loan number is 123456789. If you have any questions, please call me at 973-999-9999 after 5 pm.

Thank you,

Hap E. Homeowner

Don’t fall through the cracks! Don’t Hide from phone calls or letters – the bank is trying to help. They CAN Foreclose even if you ignore their attempts to contact

you. It is NEVER too late or too early - If you anticipate a hardship, call

and make arrangements before you miss payments, etc. Be persistent – follow up once or twice a week Banks have guidelines as to what they can work with – involuntary

hardships (fired) vs. voluntary hardships (quit) In this market, banks are making exceptions to these guidelines! Divorced Does Not Equal Release of Liability – if your ex-spouse

took possession of the property, you will need a quit claim deed and for the mortgage investor to send you a release of liability. Loss mitigation can help.

Other resources for help:

HOPE NOW is an alliance between counselors, servicers, investors, and other mortgage market participants. This

alliance will maximize outreach efforts to homeowners in distress to help them stay in their homes and will create a

unified, coordinated plan to reach and help as many homeowners as possible. www.hopenow.com

Real Estate Services TeamLois Johnson

ManagerReal Estate Services Group

Manage VAMS, REST (Client Program), & Affiliate Vendor ProgramsDirect: 704-285-6132

Toll-free: 866-896-7045

Jennifer Woodward Grace Meeks Real Estate Counselor Program Assistant Direct: 704-285-6123 Direct: 704-285-6134