San Diego Housing Solutions

If you want to keep your home, you can document your income, and don’t mind owing possibly more on your loan balance than the property is worth, a loan modification may be right for you.

Loan Modification is available to those who can document that their current income is sufficient to modify the loan to terms acceptable to lender. Most loan modifications are interest rate reductions, longer terms, waive fees, place missed payments on ‘back of loan’ and occasionally principle reductions. When principle reductions are allowed, programs require the owners to share future appreciation with that government entity and require IRS verification of current and initially stated income (no ‘liar loans’).

1. You must have verifiable income
2. Most government sponsored programs require IRS verification of income (both new and old loan)
3. All modification programs have strict loan to value guidelines
4. Borrower usually must agree to share future appreciation with modifying agency.

- No up front cost to homeowner.

- Homeowner only pays fee AFTER an acceptable modification has been negotiated.

- Fee will depend on how many mortgages must be modified, price of home, and complexity of modification.

- Typical modification cost is one month of your current monthly payment.

Through the various government programs for housing and financial stability like Homeowner Affordability and Stability Plan and Making Home Affordable, guidelines were established to modify the loans for millions of struggling Americans. However, the reality is that these programs have assisted only a small fraction of that number...

If you want to keep the property but do not currently qualify for a loan modification then you can:

1. File for bankruptcy protection (automatically stalls the foreclosure)
2. Sue the lender for a technical RESPA violation (does NOT automatically stop the foreclosure)
3. Sue the lender for predatory lending (does NOT automatically stop the foreclosure)

Filing a bankruptcy automatically stalls the foreclosure process until the bankruptcy is discharged, but the lender can petition for a ‘relief from stay’ so they can continue foreclosure.

1. Bankruptcy: Funds to pay attorney ($ 2,000 to $ 5,000) and:
1. Not previously filed a Chapter 7 more than eight years & Chapter 13 two years
2. Must meet local income and asset qualifications
3. Be willing to have BK on your credit report for: Ch 7 = 10 years Ch 13 = 7 years.
4. Not eligible for a conforming loan for 4 years.
2. Law Suit: Attorney retainer of usually $ 3,000 to $ 10,000
1. Many attorneys require you to pay a loan auditing company 500 – 1,000 to review your loan documents for technical error before they will accept your case.
2. Does not automatically stop foreclosure process
3. Can take a long time and many lenders aggressively fighting these cases
4. No refund of attorney fee if you lose.

- Cost will vary by attorney and complexity of case.

- Bankruptcy cost range: $ 2,000 to $ 5,000

- Legal Solution Retainer Fee range: $ 3,000 to $ 10,000

- Cost will vary greatly depending on experience, track record, and attorney client load.

Entities seeking relief under the Bankruptcy Code may file a petition for relief under a number of different chapters of the Code, depending on circumstances. Title 11 contains nine chapters, six of which provide for the filing a petition. The other three chapters provide rules to govern those petitions. Bankruptcy cases are typically referred to by the chapter under which the petition is filed.

For those who can’t or do not want to keep the property and want to avoid foreclosure:

1. Short Sale is when lender agrees to accept less than full loan balance to sell property
2. Anyone with a ‘qualifying hardship’ can likely be helped by a short sale
3. Hardship = loan adjusting up, loss of income, medical, divorce, death, departure
4. Credit Score: Short Sale less damaging than foreclosure (generally 100 vs. 200 drop)
5. Allows for earlier market re-entry 2 years vs. 4 years for BK and 5 years for foreclosure.
6. The government likes short sales!  Federal tax code and lending criteria benefit the short seller
7. A short sale is a win-win-win for all parties involved!

1. Property Type: Residential, Investment, Multi-Family, Commercial and Land
1. Property can be either a personal residence or investment property
2. Commercial Property and Multi-Family units can be ‘short sold’ too
3. Unfinished construction, Lots and Improved / Unimproved land is eligible

2. Who benefits the most? ‘Refi money’, over 100k 2^nd’s and 700K plus loans.
1. California is a ‘no-deficiency’ state for ‘purchase money’ residences only therefore anyone who ‘refinanced’ and has a second loan (heloc or conventional) the lender can collect on their loss on that loan after a foreclosure sale...

- No cost to homeowner

- Homes are sold in ‘as is’ condition, with no repair credits paid by seller.

- Lender pays for real estate commissions, past taxes, and certain other items.

- All parties sign document acknowledging lender will reduce loan balances to cover costs and fees.

Short Sale:  A short sale is a negotiated settlement with the lender(s) that result in a written agreement giving: a release of the lien so the property can be sold, breakdown of costs, and stating how the outstanding balance will be handled...

Short Sale vs. Foreclosure Comparison from Fannie Mae Guidelines...