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FORECLOSURE AND SHORT SALES We are seeing more and more foreclosures in the housing market. Some Realtors® are trying to rework loans with the lenders or sell these homes with short sales; thereby saving a client from a really rotten credit score. Learn what these now common situations are, what's being said about both topics, and what we can do to help you, our clients.
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Tim and Nancy Schmidt Real Estate Brokers We know how to STOP a foreclosure and we know how to CURE a foreclosure! As soon as you miss a mortgage payment, get in touch with us so that we have plenty of the time needed to "cure" an eminent problem. Please call us NOW or use the e-mail form on our CONTACT US page and use the COMMENTS section to ask your questions or tell of your situation. We are at your service!
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Senate Bill Gives Foreclosure Rebates Senator Chris Dodd (D-CT) announced on CNN this morning that he is co-sponsoring a housing recovery bill that among other things will provide a $15,000 rebate to the purchasers of foreclosed properties. This will go a long way of motivating hesitant home buyers to get off the sidelines while helping spur demand for homes. As this begins to stabilize prices, it will help clear up some of the over-supply of foreclosed properties and will generally help reduce the over 9 month supply of homes for sale. On the other hand, we are concerned that this will not immediately impact sellers of existing homes as their sellers will be competing with builders who are offering incentives to clear their inventories and foreclosure rebates (or credits). Nevertheless, this still should help by getting hesitant home buyers to get back into the market. This will change momentum into one more favorable for real estate professionals. from an article from BUYERS USA RELOCATION 04/02/08
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Bush quietly signs bill giving foreclosure relief! Washington – President Bush on Wednesday signed a massive housing bill intended to provide foreclosure relief for 400,000 struggling homeowners and stabilize financial markets. Bush signed the bill without any fanfare or signing ceremony. White House spokesman Tony Fratto said the Federal Housing Administration would begin right away to implement new policies “intended to keep more deserving American families in their homes.” The measure, regarded as the most significant housing legislation in decades, lets homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than losing their homes. It also offers a temporary financial lifeline to troubled mortgage companies Fannie Mae and Freddie Mac and tightens controls over the two government-sponsored businesses. The House passed the bill a week ago; the Senate voted Saturday to send it to the president. Bush didn’t like the version emerging from Congress, and initially said he would veto it, but he withdrew that threat last week, saying hurting homeowners could not wait – and even blamed the Democratic Congress’ delays in action for forcing an imperfect solution. Article from the Grants Pass DAILY COURIER of July 30, 2008
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WHAT IS FORECLOSURE? Foreclosure is the legal process the financial institution having an interest on your mortgage loan can initate to take away your house if you are in default (missed payments). Foreclosures can be initiated by anyone who has a lien on your house, including your lender or the county (if you don't pay your property taxes). WHAT IS A SHORT SALE AND WHEN DO YOU USE IT? A Short Sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually the lender will accept the short sale to avoid the time and expense of a foreclosure. Financially the lender is actually ahead in a short sale. It is used when you have missed, or are going to miss paying your monthly loan payment amount. There are other ways to handle a foreclosure but it seems to be the most used method of curing the foreclosure. Be sure to talk to your REALTOR® or Lawyer about the other cures for foreclosure...don't just jump into a Short Sale. It does take a while longer for your REALTOR® to negotiate with your lender over the amount they will accept. Most Buyers, if they know ahead of time, will wait for the cheaper price of a SHORT SALE. from Roger Butcher "Short Sales Express"
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GLOSSARY15 Deed of trust or security instrument In Oregon, a debt is often secured by a deed of trust rather than a mortgage, which means there is a neutral third party called a trustee. If the borrower does not make the mortgage payments, The lender will instruct the trustee to sell the property to pay off the debt. Forbearance Lenders may be willing to work with you on a payment plan, which can temporarily help you until you are in a better financial situation if you are expecting funds from other sources such as settlements or tax returns in the near future. You would need to show documentation about the money you are anticipating. Judicial vs. non-judicial foreclosure A judicial foreclosure means the process of taking the house would go to a judge as a lawsuit against the homeowner. A non-judicial foreclosure does not go to court and is not heard by a judge. If your “deed of trust” document has a power-of-sale clause, the trustee can initiate a non-judicial process. Lien A hold or a claim placed on a property to secure the payment of a debt or other obligation. eclosure: You can avoid it Mechanic’s lien This type of lien can be placed by anyone who made an improvement or provided materials for your house. Subcontractors or laborers can place a lien on your house as well. Contact the Construction Contractors Board to learn about your rights. See the resources section of this publication. Note or promissory note This document, which you should have received when you closed your loan, has the details and conditions under which you borrowed the money to buy your house. The note includes the amount of money you borrowed, the interest rate, the amount of your payments, when they are due, the grace period, and late fees. Servicing disclosure This required notification provided by your lender or the holder of your loan will notify you of your rights when your loan is sold or transferred. The notification will give you contact information, including a toll-free number, if you have questions when your loan has been sold or transferred to another institution. This disclosure also includes information about what you can expect if you file a complaint or dispute with the company holding your loan. Truth-in-lending disclosure A document you should have received from your lender within three business days after you applied for a mortgage loan. In it you will find, among other clauses, when your payments are due, a grace period, if any, for late payment charges, and if your loan has a pre-payment penalty. from: Oregon Department of Consumer and Business Services, Division of Finance and Corporate Securities.
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Even the RICH Are Facing Foreclosure! Foreclosure is plaguing home owners in some of the wealthiest counties in the nation! Homes sold on the auction block this month for as much as $852,000, more than 4 times the median home price in the United States, and auction officials believe that even higher-priced foreclosures are in the pipeline. "Because of the financing that was possible, so many people bought the bigger house, the million-dollare house with the bowling alley or the tennis count outside," says Deborah Guzek, who works for a non-profit credit counseling service in Framington Hills, Michigan. About 40% of pricey homes that were bought last year were second homes or investment properties. Josh Rosener, managing director at investment research firm Graham Fisher & Co., says these homes are even more likely than others to go into foreclosure. There's a different underpinning and thought and relationship between the buyer and home, which is a unique feature of this credit cycle,' he says. Source: Reuters News, Walden Slew (03/29/07) Daily Real Estate News / March 30, 2007
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Rural Areas Hard Hit by Foreclosures Rural America hasn't been immune to the mortgage crisis. The housing Assistance Council, a non-profit that hleps build housing in rural areas of the country, has found that foreclosures are prevalent in small towns and sometimes are overlooked in surveys as being a major problem. Mobile and prefab homes make up for at least 15% for at least 15% of the nation's rural housing, and 3/4 of them were financed with installment or personal property loans rather than mortgage loans, according to the HAC. When owners default, it leads to repossession rather than foreclosure, and these defaults are not included in the foreclosure data. In small towns, even one or two foreclosed properties can have a big impact on the community, says James Pedrozo, a Mercer County, CA supervisor. "It's not just that property values go down, but also people lose their neighbors and their community," he says. Source: The Associated Press, Evelyn Nieves (04/03/08) Daily Real Estate News/ April 4, 2008
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EXTENDING THE LAW DAY OR SALE DATE OF A FORECLOSURE If you need additional time to sell the property or to redeem, then you may ask the court to reopen the judgment to extend the law day or sale date. You should remember that in extending the law day or sale date, the court may also increase the amount you will have to pay to redeem. To reopen the judgment and get an extension, you must file a Motion to Reopen asking the court to reopen the judgment and stating the reason for the request; that is, why you need more time to redeem. You should explain to the court precisely how and when you plan to redeem. The motion to reopen must be both filed and heard before the law day or sale date. There is normally a 2 week delay between when the motion if filed and when the court schedules it for a hearing. There is a fee payable to the Court Clerk whenever such a motion is filed ($70 as of this writing). On the day you file the motion with the court clerk, you will need to send a copy of the motion to the lawyers or everyone involved in the foreclosure. Finally, you must attend the hearing that the court will schedule. From the Oregon State website.
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Is Cancellation of Debt Income Always Taxable? Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve: Bankruptcy: Debts discharged through bankruptcy are not considered taxable income. Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets. Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception. Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income. The rules applicable to farmers are complex and the assistance of a tax professional is recommended if you believe you qualify for this exception. Non-Recourse loans: A non-recourse loan is a loan for which the lender's only remedy in case of default is to repossess the property being financed or used a collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences...
From the IRS, "Questions and Answers on Home Foreclosure and Debt Cancellation" at: http://www.irs.gov/newsroom/article/0,,id=174034,00.html
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