California short sale snafus worsen

Even more real estate agents than last year characterized closing short-sale transactions as a drawn-out process laden with communication snafus, lost documents and "dual tracking," according to the California Association of Realtors.

by Broderick Perkins
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Deadline Newsroom - The short sale system in California isn't just broken, it's getting worse.

Unfortunately, that means home owners who were looking for the short sale alternative to foreclosure could be out of luck and need to consider other cures for their mortgage distress.

This year, even more real estate agents than last year characterized closing short-sale transactions as a drawn-out process laden with communication snafus, lost documents and "dual tracking" -- lenders proceeding with foreclosures even when short sales are underway, according to the California Association of Realtors.

A short sale occurs when the bank allows the sale of a home for less than the existing mortgage balance, typically, provided there's a qualified buyer in the wings. Home owners likely to seek short sales are often those floundering "underwater" with mortgage balances larger than the value of their home in a state of negative equity.

Negative equity can occur because of a decline in value, an increase in mortgage debt or both. Many home owners suffer both because they used their home equity like an ATM machine during the housing boom. When housing crashed, values tumbled exacerbating the effects of equity-tapping.

Short sales can be a better option than foreclosures for a consumer's credit history, depending upon how the lender reports the deal to credit bureaus. Instead of having the black mark of a foreclosure that can last seven years, short sellers may only take a credit score hit they can overcome in a few years.

Other options for struggling mortgage holders include refinancing to a new loan, but that's virtually impossible for home owners underwater. Another option is a mortgage modification, which retains the original mortgage, but lengthens the loan term, reduces the interest rate, or reduces the principle, or includes a combination of the three. Some lenders have additional options to foreclosures

The short sale option is long on promise but short on delivery for Californians.

CAR said 77 percent of California real estate agents reported closing short-sale transactions as "difficult" or "extremely difficult," up from 70 percent in December 2010 when CAR first gauged real estate agents' experience working with lenders in on short sale transactions.

"Despite promises by lenders to improve their short-sale processes, clearly, they are not doing enough," said CAR President Beth L. Peerce.

Kim DiBenedetto, a real estate agent with Coldwell Banker Del Monte Realty in Carmel says the problem stems from lenders kowtowing to bottom-line thinking investors, who may see a foreclosure as a better deal.

"I think the lenders are trying, but they have so many different investors and limited authority," DiBenedetto said.

"We have to stop thinking of Wells Fargo, Bank of America, CitiCorp, etc. as the 'lender.' They are the servicer for as many as 2,500 investor groups. How much authority the servicer has to negotiate with the home owner, depend upon which investor group owns a particular loan, which is why short sales are so hard to get processed," she added.

CAR said real estate agents' most frequent obstacles in the short-sale process were communication issues during the slow response time to package a short-sale (cited by 66 percent of agents); poor communication with lender representatives (55 percent); and repeated requests for documentation (51 percent).

More than 15 percent of the agents polled in June this year said the lender foreclosed on the home before the short-sale transaction could be completed.

Two-thirds (67 percent) of agents said it took more than 60 days for lenders or servicers to return a written response on the approval or disapproval of the short-sale agreement submitted; 43 percent of agents said it took the lender more than five days to return any form of communication and fewer than 20 percent of agents said lenders responded "within one business day" or less to agents' communication attempts.

Real estate agents' overall satisfaction with lenders in their most recent short-sale transaction remained extremely poor, with 75 percent saying they were "not satisfied" or "not at all satisfied," up from 67 percent in December.

Because of their dissatisfaction, 78 percent of real estate agents said they were "not likely" or "not at all likely" to refer buyers to the lender for future home purchases.

ForeclosureRadar.com's Short Sale Report offers a five-star rating system for lenders' short sale success or lack thereof and CAR offers ShortSalesCalifornia.org to rate lenders, but DiBenedetto says it's still a crap shoot. (http://www.foreclosureradar.com/short-sale-report)
(http://www.shortsalescalifornia.org/)

"This is what slicing and dicing home loans (bundling mortgages as securities sold to investors) on the secondary market has done to the process. You are no longer talking with the actual owner of the loan. You can have one short sale with a particular servicer that goes really well and another with the same servicer that doesn’t go well at all," she said.

The latter is the norm, according to CAR's survey.

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Expect fallout from a strategic default

Some homeowners are duped into strategic defaults by fraudulent services offering faulty advice. Crooked mortgage relief services often tell homeowners to stop making payments to get the lender's attention for mortgage assistance.

by Broderick Perkins
© 2011 DeadlineNews.Com

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Deadline Newsroom - When you decide to quit making mortgage payments and walk away from home ownership, you are taking a walk down a slippery path.

It's a path to a "strategic default," which occurs when a homeowner, who can afford to make mortgage payments, but proactively decides not to in order to induce foreclosure.

The questionable strategy is often used by homeowners who are "underwater" with a mortgage that's larger than the home's value. The approach is more likely if the homeowner believes the home will take too long to recover sufficient equity and the homeowner also can rent a home for less than the mortgage payment.

Other homeowners are duped into strategic defaults by fraudulent services offering faulty advice. Crooked mortgage relief services often tell homeowners to stop making payments to get the lender's attention for mortgage assistance, say a mortgage modification or other loan workout.

Experian says in the second quarter this year, on average, 17 percent of mortgages with payments 60 days more or past due where those held by calculating homeowners bent on a strategic default. For homeowners with loan origination balances of more than $1 million, 33 percent of those 60 days or more late were strategic defaulters, Experian says.

For whatever reason, a strategic default is a risky proposition.

"Not paying your mortgage will have a far-reaching, long-lasting impact on your ability to secure future credit, regardless of the reason for your default," said Charles Chung, Experian’s president of decision analytics.

If you strategically default on your mortgage, you'll certainly be rid of a big mortgage payment, but the burdens you'll carry for years may not be worth the savings.

• Only bankruptcy is more damaging to your credit than a foreclosure. Even if you continue to pay your other bills the foreclosure remains on your credit report for seven years. Bankruptcy's black mark remains for 10 years.

• After a foreclosure, your credit score can drop 150 points or more, according to the leading credit scoring system (FICO) architect Fair Isaac Corp.

A credit score is a numerical rendition of information on your credit report. The FICO score ranges from about 350 to 850 — the higher the number the better your credit score and the better shot you have a the best credit rates and terms.

• After a foreclosure, any credit and insurance available to you will cost more and you could find it tough to rent a home. Employers can't get your score, but they can have a look at your credit report, in some states, under certain circumstances, but always only with your written consent.

• You could experience a tax hit if the lender forgives the difference resulting from a foreclosure sale price that's less than the mortgage balance.

• You also could face legal costs if the lender comes after you for the difference.

• Finally, last year, Fannie Mae implemented a policy that prohibits strategic defaulters from getting a new Fannie Mae-backed mortgage for seven years from the date of foreclosure.

"Some may see strategic default as a way to get out of paying a bad debt," Chung says. "But its associated costs, like a lower credit score, higher interest rates and less ability to secure future credits, can wipe out the financial benefit of no longer having a mortgage payment," Chung said.

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Buyers' Market: Distressed Properties vs. Traditional Listings

The discount alone appears to be enough to make distressed properties a better deal than more expensive traditional listings -- if it doesn't needs a lot of work, if you can out-bid the investor and if you've got time to make the deal pencil, among other "ifs."

by Broderick Perkins
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Deadline Newsroom - Distressed homes come with deeply discounted prices, but their prices continue to tumble. Homes sold the traditional way cost more, but prices are more stable.

CoreLogic's latest "U.S. Housing and Mortgage Trends" report, issued in late July says traditional home prices appear to be doing better than homes in the distressed sector and the trend is expected to continue.

CoreLogic reported its home price index of traditional home sales dropped only 0.4 percent from a year ago. Toss in distressed properties and the index was down 7.4 percent.

The report also says while the prices of traditional existing and new homes have returned to 2009 levels, prices for bank-owned foreclosures and short sale transactions -- distressed homes -- are 10 percent below 2009 levels and "continue to decline," CoreLogic reports.

So far this year, distressed sales nationwide accounted for one in three of all homes sales, 33 percent. In 30 major cities CoreLogic tracks, the price discount on distressed sales ranges from about 20 to 60 percent, or an average of about 40 percent.

The discount alone appears to be enough to make distressed properties a good deal.

But there's more to consider. Get the full story here: "What’s the Best Buy? Bargain or Full-Priced Real Estate?"

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MARS shines on short selling homeowners

Homeowners facing foreclosure could enjoy greater access to short sales and less confusion about the foreclosure alternative, thanks to new federal regulatory relief for real estate brokers and agents.



by Broderick Perkins
© 2011 DeadlineNews.Com

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Deadline Newsroom - Homeowners facing foreclosure could enjoy greater access to short sales and less confusion about the foreclosure alternative, thanks to new federal regulatory relief for real estate brokers and agents.

The Federal Trade Commission (FTC), on July 15, announced it will immediately stop enforcing most of the provisions of the "MARS" rule against real estate professionals representing homeowners in short sales.

A short sale occurs when the bank allows the sale of a home for less than the existing mortgage balance, provided the seller finds a qualified buyer. Such homes are often held by homeowners struggling with "underwater" mortgages -- mortgages with balances larger than the value of the home.

MARS, the federal "Mortgage Assistance Relief Services" rule, protects homeowners from fraud by forcing mortgage assistance relief services to disclose information about their services. It also mandates certain business practices.

The FTC ordered the stay of enforcement because real estate brokerages' distinctive relationship with homeowners selling short conflicts with many of MARS disclosure requirements.

The full story is here: "MARS Shines on Short Selling Homeowners"

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Californian homeowners get short sale relief

"Jerry Brown stopped (open-ended short sales) that. God Bless him. This is a continuation of plugging a loophole that kept people on the hook even after a short sale," said Raffi Tal, a real estate broker and Vice President of Operations of iShortSale.com, in Woodland Hills, CA.

by Broderick Perkins
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Deadline Newsroom - California lenders who agree to a short sale must accept the agreed upon short sale payment as payment in full for the outstanding balance of all loans, including the first and second mortgages.

That's the law.

On July 15, Gov. Jerry Brown signed SB 458 into law to make short sales more viable. It was authored by State Senate Majority Leader Ellen Corbett (D-San Leandro).

A short sale occurs when the bank allows the sale of a home for less than the existing mortgage balance, typically, provided there's a qualified buyer in the wings. Such homes are often held by home owners struggling with "underwater" mortgages -- mortgages with balances larger than the value of the home.

In terms of the impact on a homeowner's credit report, there's no guarantee, but a short sale can be less harmful than a foreclosure. The homeowner should be aware of how the sale will be reported to the credit bureaus.



Previously, protections offered by SB 931 only required the first lien holder in a short sale to accept an agreed-upon payment as the full payment for the outstanding first loan balance and did not address second lien holders. Also, even the first lien holder could come after home owners for some or all of the balance left over from the short sale on the first mortgage.

"We faced that for the last four and half years. Jerry Brown stopped that. God Bless him. This is a continuation of plugging a loophole that kept people on the hook even after a short sale," said Raffi Tal, a real estate broker and Vice President of Operations of iShortSale.com, in Woodland Hills, CA.

However, without the ability to go after homeowners for a second mortgage or balance on the first, it's not clear if the growing number of short sales will stall or fall.

Short salesmade up an estimated 17.6 percent of all California resales in June, according to DQNews.com . That was the same as in May and down from 20 percent a year earlier. Two years ago, however, short sales made up only 13.5 percent of the resale market

"The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference," said California Association of Realtors' President Beth L. Peerce.

"SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lien holders -- those in first position and in junior positions -- will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property," Peerce added.

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EHLP helps employment-challenged homeowners

For many homeowners, loans from the new “The Emergency Homeowners’ Loan Program (EHLP)” will amount to a grant they won’t have to pay back. Unfortunately, there’s only so much EHLP to go around and you don't have much time to apply.

by Broderick Perkins
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Deadline Newsroom - More struggling homeowners are getting a small slice of the federal bailout pie, served up as a special no-interest loan of up to $50,000.

For many homeowners, loans from the new “The Emergency Homeowners’ Loan Program (EHLP)” will amount to a grant they won’t have to pay back.

Unfortunately, there’s only so much EHLP to go around.

Demand is expected to be so high, even if you are a qualified homeowner you will have to win a lottery to get one of the loans.

The $1 billion federal program is expected to help an estimated 30,000 distressed homeowners facing foreclosure because of unemployment or reduced employment, provided you can also demonstrate the loan will help you resume mortgage payments down the road.

The U.S. Department of Housing and Urban Development recently announced EHLP as the latest infusion from the “Dodd-Frank Wall Street Reform and Consumer Protection Act.”

Get the full scoop here: "EHLP Helps Distressed Homeowners"

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Underwater homeowners taking on more water

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Banks are selling more than three times as many distressed homes as builders are selling new ones, and half as many homes as the resale market. With as much as 39 percent slashed off what a similar resale home would cost, the distressed home sector is a real drag on home prices.

by Broderick Perkins
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Deadline Newsroom - Here's one more nasty little statistic that will make underwater homeowners wheeze for air.

Banks are selling more homes than builders. In fact they are selling more than three times as many distressed homes as builders are selling new ones, according to a recent Hanley Wood Housing Intelligence (HWHI) report.

What's more, the banks' REO (for "real estate owned") homes are selling at deep, deep discounts, with as much as 39 percent slashed off what a similar resale home would cost, according to RadarLogic's latest housing market report.

That's good news for buyers, investors and others who have the cash or can somehow wrench a loan from tight fisted lenders.

Unfortunately, the price plunge is sending homeowners further underwater if they already owe more than their home is worth.

Some economists say the deep discounts on the large volume of distressed properties sent home prices double-dipping this year, at a pace greater then the home price crash of the Great Recession.

HWHI broke down the home sale share for the first quarter 2010 with existing homes comprising 61 percent of the market, REOs accounted for 29 percent of the market and new homes only 10 percent.

For the first quarter this year, REO sales swiped a greater share, apparently getting more resale and new home buyers to join the REO buying crowd -- existing home sales' share dropped to 60 percent, REOs increased to 32 percent and the sale of new home sales also dropped to only 9 percent.

The share of new home sales has been reduced by half since peak times, and the resale share decline by about one-fourth, thanks to the incursion by REOs, according to HWHI.

"Defaults are expected to reach new record highs this year which have buyers holding out for better deals and traditional home sellers battling lowball offers from banks," HWHI reports.

RadarLogic says homeowners suffering negative equity are stuck. Most can't or won't pay lenders the difference between their current mortgage balance and the price for another home, given the new home is likely to lose value.

Other than FHA loans, lenders are tighter than ever, requiring larger down payments and higher credit scores. First-time buyers don't have the stomach for handing over hard-earned money as equity "in an environment where home prices are widely expected to fall over the next 12 to 24 months," RadarLogic reported.

Investors with cash are more willing to take the risk, especially at the bargain basement prices they can get from the REO sector.

"The aggressive pricing on distressed properties is undercutting individual home sellers and new home builders alike, and wreaking havoc on local housing markets," HWHI grimly reported.

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Californians, ethnic minorities hit hardest by foreclosure rescue scams

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Nearly one-in-four complaints from foreclosure scam victims come from Californians and virtually half of all complaints nationwide were from homeowners who voluntarily identified themselves as African-American, Hispanic, or Asian.

by Broderick Perkins
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Deadline Newsroom - If you live in California and find yourself facing foreclosure, chances are greater than in any other state, you'll be the victim of foreclosure rescue fraud.

Nearly one-in-four complaints from foreclosure scam victims come from Californians, according to the Homeownership Preservation Foundation (HPF).

HPF is a U.S. Department of Housing and Urban Development (HUD)-certified, independent, national non-profit dedicated to helping distressed homeowners avoid mortgage foreclosure.

Since February of last year, HPF found that 22 percent of complaints about foreclosure fraud came from California, followed by Florida, with 7 percent of the calls, Texas and New York, both with 5 percent, and Georgia with 4 percent.

While California's reported fraudulent activity was significantly higher than other states, only one city from the Golden State, Los Angeles, ranked in the top five, indicating foreclosure scams can hit anywhere and aren't concentrated in any one area.

"Although California was among the states most hard hit by the housing crisis, the reported foreclosure rescue scam activity seems disproportionately higher than we would have expected," said Colleen Hernandez, HPF's CEO.

Hernandez said other than Los Angeles, there isn't a concentrated scam area in California, but virtually half of the complaints were from homeowners who voluntarily identified themselves as African-American, Hispanic, or Asian.

"Repeated studies have shown that minorities were disproportionately targeted for predatory lending during the housing boom, and we have compelling evidence indicating that minorities are bearing the brunt of an unusually high percentage of mortgage scams," said Hernandez said.

Effective Jan. 31, 2011 the Federal Trade Commission's (FTC) "Mortgage Assistance Relief Services (MARS) Rule," went into effect to protect consumers from being taken by all kinds of foreclosure rescue services, including negotiating a mortgage modification, short sale or deed-in-lieu of foreclosure and intervening in a foreclosure or repossession; a forbearance or repayment plan; an extension of time to cure default, reinstate a loan, or redeem a property; a waiver of an acceleration clause or balloon payment and other related services.

HPF says consumers facing foreclosure and looking for help should know the law bans service providers, including real estate agents offering the services, from collecting fees until a home owner agrees with a finalized, written foreclosure or modification plan approved by their lender or loan servicer.

MARS allows licensed attorneys to charge advance fees, provided the fees are held in an escrow (trust) account and provided the attorney complies with state laws and regulations related to the federal rule.

In addition to not paying money up front, consumers should expect a host of disclosures required by the law, including disclosures:

• Of the proposed cost of the service.

• Telling consumers they have a right to reject any offer from the service or the lender without charge and can stop doing business with the service company at any time.

• Stating the service is not affiliated or associated with nor approved by any government entity.

• Revealing the lender can reject any change to the home owner's loan.

• Explaining the home owner could lose their home and damage their credit rating if they follow a service's advice to stop paying their mortgage.

Despite the new rule, HPF said numerous companies and individuals flagrantly violate the rule, asking for an average upfront fee of more than $2,500 to modify a mortgage. In virtually all instances, either no mortgage reduction was achieved or no work was actually performed, according to HPF.

Hernandez says companies illegally demanding upfront fees to renegotiate mortgages are often run by individuals who were responsible for facilitating highly dubious mortgage loans during the housing bubble.

"They profited on the front end and now they are seeking to cash in on the back end," she said.

Also exacerbating the problem, reductions in federal housing counseling funds have reduced the availability of previously limited free counseling services. That's likely to lead to a surge in mortgage scams as consumers scramble for help.

"Being scammed out of thousands of dollars is often a knockout punch for already distressed homeowners. Reducing funding for counseling would be tantamount to giving foreclosure rescue scam artists a major subsidy as they will be able to operate virtually unfettered," Hernandez.

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'Flopping' works other side of the 'flipping' street

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Following in the footsteps of foreclosure rescue scams and mortgage modification schemes, flopping is one of the latest scourges of the housing market.

by Broderick Perkins
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Deadline Newsroom -

Real estate investors who legally cash in on rising home values by buying and quickly reselling, or "flipping" properties shouldn't be confused with an offshoot band of "floppers" working the other side of the street.

Honest flipping profits from a true increase in property value. Conversely, flopping illegally profits from a false decrease in property value.

Following in the footsteps of foreclosure rescue scams and mortgage modification schemes, flopping is one of the latest scourges of the housing market.

Flopping takes aim at the short sale sector of distressed housing.

Get the full story here: "Fraudulent ‘Flopping’ Takes Cue from Legal ‘Flipping’ "

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Unsung hero community groups save neighborhoods

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"Implementing the Neighborhood Stabilization Program (NSP): Community Stabilization in the NeighborWorks Network" is the NeighborWorks America's report detailing a dozen "Yes, we can!" case studies about the super heroic efforts of community groups that kept neighborhoods alive during their darkest hour.

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Against all odds created by the deepest recession since the Great Depression, a network of community organizations beat back bad times and saved a host of distressed neighborhoods -- often block-by-block and home-by-home.

"Implementing the Neighborhood Stabilization Program (NSP): Community Stabilization in the NeighborWorks Network" is the NeighborWorks America's report detailing a dozen "Yes, we can!" case studies about the super heroic efforts of community groups that kept neighborhoods alive during their darkest hour.

The studies reveal the power behind the National Community Stabilization Trust's "5 Cs of stabilization" a strategy used to rescue neighborhoods submerged in foreclosures, at a time when money was tight, resources were slim and the line for help went out the door.

The trust facilitates transferring foreclosed and abandoned properties from banks to local housing organizations. The homes are "recycled" for reuse to keep neighborhoods stable.

The "Cs" include comprehensiveness, a plan that addresses all destabilizing forces in the community; concentration, targeting for maximum impact; collaboration to include a broad array of partners with a strong focus on residency; capacity from organizations with demonstrated ability in the effort; and capital, especially new sources of capital.

Here's a sampling of the neighborhoods saved by the work of NW agencies.

• Home HeadQuarters, Inc., Syracuse, NY - The agency collaborated with local residents and a wide range of stakeholders to focus community stabilization and revitalization efforts on a 15 to 20-block area known as the SALT District. Using a combination of funding, the agency acquired and redeveloped 90 foreclosed, vacant and abandoned properties.

• Housing and Neighborhood Development Services, Inc., Orange, NJ - This group worked with nonprofit, for-profit and city agencies to acquire and redevelop foreclosed inventory, first by acquiring the mortgages on 47 foreclosed properties housing 92 units.

• Neighborhood Development Services, Inc., Ravenna, OH - In the small city of Barberton, this agency helped acquire a 24-unit property from foreclosure and redeveloped it into an attractive community asset with affordable housing units. The agency collaborated with local, county and state agencies to acquire capital and worked with residents in the process of designing the improvements for the property.

• Neighborhood Housing Services of Orange County, Anaheim, CA - The agency worked with nonprofit, municipal and for-profit groups to obtain capital to acquire, renovate and re-sell nearly two dozen foreclosed homes to eligible buyers.

• Neighborhood Housing Services of Kansas City, Kansas City, MO - This agency became a one-stop shop for identifying properties, providing first mortgage loans, developing scope of rehab work, managing construction, assisting buyers with obtaining down payment assistance and closing the loans on 30 properties.

• Neighborhood Housing Services of South Florida, Ft. Lauderdale, FL - The agency worked with nonprofits to apply for and implement funding from city and county governments and to redevelop 90 foreclosed homes.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
• National Real Estate Examiner
• National Consumer News Examiner
• National Offbeat News Examiner

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MARS' loan modification protections extend to short sales, other foreclosure relief

Click: Consumer news

MARS news has been focused largely on the cottage industry of private companies offering modification services to consumers, but the rule impacts all mortgage assistance relief services including those offering short sale services and other assistance.

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Rules protecting consumers from being taken by modification services also extend to short sale services and other forms of mortgage assistance, including some assistance offered by real estate agents.


Effective Jan. 31, 2011 modification assistance firms have been banned from collecting fees until a home owner agrees with a written foreclosure or modification plan approved by their lender or loan servicer.

The ban and other related disclosure and regulatory provisions are part of the Federal Trade Commission's (FTC) "Mortgage Assistance Relief Services (MARS) Rule", designed to curb fraud, scams and rip-offs in the distressed mortgage services industry.

While MARS news has been focused largely on the cottage industry of private companies offering modification services to consumers, the rule impacts all mortgage assistance relief services including those offering short sale services and other assistance.

Some real estate agents must comply

Laurie Janik, National Association of Realtors' general counsel, recently reviewed the new rule at a forum during the Realtors 2011 Midyear Legislative Meetings & Trade Expo in Washington, D.C. and put on notice, real estate agents who provide short sale services, according to a recent DSNews report.

"As the leading advocate for homeownership, NAR supports efforts to ensure that mortgage assistance relief services truly benefit consumers. Nevertheless, NAR has some concerns about the rule and its application to real estate professionals involved in short sales transactions," Janik told DSNews.

But it's not just short sales. The official Federal Register Vol. 75, No. 230 rendition of the rule is pretty clear, as federal regulations go.

"The Rule is intended to regulate for-profit providers of mortgage assistance relief services...defined as 'any service, plan, or program, offered or provided to the consumer in exchange for consideration, that is represented, expressly or by implication, to assist or attempt to assist the consumer' in negotiating a modification of a dwelling loan…stopping, preventing, or postponing a foreclosure or repossession; or obtaining one of several other types of relief to avoid delinquency or foreclosure... (including) a forbearance or repayment plan; an extension of time to cure default, reinstate a loan, or redeem a property; a waiver of an acceleration clause or balloon payment; and a short sale, deed-in-lieu of foreclosure, or any other disposition of the property except a sale to a third-party that is not the loan holder."

One question is obvious: If a company doesn't charge for mortgage relief services, does the MARS rule apply?

"Most of the local short sale specialists advertise this as a free service to our sellers and understand that the cost of the professional negotiations will be paid out of the hired Realtor's commission," said Julie Larsen Wyss, broker associate, Intero Real Estate Services, Los Gatos, CA.

Janik acknowledged to DSNews that real estate agents who do offer fee-based services must not take upfront fees, as the law requires, but she also voiced concern that other MARS rules could also apply to real estate agents helping with short sales, including rules that touch on disclosures, advertising, communicating with clients, negotiating a short sale or arranging for a short sale negotiation.

"NAR is discussing with the FTC some language in the second and third disclosures as well as some other requirements found in the MARS rule," Janik said, according to DSNews.

"The FTC is considering possible options to help make the rule more applicable to a real estate brokerage…when they are performing traditional real estate functions in a short sale transaction," she added.

A history of fraud

Too many foreclosure rescue and loan modification services became a festering outgrowth of the mortgage market meltdown that left many home owners underwater with a mortgage balance greater than the value of the home.

The operations often promised to be a go-between and negotiate with the lender to obtain a modification, short sale or some other relief from foreclosure. Some also duped home owners into believing they were affiliated with real government assistance programs.

Now, without up front fees, many fly-by-night operations don't have the capital to resume operations.

MARS does allow licensed attorneys to charge advance fees, provided the fees are held in an escrow (trust) account and provided the attorney complies with state laws and regulations related to the federal rule.

MARS rules are disclosure heavy. The rules say mortgage assistance relief services must disclose:

• The proposed cost of the service.

• That consumers have a right to reject any offer from the service or the lender without charge and can stop doing business with the service company at any time.

• That the service is not affiliated or associated with nor approved by any government entity.

• That the lender can reject any change to the home owner's loan.

• That home owners could lose their home and damage their credit rating if they follow a service's advice to stop paying their mortgage.

If services are offered or negotiated in Chinese, Korean, Spanish, Tagalong or Vietnamese, the disclosures must also be provided in the same language.

Foreclosure rescue and loan modification services are also prohibited from making any false or misleading claims about their services, including claims about results, government affiliation; the consumer's financial obligations; refund and cancellation policies; legal representation and the amount of savings a consumer can expect, among others.

Home owners should also check with their state rules for the services. Some states have stronger regulations than the federal MARS rule.

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© 2010 DeadlineNews.Com

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Get "News that really hits home!" for your Web site or blog from the DeadlineNewsGroup.Com.

You are reading a sample of "News that really hits home!" now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins is managing editor of HomeAway.com's Gulf Coast Response Center.

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
• National Real Estate Examiner
• National Consumer News Examiner
• National Offbeat News Examiner

Other DeadlineNews Group Feeds are available from DeadlineNews.Com.

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FICO study for lenders inadvertently creates blueprint for strategic defaults

Robert Aldana: "How long before you break
even on your underwater mortgage?"

"Predicting Strategic Default," by major credit scoring system architect FICO (Fair Isaac Corp.), could encourage more strategic defaults. Contrary to some assumptions, strategic defaulters are far from being financially distressed before they decide to walk and they are quite calculating in their move.

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - An early warning system to help lenders detect impending strategic defaults could serve as a blueprint for homeowners considering walking away from their mortgage and that could encourage more strategic defaults.

Strategic defaulters are homeowners who can afford to make mortgage payments, but proactively decide to stop making mortgage payments in order to induce foreclosure.

The strategy grew in popularity in an uncertain economy with bleak employment prospects, particularly among short term homeowners who are "underwater," owing more on their mortgages than their homes are worth.

What could encourage more strategic defaults is "Predicting Strategic Default," by major credit scoring system architect FICO (Fair Isaac Corp.). It found that contrary to assumptions, strategic defaulters are far from being financially distressed before they decide to walk.

Get the full story here: "Study Inadvertently Draws Blueprint For Strategic Defaults"

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© 2010 DeadlineNews.Com

Advertise on DeadlineNews.Com | Shop DeadlineNews.Com

Get "News that really hits home!" for your Web site or blog from the DeadlineNewsGroup.Com.

You are reading a sample of "News that really hits home!" now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins is managing editor of HomeAway.com's Gulf Coast Response Center.

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
• National Real Estate Examiner
• National Consumer News Examiner
• National Offbeat News Examiner

Other DeadlineNews Group Feeds are available from DeadlineNews.Com.

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Most Americans thumbs down on 'strategic defaults'

New postal rates could boost your income tax bill

Even if you are "underwater" -- owing more on your mortgage than your home is worth -- there's rarely a good reason to stop paying your mortgage, according to a majority of Americans.

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - The fallout you can expect from walking away from home ownership could include the ire of your neighbors.

Even if you are 'underwater' -- owing more on your mortgage than your home is worth -- there's rarely a good reason to stop paying your mortgage, according to a majority of Americans.

A new FindLaw.com survey says 60 percent of Americans believe that it is "never OK" for homeowners to simply stop making payments on their mortgages.

Another 34 percent said walking away, called a "strategic default," is OK for homeowners, but only if they aren't able to make the monthly payments.

Only 3 percent said home owners should be able to walk away from mortgages anytime they want.

Tossing the door keys in the circular file and stopping mortgage payments will eventually lead to foreclosure, but that's not all. Unanticipated consequences could include tax problems, contractual issues, damage to your credit and credit scores, damage to your ability to borrow in the future, even a lawsuit.

"Many homeowners are currently facing very difficult and complicated situations involving their home mortgage, in some cases even including the threat of foreclosure," said Stephanie Rahlfs, an attorney and editor for FindLaw.com.

"But before making any major decisions, homeowners should consult with financial and legal professionals, including accountants, real estate attorneys and financial advisers," Rahlfs added.

She also said, "Various government programs and tax changes involving mortgages have been enacted since the beginning of the housing crisis. Combined with private programs and variations in state laws, it creates a complicated web of potential actions available to homeowners."

FindLaw.com advises consumers not to play Ostrich, but, at the first signs of financial trouble, to seek help from counselors, community and social organizations and your lender or servicer. Examine all the alternatives before bailing on homeownership.

They include:

• Refinance. If you qualify, turn your existing mortgage for a new one. If you have a mortgage that is underwater, this could be the toughest option to accomplish. However, federal programs, including the Federal Housing Administration's refinance effort, can be a good bet for those who haven't yet faced hardship and can qualify for a new loan.

• Mortgage modification. A mortgage modification reworks the terms of your existing loan to get the payment down to a more affordable level. To add greater affordability, lenders lower the interest rate, lengthen the term of the loan or reduce the principal -- or do some combination of all three.

• Short sale. A short sale occurs when the bank allows the sale of your home for less than the existing mortgage balance, typically, provided there's a qualified buyer in the wings.

• Deed-in-lieu-of-foreclosure. With this option, you hand over the property to the bank for resale. Some short sales and deed-in-lieu of deals qualify for the government sponsored Home Affordable Foreclosure Alternatives (HAFA) deal -- the lender or servicers can't request any cash from the home owner, require a promissory note or pursue any deficiency judgments.

• Bankruptcy. Bankruptcy is a court-based process that can give you a financial "fresh start" by getting you out from under burdensome debts. Once the bankruptcy process is complete, you typically are released from personal liability for most debts.

• Reinstatement, repayment plans and forbearance plans. These plans help you get current on their mortgage when you have temporary financial problems. Talk with your lender or loan servicer for details.

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© 2010 DeadlineNews.Com

Advertise on DeadlineNews.Com | Shop DeadlineNews.Com

Get "News that really hits home!" for your Web site or blog from the DeadlineNewsGroup.Com.

You are reading a sample of "News that really hits home!" now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins is managing editor of HomeAway.com's Gulf Coast Response Center.

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
• National Real Estate Examiner
• National Consumer News Examiner
• National Offbeat News Examiner

Other DeadlineNews Group Feeds are available from DeadlineNews.Com.

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!