If you are a regular reader of my blog, you may recall an article I wrote last year ‘Beware of Short Sales without a Waiver of Deficiency’.  One of the major issues with deficiency judgments in many cases was that the banks had years to file for a deficiency judgment.  Waiting until the (former) homeowner recovers financially to sue for a deficiency judgment certainly raises the lenders’ chances of collecting on the deficiency, but it also creates a situation where many Americans can never quite recover financially from this crisis.

A recent House Resolution, called the Fairness in Foreclosures Act of 2011 or H.R. 3566, would put a one year limit on deficiency judgments, preventing the banks from going after homeowners years later and prolonging the damage.  This bill also provides protection for ‘low income’ households.

Rep. Ed Towns, D-N.Y. introduced the bill earlier this month.

“At a time when so many Americans are out of work due to the excesses of the financial industry, we must protect those who are unable to protect themselves.  I am fully committed to offering relief to struggling homeowners across the country,” Rep. Towns stated in a release.

“A deficiency judgment after foreclosure seems to be one of the greatest injustices that occur to homeowners after they have gone through the arduous foreclosure process,” “Not only are they behind by thousands of dollars on their mortgage payments and facing public auction of their houses, the ordeal may continue indefinitely.”

California and Nevada currently have laws in place protecting homeowners from deficiency judgments, but in some states banks have as long as 6 years to go after homeowners for a deficiency.

This Bill would be a great help to homeowners suffering in this tough economic climate.  Unfortunately, another concern is that the banks may issue a 1099 to homeowners for the deficiency, allowing the IRS to go after homeowners for the income taxes on the difference.  The IRS considers any forgiven deficiencies a gift from the bank and will charge former homeowners income taxes on the shortfall.

There is currently a Mortgage Forgiveness Debt Relief Act in place to help homeowners in this situation, but it is due to expire December 31^st, 2012.  Extending this act may be an important addition the Fairness in Foreclosures Act to truly help homeowners in need.

If you have any questions regarding a short sale, foreclosure or concerns about a deficiency judgment, please don’t hesitate to contact me for a consultation.

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With home prices in decline over the past 4 years, and still falling in most markets, many people have fallen victim to foreclosure.  For some, the decision to let a home go to foreclosure can feel like a relief after a long struggle and failed negotiations with lenders.  Unfortunately, that sigh of relief may be a little too soon.

Most homes that are lost to foreclosure are underwater on their loans, meaning that the home value has dropped far below the existing mortgage loan amount.   When homes are sold in foreclosure, they often sell for substantially less than the loan, leaving the banks holding upwards of $100,000 on the loan.

More and more, banks are suing homeowners for the deficiency, or balance due on the loan after the foreclosure sale.

Rather than helping struggling homeowners with a fresh start, lenders are trying to squeeze even more money out of distressed borrowers.  These days, foreclosure may mean losing your home and still finding yourself burdened with a large debt, with interest building each month, and nothing to show for it.

A recent article in the Wall Street Journal highlights several homeowners in Florida who have found themselves in similar situations after losing their homes to foreclosure.

“Ray Falero, a truck driver whose Orlando home was foreclosed on and sold in August 2010, says he thought he was hallucinating when, months later, he opened the door and saw a sheriff’s deputy. The visitor handed him a notice saying he was being sued for $78,500 by the lender on the home purchase, EverBank Financial Corp., of Jacksonville, Fla.

“’I thought I was done with this whole mess,’ he says.”

This has also spurred increased business for debt collectors.  Increasingly, banks are selling debt to collection agencies, who then file suit against borrowers for the deficiency.  Lenders have up to 5 years to file for a deficiency judgment, leaving distressed former homeowners time to recover and therefore able to make payments.  In the meantime, debts grow at an average of 8% interest rate.

There are better options for homeowners out there facing the possibility of foreclosure.  One option may be to consider a “short sale” on your property.  An experienced attorney can help to navigate these troubled waters, and to protect you from unexpected lawsuits and deficiency judgments in the future.  I specialize in short sales, foreclosures and distressed real estate situations such as these.  Please, contact me before you lose your home, I am here to help.

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Many homeowners in the US find themselves tied to properties with negative equity.  As a matter of fact, nearly 11 million properties, or 22.5% of homes in the US, are worth less than the underlying mortgages.

Further complicating problems is that many homeowners in this situation also find themselves paying above market interest rates on their homes.  As a matter of fact, 3 out of 4 homeowners with negative equity in their homes are paying well above current market interest rates, putting them in a very precarious financial situation.

Negative equity is preventing many homeowners from refinancing or selling their homes, leaving them strapped to a high interest mortgage and paying more each month than they should be, for a home that is no longer worth the remaining balance of the mortgage.

According to CoreLogic, nearly 28 million mortgages are at above market interest rates.  Unless the Obama administration relaxes or eliminates negative equity restrictions on Fanny Mae and Freddie Mac loans, homeowners with negative equity will continue to pay well above current interest rates.

Some analysts claim that the housing market is still falling, expecting prices to drop another 5% at the beginning of 2012.  This will further impact the number of homes with negative equity, pushing the number of homes with mortgages that are higher than the equity owned to above 15 million homes.

Economists consider high mortgage payments on homes that are “underwater,” or worth less than the debt owed on them, to be more likely to lead to foreclosure, according to an article in the Seattle Times.  These homeowners can end up feeling hopelessly trapped by the bad decisions made during the boom years.

There are, of course, better options to consider before allowing your home to go into foreclosure.  It’s always a good idea to consult an experienced real estate attorney for advice before making any decisions.

A short sale can be a good option for both borrowers and lenders, if transactions are handled properly; ultimately saving all involved the headaches and costs of foreclosure, and lessening the blow to your credit score as well.

Our office specializes in short sales, working with both buyers and sellers, to avoid the frustrations often encountered during the short sale process and provide positive results for all parties.

If you find yourself strapped to a high interest mortgage on a property with negative equity, or are considering a short sale for any reason, please give us a call.  We have the experience to answer any questions you might have.

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There has been disagreement among those in the real estate business (and in the media) recently about whether short sales are a good thing or a bad thing. Anyone new to the process and looking for information can easily become confused by the conflicting reports available in the news and on the internet.  Even the opinions of real estate agents can vary drastically depending on what their past experiences may have been.

Those who feel that the short sale process is broken may have experienced unnecessary delays and frustrating miscommunications with lenders.  Many claim that “Instead of helping struggling homeowners who need to sell and willing homebuyers who want to buy, lenders have created manmade roadblocks that have caused real estate gridlock and hindered a desperately needed housing recovery.”

On the other side of the coin, however, you find many homeowners for whom the short sale option has been a godsend. This article from CBS News tells the story of Suzette Parris, a homeowner in New York who was saved from losing her home to foreclosure by getting her bank to agree to a short sale instead.

The truth is that banks generally prefer a short sale to a foreclosure as well. A recent article from NuWire Investor reveals that “While significant losses may be incurred in both foreclosure and short sale scenarios, the overall negative financial impact of short sales is typically less than that of foreclosure. In many cases short sales represent the best way for lenders to minimize their overall losses. In general, all parties fare better when a foreclosure is prevented.”

It seems that the best way to avoid a bad short sale episode is to enlist the help of an advisor with plenty of short sale experience under his belt. My own background with short sales has been that each individual sale will be different; and while some short sales are certainly easier than others, every short sale will pay off in the end if you just stick with it.

This is why I’ve set up my own practice to specialize in short sales. With my streamlined process I am able to easily and effectively work on multiple short sales at one time.  I work with real estate agents to ensure they get the full 6% commission they deserve and help buyers and sellers navigate the short sale process to avoid frustration and achieve the greatest benefit possible.

I know from experience that with patience and attention, short sales can provide positive results for all involved. Please contact my office if you are involved in a short sale, or if you have any questions about whether a short sale might benefit you.

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With so many foreclosures happening around the country, homeowners aren’t the only ones affected—home renters find that they are being hit almost as hard when the properties they rent are foreclosed upon and bought up by new owners. The experience these tenants have during the foreclosure process varies, but all of them worry about the uncertainty of a new landlord, and wonder about their rights as tenants when the landlord they’ve known for months (or sometimes years) suddenly disappears.

The first thing renters need to know is that renters do have rights. This article on the Nolo website explains that the Protecting Tenants at Foreclosure Act of 2009 ensures that tenants of foreclosed properties are protected. “This legislation provided that leases would survive a foreclosure — meaning the tenant could stay at least until the end of the lease, and that month-to-month tenants would be entitled to 90 days’ notice before having to move out (this notice period is longer than any state’s non-foreclosure notice period, a real boon to tenants).”

The 2009 law applies to ALL properties—apartments, condos, single family homes.  It even applies to tenants in rent controlled properties. “Tenants who live in cities with rent control “just cause” eviction protections are also protected from terminations at the hands of an acquiring bank or new owner. These tenants can rely on their ordinance’s list of allowable, or “just causes,” for termination.” This is an important point for many New York renters.

The only exception to this rule is if the new owner of the foreclosed property intends to live in the property.  Under these circumstances, the buyer may terminate the lease, but is required to give no less than 90 days notice to the existing tenant. This may still be disappointing to renters, but as the article points out, a 90 day notice period is “longer than any state’s non-foreclosure notice period,” and is “a real boon to tenants.”

Of course, these new protections don’t necessarily ensure that the foreclosure and transfer of ownership will be smooth sailing for tenants.  The most common complaint from renters is that once a property is in (or has gone through) foreclosure it becomes almost impossible to get a response to maintenance requests. “If the bank becomes the owner, it may pay a servicing company to handle the property. But don’t expect close attention — these companies are focused on financial matters, not mundane things like maintenance.”

In more severe cases, tenants won’t even be aware that the property is being foreclosed upon until after the fact—sometimes long after the fact.  It is not unusual to hear stories about tenants who, unaware that the property had changed hands, continue paying rent to the old owner for months before they are notified of the change of ownership.

But perhaps the most drastic stories are stories like that of Pamela Lewis in Jacksonville Florida; stories about foreclosed properties, or properties in-between owners, which are fraudulently rented out without the knowledge of the actual owner. This is an extremely unusual case, but with so many foreclosed properties being bought up by banks which simply don’t have the time or manpower to attend to each one, the idea of a fraudulent lease is not impossible to imagine.

All of this only goes to show that renters in today’s market need to be especially cognizant of their rights—and especially vigilant about the terms of their leases. If you are a renter don’t be afraid to ask for help in navigating these turbulent legal waters; the help of a professional in reading and understanding a lease can be immensely helpful, and when maintenance requests go ignored the attention of a knowledgeable attorney can sometimes get a response more quickly than repeated requests from a tenant.  But most importantly, if you feel you are being wrongly evicted, or worry that your new lease may be fraudulent, don’t hesitate to contact me immediately. Waiting only eats up valuable time, and makes it that much harder to ensure that your rights as a renter are protected.

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