Short Sale Pre-Listing Packet

Sandy Erickson Team

Short Sale Client Representation Program

Program Details:

Short Sale Seller will have initial consultation with attorney at Markve &

Zweifel to establish hardship and receive legal advice.

Short Sale Seller shall be entitled to contact with attorney via phone or email

for further advice regarding the short sale throughout the process.

Short Sale Seller and Agent shall have contact with legal staff as needed to

facilitate the short sale negotiation.

Attorney and legal staff will represent Seller in preparation of short sale lender

package and negotiation with the lender(s) to short sale approval and/or

settlement when applicable with lender as long as there is an active purchase

agreement on the property.

Legal staff will keep Seller and Listing Agent informed on a consistent basis as

short sale works its way through the lenders systems.

Attorney will consult with Seller regarding all terms of the short sale approval

letter provided by the lender(s).

Program Fees:

The initial consultation for Seller with an attorney shall be at no charge.

Legal fees charged to seller shall be $995 to $0 based on financial hardship as

determined by the attorney, and shall be payable when seller signs retainer

agreement. Retainer fee is fully refundable if Seller cancels retainer agreement

at any time prior to initial purchase agreement being submitted to lender(s).

Seller is not charged any additional attorney fees for the services whether short

sale closes or not.

In addition, legal fees charged from sale proceeds and only due upon successful

closing are $1545 when the seller’s property has one mortgage and $1940 when

the seller has two mortgages.

Upon successful closing, the listing agent agrees to contribute (as a transaction

expense) up to $500 toward unpaid portion of the settlement legal fees in the

event the stated fee is not paid in full from the proceeds of the sale.

Benefits to the Sellers:

Free legal counsel regarding short sale process and foreclosure avoidance.

Referrals to tax specialist or bankruptcy attorney when applicable.

Legal counsel regarding financial information provided to lenders(s).

Timely updates throughout the process.

Negotiations of settlements when applicable based on lender(s).

Negotiation of terms of the short sale approval letter(s).

Legal guidance regarding the terms of the short sale approval and advice on

any possible occurrences that may arise after the closing.

The ability to speak with confidentiality to people who understand your

situation.

For more information regarding additional short sale counseling in your

area, visit www.dontborrowtroublemn.org or call 612-312-2020.

http://www.dontborrowtroublemn.org/

COMMON MISCONCEPTIONS REGARDING

SHORT SALES, FORECLOSURE AND BANKRUPTCY

1. If a property is foreclosed upon, borrower is released of all debt.

Borrower is only released of the debt if lender forecloses via advertisement. If lender

forecloses via litigation, then borrower is still responsible for the debt. If there is a second or

third mortgage, borrower is still responsible for those even after end of redemption period.

2. After the sheriff sale, the second mortgage is gone.

The second mortgage still has a lien on the property after the sheriff sale. The 2nd mortgage

lien only goes away at the end of the redemption period. Therefore, if seller is redeeming

from sheriff on foreclosing mortgage in a short sale, any other mortgage holder is entitled to

the proceeds and must be negotiated for release of lien via short sale.

3. If a borrower has filed bankruptcy, the second mortgage “goes away”.

Even if the debt on all mortgages on the property were included in the bankruptcy, it is only

the borrower’s obligation under the note that is forgiven. The lender(s) still hold their lien on

the property and must be negotiated and/or settled to obtain a release of that lien in order for

sale to go through.

4. If a short sale is approved and closed, seller doesn’t owe anything to the lender(s).

It depends on the terms and verbiage in the approval letter. The letter must state release of

lien AND satisfaction of debt (or similar verbiage) or seller is still responsible for the

deficiency balance.

5. If a short sale approval includes seller signing a promissory note, the seller can just “bankrupt”

it later.

Seller may not be eligible for bankruptcy. And even if they are, they may not be able to

bankrupt new note as they signed it with intention of never paying. New note may prohibit

bankruptcy or may not be able to be included in bankruptcy. Seller should discuss with

bankruptcy attorney before ever signing a new promissory note with that intent.

6. A seller can buy a new house while credit is still good and then just short sale the old house.

In order to obtain a mortgage on the new house, seller had to prove they can afford both

house payments. They cannot now claim they can’t afford payment on the old house,

therefore, in most cases, no hardship and short sale may likely be denied or approved with

terms at high cost to seller.

7. It’s good to submit any short sale offer to lender to “get the ball rolling.”

Short sale negotiations are buyer specific. In most cases, when bad offer is rejected and new

offer is submitted, the whole process starts over from the beginning.

8. A bad offer is better than no offer.

A bad offer still takes time to negotiate out. When bad offer is being worked on, showings

diminish. When bad offer is rejected or countered at terms buyer won’t accept, your seller is

now a couple of months closer to foreclosure and time has been wasted.

9. All short sale offers must be submitted to lender.

All offers must be submitted to the seller. Seller can reject any offer their agent feels will not

be approved by lender, therefore, it is not submitted to the lender for the reasons above.

10. A seller will have to pay income taxes if a 1099 is issued after short sale.

It is common through tax law and/or seller insolvency that seller will not have to pay taxes

on the income stated on the 1099. It is case by case and seller needs to consult tax

professional.

11. A seller won’t get a 1099 if property goes through foreclosure.

Seller may receive a 1099 on lender’s loss via foreclosure. Same rules apply as in #11.

NOTE: Each individual situation is different. This information is meant as a general guide but not a specific recommendation for your exact situation.

Seek legal advice to discuss the options in detail for your individual situation.

Foreclosure vs. Short Sale Homeowner Consequences

Issue Foreclosure Successful Short Sale

Future Fannie Mae Loan - Primary Residence (effective May 21, 2008)

A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.

A homeowner who successfully negotiates and closes a Short Sale will be eligible for a Fannie Mae backed mortgage after only 2 years.

Future Fannie Mae Loan - Non Primary (effective May 21, 2008)

An investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years.

An investor who successfully negotiates and closes a Short Sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.

Future Loan with any Mortgage Company

On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" This will affect future rates.

There is no similar declaration or question regarding a Short Sale.

Credit Score Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years.

Only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points if all other payments are being made. A Short Sale's effect can be as brief as 12 to 18 months.

Credit History Foreclosure will remain as a public record on a person's credit history for 10 years or more.

Short Sale is not reported on a credit history. There is no specific reporting item for 'Short Sale'. The loan is typically reported 'paind in full, settled'.

Security Clearances Foreclosure is the most challenging issue against security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a Foreclosure and is police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in most cases clearance will be revoked and the position will be terminated.

A Short Sale on its own does not challenge most security clearances.

Current Employment

Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A Foreclosure may be grounds for immediate reassignment or termination.

A Short Sale is not reported on a credit report and is therefore not a challenge to employment.

Future Employment

Many employers are requiring credit checks on all job applicants. A Foreclosure is one of the most detrimental credit items an applicant can have and can challenge employment.

A Short Sale is not reported on a credit report and is therefore not a challenge to employment.

Deficiency Judgement In many states, depending on the kind of the loan, the bank has the right to pursue deficiency judgment.

Depending on the type of loan some lenders who accept a Short Sale may be able to pursue a borrower for a deficiency judgement. In many successful Short Sales it is possible to convince the lender to give up this right as a part of the Short Sale.

Deficiency Judgement (amount)

In a Foreclosure the home will have to go through an REO process if it does not sell auction. In most cases this will result in a lower sales price and longer time to sell in a declining market. This will result in a higher possible deficiency judgement.

In a properly managed Short Sale the home is sold at a price that should be close to market value and in almost all cases will be better than an REO Sale resulting in a lower deficiency.

Each individual situation is different. This information is meant as a general guide but not a specific recommendation for your exact situation. Seek legal advice to discuss the options in detail for your individual situation.

Home Marketing Strategy

Provide a home staging consultation to prepare your home for sale Review the most common inspection repair requests to help alleviate post inspection problems Review market data to help ensure home is priced to sell Keep you informed so we stay ahead of the market to help guarantee the home sells Supply instructions regarding the showing process Furnish showing preparation checklist for your reference Discuss any specific points of interest you feel we should emphasize while

marketing your home (ie. updates, improvements, special features) Submit home details to MLS and check for accuracy on all internet sites Submit up to 18 quality photos to MLS within 2 business days Upload Sellers Disclosures and supplemental Update Sheet to MLS for buyer/agent reference Place lawn sign on property in a visible location (placed within about 5 days) Place lock box on your home for key(s) Provide professionally designed marketing material, home features and disclosures at your home Notify local real estate agent network regarding new listing Post your listing on top websites to provide maximum internet exposure Follow up with all prospective buyers Set up and record all buyer showings Email all showing agents for feedback and relay to you Stay in touch with agents who have buyers with potential interest Contact showing agents, local realtor network, and potential buyers about price improvements Provide you with your own personal website to keep you informed of my marketing and

service efforts (a hard-copy can be provided if requested) Keep you informed of new listings and sold properties with weekly MLS search emails Provide a thorough review of the market periodically Communicate weekly with you throughout the process Communicate regularly with Attorney Firm and relay information to you Follow all guidelines set forth by Attorney Firm to help ensure a successful short sale

I agree to the above marketing plan reviewed with Sandy Erickson.

____________________________ ___________________________ ____________Signature Signature Date

2680 Snelling Avenue N, Suite #100Roseville, MN 55113Phone: 651.269.3487Email: [email protected]: www.SandyErickson.com

Service and Performance Pledge

As your listing agent, I will address any special concerns or requests you may have throughout the

process, as well as assume responsibility for all of the following activities:

Execute home marketing strategy

Provide information regarding the showing process

Provide information regarding the feedback process

Provide knowledge, experience, and market statistics so you can make informed decisions

Evaluate buyer’s financial qualifications when an offer is received

Explain offers, answer your questions, and negotiate on your behalf

Arrange all necessary inspections and buyer’s appraisal

Follow through on buyer’s mortgage approval

Stay in close contact with attorney firm during short sale process

Coordinate the closing with you, the buyer, the lender and the title company

Return your phone calls or emails on the same day

(Please note: I am available on a limited basis weekends and after 5 pm daily)

Obtain answers to your questions and communicate progress in a timely manner

Strive to ease your stress!

My main objective is to professionally manage this process for you and alleviate your concerns.

Should I, at any point, fail to fulfill the commitments I’ve made, you may cancel your listing with

me. However, I would hope that you would bring any concerns to my immediate attention so we

can try to resolve them together. If a cancellation is necessary, a signed form is required and a

five hundred dollar cancellation fee will apply unless a retainer fee was collected up front. I

appreciate your confidence in me and look forward to helping you.

Thank you.

______________________________ _____________________________ ____________

Signature Signature Date

______________________________ _____________________________ ____________

Signature Signature Date

2680 Snelling Avenue N, Suite #100

Roseville, MN 55113

Phone: 651.269.3487

Email: [email protected]

Website: www.SandyErickson.com

FICO® Scoring Questions2010 National Interagency Community Reinvestment Conference2010 National Interagency Community Reinvestment Conference

Tom QuinnTom QuinnVice President, Global ScoringFICO

Confidential. The material in this presentation is the property of Fair Isaac Corporation, is provided for the recipient only, and shall not be used, reproduced, or disclosed without Fair Isaac Corporation's express consent.© 2010 Fair Isaac Corporation. 1

March 2010

Sample Credit Report“The Five Information Zones”

IDENTIFYING (PERSONAL) INFORMATION1 IDENTIFYING (PERSONAL) INFORMATIONI. Wishfor Credit 12 Lost Lane Sam’s Gas & Oil805 Main St. Somewhere, USA 66666 AttendantAnytown, America 77777 Date of Birth 1-25-56

SSN 888 88 8888PUBLIC RECORD (LEGAL ITEMS)

1

2 ( )9-06 Judgment $1000 Satisfied 3-07

COLLECTION ITEMS7-05 Collection $500

23

TRADE LINE (ACCOUNT) INFORMATIONIndustry Date Date High Balance Current Historical

Reported Opened Credit Rating RatingBankcard 6-08 3-89 $5,000 $0 Current 120+, 6 yrs ago

4$ , $ , y g

Auto loan 6-08 7-06 8,000 1,500 CurrentRetail 3-08 6-97 1,000 200 30 days

INQUIRIESDate Industry Date Industry7 01 08 B k 6 01 08 A t fi

5

© 2010 Fair Isaac Corporation. Confidential.2

7-01-08 Bank 6-01-08 Auto finance6-15-08 Oil company 2-07-09 Retail

FICO® Score Predictive Information

CONSIDERED NOT CONSIDERED

Tradelines

CONSIDERED NOT CONSIDERED

Age

Inquiries

Collections

Address

Employment

Public Records

p y

Income

GenderGender


What Drives a Consumer’s FICO® Score?

1. Payment History

35%5. Credit Mix

10%

35%

22. Outstanding

Debt30%

3. Credit History

4. Pursuit of New Credit

10%% Credit History Length15%

10%


Loan Modification Impact on Credit Scores

» The exact impact of a loan modification on a credit score depends on a number of factors:

Whether or not the lender chooses to report the loan modification» Whether or not the lender chooses to report the loan modification event to the credit reporting agency.

» What information is reported regarding the loan modification.The overall composition of the consumer’s credit report» The overall composition of the consumer s credit report.

» When present, negative information is considered in terms of severity, frequency, and recency.

» Generally speaking … » The impact on score will not be as noticeable for consumers whose

credit files already included missed payments/carry heavy debtcredit files already included missed payments/carry heavy debt loads.

» Conversely, the downward impact on score will probably be more noticeable on consumer files with no other delinquency/derogatory


q y g yitems and relatively low debt levels.

The Data Shows…

» Consumers with previous indications of not paying as agreed are more likely to demonstrate higher future risk.

M d f t i k ( t 12 th f i d ) f l» Measured future risk (recent 12-month performance window) for several population segments of interest.PopulationSegment Description Bad Rate

%Segment p %1 No mortgage, clean on other accounts 5.0%

2 No mortgage, has delinquency on other accounts 42.1%

3 Has mortgage clean on mortgage clean on all other accounts 2 9%3 Has mortgage, clean on mortgage, clean on all other accounts 2.9%

4 Has mortgage, clean on mortgage, delinquency on other accounts 18.9%

5 Has mortgage, delinquency on mortgage, delinquency on other accounts 49.6%

6 Has mortgage, delinquency on mortgage, clean on other accounts 17.5%

» Consumers with negative mortgage information experienced future bad t th t 6 t 17 ti hi h d t ith

Bad Rate = 90+ days past due on any credit obligation


rates that are 6 to 17 times higher compared to consumers with no negative items on file.

Mortgage Loan/Mod Workout Reporting

» Industry reporting guidelines (Metro 2) are created by the Consumer Data Industry Association.

Includes guidelines for different programs (Making Home Affordable» Includes guidelines for different programs (Making Home Affordable Program, Hope for Homeowners Program, Freddie Mac/Fannie Mae programs).

» Includes guidelines for trial period post trial period renegotiated or» Includes guidelines for trial period, post trial period, renegotiated or refinanced loans, loans in forebearance, short sale, foreclosure.

» Generally speaking … A d i di i i i i ll d» Any account status code indicating not paying as originally agreed and/or any indication of late payments in the mortgage obligation’s payment history profile will be considered negative by the score.

» Special comment codes reported by the lender may or may not be» Special comment codes reported by the lender may or may not be considered negative by the credit score.


Impact on Credit Score Can Vary

»Benecia. Note that their initial FICO scores are 100 points apart.First, let's give you a general snapshot of Alex's and Benecia's credit profiles:

» Let’s compare potential score impact for two consumer scenarios:

Alex has a FICO® Score of 680 Mary has a FICO® Score of 780 and:

yand:

Has six credit accounts, including several active credit cards, an active auto loan, a mortgage,

d t d t l

Has ten credit accounts, including several active credit cards, an active auto loan, a mortgage,

d t d t land a student loan and a student loan

An eight-year credit history A fifteen-year credit history

Moderate utilization on his credit card accounts (his balances are 40-50% of his limits)

Low utilization on her credit card accounts(her balances are 15-25% of her limits)

Two reported delinquencies: a 90-dayTwo reported delinquencies: a 90 daydelinquency two years ago on a credit card account, and an isolated 30-day delinquency on his auto loan a year ago

Never has missed a payment on any credit obligation


Has no accounts in collections and no adverse public records on file Has no adverse public records on file

Impact on Credit Score Can Vary

» What happens to score if one of the following scenarios takes place and is reported according to CDIA reporting guidelines?

John (680) Mary (780)

Bankruptcy posted 530-550 540-560

F l t t d 575 595 620 640Foreclosure on mortgage reported 575-595 620-640

Short Sale on mortgage reported 600-620 650-670

New 30-day late on mortgage is reported 600-620 670-690New 30 day late on mortgage is reported 600 620 670 690

Enters Loan Mod Trial Period* 580-600 620-640

Enters Loan Mod Trial Period** no change no change

Loan Mod Final** no change no change

Mort Loan in Forebearance** no change no change


Refinance (prev trade closed/new trade posted) minor change minor change* Any comment code reported is considered negative.** Any comment code that is reported is not considered negative.

Overtime, FICO® Scores can Rebound Back

» Delinquency and derogatory related items required to be purged after 7 years*

» As delinquency and derogatory information ages on the credit report, less points are lost for “recency related” characteristics (assumes no new late payments hit the file)

» Demonstration of other sound credit behaviors will help the score» Keep balances low » Make payments on time» Make payments on time» Only apply for credit when needed


FICO® Score Resources

» Wealth of credit scoring information at www.myFICO.com

» Consumer can also obtain their FICO score, explanation and punderlying credit report to understand their specific credit situation

» Other FICO credit educational brochures and learning aids» Other FICO credit educational brochures and learning aids available as well


THANK YOU

[email protected]

Confidential. The material in this presentation is the property of Fair Isaac Corporation, is provided for the recipient only, and shall not be used, reproduced, or disclosed without Fair Isaac Corporation's express consent.© 2010 Fair Isaac Corporation. 12

Short Sale Pre-Listing Packet

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Transcript of Short Sale Pre-Listing Packet