Loan Modification, Short Sales & Foreclosure FAQs

Loan Modification Questions

Q: I'm I eligible for the Home Affordable Modification Program (HAMP)?
Q: What is the Trial Period?
Q: Will my credit score be affected by accepting a trial period plan or loan modification?
Q: What happens if I am unable to make payments during the trial period?
Q: Are there programs to modify the 2nd Lien on my property?
Q: My credit is bad, am I wasting my time?
Q: Is it possible to get a reduction in my loan balance with a modification?
Q: What does your firm charge for your services?
Q: How long have you been helping homeowners obtain loan modifications?
Q: What areas do you cover?
Q: My Lender will not work with me. How can you help?
Q: What if I have an FHA loan?

Short Sale Questions

Q: What is a Short Sale?
Q: Do I need to be behind on my payments to do a short sale?
Q: What is a Strategic Short Sale?
Q: Do all Short Sales get approved?
Q: How much will it cost me to Short Sell my property?
Q: How does your company get paid? Who pays your commission?
Q: What areas do you cover?
Q: Will I have to pay past due property taxes if I do a short sale?
Q: What if I'm late or past due on my Home Owners Associations or HOA dues?
Q: Can I live in the home during the short sale?
Q: How long does a short sale normally take?
Q: Will you put a For Sale sign on my property
Q: Is the HAFA program still active?
Q: Can the 1st and 2nd lien holders try to collect from me after the short sale?
Q: What are the Federal income tax liabilities from a short sale on a Primary Residence?

Foreclosure Questions

Q: What options do I have?
Q: What are the main issues a person undergoing foreclosure needs to be aware of?
Q: Why is time such a factor?
Q: What happens to those who do not act?
Q: I made a payment but my mortgage company sent it back?
Q: California Foreclosure Rules - What is the Purchase Money Rule?
Q: California Foreclosure Rules - What is the One Action Rule?

Loan Modification Questions

Q: I'm I eligible for the Home Affordable Modification Program (HAMP)?
A: The Home Affordable Modification Program (HAMP) Expired on December 31, 2016.

Q: What is the Trial Period?
A: Modification Programs require borrowers to enter into a 3-month Trial Period Plan before receiving a Permanent Loan Modification. During this period, borrowers must submit trial payments and all required forms and documents. Your loan servicer should mail you your permanent modification documents after you've made your third payment.

Q: Will my credit score be affected by accepting a trial period plan or loan modification?
A: Yes. Your loan will be reported as paying under a partial payment plan during the trial plan, and as modified after the final modification agreement.

Q: What happens if I am unable to make payments during the trial period?
A: If you can’t make three payments by the end of the trial period, you lose your eligibility for a modification.

Q: Are there programs to modify the 2nd Lien on my property?
A: Yes. Almost all Banks and Servicing Companies offer Second Lien Modification Programs.

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Q: My credit is bad, am I wasting my time?
A: No. Everyone who is behind on their house payments has their credit negatively affected. We help people regardless of credit.

Q: Is it possible to get a reduction in my loan balance with a modification?
A: It is becoming increasingly difficult to receive a reduction in the principle balance or past due amount. Currently the practice is to defer part of the principle or past due to the end of the term of the loan.

Q: What do you charge for your services?
A: Your Initial Consultation is always Free. The fee depends on the complexities of your case but in general the charge for a successful loan modification is $1500.00. Our Short Sale Service is always FREE.

Q: How long have you been helping homeowners obtain loan modifications?
A: We've helped hundreds of California homeowners since 2006.

Q: What areas do you cover?
A: We work with homeowners throughout the entire state of California.

Q: My Lender will not work with me. How can you help?
A: Yes, I can negotiate on your behalf to find the best solution for you.

Q: What if I have an FHA loan?
A: Your FHA loan may qualify for a Partial Claim modification. For any FHA modification your loan must be no more 12 months delinquent.

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Short Sale Questions

Q: What is a Short Sale?
A: A short sale is when the lender(s) agrees to settle the debt owed on the property for less than what you owe.

Q: Do I need to be behind on my payments to do a short sale?
A: No. You do not need to be behind or late but if you're current you'll have to show a financial hardship to motivate the lender to proceed with a short sale. If the property is underwater and you can afford the payment you will have to miss payments to prove to the bank your intention of doing a “Strategic” short sale.

Q: What is a Strategic Short Sale?
A: A strategic short sale is when an owner is able to continue making payments but is upside-down on the property and has made a business decision to unload the property. It takes an experienced real estate agent who specializes in short sales to get the lender(s) to approve the short sale.

Q: Do all Short Sales get approved?
A: No. In fact a recent report showed less than 50% of short sales in California are approved and completed. It's critical to work with a real estate agent that specializes in Short Sales.

Q: How much will it cost me to Short Sell my property?
A: There are no direct costs to the Seller to complete a Short Sale. Commissions, Title and escrow fees and unpaid property taxes will be paid by the lender as part of the Short Sale approval. Lenders approve Short Sales and accept the resulting loss in an effort to avoid larger losses should the property go through foreclosure.

However if there are HOA, Tax and/or 3rd Party Liens on the property the Seller could incur costs to negotiate a Release of the Lien.

Q: How does your company get paid? Who pays your commission?
A: The bank will pay the commission along with all the other usual closing costs. You will never have to pay our firm for our short sale services.

Q: What areas do you cover?
A: We cover the entire state of California.

Q: Will I have to pay past due property taxes if I do a short sale?
A: No. We always negotiate to have the 1st lien pay all past due property taxes.

Q: What if I'm late or past due on my Home Owners Associations or HOA dues?
A: We can usually negotiate with the HOA to settle past due fees at 50 cents on the dollar. We have a few options to pay for the settled amount, including the seller paying, a buyer credit, a credit from commissions and in some cases the bank will pay.

Q: Can I live in the home during the short sale?
A: Yes. We will keep you informed at all times on the timeframe of the short sale process and you will have at least 60 days notice before the short sale is complete.

Q: Will you put a For Sale sign on my property
A: No. Most short sale sellers prefer not to have a for sale sign on their property and we honor their request.

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Q: How long does a short sale normally take?
A: It will depend on your time frame. If you're not behind on your payments and in no hurry to move it can take 6 to 9 months or more. If your loan is already in foreclosure it will take 2 to 3 months. If you're in a hurry we can complete a short sale in 30 days. We will work with you to develop a time frame that meets your needs.

Q: Is the HAFA program still active?
A: The HAFA program expired on December 31, 2016.

Q: Can the 1st and 2nd lien holders try to collect from me after the short sale?
A: No. Starting in July 2011, California law absolves borrowers of any debt deficiency not covered by the short sale price.

Q: What are the Federal income tax liabilities from a short sale on a Primary Residence?
A:The Mortgage Forgiveness Debt Relief Act of 2007 generally allowed taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualified for this relief.

This provision applied to debt forgiven in calendar years 2007 through 2016. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion didn’t apply if the discharge was due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

The amount excluded reduces the taxpayer’s cost basis in the home.

The Mortgage Forgiveness Debt Relief Act of 2007 did not apply to short sales on Second Homes or Investment Properties. However there were Exclusions that applied.

Consultation with an experienced tax professional to see how the law applies in your circumstance is advisable.

For more information see IRS Publication 4681 - Canceled Debts, Foreclosures, Repossessions, and Abandonments.


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Foreclosure Questions

Q: What options do I have?
A: Although many options exist, the only one that is right for you is the one that best fits your financial situation. Please keep in mind, the sooner you act the more options you will have.

Q: What are the main issues a person undergoing foreclosure needs to be aware of?
A: Be very careful of amateurs and other scam artists that try to take advantage of your situation. Second, know that honest loss mitigation companies present alternatives which may save your property or substantially reduce your debt. They may not only prevent foreclosure and the terribly unpleasant eviction process, but may also help stop further credit damage. Third, property owners have no time to wait. Time works against them. Once a lender starts the foreclosure process, it is a race against time.

Q: Why is time such a factor?
A: Many people believe or dream that sometime in the near future they will be able to resolve their financial problems. They don't believe they will lose their property and be evicted. The sooner one acts, the better the chances are that we can help. The sooner you face your financial reality, the higher the probability of your success.

Q: What happens to those who do not act?
A: We hear many sad stories. Clients lose everything. Their home, their credit, their self respect. It's very emotional. Many of them face eviction and are unable to rent either because their credit is so bad and/or the deposit demanded from them is enormous. It will now take them years to rebuild their credit and above all, they could still be exposed to lawsuits and judgments by their lenders. The basis of loan mitigation is to relieve our clients of their current situation and give them a new start.

Q: I made a payment but my mortgage company sent it back?
A: After your mortgage company accelerates your loan, they will no longer accept a payment less than the full past due amount.

Q: My lender/service company has charged questionable fees and will not respond to my claims. Is there anything I can do?
A: Yes there is. It's called a “Qualified Written Request”. Under Section 6 of the Real Estate & Settlement Procedures Act (RESPA), a borrower can request that the lender/mortgage servicer document all claims for fees and answer special inquiries or disputes. The lender/mortgage servicer is required to acknowledge the request within 20 business days and must try to resolve the issue within 60 business days.

The following is a sample qualified written request from you, the borrower, to a lender. Use this format to address complaints under the Real Estate Settlement Procedures Act (RESPA).

Attention Customer Service:
Subject: [Your loan number]
[Names on loan documents]
[Property and/or mailing address]

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This is a “Qualified Written Request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

    I am writing because:
  • Describe the issue or the question you have and/or what action you believe the lender should take.
  • Attach copies of any related written materials.
  • Describe any conversations with customer service regarding the issue and to whom you spoke.
  • Describe any previous steps you have taken or attempts to resolve the issue.
  • List a day time telephone number in case a customer service representative wishes to contact you.

I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days.

Sincerely,
[Your name]

REMEMBER: This letter SHOULD NOT be included with your mortgage payment, but should be sent separately to the customer service address.

You SHOULD continue to make the required mortgage and escrow payment until the request is resolved.

You may bring a private right of action under Section 6, if you suffer damages due to the lender's servicing of the loan.


Q: California Foreclosure Rules - What is the Purchase Money Rule?
A: In California the lender who loaned you the money to purchase your primary residence can only foreclose on your property. This means if the foreclosure sale does not pay off the loan balance, the lender cannot sue you for the unpaid balance.

This applies to second mortgages used in many 80/20 100% financing deals.

However if you refinance your original purchase money loan or loans this rule does not apply.

Q: California Foreclosure Rules - What is the One Action Rule?
A: In California, a lender can only take one action against you – either a judicial foreclosure or a non-judicial foreclosure. If your property has only one mortgage the lender will in almost every case pursue a non-judicial foreclosure.

If the sale of the foreclosed property does not pay off the mortgage in full, the foreclosing lender cannot get the unpaid balance from you. By pursuing a non-judicial foreclosure the lender has used their “ONE ACTION”.

If your property has a 2cd loan and the 1st lender pursues a non-judicial foreclosure and the sale of foreclosed property results in an unpaid balance to the 2cd lender, the 2cd lender can obtain a deficiency judgment for the unpaid balance because they have not had their ONE ACTION against you yet (with the exception of the Purchase Money rule).


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