With the global COVID-19 pandemic, many people have suffered reduced income – for many, income has gone down to zero. The response from the U.S. Government has been substantial, and the CARES Act, enacted in March of 2020, provides relief for many taxpayers. The CARES Act also provides for COVID-19 mortgage forbearance for many borrowers, and we will explore how that works in this article. Please bear in mind that this is a very fluid situation. COVID-19 mortgage forbearance is new, and it’s rapidly evolving. What is true today may not be true tomorrow. Update May 19, 2020: the rules have changed in favor of those receiving forbearance. This article (and video) mention that conventional loan borrowers need 12 months in a row without a missed or late payment. The new guidelines say that if you have been in forbearance but have made at least 3 on-time payments since exiting forbearance, you can then refinance your mortgage or get a new one. See this article on CNBC. COVID-19 Mortgage Forbearance Presentation Video What is Mortgage Forbearance? Mortgage Forbearance is a temporary freeze on your mortgage payments. Your Loan Servicer Must Agree to the Forbearance. A Servicer is the Bank/Lender/Company that collects loan payments. What does Forbearance mean under the CARES Act? Borrowers are entitled to a temporary freeze of mortgage payments up to 180 Days – if you say have been impacted by COVID-19. No documentation is required to prove you have been impacted. Please know that many servicers will only initially offer you 90 days … Read More
Watch this informative loan modification video and learn how you can get your bank to give you a loan modification. While many people who do seek to get a loan modification are denied, a lot of people are successful getting their loan balance reduced, interest rate lowered, the loan recast, get a forbearance agreement, and a variety of other positive outcomes. In this video, mortgage expert Chick Donaldson explains the loan modification process. Watch this 7 Minute Loan Modification Video Mr. Donaldson begins the interview by explaining that a key to a successful loan modification is a good hardship letter, explaining to the bank why you can no longer afford to make payments on your loan. You’ll also need to show though how much you are able to pay – if you have no income whatsoever, or insufficient income, a bank will be unable to modify your loan on terms acceptable to them and will likely encourage you to do a short sale. If you are interested in pursuing a loan modification, you can download our Loan Modification Guidebook or our Short Sale Guidebook in the Homeowner Resources section of our web site.
The California Department of Real Estate (now the Bureau of Real Estate) put out a guide to foreclosure for California homeowners in 2010. It’s about 70 pages long, and contains a wealth of information for anyone facing foreclosure in California. The guide includes information on a wide array of topics: Notice of Default (NOD) Notice of Sale Modify or Restructure the Terms and Payment Schedule of Your Existing Loan Refinance: Pay Off Your Loan with a New Loan on Better Terms Pursue a “Short Sale” Sell Your Home to Access the Available Equity Offer a “Deed-in-Lieu of Foreclosure” to Your Lender rather than Proceed with a Foreclosure Sale The Foreclosure Procedure Timeline Post-Foreclosure Option for the Former Homeowner Resources from Federal, State, and non-profit agencies The guide can be downloaded using this link. They have also provided a version in Spanish, which can be downloaded here.
This morning I received an email from Bank of America that there is still Transition Assistance for Distressed Homeowners in California. Not all homeowners will qualify, but for those who do, it can be a real blessing. Here’s the email: Distressed California Homeowners May Qualify for California’s Keep Your Home California Transition Assistance Program (TAP). If your financially distressed California clients can no longer afford their homes and are pursuing a short sale or a deed in lieu of foreclosure, they may be eligible for financial help with their relocation to alternative housing. The funds come from the Transition Assistance Program (TAP), part of the Keep Your Home California Program. The state of California is providing up to $5,000 in transition assistance to qualified homeowners who can no longer afford to stay in their homes. You can help by advising your distressed clients that they must: Apply for the funds through their state’s website or by calling 1.888.954.5337. Maintain their property until their house is sold or returned to the lender via a negotiated deed in lieu of foreclosure. For qualified homeowners, these state funds may be used in addition to any other transition assistance that the homeowner may receive by participating in the Federal Home Affordable Foreclosure Alternatives (HAFA) program or in any other pre-offer short sale program. To learn more about the Transition Assistance Program’s guidelines, and how your clients may qualify, please visit that program’s website at keepyourhomecalifornia.org. You can also direct your clients to call 1.888.954.5337 and identify themselves as Bank of … Read More
While you can get a good deal on a property by buying it as a short sale, I posit that you are not necessarily getting a “good deal” – you are probably getting a fair deal, given the state of the market. … The thing with short sales is, the lender gives short sale approval, with a close of escrow to be on-or-before a certain date – and they typically don’t give you very much time to close escrow once they have given you approval, as was the case here. To cut a long story short, we were ultimately able, by hook and by crook, to get the unit certified as “asbestos free” in time such that the lender could fund the loan and close escrow in time to stay within the time period permitted by the short sale approval letter. We had to kind of cheat here, actually – my client got the testing company to do a simple field test, because if we’d have had to wait for the actual electron-microscope lab test, we wouldn’t have made the cut-off date.
There are short sale gurus out there all over the place selling seminars and CDs and books to Realtors on how to do short sales – I spent a weekend in one, and actually it was pretty interesting.
…Realtors are getting burned out by loss mitigation departments who are uncooperative, buyers are turned off by the uncertainty and delay that is involved with a short sale, and of course, sellers are often totally burned when they cannot complete their short sale and get foreclosed on, which is happening a couple of times per week at least in Watsonville right now.
…It helps if the seller has already had an offer that maybe didn’t come together, and that they are in contact with the lender’s loss mitigation department and have perhaps worked out an agreement with them already, and you can just walk in, furnish the missing contract, cash, and loan, and be on your way. Other than that, you’re probably much better off finding a nice bank-owned REO property, or (suspend your disbelief here, just for a second) buy a house from a buyer who isn’t totally distressed and facing foreclosure.