The Cassidy Team: North Shore Realtors » Short Sale VS Foreclosure

Home Affordable Foreclosure Alternative Program (HAFA)

Deborah — Tue, 02 Mar 2010 19:12:33 +0000

The Treasury Department recently released guidelines and forms for its new Home Affordable Foreclosure Alternatives (HAFA), which is part of the Home Affordable Modification Program (HAMP), designed to streamline and create incentives for short sale transactions for lenders and borrowers. This new program is effective April 5, 2010 and goes through December 31, 2012. HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline short sales and deeds-in lieu of foreclosure.

Eligibility: The homeowner must meet the following guidelines to be eligible for HAFA:

1. The property must be the homeowner’s principal residence;

2. The mortgage is a first deed of trust dated prior to January 1, 2009;

3. The loan is delinquent or a default is reasonably foreseeable;

4. The current loan balance is less than $729,750.00; and

5. The borrower’s total monthly mortgage payments exceed 31% of the borrower’s gross income.

Program Benefits: The HAFA program provides for the following:1. Allows borrowers to receive pre-approved short sale terms before listing the property (including the minimum acceptable net proceeds).

2. Prohibits servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6%).

3. Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

4. Uses standard processes, documents, and timeframes/deadlines.

5. Financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

For a more detailed look at the HAFA program, please visit the U.S. Treasury’s website at

: The HAFA program provides for the following:www.ustreas.gov.

: The HAFA program provides for the following:www.ustreas.gov.

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Foreclosure -vs- Short Sale

Deborah — Mon, 11 Jan 2010 01:45:29 +0000

This chart will show the difference between a Successful Short Sale and a Forelcosure;
and how each one will affect you:

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.	In some cases 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. In some states default can be reported as a foreclosures however the time a short sale instead of a foreclosure will affect a borrow is much less. A short sale’s affect can be a 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.	A Short Sale is not reported on a persons credit history. There is no specific reporting item for ‘short sale’. In most cases a loan is typically reported ‘paid in full, settled’ or ‘paid as negotiated’.
Security Clearances	Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in almost all cases clearance will be revoked and 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 in many cases is ground 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 in most cases will challenge employment.	A short sale is not reported on a credit report and is therefore not a challenge to employment.
Deficiency Judgment	In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment.	In some successful short sales it is possible to convince the lender to give up the right to pursuit a deficiency judgment against the homeowner.
Deficiency Judgment (amount)	In a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgment.	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.

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The Illinois Foreclosure Process

Deborah — Sun, 10 Jan 2010 18:20:05 +0000

Illinois Foreclosure Process
Average time in Illinois is 321 days
THE ILLINOIS FORECLOSURE PROCESS

Illinois is a judicial state requiring court actions to foreclose a mortgage. A typical foreclosure action requires anywhere between 210 to 270 days to completely take away the homeowner’s ownership of the property. An important point to remember is that the only way a bank becomes the actual owner of the property is when the entire foreclosure process takes place and a deed is issued to the bank. Until that happens, the borrower is still the legal owner of the property.
Below is a timeline of what typically happens from the time a borrower defaults on a note to when the bank acquires the property.

Pre-Foreclosure Process

• The borrower defaults on the promissory note. (The term “default” is defined in both the promissory note and the mortgage.)
• After default, either immediately or after a period of trying to work out the default, the lender is required by the terms of the mortgage and note to give a “Notice of Default” and acceleration letter to the borrower calling for the entire loan to become due.
• Before the foreclosure process begins, the lender orders a title search (called Minutes of Foreclosure) to see if any liens are ahead of the lender’s mortgage.

Court Process
• The lender files a Complaint to Foreclose Mortgage.
• The Complaint is served to the borrowers and any other defendants

All junior lien holders must be named as defendants in the Complaint to ensure title is free and clear of all liens at the time of the foreclosure sale. Keep in mind that property taxes and certain municipal liens cannot be extinguished through foreclosure. So lenders will closely monitor tax liens during default because a tax lien can jump ahead of a valid mortgage lien and terminate it when the tax redemption expires.
If a defendant can’t be located—Illinois allows a lender to serve through publication
The plaintiff (lender) records a Lis Pendens (notice of foreclosure) with the county where the property is located.
Upon being served, the defendant has 30 days to file an Answer with the court.
If the defendant fails to file an Answer, the court will enter an Order of Default.
If the borrower or other lien holders file an Answer contesting foreclosure, the parties can take the issue to trial.
If the defendants do not contest, then a Judgment of Foreclosure and Sale is entered. The Judgment includes the following:

The amount due (including principal, interest, attorneys’ fees, costs of filing/service, title expenses, paid taxes)
The redemption period;
Identification of the property;
Service and default against the defendants; and
The statutory foreclosure sale process.

Redemption Period

The borrower’s right to redeem the property ends:

7 months after the date of service of the Complaint if the borrower is living in the home,
6 months after the date of service of the Complaint if the borrower is not living in the home, or
3 months after the Judgment is entered, whichever is later.

To redeem the mortgage, the borrower must pay the entire amount as stated in the Judgment.
If the property is abandoned, the court can shorten the redemption period to 30 days after the Judgment is entered (the plaintiff would sign an affidavit stating an investigation was made to support the conclusion that the property is abandoned).

Sheriff’s Sale

The Sheriff’s Sale must occur after the redemption period.
Notice of the Sheriff’s Sale is published in a local newspaper in the county where the property is located once a week for 3 weeks (Cook County requires publication in two separate papers).
After the final notice of Sale is published, seven days must pass before the Sheriff’s Sale is held.
The highest bidder receives a Certificate of Purchase.
A Motion to Confirm Sale must be filed and the sale must be confirmed by the court.
After the court confirms the Sale, the Sheriff’s Deed is issued.
If the residence is occupied, there is an automatic 30-day stay of possession from the order confirming the sale. After 30 days, the county sheriff can evict anyone still living in the house.

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Help for America’s Homeowners

Deborah — Thu, 14 May 2009 22:41:12 +0000

This site will give you some very helpful information to find the help that you need

including a self assesment tool to see if you are able to qualify for this program

www.Makinghomeaffordable.gov

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