Can my Lender sue me for not Making my Mortgage Payments?

The wave of possible lender lawsuits against borrowers has started, primarily by junior lenders whose seconds (often HELOCS) were wiped out when a senior lender foreclosed. We presently know of borrowers being represented in a number of these lawsuits and have already settled several. The most important points to remember if you are served with a lawsuit are: 1) don't panic and ignore it. Get competent legal counsel in your State to advise you how and when to respond; and 2) almost all such lawsuits will resolve without going to trial.
There are several defenses that can be raised in defense to any lender lawsuit that may reduce or even eliminate their claim. These include:

1. Lender does not own the loan - In order to file a lawsuit against you, the lender must actually "own" the loan, that is they own and have possession of the Promissory Note. Loans change ownership all the time and it is possible that the lawsuit has been brought by a loan "servicer" or collection company, not the actual owner. If they cannot prove ownership, they do not have "legal standing" to file the lawsuit and they would potentially lose.

2. Loan was predatory - One of the key reasons why we had this market collapse was that from 2000 through 2006, lenders made loans to borrowers who in reality could not afford the loan. Sometime this was done by misstating income on "stated income" or "no document" loans and often this misstatement was done by the lender, not the borrower. Other times the loan was unrealistic, such as a 1% interest rate on which the borrower qualified for the loan but which jumped up much higher after the first month. So the buyer only qualified on month one but would never qualify on month two. Failure was inevitable unless the buyer could quickly flip the property. If the lender should never have made the loan, they likely will not recover against the borrower in court. For the agents that have the FACS certification we call these loans NINJA Loans (No Income No Job or Assets)

3. Loan was result of fraud - Similar to predatory loans, many borrowers obtained loans through actual fraud where the loan agent altered information supplied by the borrower or made false representations to the borrower such as: "take this adjustable rate now and we'll convert it to a fixed rate within a year". For most borrowers, that loan agent was never to be found within the year, the fixed rate was not obtainable, and the increasing adjustable rate forced the borrower into default. If the lender's loan agent defrauded the borrower into getting the loan, they likely will not recover against the borrower in court.

4. Lender failed to do diligence - One of the biggest causes of the market collapse was that the lenders failed to exercise any diligence in checking to make sure the information on the loan application was true, such as checking tax returns and confirming the borrower’s employment and income. The banking deregulation in the late 1990's created a flood of money in the market for new loans to be made and lenders accepted virtually any application without checking whether the loan was good. The result was billions of dollars of bad loans secured with property that was not worth the debt. If the lender should never have made the loan, they likely will not recover against the borrower in court. If the lender is trying to give you a commissionectamy when negotiating a commission, remind that lender of exactly the above point and additionally you did not tell them how many points to charge when they originated the loan.

5. Lender knew the market was inflated in a bubble - The combination of banking deregulation and easy money created a huge increase in demand by possible homeowners and investors which drove up the prices on available properties, often increasing by $10,000 or more in a single month. Developers rushed in with new subdivisions everywhere trying to fill the demand as competition for homes kept driving prices upwards. This inflationary bubble was almost entirely fueled by high-risk loans, speculative appraisals, and the lack of real underwriting and diligence by the lenders. It was completely foreseeable to lenders that this bubble would burst but they made the loans anyway because they earned commissions and could sell the loans in the secondary mortgage market. It was no real surprise to lenders when the borrowers started defaulting in 2005 on the increasingly expensive loans which led to the collapse starting in 2006. If the lender should never have made the loan, they likely will not recover against the borrower in court.

6. Lender has insurance for the loss - Many of the loans made were 100% of purchase price and even more. Generally, if the loan was for more than 80% of the property value, mortgage insurance (PMI) was required. Although paid for by the borrower, this insurance paid the lender for any loss on a default. The lawsuit may be an attempt by the lender to collect on a loss that they have already recovered on through the insurance. If the lender has already been compensated for any loss, they likely will not recover against the borrower in court.

7. Lender has been bailed out by the taxpayers - Between 2008 and 2009, Federal bailout monies paid by taxpayers (including the borrower) provided protection for lenders damaged because of loan losses. Our government guaranteed billions of dollars in lender bad debt, guarantees that we and our children will be paying for years to come. Many consider these bailouts to be a reward for bad business practices instead of the punishment that might be deserved. If the lender has already been compensated for any loss, they likely will not recover against the borrower in court.

8. How Should You Prepare? - In many states, the deadline for a lender to bring a claim against a borrower is four years other states are six years while I have heard as high as seven years in other states. Don’t forget that most states the owners of the debt are able to get an extension for up to ten years and in some states you can get that extension of ten years twice. Meaning for the next twenty six years the homeowner is going to be on the hook for the debt. That’s generally from the date the borrower defaulted, not to be confused with the actual foreclosure date. With hundreds of thousands of borrowers just now in default, these lawsuits will be a constant threat for many years to come. These may be joined by deficiency lawsuits following short sales to which the same defenses can be raised in addition to several other defenses unique to short sales which I'll cover in subsequent Blogs assuming I have the time!

Before anybody makes any kind of decision concerning your upside-down home or investment property, be certain to get tax and legal advice from qualified professionals in your State who can look at your specific situation and advise you on how these rules apply to you, particularly on how to identify and minimize the risks of a lender lawsuit. Thank you to Attorney Mr. Steve Bedde from the Sacramento California area in helping us to recognize these steps. www.stevebeede.com

This article in no way is serving as a function of legal advice. You must talk to an attorney in the state your property is located in order to make an intelligent decision in diagnosing the recourse of your debt.

-Christopher Rockey

Jimmy HAFA

Please excuse the delayed post. I have been travelling the world in 60 days. I am having a lot of agents tell me HAFA is going to change the world. That's great!!

Tell me what you see missing...

The first gives up rights of recourse, great many states are a single action state anyway (Sorry Florida) How about the second?

HAFA is designed for homeowners who have applied to HAMP for assistance but have had no success with their loan modification program. To participate in HAFA, homeowners must still meet HAMP’s eligibility criteria (principal residence, first-lien mortgage, serious delinquency, unpaid balance under $729,750, and a mortgage payment over 31 percent of gross income).

Homeowners must be considered for HAFA within 30 days if they cannot meet HAMP’s requirements or if they specifically request consideration for HAFA. However, the homeowner only has 14 days to respond to a written notice that HAFA may be available to them, giving the lender time to meet their 30-day deadline.

As with other short sales and deeds-in-lieu, the lender or loan servicer of the primary mortgage must approve of the transaction and conduct their own independent appraisal. Under HAFA, however, they must also agree to accept the proceeds from the sale of the house as payment in full, waiving their right to collect the balance of the loan from the homeowner.

It is up to the lender or servicer of the first-lien mortgage whether they or the homeowner negotiate with any subordinate lienholders. Lenders of HELOCs and other subordinate liens may be allowed to keep a limited portion of the proceeds (up to $3,000 each) of a short sale, with the first-lien lender’s approval. These funds are part of an incentive program for subordinate lienholders to waive their right to collect the balance due on their loans. The original lender may not be held responsible if any subordinate lienholders decline to participate and decide to sue the borrower for the amount of their unpaid debt.

HAFA’s Short Sale Agreement (SSA) has certain stipulations for all parties involved. Their SSA requires that the deadline for the homeowner to find a buyer and complete the transaction be not less than 120 calendar days from the date the SSA is mailed to the homeowner. The lender has the option of extending this deadline another 245 calendar days, for a total term of 12 months. The SSA also mandates that a HAFA transaction must be ‘arms-length’, and that the end buyer must agree to hold the property for at least 90 days after closing. Finally, the SSA gives the listing real estate agent the right to an undiscounted 6 percent commission at closing.

A short sale is any sale of property, usually during the foreclosure process, in which the lender(s) agrees to accept less than the balance due on the mortgage(s) or lien(s) in order to avoid the cost of foreclosure. Depending on HAFA requirements and state law, the lender(s) may or may not pursue the homeowner for the remainder of the debt. The vacancy date is determined by the terms of the closing.

Unlike a short sale, a deed-in-lieu simply allows the homeowner in default to transfer the deed to the property back to the lender in exchange for partial or full payoff of the mortgage. The vacancy date must be at least 30 days after the deed-in-lieu agreement is signed.

In either case, HAFA requires that the lender agree to suspend all foreclosure sales in good faith, pending the outcome of either transaction. In the case of a short sale, the lender also must agree to pay the administrative closing costs.

The Department of the Treasury, which authorizes all programs under the Making Home Affordable umbrella, has designated Freddie Mac as its compliance agent.

The HAFA program is set to begin on April 5, 2010. Servicers may initiate a HAFA transaction earlier in 2010 under certain conditions. As of this writing, all HAFA agreements must be finalized and signed by December 31, 2012.


-Christopher Rockey
www.facseducation.com

Fed to Save the Day? And if Not?

The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS).

In the week ending January 27, 2010, the Federal Reserve purchased a total of $12.50 billion agency MBS. In those five days the Federal Reserve sold $500 million (supported the roll market) for a net total of $12 billion purchases.

The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.

Since the inception of the program in January 2009, the Fed has spent $1.16 trillion in the agency MBS market, or 92.87 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010. This leaves $89.1 billion left to purchase MBS coupons in the TBA market.

Uh-Oh...

Until this very moment I have not considered the Federal Reserve Bank of New York to suffer from Dawn syndrome...

A new study found that borrowers who receive loan modifications that reduce loan balances, and not simply interest rates, are less likely to redefault on the loan, according to the Federal Reserve Bank of New York.

Principal reductions are more successful at avoiding redefaults because they reduce negative equity and provide the borrowers with greater incentive to remain current on the loan, according to the study. The study also found that borrowers who owe 15 percent or more than their homes’ value have a 51 percent higher risk of redefaulting in any given month.

I'm not going to waste too much time on this but i will say that Dawn syndrome is popularly named after a famous radio disk jockey who carries the first name of Dawn and always states the obvious. Most of her listening audience want to present her with a bouquet of roses complimented with a nice fresh slap.

Home Prices Dropping?

At the FACS certification program we are the hugest advocates of stabilization and standardization. Lenders have potentially decided to manipulate the housing economy by withholding REO inventory which has boosted demand the highest we have seen it since early 2006. unfortunately that is a bet lenders could loose if defaults continue to rise which they have. After four months of gains, home prices flattened in October. Worse yet, industry insiders think that they'll soon start to fall.
Prices have risen more than 3% since May, according to S&P/Case-Shiller.
But most forecasts predict price declines in 2010, with possible losses ranging from anywhere from 3% on up. Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.

"We've seen recent price stabilization because of low mortgage interest rates and the impact of the first-time homebuyers tax credit," said Pat Newport of IHS Global Research. "But there are really good reasons to think prices will now start going down."

There are three main reasons for the reversal: a coming flood of foreclosures, rising interest rates and the eventual end of the tax credits.

More foreclosures
For Gus Faucher, the director of macroeconomics for Moody's Economy.com, the huge number of foreclosures that remain in the pipeline is the big problem.

Moody's upped its estimate of defaults recently because of shortcomings of the government-led mortgage modification programs. Trial workouts are not being made permanent and completed modifications are redefaulting at high rates.

"There are going to be fewer [successful] modifications than we thought," said Faucher.

Even so, he added, much of the price decline has already occurred and Moody's forecast is for only another 8% drop. The worst-hit markets will be the ones suffering the most foreclosures, places like Arizona, California, Florida and Nevada.

Resetting option ARMs (adjustable rate mortgages) will also aggravate the foreclosure problem. These mortgages allow borrowers to pick their own payments, which can be so low they don't even cover the interest. Balances swell.

For many of the more than 350,000 option-ARM borrowers, it's time to pay the piper. Their loans will change into fully amortizing mortgages that will carry much higher monthly payments. A very large percentage of these homeowners will default, according to Shari Olefson, author of "Foreclosure Nation: Mortgaging the American Dream."

"We've still only seen the tip of the foreclosure iceberg," she said.

She also predicts more strategic defaults, people deliberately walking away from even fixed-rate mortgages as the value of their homes dips well below the amount they owe.

Olefson's forecast is for price declines of 5% to 15%, depending on the area, with a national median price drop of about 10% for 2010.

Rising interest rates
Also affecting prices will be higher interest rates. Some analysts, according to Newport, think rates for a 30-year mortgage will pass 6% next year as the government curtails housing market support.

The Federal Reserve has helped keep rates low through purchases of mortgage-backed securities. But that program is winding down and will end in March.

"The government is throwing everything at the market but the kitchen sink," said Peter Schiff, president of Euro pacific Capital. "It can't prop up housing markets forever."

Schiff is among the bigger bears. Though he gave no specific prediction, he thinks prices -- already down 29% from the peak -- are only halfway to the bottom.

The end of the tax credit
As a tool for supporting housing markets and prices, the tax credit for homebuyers is a two-edged sword. It reduces taxes dollar-for-dollar by up to $8,000 for new homebuyers and $6,500 for buyers who already own a home and should support home prices. But it ends at the end of April.

Many buyers will push their deals forward to get in before the deadline and then demand for homes could sink afterward.

One of the few bulls out there is NAR, whose chief economist, Lawrence Yun, is counting on the tax credit to provide temporary support for housing markets until the economy recovers enough to start fueling sales. He predicts price improvement in 2010 of more than 3%.

"The headwind we face is rising mortgage interest rates," Yun said, "but the compensating factors will be the homebuyers tax credit in the first half of the year and increased job creation in the second half."

At FACS we believe that several economists have tried to rely on there influential position to induce consumer spending. Remember the saying 'If your mother tells you she loves you get a second opinion'

Stay and Fight or Walk?

Troubled home loans continued to mount in the nation's banks in the third quarter as even once-solid borrowers increasingly fell behind on their mortgage payments.

For the first quarter ever, the number of homes in foreclosure with mortgages serviced by U.S. national banks and savings and loans topped the 1-million mark, according to figures released Monday by the Office of Thrift Supervision and the Office of the Comptroller of the Currency.

The percentage of prime borrowers whose loans were 60 or more days past due doubled from the July-to-September period a year earlier. And more than half of all homeowners whose payments had been lowered through modification plans defaulted again.

The report, which covers about 34 million loans, or about 65% of all U.S. mortgages, underscores the obstacles to strengthening the nation's rickety housing market. Stubborn unemployment is making it tough for millions of homeowners to pay their debts. In addition, many people whose monthly installments have been lowered still are unable to keep up with their payments.

Of the mortgages serviced by national banks and thrifts, only 87.2% were current and performing. It was the sixth straight quarter that the quality of those home loan portfolios had slipped.

"Mortgage performance continued to decline as a result of continuing adverse economic conditions including rising unemployment and loss in home values," the report said.

Seriously delinquent mortgages -- loans 60 or more days past due and loans to delinquent borrowers who have filed for bankruptcy -- rose to 6.2% of the servicing portfolio. That's a 16.7% increase over the second quarter and a 73.8% increase from a year earlier, the report said.

Of those seriously delinquent loans, the number of homes in the foreclosure process reached 1.09 million, about 3.2% of all the loans surveyed.

The report highlighted some troubling trends as the housing market continues to struggle despite increasing sales and prices in many areas. Difficulties increased for holders of prime mortgages, with the percentage of those loans that were 60 days or more past due increasing to 3.2%, up almost 20% from the second quarter and more than double the rate of a year earlier.

-Christopher Rockey

FACS Endorses Moratorium

Fannie Mae and Freddie Mac will suspend foreclosure evictions from December 19, 2009 through January 3, 2010. To help struggling families over the holidays, both owner-occupants and tenants living in properties foreclosed upon by Fannie Mae will not be evicted. Freddie Mac's suspension of evictions will be limited to properties up to four units.

In a similar move, Citigroup Inc. will suspend foreclosure sales and evictions for 30 days through January 17, 2010 for loans it owns. Citigroup's foreclosure moratorium, however, does not extend to loans it services on behalf of other investors. Given these developments, other lenders may follow suit, so check with the lender if appropriate.

I believe we can expect several lenders to follow suit in fact. The Moratorium Christmas rumor has been around for months now. I think it's a great move to not have the sheriff throw someone out of their home on Christmas Eve. By the way, it's a very voter initiative also.

-Christopher Rockey

FACS agrees on High Priced Homes

Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate and some are turning to so-called short sales to unload properties as stock-market losses and pay cuts squeeze wealthy borrowers.

“The rich aren’t as rich as they used to be,” said Alex Rodriguez, a Miami real estate agent with JM Group USA Inc., whose listings include a $2.9 million property marketed as a short sale because the price is less than the mortgage, leaving the bank with a loss. “People have reached the point where they can’t afford the carrying expenses of a $2 million home.”

Payments on about 12 percent of mortgages exceeding $1 million were 90 days or more overdue in September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages, according to data from First American CoreLogic Inc., a Santa Ana, California-based research firm. The rate for mortgages above $1 million was 4.7 percent a year earlier.

As defaults on the biggest mortgages rise, borrowers such as Steve Holzknecht are turning to short sales to exit loans that now are larger than the market value of the house. In such a transaction, the lender agrees to accept less than a 100 percent payoff on a mortgage to expedite the property’s sale.

Holzknecht, 53, last month cut the asking price for his 7,280-square-foot home in Kirkland, Washington, by $550,000 to $1.25 million, lower than the balances of his two mortgages. Holzknecht, the former owner of Four Suns Inc., a Seattle luxury homebuilder that went out of business two months ago, constructed the Craftsman-style home in 2000. He declined to identify his lenders or the amount he owes.

Common Plight

“It’s not uncommon to see this situation on the high end of the market -- homes selling for less than it would cost to build them,” said Holzknecht’s agent, Joe Flick of Roanoke Group in Seattle. The property came on the market eight months ago priced at $1.85 million, he said.

Porter Michael Peterson, a 33-year-old linebacker for the National Football League’s Atlanta Falcons, bought a mansion near Tampa, Florida, four months ago for $1.1 million -- almost half the amount of the mortgage taken out by the sellers three years earlier, according to real estate records. Reggie Roberts, a spokesman for the Falcons, didn’t return a call seeking comment.

Short sales almost tripled to 40,000 in the first six months of 2009 from the same period a year earlier, according to data from the Office of Thrift Supervision. The bank regulator doesn’t break out short sales by size of mortgage.

Upside Down Mortgages

“You are just starting to see the tip of the iceberg with luxury short sales,” said Adrian Heyman, owner of Property Advisors, a real estate broker in Scottsdale, Arizona. “A lot of wealthy people are upside down in their mortgages and they just can’t afford the second or third vacation home anymore.”

There are 114,000 home loans of more than $1 million, according to First American. About a quarter of all mortgaged homes in the U.S. have loan balances bigger than their current value, known as being upside down or underwater, the data company said.

The Dow Jones Industrial Average lost more than half its value as it tumbled to a 12-year low in March. The number of U.S. households with a net worth of more than $1 million, not counting primary residences, fell to a five-year low of 6.7 million last year from a record 9.2 million in 2007, according to Spectrem Group, a Chicago-based consulting firm.

The financial-services industry was among the hardest hit by the recession. While Goldman Sachs Group Inc. set aside a record $16.7 billion in the first nine months of the year for employee bonuses, some Wall Street executives will see pay cuts, according to Johnson Associates Inc., a New York-based compensation-consulting firm.

Distress

Year-end bonuses for people at hedge funds, asset- management firms and insurance companies probably will drop an average 20 percent, the firm said.

“There’s a lot of distress,” said Tracy McLaughlin, co- owner of Morgan Lane Real Estate in Ross, California, north of San Francisco. “You have hedge-fund guys whose funds evaporated and a year-and-a-half later they’re still not working.”

The entry-level segment of the housing market was aided this year by an $8,000 first-time buyers tax credit that pushed resales to a 6.1 million annual pace in October, the highest since February 2007, the National Association of Realtors said in a Nov. 23 report.

President Barack Obama signed a bill last month extending the program into next year. The new version keeps the first-time buyer benefit and makes a smaller credit available to some move- up buyers. It can’t be used for homes priced above $800,000.

Luxury Market Left Out

The Federal Reserve set out in January to lower fixed mortgage rates by purchasing $1.25 trillion of bonds backed by home loans. The 30-year fixed rate for so-called conforming loans that can be bought by Fannie Mae and Freddie Mac dropped to an all-time low of 4.71 percent in the week ended Dec. 4, according to McLean, Virginia-based Freddie Mac, the second- largest U.S. mortgage financier. The rate rose to 4.81 percent last week.

The Fed purchases haven’t affected the high end of the market because they exclude so-called jumbo loans. Mortgages above the $729,750 limit set by Congress for the nation’s highest-priced markets cost almost 1 percentage point more than conforming loans, according to Keith Gumbinger, vice president at HSH Associates, a mortgage-data company in Pompton Plains, New Jersey. That’s quadruple the historic spread.

“There is no refinance market for you if you are underwater and outside the Fannie and Freddie framework,” Gumbinger said. “High-end neighborhoods are all suffering from the same problems of diminished income at a time when there is little equity to work with.”

Trapped by Market

Masoud Bokaie, co-founder of engineering firm BORM Associates Inc. in Irvine, California, owes $2.6 million on a 3,664-square-foot house with marble floors and granite counters about 10 miles (16 kilometers) away in Newport Beach. He’s waiting to hear whether lenders Luther Burbank Savings and Wells Fargo & Co. will approve a short sale.

He received an offer last month “close to” the loan balances, said Shirley Cameron, his agent at Coldwell Banker Platinum Properties in Irvine, who declined to specify how much. Bokaie said he doesn’t want to pay $7,000 a month in net costs including the property’s mortgages and taxes when real estate values in the area continue to tumble.

“What’s the point when the market is going in the other direction?” Bokaie said in an interview.

The U.S. median home price was $173,100 in October, 25 percent lower than its July 2006 peak, according to the National Association of Realtors. Prices fell 7.1 percent from a year earlier, the slowest pace of the year.

More Declines Expected

“The reason the low end stopped falling is because the government stepped in with affordable loans,” said Scott Simon, managing director at Pacific Investment Management Co., a Newport Beach-based investment firm that runs the world’s largest bond fund. “There is no political will to bail out a million-dollar house.”

Luxury home prices probably will drop another 5 percent before reaching a bottom in September 2010, according to Sam Khater, senior economist at First American.

Those declines may lead to losses on jumbo mortgages that dwarf the “haircut,” or discount to full value, that banks take on short sales or foreclosures of moderately priced homes, said Rodriguez, the agent with JM Group in Miami.

“When the bank takes a loss on a $3 million property it’s a lot bigger than the loss on a home with a $150,000 mortgage,” Rodriquez said.

I have said it a thousand times now and I will continue to say it. Any Lender big enough to give your clients everything they want is certainly big enough to take away everything they have. A mortgage on a high priced home three years ago for three million dollars is now only worth one million. They do a Short Sale like they should, make sure you are getting them 'Full Settlement Language' against any further potential recourse. We have clients all the time that think letting the home go to foreclosure will satisfy the exposure to deficiency. Not true I will say this, I would rather have the common exposure to a forty thousand dollar deficiency than a couple million. Short Sale or foreclosure in many states. That could potentially be catastrophic to the financial future of a seller for years to come.

-Christopher Rockey

-Christopher Rockey

Loss Mitigation and FACS

The Treasury Department has started dispatching what it calls foreclosure "SWAT teams" to big banks to take a hard look at their operations.

The administration says it is cracking down on mortgage companies that aren't doing enough to implement President Obama's program to prevent foreclosures. The government hopes to help 3 million to 4 million people. But many economists say the program is stumbling, and that greater oversight is needed.

About 750,000 people have had their mortgage payments reduced so far through the president's Making Home Affordable plan. But the vast majority of those people — more than 95 percent — are just in the temporary trial stage of the program. Meanwhile, the foreclosure crisis remains one of the biggest threats to the economy.

One judge publicly announced "The behavior of these lenders are similar to the behaviors we saw with early century Gangsters." With that said all involved in these transactions run into several frustrations. It is important for Real Estate professionals especially working on Short Sales never loose their professionalism. Loss Mitigation is very much an art rather than a science this is truly a people business.

-Christopher Rockey

FACS Certification

“FOR IMMEDIATE RELEASE”

Mortgage Resolution Services Introduces a National Foreclosure Alternative Certified Specialist designation for Realtors®

SACRAMENTO, CA. – Mortgage Resolution Services, the nation’s pre-foreclosure solution and Short Sale experts (www.mrseducation.com), and subsidiary of Fidelity National Financial (NYSE: FNF) has announced the creation of a Foreclosure Alternative Certified Specialist (FACS) designation for Real Estate professionals. The FACS designation will allow professionals to move short sale opportunities forward more quickly, avoiding time consuming and potential deal ending delays and missteps. Through the course participants will learn key short sale expectations and points of negotiation established by lenders. FACS will also assist professionals in expanding their abilities to help the over 3.9 million homeowners currently in default with selling their homes through short sale proceedings avoiding full-scale foreclosure.

“Short sales are very much an art not a science,” says Scott Thompson, founder of Mortgage Resolutions Services, a national expert on the subject of short sales, and one of two instructors in the FACS course. “The key is mastering the rules and expectations of the lenders, and then learning how to structure the sales for rapid approval. The FACS course teaches real estate professionals how to do this – efficiently and effectively.”

The FACS course will be held in major metropolitan cities throughout the nation during 2010. The cost for the one day course is well below other short sale courses available in the market, but the content is significantly superior. “Our FACS course is the most current and unique short sale education available,” says Christopher Rockey, Mortgage Resolutions Services, Director of Education, “because the course is always adapting. We work with lenders negotiating and closing short sale transactions on a daily basis. The FACS participants are the beneficiaries of this constant interaction and experience.”

Those Real Estate Professionals certified with the FACS designation will experience a turning point for their careers. With foreclosure filings exceeding over 300,000 for the ninth straight month, the landscape of the real estate market is changing and the knowledge needed for real estate professionals to be successful is clear. The FACS course is comprised of the best material needed to teach the highest level of pure short sale strategy and execution available in the market. For more information or to register for the FACS course please visit www.mrseducation.com.


Mortgage Resolution Services, Inc. provides a full range of services to the real estate community, all designed to support the efforts of brokers and agents working with homeowners overburdened with mortgage debt. MRS provides education, coaching and a comprehensive short sale processing services to help real estate professionals who are seeking to adjust their business plan to account for current market conditions.

Fidelity National Financial, Inc. (NYSE:FNF), is a leading provider of title insurance, specialty insurance, claims management services and information services. FNF is the nation's largest title insurance company through its title insurance underwriters - Fidelity National Title, Chicago Title, Commonwealth Land Title, Lawyers Title, Ticor Title, Security Union Title and Alamo Title - that collectively issue more title insurance policies than any other title company in the United States. FNF also provides flood insurance, personal lines insurance and home warranty insurance through its specialty insurance business. FNF also is a leading provider of outsourced claims management services to large corporate and public sector entities through its minority-owned subsidiary, Sedgwick CMS. FNF is also a leading information services company in the human resource, retail and transportation markets through another minority-owned subsidiary, Ceridian Corporation. More information about FNF can be found at www.fnf.com.

-You saw it here first!

FACS Flipping Warning

We at FACS (Foreclosure Alternative Certified Specialist)have no intention to be on our soap box or to tell agents what they can or cannot do. Within the last year there has been a dramatic increase of ‘Option contract’ flipping. The good news is that yes option contracts are legal. The bad news is that an option contract is not good for anyone beyond the middle man investor. Option contracts expose a seller to a higher liability of recourse debt and could exploit a homeowner to greater tax related penalties. BEWARE of the legal and especially the ethical issues in option contracts I assure you staying away from them is the wisest way not to be sued by a past client. Besides I have had Cracker Jack box attorney’s tell me they would be more than happy to take any option contract case pro bono.

Flipping houses is becoming big business in the world of real estate investment. Unfortunately it takes all kinds of ‘flippers’ to make the world go around and some of them aren’t nearly as conscientious as others. If you are going to get into the business of flipping houses and want to make a living, and build a good reputation, for producing quality results you need to see to a few details throughout the process.

1) Do what needs to be done. Don’t cut corners and create situations that will put the family that purchases your home in personal or financial risk. You want to create a safe home for the family or person that ultimately makes the purchase. You do not accomplish this by taking shortcuts and using shoddy workmanship.
2) Avoid spending money that doesn’t need to be spent. By this I mean don’t spend money creating more work. Many people do this by deciding to tackle additions, rip out walls, or changing floor plans. These kinds of changes are best left to the buyer unless they will significantly improve the asking price you can bring in on the house. Otherwise spend the bulk of your money in kitchens and baths where they are best known for bringing in bigger profits.
3) If it ain’t broke don’t fix it. There is a lot of wisdom in this age-old saying. There is no reason to go in and fix something that doesn’t need to be fixed unless doing so will improve the value of the house to its buyers.
4) Always work within a budget. Most people set a budget when planning to flip houses but very few manage to work within that budget. This is the difference in making the profits you anticipated and putting the entire project at risk.
5) Create a home that the buyer will want to live in not the home that you will want to live in. You should never flip a house or design a flip according to your tastes; it is a recipe for disasters in more ways than one. First of all, it is unlikely that buyers will be able to afford it. Second, it sets you up for hurt feelings if a potential buyer rejects any small details. Third, it often raises the price you must seek for the property in order to cover the increased costs of decorating and designing according to your taste. Finally, it often leads to unnecessary expenses, which defeats the purpose of a quick flip type of project.
6) Time is money. Remember this in all things. The more time it takes to do the flip the more money it’s going to cost and the less money you are going to make. Plan small changes that have a big impact and can be done quickly to get the most out of your flip.
7) Never attempt a champagne flip unless you have a champagne budget to back it up. Just as flipping above the market is an unwise move it is equally unwise to flip a property beneath your target market as well. Do not attempt to flip a house in an upscale neighborhood if you can’t manage the upscale building supplies and appliances that will be needed in order to make it a success.

While these aren’t guarantees for success they are solid advice that will minimize the risks you face when flipping properties.

Keeping an ethical head will greatly reduce your personal exposure to legal issues and your reputation will be such that your investor pool should greatly increase.

-Christopher Rockey

FACS May Disagree

Stop paying your mortgage.

That's the underlying message from a University of Arizona law professor, whose new paper is hitting a nerve as the nation's housing crisis enters its fourth year.

Brent White denies advocating walking away from a mortgage that is bigger than the value of a home. Nonetheless, he lays out a case of how it can be done, and his suggestions have gone viral, popping up online, in newspapers and on television.

White is hardly first to talk about the idea of walking away from a mortgage that is bigger than the value of a home. Nonetheless, his suggestions have gone viral and are popping up online, in newspapers and on television.

It's a move that can save some people money, but at the expense of wrecking their credit.

The topic is central to what's crippling the housing market: About one in four homeowners, or 10.7 million Americans, are considered underwater, meaning their mortgage exceeds their home value, according to real-estate information company First American CoreLogic.

In the markets hardest hit by the nation's housing bust — Florida, Arizona, California, Michigan and Nevada — the share of homeowners who are underwater is 40 percent.

"Millions of Americans would be better off financially if they did walk away," says White, who authored the paper "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

What White is saying goes against everything that we've been taught about contracts. If you make a mortgage commitment, most people think you have a responsibility to pay.

On top of that, White suggests those who decide walk away should consider getting a new car or house before they default on their mortgage, which will constrain their credit.

Mr. White, here is my question to your cavalier media seeking agenda. While standing by your name as a Professor, aren't you advising clients to walk away from debt that may hold recourse? Mr. White may not be familiar with all the facts of recourse debt even in his own state of Arizona which is commonly mistaken as an anti deficiency state. In Arizona they have a unique definition of purchase money to any other state. Lenders only have recourse on non purchase money which can be defined in Arizona exclusively as 'Cash Out.' With that said, if there is a potential for recourse (Arizona also carries a 2.5 acre property recourse law) and Professor White is advising homeowners to walk away? I believe because of the nature of his job status he may be taking a huge public liability. Of course we should show some sense of forgiveness, after all he is only an ASU professor.

Just teasing Sun Devils! I wish you all the luck, Foreclosure Alternatives are always the way to go!

-Christopher Rockey

Your FICO Score

Borrowers already knew that late payments hurt their credit scores, but for the first time, they now know the extent of that damage.

Did you max out your credit card? Expect a credit score drop of 10 to 45 points. Declare bankruptcy? Your score will plummet by up to 240 points, and your odds of getting credit will nosedive with it.

The "damage points" data, unveiled recently by FICO, are part of the most revealing glimpse into the firm's once-secret -- and still mysterious -- credit scoring model. The new information discloses how many points borrowers' scores will drop when they make the most-common mistakes.

'Help People Understand' Scores

"I hope this information will help people to better understand FICO scores and the value for them of avoiding credit missteps. It illustrates key points such as the higher your score, the farther it can fall if you stumble," says FICO spokesman Craig Watts. "Getting and maintaining a good score isn't complicated. We all just need to pay our bills on time, keep credit card balances low and take on new debt sparingly. "



The greater transparency about FICO scores is important because American consumers' ability to get credit rises and falls with the number. FICO, the company that pioneered credit scoring, assigns consumers a three-digit number from 300 to 850, depending on how well they handle credit. Other companies also offer scores, but FICO's version is the most widely used by lenders in determining whether a consumer can borrow, and at what rate.

FICO's credit score has been around for decades, but only within the past decade have consumers gradually gained access to theirs. Though the raw numbers can be purchased, how they're figured remains a FICO secret, as closely guarded as the formula for Coca-Cola. Until Thursday, FICO revealed only broad categories of factors influencing the score, but not the number of points at stake for consumers who fail to pay as agreed. The "damage points" information, revealed in a report by personal finance writer Liz Pulliam Weston, will be made available through its myFICO.com Web site starting this weekend.

FICO's information shows that bankruptcy does the most serious damage to a credit score (up to 240 points), followed by foreclosure (up to 160 points) while maxing out a credit card has the least numerical impact (as few as 10 points).

Those with good or excellent credit -- so-called prime borrowers -- put more points at risk with each mistake. For example, someone with an average credit score of 680 who pays a bill 30 days late will see a drop of 60 to 80 points. But for someone with an excellent credit score -- 780 -- that same delinquency can send a FICO score tumbling by 90 to 100 points.

If you earn your FACS certification as a Real Estate Professional you get a hand out showing what the three major credit Bureaus told me in a face to face interview specifically on the topic of Short Sale's.

-Christopher Rockey

Defaulting on Your Mortgage? Is Your Agent FACS Certified?

Due to the national mortgage failure rate there are several alternatives available to homeowners to avoid Foreclosure. If you are considering a Short Sale make sure your agent is FACS Certified. The Foreclosure Alternative Certified Specialist is the highest level of Short Sale education in the country according to Fidelity National Financial. Beyond Short Sale's, the agent's who have earned FACS will have a superior knowledge of Loan Modification, Short Refinance, and several other options.

Activity in Fannie Mae’s portfolios declined according to most metrics during the month of October as compared to September. Delinquency rates reported, however, continued to increase.

In their monthly summary, Fannie Mae reported the corporation’s Book of Business declined at a compound annualized rate of (3.1) percent during the month. The current Book of Business is $3.23 trillion, an increase 4.8 percent thus far in 2009.

The retained portfolio declined 27.8 percent to $771.5 billion during October. The portfolio has declined 2.4 percent thus far in 2009. The principal decline was in non-Fannie Mae Agency Securities which dropped from $60.6 billion to $49.4 billion. Mortgage loans increased by about $5 billion and non-Agency securities decreased a little over $5 billion. Fannie Mae, along with Freddie Mac is mandated to reduce its portfolio by 10 percent a year beginning in 2010 until the portfolio of each corporation reaches $250 billion.

It is imperative for agent's to know they have no choice but to be in the default market if they are planning to do Real Estate over the next ten years. The Foreclosure Alternative Certified Specialist (FACS) designation should be mandatory for Real Estate Professionals.

-Christopher Rockey

Why You Need to Earn the FACS Certification

Option-ARMs: File under, "It sounded good at the time."

These exotic mortgages allowed homebuyers to come to closing with little cash and choose, monthly, how much to pay: interest and principal, interest only, or a minimum amount less than the interest due.

Of course, the last option is the one 93% of option-ARM buyers selected, according to a new report released this week by Standard & Poors.

But eventually, everyone has to pay the piper.

Nearly all of the 350,000 option-ARM borrowers owe more than when they first bought their homes thanks to the unpaid interest accumulating. And many loans written during the first big wave, which started in 2004, are getting ready for their five-year reset, when they become standard amortizing loans. Additionally, some newer loans will reset early if the accumulated interest has pushed the loan-to-value ratio above 110% to 125%.

That means borrowers are about to start paying very hefty prices for their homes. In one scenario outlined in the S&P report, the payment on a $400,000 mortgage jumps from $1,287 to $2,593.

25% default rate
But that doesn't just spell bad news for borrowers. Some industry pessimists say the looming default problem could have the power to derail the nascent housing market recovery. "The crux of the matter is that as soon as these mortgages recast, the history is that they will default," said Brian Grow, one of the S&P report's coauthors.

And the newer the loans, the worse they will perform, the report said. The last year that any option-ARMs were issued was 2007. In the first 20 months after issuance, this vintage of option-ARMs had an average default rate of just over 22%.

That includes all option-ARMs issued in 2007. But if you calculate default rates for only 2007 option-ARM borrowers who are now underwater, the default rate jumps to 25% after just 20 months, according to S&P.

So, while there may not be an awful lot of these loans out there, their high default rates will have an outsized influence on housing markets, adding to already bloated foreclosure inventories and driving prices down further.

Bubble markets
And the markets where they'll produce the most foreclosures are still among the most vulnerable in the nation.

Option ARMs were most popular in bubble markets -- California, Nevada, Florida and Arizona -- where double digit home annual price increases put the cost of buying a home out of reach.

In fact, 60% of these loans went to residents of California and other Western states, places where prices have fallen the most, according to report coauthor Diane Westerback. "The geography is negative for these products," she said.

Many borrowers in these places could only afford a home if they chose the option ARM. Many counted on continued hot market conditions to add value to their homes. The extra equity could then be tapped to pay their bills.

We all know how that worked out.

Home prices in many of the markets where option ARMs are most concentrated have fallen 30%, 40% or more. When the loans recast, most borrowers will find themselves severely underwater.

"Because borrowers of [options ARMs] are in a much worse position," said Westerback. "You'll see defaults rising very rapidly."

And most option ARM borrowers will not be good candidates for refinancing or mortgage modifications because their loan-to-value ratios will be far too high. Under the administration's Making Home Affordable program, for example, mortgages with balances that exceed 125% of the home's value are not eligible for help.

Not so white lies
There is another little problem that many option-ARM borrowers seeking refinancing would face: "Upwards of 80% of were stated-income loans," said Westerback.

These are the so-called "liar loans" in which lenders did not verify that borrowers earned as much money as they said they did. Lenders may not be able to modify mortgages because many of the borrowers' income could not stand up to the scrutiny. Borrowers may also not want to go through underwriting again because they could be held legally liable for deliberate inaccuracies on their original applications.

Add to those conditions the still fragile economy and high unemployment rates, and you have a recipe for disaster.

I had a conversation wit h the HR Director for Layton Construction this evening who said on the commercial side they expect 2010 to be the toughest year to get work since the great Depression. I will form an opinion on Commercial Real Estate soon but I can tell you, historical trends are pointing in a bad direction!

-Christopher Rockey

FACS

Foreclosure Alternative Certified Specialist (FACS)
In 2008 Fidelity National Financial (FNF) acquired a California based company that specializes in pre-foreclosure and Short Sale compliance. This company, Mortgage Resolution Services, since it’s FNF acquisition has had the opportunity to make a very serious place for itself in the Short Sale industry. Because Mortgage Resolution Services has an affiliation with FNF they are able have face to face appointments with lenders. These meetings are specifically made to learn the lenders language in the Short Sale process.
Mortgage Resolution Services has a unique ability to teach the lenders language and then pass that education on to Real Estate professionals. The FACS certification is specific to Short Sales but not exclusive. Because this is a foreclosure Alternative certification, we present all avenues to avoiding foreclosure including, Loan Modification, Short Refinance, High LTV refinance and others.
The FACS course is the only interactive course that requires participation from all attendees. Each student is broken into a team with one common goal much like in real life. This is also a unique teaching method rather than other certifications that bolt a desk to the ground, lock the doors and make you listen to an instructor for two days.
Mortgage Resolution Services is highly sensitive of its FACS education and only teaches very specific Short Sale strategy and execution. Because our course is the only one day Short Sale, it is fast paced a lot of fun and cost efficient.
Scott Thompson the founder of Mortgage Resolution Services who authored the FACS course has been recognized as an industry expert by National Association of Realtors. NAR has had Scott Thompson out to Washington DC on numerous occasions for national webinar education on the subject of Short Sales. Christopher Rockey, the Director of Education for Mortgage Resolution Services and the FACS certification is also a National Speaker on Short Sales.
FACS is the highest level of Short Sale strategy and execution offered for your budget as a one day course. If you are an agent interested in how to get short Sales done in a more efficient manner, specific strategies on settling with junior lien holders, how to protect commissions and interested in depth training on Risk Management, FACS should be highly considered as the training course for you and your team of Real Estate Professionals.

FACS

Media Advisory

“FOR IMMEDIATE RELEASE” Fidelity National Financial

Rancho Cordova, California www.mrseducation.com

November 24th, 2009 916.631.6180


Fidelity National Financial Implement’s National Pre-Foreclosure Compliance Course for Realtors®

SACRAMENTO, CA. – Fidelity National Financials pre-foreclosure solution and Short Sale arm known as Mortgage Resolution Services (www.mrseducation.com) has announced the Foreclosure Alternative Certified Specialist, FACS designation for Real Estate professionals today on a national platform. Mortgage Resolution Services is a national Short Sale processing center located just outside of Sacramento California.

Scott Thompson the founder of Mortgage Resolution Services is considered a national expert who has already been sought out nationally for expert advice on the subject of Short Sales. Thompson will be one of two instructors who was recently quoted in Time magazine saying “Short Sale’s are very much an Art not a Science.” Christopher Rockey, Director of Education for the FACS certification is recently quoted as saying “It’s important for the Realtor® to know that any lender big enough to give their clients everything they want is certainly big enough to take away everything the homeowner has.”

The FACS course will be unique to any other course because of the affiliation Mortgage Resolution Services has with FNF. Tom Bolinger, twenty year FNF employee heads up Mortgage Resolution Services and is quoted as saying “Our FACS Course and Instructors have a more unique understanding of the lenders language than the lenders themselves in some cases.” This understanding and ability to communicate that language to Realtors® will make this one day training a turning point for the careers of Real Estate professionals nationwide.

Thompson and Rockey the instructors for the FACS course, have taken part in writing Short Sale certification courses in the past. The two believe they have comprised the best of the material to bring the highest level of pure Short Sale strategy and execution on the market.

Please note for registration information please go online to www.mrseducation.com
# # #

Uncle Ben

Federal Reserve Chairman Ben Bernanke has a tough road ahead.
Very tough.
Bernanke, whose four-year term expires in January, is certain to face a contentious Senate banking panel at his confirmation hearing, set for Dec. 3. He is also defending against the sharpest attack on Federal Reserve powers ever.

The latest blow came last week, when a House panel overwhelmingly agreed to tack on to must-pass regulatory reform a proposal to dig into the Fed's books, despite attempts by Rep. Barney Frank, D-Mass., to make it less intrusive.

Fed watchers say they expect that Bernanke will be confirmed for a second term as chairman. But he may get the fewest favorable votes on record - and end up at the helm of a vastly changed Federal Reserve.

"It's going to wind up to be a very different institution," said American Enterprise Institute scholar Vincent Reinhart, a former director of the Fed's division of monetary affairs. "At least on the Federal Reserve part, Congress is going to converge on something that's tougher on the Fed. It's a way to vent anger. And fundamentally people are angry."

What Congress has in store for the Fed
While many credit Bernanke for saving the economy from falling into the next Great Depression, some in Congress blame the Fed - and Bernanke - for having failed to restrain the housing bubble. Others say he has gone too far in the financial system bailouts.

Interesting to see why Mr. Frank wants such a high level of anonymity? I wonder if it has anything to do with intrusions in his own personal life?

-Christopher Rockey

Deed for Lease Program

Fannie Mae announced Thursday that it is implementing a program under which qualifying homeowners facing foreclosure will be able to remain in their homes as renters if they voluntary transfer the property deed back to the lender.

The GSE’s new Deed for Lease Program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under the program, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at market rate.
“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Fannie Mae’s VP. “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Investor properties with tenants are also eligible for the program.

Prospective renters must show that they can afford to pay the new market rental rate and must be able to document that the rental payment is no more than 31 percent of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period.

A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.

Loan Modification Failure Rate

I have spent the last several years preaching Short Sales and the importance of recognizing there significance in the market place. Now with the national changes in the political climate the 'Anti Foreclosure Parade' marches on. Here are some facts about Loan modification which I am anxious to stop writing about. It appears the HAMP program is about as significant as a Big Foot sighting!
In what it termed a "conservative projection," Fitch Ratings says 65% to 75% of securitized subprime loan modifications will fall back into default a year after modification.

The findings were included in Fitch's semiannual report on loss mitigation actions taken by servicers on securitized loans. The report, which included information from Fitch-rated servicers and data from First American Loan Performance, found that, during the first half of 2009, about 30% of modified subprime loans fell back into default by the six-month mark and about 60% redefaulted 12 months after modification.

These numbers actually understate the number of loans that fail after modification, Fitch says, because the figures do not include modified loans that were subsequently re-modified or liquidated. While the rating agency adds that the number of prime-loan modifications initiated this time last year is insufficient for Fitch to determine a 12-month trend, at six months, the statistics on prime redefaults are similar to those for subprime and Alt-A loans.

By analyzing a pool of loan modifications from the third quarter of 2008 - a pool that included prime loans but mostly comprised Alt-A and subprime loans - Fitch found that 34% of the loans are current today. Five percent are in 30-day buckets, 17% received a second modification and 8% have been liquidated. These statistics support Fitch's contention that its 65%-75% redefault projection is conservative.

In explaining why modifications may not necessarily be the best route for servicers to take with certain borrowers, Fitch warns its rated servicers against re-modifying loans for the sake of improving performance data.

"The use of multiple mods for the sole purpose of managing default statistics and advances could not only put at risk a servicer's, as well as the transaction's, ratings, but also could greatly increase the ultimate loss to the investor," the report's authors state.

Modifications as a percentage of loan resolutions (i.e., actions that result in home retention as well as those that result in foreclosure) grew in the first six months of the year when compared to the six months ending Dec. 31, 2008. Loan modifications accounted for 58.1% of residential mortgage-backed securities loan resolutions in the first half of 2009, whereas they made up only 39.6% of loan resolutions in the last half of 2008. In total, 88.5% of the loans worked by Fitch-rated servicers' loss mitigation departments between January and June 2009 resulted in workouts. For the prior six-month period, 71.4% of cases resulted in workouts.

Looking for a Loan Modification, good luck. All too many loan moods are in favor of the lender and not the consumer!

-Christopher Rockey