Posts Tagged ‘realtor’
SHORT SALES, FLORIDA ASSOCIATION OF REALTORS AND SELLER/REALTOR SHORT SALE LIABILITY
Author: Matthew D. Weidner, Esq.
Realtors across the state are exposed to massive liability every time they have consummate a short sale transaction because the previous version Short Sale Addendum form prepared by the Florida Association of Realtors completely ignores the liability faced by homeowners for a deficiency judgment.
I first altered the Realtors I work with and the Florida Association of Realtors to this problem shortly after I started seeing the prior addendum over a year ago, and it appears that they have finally accepted this message. The attached Short Sale Addendum, revised in June 2010 includes the exactly language that I have been directing my Realtor clients to use. For every Realtor and seller under contract, this addendum should be replace the prior contract that is part of the transaction
Short sales still present massive liability for all parties and it is absolutely critical that sellers and all agents involved in these transactions obtain the advice of an experienced foreclosure defense attorney. Review my blog and contact me directly for more information about this important issue.
HAMP Modifications Not Working! HAFA is the Answer!
Author: Matthew D. Weidner, Esq.
Thousands of homeowners struggle to keep current with their mortgage obligations and foreclosures continue to be filed against them in record numbers. In response, the Obama administration announced the HAMP mortgage modification guidelines which provided directions lenders were required to follow in determine who was eligible for modification.
The problem with the HAMP modification program is the guidelines are too restrictive and not enough homeowners are able to qualify for the program. A related problem is lenders and servicers are totally unprepared to effectively process the applications for modification in the first place. A fact which is admitted in a report recently issued by the Government Accountability Office. (No word on how to get lenders/servicers to be more effective or efficient in this area so the nightmare continues.)
HAFA- The Home Affordable Foreclosure Alternatives Program
This new program provides alternatives to homeowners who do not qualify for a HAMP modification and offers financial incentives to lenders who offer this new alternative to homeowners. A lender must first determine that a homeowner does not qualify for a HAMP modification, then the lender may offer the homeowner one of the HAFA alternatives like a deed in lieu (where the lender allows the homeowner to deed the property back to them) or a short sale (where the lender agrees to accept less than what is owed on the property.) Both alternatives require the lender to release the borrower from any further liablity on the note. The program has an effective Date of April 10, 2010, but lenders may elect to apply the program guidelines earlier. Key components of the program are:
- Complements HAMP by providing alternatives for borrowers who are HAMP eligible.
- Utilizes borrower financial and hardship information collected in conjunction with
HAMP, eliminating the need for additional eligibility analysis. - Allows the borrower to receive pre-approved short sale terms prior to the property listing.
- Prohibits the servicer from requiring, as a condition of approving the short sale, a
reduction in the real estate commission agreed upon in the listing agreement. - Requires that borrowers be fully released from future liability for the debt.
- Uses standard processes, documents and timeframes.
Provides financial incentives to borrowers, servicers and investors.
In order to qualify for this new program, the loan/borrower must meet the following criteria:
- The property is the borrower’s principal residence;
- The mortgage loan is a first lien mortgage originated on or before January 1, 2009;
- The mortgage is delinquent or default is reasonably foreseeable;
- The current unpaid principal balance is equal to or less than $729,7501
; and
- The borrower’s total monthly mortgage payment (as defined in Supplemental Directive09-01) exceeds 31 percent of the borrower’s gross income.
Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days of the date the borrower:
- Does not qualify for a Trial Period Plan;
- Does not successfully complete a Trial Period Plan
- Is delinquent on a HAMP modification by missing at least two consecutive payments; or
- Requests a short sale or DIL.
This new program offers additional alternatives for homeowners but taking advantage of the program and determining who fits within its guidelines will take some time to figure out. For more information on HAMP/HAFA, contact Matt Weidner at www.mattweidnerlaw.com
5 Critical Things Realtors Need to Consider In This Market
Author: Matthew D. Weidner, Esq.
1. Title Underwriters Are Going to Go Bankrupt
For as long as any of us can remember, we paid little attention to the title underwriter that was issuing title insurance right? Well those days are long gone. All of the title underwriters are under extreme financial pressures caused by decline in new premiums and claims on old policies. The vast majority of new policies being written are being written over foreclosure properties, REO’s and other properties that have a much greater risk of hidden problems and title claims. Because of this we can expect extreme pressure on these companies and some just will not make it in the long run. To protect your client, you need to take an active role in considering who will close your deals and you should go the extra step to confirm the title work with your agent.
2. You Must Take A Much More Active Role In Your Closing
The days of turning your contract over to the title company then waiting for your closing date are long over. You need to be very proactive with your title agent, making sure that all bases are being covered and that all conditions and problems are being actively resolved from the moment the contract is signed. The days where your involvement in closing was limited to reviewing the HUD when you arrived at the closing are long gone. Develop a strong working relationship with your title agent and be actively involved in every step of the process.
3. Make Sure Your Listing Agreement and Sales Contracts Reflect The New Closing Realities
In previous postings, I have described where the FAR/BAR Short Sale Addendum is deficient, does not adequately protect sellers and may lead to complaints and litigation against realtors. The reality is that every contract, from the listing agreement to the sales contract should be modified to reflect the inevitable delays, miscommunications and problems that are now a part of every closing. If you do not, you can expect complaints and problems at some point in time.
4. Know Your Clients and Their Situation
Every listing agreement should contain explicit instructions that your client must notify you in writing if they are served with a foreclsoure lawsuit. If they are served with a foreclosure suit, they must retain a local attorney who can properly defend the foreclosure. Defending the foreclosure creates the space you and your clients need to help effectively negotiate a sale. If your client fails to respond and a default is entered against them, you lose important negotiating power against the lenders.
5. Know All Parties That Are Involved in Your Closing
Clients these days are approached by all sorts of individuals and businesses who are offering to help them and in some cases take advantage of their situation. Florida recently passed one of the toughest consumer protection statutes that makes most of these activities illegal and which subjects all parties involved in such transactions subject to penalties and fines. You may be surprised at all the activities and made illegal, but as the professional involved in the transaction, you are responsible to know these details and take steps to protect your clients! The text of the statute can be viewed here keep in mind that the language is drafted so broadly that many activities that were once permissible are now illegal.
These are challenging times in the industry and you need to work harder than ever to protect your clients and yourself. Make sure you’re working with an attorney who knows this market and who can properly advise you.
5 Things Realtors Need To Know in This Tough Market
Author: Matthew D. Weidner, Esq.
1. BEWARE THE FAR BAR SHORT SALE ADDENDUM!
The existing FAR/BAR short sale addendum is deficient in many respects but one section in particular poses real risks for real estate agents ad brokers who encourage their clients to sign the addendum as part of a sales contract. Due to a glaring oversight in the language contained within the addendum, a situation could develop that will guarantee you will be faced with an unhappy client. In the worst case scenario, you could be subject to a complaint or litigation! Don’t sign another acceptance until you find out what this crucial problem is!
2. BEWARE THE SHORT SALE “FLIP” TRANSACTION!
It’s no secret that the only real action in this challenging economic environment are short sale transactions. Many agents are either knowingly or unknowingly getting involved in “flip” transactions where a second transaction for a higher price is on the table immediately behind the first transaction. You need to be aware that in most cases, these transactions are fraught with liability for all parties involved and as the licensed professional, you’ve got the most to lose.
3. BEWARE OF PROVIDING YOUR CLIENTS LEGAL ADVICE!
If a client is behind on his mortgage they will look to you for advice. Should they stop paying? What are the consequences of not paying or of a short sale? What should they do if they get served with foreclosure? You risk serious consequences for attempting to answer any of these questions and you will almost certainly be subject to liability if anything goes wrong. Don’t make the mistake of crossing the line between trusted sales advisor and providing legal advice. It complicates and interferes with the relationship you have worked to build and may work against getting your deal closed.
4. CLIENTS IN FORECLOSURE ABSOLUTELY MUST HIRE AN ATTORNEY!
So you’ve got a listing that you’ve been working on for days, weeks or months and you find out a foreclosure case has been filed against them…what should you do? The most important thing you can do to protect your client’s interest in the property and your interest in the closing is to insist that your client hire an attorney. Even if you’ve got a contract on the table or feel like you can get the home sold before a foreclosure sale occurs, you cannot risk the possibility that this might not happen. Only an attorney properly licensed in the state can represent your client and the most effective attorney is one who practices before the local judges all the time.
5. BEWARE OF LOSS MITIGATORS, “SHORT SALE EXPERTS” AND OTHERS
Florida’s Foreclosure Rescue Fraud Act makes it a crime and subjects parties to fines of up to $25,000 for any party who takes any money or who engages in virtually any activity on behalf of a homeowner who is in foreclosure. This law is very broad and applies to just about every conceivable interaction with a homeowner in foreclosure. Don’t risk getting drawn into the wave of prosecutions and enforcement actions that are coming…carefully consider any party involved in your transactions and do not associate with parties who may be violating the Act.
These are tough and challenging times for everyone…protect yourself and your clients…work with an attorney who knows how to do both!
Foreclosure and Flipping Fraud in Florida
Author: Matthew D. Weidner, Esq.
A recent article in the Sarasota Tribune detailed the newest chapter in the mortgage/foreclosure crisis, which involves homeowners “selling” their homes to a purchaser who turns around and immediately to a third party after skimming off a significant profit. The transaction only works when the lender agrees to a payoff which is less than owed on the property. After the flipper recieves the reduced payoff, he’s free to market and sell the home for a price greater than agreed to by the lender.
The obvious losers in the transaction are lenders who accept the reduced payoff and the homeowner who still may face liablity on the balance of the mortgage. To read the article, visit the Sarasota Tribune here.
For more information, contact Matt Weidner at www.mattweidnerlaw.com.
Short Sales and Legal Pitfalls for Realtors
Author: Matthew D. Weidner, Esq.
1. Misrepresenting tax consequences.
Although it’s true that the federal government passed a law in 2007 directing the IRS not to count mortgage debt forgiven by a lender as income, the provision is limited. It applies only to purchase money; it doesn’t apply to debt on a cash-out refinancing, and it doesn’t apply to second homes. There’s also a dollar limitation, albeit a generous one ($1 million for married couples filing separately, twice that for joint filers). “A lot of associates are telling people there are no tax consequences,” says Lance Churchill, a short sales specialist and trainer who operates in Boise, Idaho, and San Diego. “But it’s a limited law and you just need to be accurate about it.”
2. Misrepresenting how secondary debt is treated.
Practitioners might mistakenly tell sellers that all the house debt is forgiven once the primary lender approves a short sale. But that might not be the case, Churchill says. Holders of second deeds of trust don’t typically forgive the debt. More commonly, they accept a partial payment, like $2,000; and rather than write off the balance, they sell the balance to a collection agency for another few thousand dollars. In many states, these second loans are recourse, so sellers can be caught by surprise when the collection agency contacts them a year later seeking payment of the debt.
3. Acting on inappropriate lender requests for seller contributions.
It’s not uncommon for lenders to go after money that the sellers have in the bank or in a retirement account before they approve a short sale request. They’ll sometimes seek to put the onus on the real estate practitioner to get sellers to sign over a note for the amount they have in the bank as a condition of sale. But in states where mortgage debt is nonrecourse, lenders have no right to the money, and associates that suggest otherwise to the sellers might be later sued for negligence.
4. Breaching fiduciary duty.
Investors are increasingly executing what’s known as a “double close and flip,” a type of short-sale transaction that can leave practitioners exposed to irate sellers who say they got a raw deal. Here’s what typically happens: Investors insist on handling short-sale negotiations with the lender, freeing up their real estate practitioner to concentrate on finding a buyer. During the negotiations, the investors—often without the practitioner’s knowledge—talk the sellers into turning over the deed. Once the practitioner finds a buyer, the investors do a double closing, buying it themselves at a deep discount and then flipping it to the buyer at the listed price, making money on the spread. “The seller might feel he got less than he would have had the associate done his job and not handed over negotiations to the investor,” says Churchill.
5. Providing poor oversight of a loss mitigation company.
Companies that specialize in managing short sales promise to focus on the complicated details of the short sale, freeing up practitioners’ time to find buyers. But if you take a hands-off approach, you can be charged with negligence if a deal falls apart. “A lot of these companies are fly-by-night or have one person who’s overworked,” Churchill says. “Practitioners are coming back a month later to find no one’s even opened the file.”
6. Lacking the required license to undertake loss mitigation.
It often makes sense for practitioners to take a two-pronged approach with clients facing a difficult time paying their mortgage—first trying to help them accomplish a loan modification (for a fee), and then finding a buyer if a modification doesn’t work. But watch out. Depending on your state, you could need a specific license, sometimes called a credit repair license, to earn a fee for helping owners modify mortgage terms. Without having the right credentials, taking a fee for loan modification assistance could be a criminal offense.
7. Facilitating transactions not listed on the HUD-1 form.
It’s not uncommon for investors to offer incentives to sellers to move a deal forward, but lenders typically frown upon sellers who walk away with money when they’re supposedly taking a loss. Investors sometimes work around this limitation by offering to buy something from the sellers at an attractive price, such as a couch for $5,000. Associates who communicate these offers to sellers can get tied into charges of lender fraud because the deals may be deceptive.
