What is a Certified Distressed Property Expert?

A certified distressed property expert is that individual which is normally licensed as a real estate agent or real estate broker and has completed continuing education for the benefit of understanding distressed properties.

As with any continuing education, there is simply nothing that replaces the experience of working with lenders, servicers, and mortgage investors. It is through this experience that one begins to understand the nature of distressed real estate, how to best deal with buyers, sellers, and most importantly mortgage holders and servicers.

As the designation of a certified distressed property expert certainly serves a purpose and is beneficial for those individuals that had no prior experience with loss mitigation or distressed real estate, nothing matches
the experience of being in the trenches performing workouts on a day-to-day basis.

Have Additional Questions?

Call Alan Today

888-624-9310

 Alan Palange is a Licensed Florida Real Estate Broker with over twenty five years experience in Real Estate Investing. Alan is also the Executive Director of Consumer Lawyers of America, PA located in Florida. Alan also worked as a licensed Florida Building Contractor building many homes from Palm Beach to Palm Bay.

When you hire Alan you get an enormous amount of experience and wisdom on your side. Alan has assisted hundreds of clients throughout Florida get out of a bad situation. There is never a fee for processing a Short Sale. In most cases Alan is able to get relocation funds for his clients upon the successful completion of the Short Sale. Alan is one of the best at what he does. It’s worth calling and speaking with him today for a free telephone consultation

What is the Equator System?

How many times have you heard, the bank lost the package? The amount of paperwork generated in a typical short sale is enough to boggle the mind, Often times with additional information being requested throughout the process of the short sale.

Not all banks subscribe to the equator system, but for those that do and those agents and real estate brokers that understand how to use equator, it has certainly streamlined the entire short sale process.

The equator system allows for the transmittal of all documents during the short sale process. It also acts as a portal to the lender, servicing agent, or mortgage holder for all communication during the short sale process. Another cool feature of the equator system, is the equator library. The library maintains a static record of all requests from the lender to the agent and maintains a complete portfolio of all of those documents that have been submitted to the lender on the half of the short sale seller.

 

Have Additional Questions?

Call Alan Today

888.624.9310

 Alan Palange is a Licensed Florida Real Estate Broker with over twenty five years experience in Real Estate Investing. Alan is also the Executive Director of Consumer Lawyers of America, PA located in Florida. Alan also worked as a licensed Florida Building Contractor building many homes from Palm Beach to Palm Bay.

When you hire Alan you get an enormous amount of experience and wisdom on your side. Alan has assisted hundreds of clients throughout Florida get out of a bad situation. There is never a fee for processing a Short Sale. In most cases Alan is able to get relocation funds for his clients upon the successful completion of the Short Sale. Alan is one of the best at what he does. It’s worth calling and speaking with him today for a free telephone consultation

What is an Investor in a Mortgage?

Often times you will hear the expression, we need to get the approval of the investor. As you may have heard by now, many of these mortgages were treated as though they were commodities, stocks or bonds. You may have heard the term mortgage backed securities, these instruments are made up of hundreds, if not thousands of mortgages and promissory notes.

Many times you went to an individual or a mortgage brokerage company for the benefit of getting a mortgage. Often shortly after you closed on the mortgage, that instrument was sold to an investor. Most often an investor will give their interest in the security to a servicing company to handle the day-to-day work that is involved in servicing a mortgage, such as mailing out statements, taking phone calls and all other general duties that are needed to service a mortgage client.

What is a Servicer of a Mortgage Loan?

Most investors owning an interest in mortgages are not equipped to handle the day-to-day activity of servicing loans. Many of the country’s top financial institutions service hundreds of thousands if not millions of loans for other investors. The servicer has an agreement with the investor to provide for certain duties on a day-to-day basis for the benefit of receiving a small percentage of each monthly mortgage payment.

Unfortunately in today’s environment loan servicers many times make more money when a loan is in default than when the loan is current. This addresses part of the issue in the difficulty of working with the servicer while pursuing any level of loss mitigation, be it a short sale, deed in lieu of foreclosure, or a loan modification.

Imagine an organization built and structured around the concept of servicing various loans, and all of the sudden needing to alter their entire business model to support the onslaught of loan modifications and short sales. It literally took many of these institutions two or three years to get up to pace and modify their internal protocols to have the capacity to work within today’s environment.

How Long is The Short Sale Process?

This is a question I receive all of the time; how long will it take to complete the short sale process? In a typical short sale many times the process will take between four and six months. We have however closed short sales from start to finish in as little as 90 days, we have also had other short sale files that have taken well over one year to complete.

Here are a few of the variables that effect the short sale process; how responsive is our client to the request we make for various documents and information? How capable is the company managing the short sale in packaging these documents and getting them to the lender in a timely fashion? How responsive is the lender or servicing company in assigning the file to their loss mitigation department? When additional requests are made of the third-party representing the short seller, how responsive is that party in securing the proper information requested and funneling this is data back to the lender? How is the real estate market at that given time when trying to endeavor for a short sale? If the market is healthy and there is a balance between buyers and sellers this helps expedite the overall short sale process. Don’t be fooled, the short sale process is nothing like a conventional real estate transaction. When the buyer begins to navigate the process of obtaining a loan, or homeowners insurance, the process can break down rather quickly.

Unfortunately, in most short sale situation’s if the buyer finds a deficiency while performing the inspection or attempting to satisfy the mortgage lender or insurance company, many times the seller is not willing to participate with any of the potential remedies.

In the end, it requires a very well skilled organization to manage and manipulate or all of the various elements that go on behind the scenes. Most real estate agents and brokers have become accustomed to outsourcing their files with title companies. This trend started and finished rather quickly, as title companies ultimately realized the amount of time and energy it takes to complete a short sale was not worth the potential rewards when the file closed.

In my organization, over the many years of processing and closing short sales we close most of our files between four and six months.

Call today and speak with Alan

888-624-9310

 Alan Palange is a Licensed Florida Real Estate Broker with over twenty five years experience in Real Estate Investing. Alan is also the Executive Director of Consumer Lawyers of America, PA located in Florida. Alan also worked as a licensed Florida Building Contractor building many homes from Palm Beach to Palm Bay.

When you hire Alan you get an enormous amount of experience and wisdom on your side. Alan has assisted hundreds of clients throughout Florida get out of a bad situation. There is never a fee for processing a Short Sale. In most cases Alan is able to get relocation funds for his clients upon the successful completion of the Short Sale. Alan is one of the best at what he does. It’s worth calling and speaking with him today for a free telephone consultation.

Can I Rent My Property While in Foreclosure?

Renting your property while in foreclosure has the potential to cause  far more harm than good, not to mention that you may be violating Florida Statute 697.07. The main objective concerning any short sale is the avoidance of foreclosure.

In a moment I will describe some of the potential pitfalls of renting a property while in foreclosure. Most importantly, you need to understand that Florida law prohibits renting a property while in foreclosure without the benefit of a full disclosure to all parties involved. This disclosure must outline to the potential tenant the risk if they rent a property which is faced with foreclosure. The state of Florida describes a property in foreclosure as any property that is in technical default. If you have missed more than one complete monthly cycle of your mortgage payment you are technically in a pre-foreclosure status. Do you realize that while the mortgage is in default the lender can make a claim on all rental funds collected. Yep, it’s right there in that twenty page mortgage you never took the time to read.

Many people do not understand the bank has every right to technically foreclose on your property or start the foreclosure process the moment you went 31 days late on your mortgage payment. Of course this never happens, as a bank truly has no interest in taking back your piece of real estate. Lenders do a terrible job in managing a real estate portfolio and much more desire to work out a plan of action with a homeowner.

Here are just some of the potential pitfalls of renting your property while in foreclosure:

  • Many tenants begin to feel as though they have no obligation to pay the monthly rent if the landlord is not paying the bank. Many times tenants want a discount off the current market rental value as the tenant has some inherent risk in the deal is well.
  • If the tenant begins to resist in assisting the seller and the real estate broker in accomplishing the short sale, the house can potentially go into foreclosure.
  • Eviction of the tenants in a property that is in foreclosure becomes a messy situation. The eviction process in Florida is judicial in nature, with the courts having very little understanding or concern for a landlord collecting money on a property in which the mortgage is not being paid.

The whole point is simply this, performing a short sale requires the participation of all parties involved. If there is a loose link within that chain you increase the likelihood of not accomplishing the short sale and ultimately going into foreclosure.

One must ask themselves if collecting the monthly rent is potentially worth having a foreclosure on their record. I will talk later in more depth about the difference in one’s credit file between a foreclosure, bankruptcy or short sale.

Foreclosure Versus Short Sale

There is no question that a foreclosure will harm your credit profile far worse than a short sale. As I’ve mentioned before, if your seeking a new loan an underwriter will make the assumption that you participated and assisted the bank in resolving an issue by performing a short sale.

On the other hand, a foreclosure on your file will reflect to an underwriter that you did not participate or assist the lender in any level of loss mitigation. When an underwriter processes a file, they are often looking for two variable factors: 1) does the client have the ability to pay back the loan 2) does the client have the motivation to repay the loan.

Having a foreclosure on your file is a major red flag to the lender. It’s one thing to have a situation that causes the default on a mortgage, it’s quite another to not care enough to assist the lender in resolving the situation by performing a short sale.

Don’t get me wrong,  a foreclosure or a short sale is certainly not positive, but given the choice, a short sale is a far cry from a foreclosure. There are many estimates on exactly how many points you may lose on your credit score, many experts guess that a foreclosure could easily cause a decline of 300 to 400 points in your overall credit score while a short sale may cause a loss of 200 points, but again, don’t let the point scale of your credit fico score be the ultimate determining factor as to what you do. At the end of the day foreclosure will do far more harm than a short sale.

In the end, do yourself a favor, do everything humanly possible to execute a short sale and walk away as clean as possible.

What will it take to Qualify for a New Loan

These are the general guidelines that FHA, Fannie Mae, and Freddie Mac follow when considering a loan after a short sale or foreclosure:

Short sale with FHA Loan

  • Can purchase right away with no mortgage default
  • 2-3 year wait if in default at the closing
  • Reduced wait if the borrower has re-established good credit and can show extenuating circumstances

Short Sale With Fannie Mae Loan

  • 2 year wait if the borrower puts 20% down
  • 4 year wait if the borrower puts between 10% to 20% down
  • 7 year wait if the borrower puts less than 10% down
  • 2 year wait if the borrower can show extenuating circumstances and puts more than 10% down

Short Sale with Freddie Mac Loan

  • 4 year wait before being able to get a loan
  • 2 year wait if the borrower can show extenuating circumstances

Foreclosure with an FHA Loan

  • 3 year wait before being able to get a loan
  • Reduced wait if the borrower can show extenuating circumstances and re-establishes good credit

Foreclosure with a Fannie Mae Loan

  • 7 year wait from the completed foreclosure sale date
  • 3 year wait if the borrower can show extenuating circumstances. Additional underwriting requirements apply for 4 years after a 3 year waiting period.
  • 7 year wait for a 2nd home, cash out re-financing, or an investment property

Foreclosure with a Freddie Mac Loan

  • 5 year wait from the completed foreclosure sale date
  • 3 year wait if the borrower can show extenuating circumstances

** As a side note a deed in lieu of foreclosure follows the same guidelines as FHA’s foreclosure policy, the same as Fannie Mae and Freddie Macs short sale policy.

Keep in mind these are general guidelines. If you are considering purchasing a home it is always wise to speak directly with a lender about your particular situation to see where you stand in regards to qualifying. And if you need to speak to a lender… let me know and I can give you a great referral.

Have additional questions?

Call Alan today

888.624.9310

 

 Alan Palange is a Licensed Florida Real Estate Broker with over twenty five years experience in Real Estate Investing. Alan is also the Executive Director of Consumer Lawyers of America, PA located in Florida. Alan also worked as a licensed Florida Building Contractor building many homes from Palm Beach to Palm Bay.

When you hire Alan you get an enormous amount of experience and wisdom on your side. Alan has assisted hundreds of clients throughout Florida get out of a bad situation. There is never a fee for processing a Short Sale. In most cases Alan is able to get relocation funds for his clients upon the successful completion of the Short Sale. Alan is one of the best at what he does. It’s worth calling and speaking with him today for a free telephone consultation.

How Long After The Short Sale Can I Buy a House?

Participating in the short sale process is seen as a benefit to potentially attempting to purchase another property. The underwriter of the loan will understand that circumstances possibly beyond the control of the mortgagee led to their default. By having a short sale on your credit file is proof positive to the underwriter that you did participate in loss mitigation process and assisted the lender in resolving the issue. This goes a long way.

In most cases, with the proper income, and proper credit profile subsequent to the short sale for a period of 18 months, one could expect to qualify for a new home purchase.

The key is very simply to watch your credit file like a hawk, and make sure that you have strict proof of managing all of your liabilities and monthly bills in proper fashion, which establishes proper credit. Most credit professionals also recommend acquiring a prepaid credit card to further enhance the development of credit and a positive credit profile.

More Questions?

Call Alan today

888.624.9310

Bankruptcy Versus Foreclosure

The one thing that amazes me through all that is gone on over the last five years is how loosely people have become with filing bankruptcy.

Don’t get me wrong, bankruptcy serves a real purpose and is meant to discharge the debt that a potential debtor would otherwise never be able to pay off. As I cover this topic, please do not think I approach this from a moral perspective or with the passing of any judgment concerning anyone that files bankruptcy. My point is simply this, the filing of bankruptcy is a serious event that should only be done under the greatest of consideration. What bothers me is how quickly attorneys are to put their client into bankruptcy and how receptive clients seem with the concept of filing bankruptcy. I think most clients would make other considerations if properly consulted.

When I think of these events, I think of them from a strategic point of view. What effect will the bankruptcy have on me and my family looking out over the short and long-term? Don’t get me wrong, if I felt filing for bankruptcy would discharge debt that would be impossible to pay, I would file bankruptcy in a New York minute.

For me personally, I would only file bankruptcy if I had no other option. I would not file bankruptcy strictly out of fear that the bank may come after me one day for the deficiency achieved during a short sale or foreclosure. You must remember, for the rest of your life when asked on an application have you ever filed bankruptcy, the answer must be yes. To answer no is to basically commit a criminal event.

Again, for me personally, if I prosecuted a short sale or had a foreclosure, I would wait until the creditor literally came knocking on my door in an attempt to collect the deficiency. Keeping in mind that obtaining a judgment and prosecuting to collect on a deficiency is a judicial procedure (in Florida) that needs to occur. The filing of bankruptcy, many times can be achieved in a very short period of time, allowing you to maneuver as needed through the process.

With a short sale or a foreclosure, of course, we never quite know how the lender will handle the deficiency. Many times the lender does not go after the clients in an attempt to collect the deficiency. Many times the lender will file a 1099 C, which gets treated as ordinary income to mortgagee for the short sale or foreclosure. As of the date of this writing, a prior law passed in 2007 which forgives this income for people residing in a primary residence for two out of the last five years. These folks are not subject to the income tax liability on the 1099 they receive from the lender. This law is formally called the debt relief act of 2007, signed into law by President Bush.

In no way do I wish to tender legal or accounting advice. I highly recommend that you speak with your accountant, tax adviser or a licensed Attorney to better understand what your liability actually is. When speaking to your accountant, ask about the IRS code that allows for the avoidance of income tax derived from a 1099 if you are technically insolvent at the time that the incident happened. The IRS considers you insolvent if you owe one dollar more in liabilities then what you have in assets. The calculation adds up every thing you owe including the home or real estate property in question and treats that as liabilities, it then adds up all of your assets, thus forming a balance sheet. Again, if you owe one dollar more in liabilities than that in which you have in assets you may not be subject to personal income tax on the cancellation of the debts from a short sale or foreclosure. With any luck Congress will extend the current law concerning the 2007 debt relief act which will help relieve much pain on many of the constituents here in Florida.

Just remember, bankruptcy can be filed at anytime, many times in a very expeditious fashion. In certain cases bankruptcy can discharge a tax liability that was derived from receiving a 1099 on a foreclosure or short sale if needed. I very much recommend you speak to a licensed accountant to better understand your individual situation prior to contemplating bankruptcy.

Have more questions?

Call Alan today

888-624-9310

 

 Alan Palange is a Licensed Florida Real Estate Broker with over twenty five years experience in Real Estate Investing. Alan is also the Executive Director of Consumer Lawyers of America, PA located in Florida. Alan also worked as a licensed Florida Building Contractor building many homes from Palm Beach to Palm Bay.

When you hire Alan you get an enormous amount of experience and wisdom on your side. Alan has assisted hundreds of clients throughout Florida get out of a bad situation. There is never a fee for processing a Short Sale. In most cases Alan is able to get relocation funds for his clients upon the successful completion of the Short Sale. Alan is one of the best at what he does. It’s worth calling and speaking with him today for a free telephone consultation.

Can My Relatives Repurchase My House Under a Shorts Sale?

The short answer is no. Nobody associated with you or working on your behalf may purchase your property in a short sale for your benefit. The bank figures if it is going to take a great loss, you certainly should not be the benefactor of such a loss. As I write this, I’m not sure I agree with the logic of the lenders or the investors in the mortgages. I would much rather keep the homeowner in their property while reducing the principal owed.

However, this presents many issues for lenders and investors. If such a program was instituted on a national level, there is a great likelihood that many more loans would have gone into default then otherwise did. In certain markets real estate is cyclical, and does go through periods of expansion and contraction concerning the value of the underlying real estate. Depending on your location in the United States the latest decline in real estate values have never been witnessed before in modern times.

At the time you complete a short sale, the lender will have you sign an arms length addendum. In this addendum you are stating that you are not affiliated with, or have made arrangements with any party to act as a straw buyer on your behalf. It is very important that you understand that many of these loans are federally insured, in short, lying on an addendum, attesting that you in no way will benefit when the truth may be different, subjects you to federal criminal charges of the likes that I would not wish on my worst enemy.

My personal opinion concerning this very subject may be different than the reality of what the lenders will require, but my general opinion is to never risk putting yourself in such a situation where you would be subject to any criminal claims.

As painful as it may be for certain homeowners to give up a property in which they raised a family, have many memories, and invested great time and energy maintaining the property, it’s sometimes better to just walk away.

More Questions?

Call Alan Today

888-624-9310