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Answers to the California Mortgage Servicing Settlement

The Obama Administration is committed to ensuring that everyone in the mortgage process-banks, mortgage servicers, and other institutions-are following the law. If they’ve not followed the law they should be held accountable. Banks and mortgage services expect that homeowners will meet their obligations under a mortgage; American homeowners should have the same expectation that banks and mortgage servicers meet all of their responsibilities. And it is our job in the federal government and in state and local government to make sure that they do. In meeting that obligation, the Obama Administration has coordinated the reviews and investigations conducted by a broad range of federal agencies and with the 50 state attorneys general to reach a servicing settlement agreement with lenders who have violated state and federal law and Americans’ trust.

Who May be Eligible for Assistance

Because of the complexity of the mortgage market and this agreement, which will be performed over a three-year period, borrowers will not immediately know if they are eligible for relief. Borrowers from states who did not sign the settlement will not be eligible for any of the relief directly to homeowners. Borrowers from Oklahoma will not be eligible for any of the relief directly to homeowners because Oklahoma elected not to join the settlement.

The settlement provides assistance for:

Homeowners needing loan modifications now, including first and second lien principal reduction. The servicers are required to work off up to $17 billion in principal reduction and other forms of loan modification relief nationwide.

State attorneys general anticipate the settlement’s requirement for principal reduction will show other lenders that principal reduction is one effective tool in combating foreclosure and that it will not lead to widespread defaults by borrowers who really can afford to pay.

Borrowers who are current, but underwater. Borrowers will be able to refinance at today’s historically low interest rates. Servicers will have to provide up to $3 billion in refinancing relief nationwide.

Borrowers who lost their homes to foreclosure with no requirement to prove financial harm and without having to release private claims against the servicers or the right to participate in the OCC review process. $1.5 billion will be distributed nationwide to some 750,000 borrowers.


Over the next 30 to 60 days, settlement negotiators will be selecting an administrator to handle the logistics of the settlement and monitor compliance.

Over the next six to nine months, the settlement administrator, attorneys general and the mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible will receive letters.

This settlement will be executed over the next three years.


For loan modifications and refinance options, borrowers may be contacted directly by one of the five participating mortgage servicers. Keeping in mind the timeline above, you may contact the banks directly if you need additional information:

Ally/GMAC: 800-766-4622
Bank of America: 877-488-7814 (Available M-F 7am – 9pm CT and Saturdays 8am CT – 5pm CT
Citi: 866-272-4749
JPMorgan Chase: 866-372-6901
Wells Fargo: 800-288-3212 (Available M-F 7 a.m. to 7 p.m. CST)

Loans owned by Fannie Mae or Freddie Mac are not impacted by this settlement. You may visit the following websites to learn if your loan is owned by either Fannie Mae or Freddie Mac:

These sites will also include links to information about mortgage and foreclosure programs you may be eligible to access. You may also call 1-888-995-HOPE (4673)

For borrowers who lost their home to foreclosure between Jan. 1, 2008 and Dec. 31, 2011, a settlement administrator designated by the attorneys general will send claim forms to persons eligible for cash restitution.

If you believe you are eligible for relief under this settlement but are concerned you will be difficult to locate, please contact your Attorney General’s Office. We will collect and forward your information to the appropriate person to ensure you are contacted if you are eligible.


Scammers are already at work trying to capitalize on the national mortgage settlement to access your personal information–or worse, your money. The Attorneys General have already received reports of scammers in Alabama calling borrowers claiming to be one of the major banks involved in this settlement and offering a cash payment to consumers if they simply provide the routing number to access their bank account. If you receive an unsolicited call from one of the major banks, you can identify a scam in several ways:

Does the caller identify themselves as representing your loan servicer? Or do they ask you to provide the name of your loan servicer? If they ask you for the name of your servicer, they may be a scammer.

Does the caller offer to provide your personal information to assist you in identifying your account? Or do they ask you to provide that? If the caller is from your loan servicer, they will be able to tell YOU your personal information because they will have it. You should never provide your personal information (including bank account numbers, social security numbers, etc.) to an unsolicited caller–no matter what they promise you.

Does the caller offer to speed your settlement relief for a fee? They are definitely a scammer! Neither the banks nor the Attorneys General will charge a fee to speed your settlement.

If you think the caller may be legitimate, ask for their contact information, tell them you are going to call your bank’s hotline (located above) and confirm, then call them back. Chances are if they’re a scammer, they won’t want you to check on them and they won’t provide their contact information.

Why A Short Sale May Work Better Than A Foreclosure

When a homeowner realizes that they can no longer pay for their mortgage, they may wonder about their choices. The option of foreclosure may be possible and so will the idea of a short sale in Las Vegas. There are a few differences in both of the choices, that could impact the financial future of person. Whether there is lots of time to decide or just a few days, there are always options that can be discussed.

A short sale is when the home goes on the market for just under what it owes. Banks often like this approach better than just leaving the home, because they may get more for the house selling it that way. Often a house that is up for sale under a short sale, will sell in a fast amount of time.

Homeowners can seek help from banks, real estate agents and legal representation when trying to make the choice. A legal department that specializes in bankruptcy and foreclosure may be able to tell someone what the points are to consider if leaving the home is the only option.

Often when someone knows what the pros and cons are to their choice, they will make one that is responsible for them. Using this type of measure to sell off a property, may be better for someone’s credit. They may be able to get out of their home through selling it, and manage a way to pay off the rest of their debt. Learning how to get out of debt without claiming bankruptcy, may be the best way to salvage a credit score.

When a home is up on the market under a short sale, real estate agents will keep their eye out for it. It is in other buyer’s interests to take a look at the property listed under these circumstances. Typically the buyer is just trying to get out of their loan and the home will be sold for under its value.

Buying a home for under its actual value can allow someone to sell it again and this time make a profit. This type of listing may be great for someone who wants to simply sell it, fix it up and sell or move into a house at a really good rate.

This choice can be made just days before having to foreclose. Real estate agents can put it on the market and try to have it gone again in a matter of days. In some cases bidding wars break out from people trying to get their hands on the cheap deal.

When debts are climbing and the mortgage just cannot be paid, there are other options. While temporary loans may help in the short term, often they are only a quick solution. If someone is out of work or not able to work, then the present situation may also be the same in the future. When time is running out, the best thing to do may be to consider a short sale in Las Vegas.

Article Source: http://www.articlesnatch.com

About the Author:
Schwartz Law Firm (http://www.andopportunities.com/) is focused on short sale Las Vegas as aims to help homeowners who are in financial distress by guiding them through the challenging process of selling their homes when they are worth less than they owe.

Short Sales And Credit Scores – Short Sale Education

A couple of months ago, I wrote the blog “Bankruptcy, Foreclosure, or Short Sale? What happens to my Credit Score?” This month, I’d like to give an update on Short Sales and Credit Scores.

Credit Score:Drops score approximately 60-100 points
Length of Time on Credit Report:7 years
Buying Another Home: Qualify for a mortgage with a decent interest rate after 18-24 months

Note: There are several caveats when it comes to a short sale because short sales are relatively new and credit bureaus are still trying to figure it into their credit risk modeling. In fact, in the future, it has been analyzed that some lenders may look at a short sale the same as a foreclosure.

Above states an 60-100 point hit for a short sale and this hit does depend on how many payments were missed prior to the completion of a short sale

For a short sale, it has been reported that a credit report will show Satisfied with a note that states “Creditor settled for less than the amount due”. If you are lucky, you will just get “Paid In Full”. This does not happen often. Most likely, a short sale will show as a charge off or a settlement

Lenders using the Fannie Mae and Freddie Mac mortgage approval system will see mortgage payments that are 120 days late or receipt of a Notice of Default the same as a foreclosure

Many lenders may not consider a short sale unless the homeowner is late, but more are considering a short sale even if the homeowner is not late with a convincing and full proof of a hardship

Homeowners who have a mortgage under water are more inclined to try a short sale ”short sale” before throwing their hands in the air and going to foreclosure or go through bankruptcy. In 2009, the National Association of Realtors estimated that about ten percent of all sales last year were short sales and it is expected to increase this year.

With Obama’s HAFA program, lenders are provided incentives to perform short sales and so are homeowners because under this program they would receive $1500 for relocation costs.

There is still a lot of confusion around how a Short Sale Secrets will affect a borrower’s credit score. It really depends on how many lates a homeowner has had on their mortgage and how the lender decides to report it to credit agencies, Experian, Equifax, TransUnion.

The main point that homeowners should realize is that if they are successful on doing a short sale to get out of their situation, the road to credit recovery is shorter than if they went to foreclosure. Protecting ones credit score will help to minimize the amount of interest a borrower pays on credit cards an loans.

It has been reported that a homeowner would be able to buy a home after 2-3 years, given they continue to work on their credit after a short sale. If they went to foreclosure, they would have to wait as long as 7 years.

Many homeowner are frustrated on figuring out how to resolve their mortgage being underwater and many are just walking away but this is a mistake. A homeowner can ask for a short sale even if they are not late on their mortgage, but the reality is that a lender has no incentive to allow a short sale if payments are still being made on time.

There are some states that do not allow lenders of 1st mortgages to pursue a seller for the unpaid balance. But in all states, second liens and equity credit lines can pursue the seller unless an agreement has stated otherwise. Borrowers will have to pay tax of any unpaid mortgage balance unless they meet IRS’s home exclusion or insolvency rules. Owners of second or investment properties do not qualify for the home exclusion rules.

Look out for our future blogs/articles from our Short Sale Leadership Series content.To view our blog updates, visit www.whbsolutions.com/blog.

Article Source: http://www.articlesnatch.com

About the Author:
For more information on becoming a Short Sale Education Leader in your community, join WHB Solution’s community of Short Sale Success and join short sale experts at www.whbsolutions.com/members

$18 Billion for Struggling California Homeowners

Attorney General Kamala D. Harris today announced an historic commitment to California of up to $18 billion that will benefit hundreds of thousands of homeowners in the state hardest hit by the mortgage crisis.

“California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,” said Attorney General Harris. “Hundreds of thousands of homeowners will directly benefit from this California commitment.”

“This outcome is the result of an insistence that California receive a fair deal commensurate with the harm done here. We insisted on homeowner relief for Californians and demanded enforceability so homeowners actually see a benefit that will allow them to stay in their homes, and preserved our ability to investigate banker crime and predatory lending,” continued Harris.

California secured the $18 billion agreement as part of a national multistate settlement to penalize robo-signing and other bank servicing and foreclosure misconduct. The agreement comes after California departed from the multistate negotiations last September when the estimated relief to California was $4 billion. Attorney General Harris insisted on more relief for the most distressed homeowners, meaningful enforcement, and the ability of California and other states to pursue investigations into misconduct.

California’s participation in the settlement also increased the amount of relief other states will receive by approximately $6 billion.

Attorney General Harris also obtained separate, enforceable guarantees to ensure that banks will be accountable for their commitments to California. As part of the separate California guarantee, banks must enact a minimum of $12 billion in principal reductions for California homeowners. Failure to achieve this minimum level of reductions will result in substantial cash payments of up to $800 million that the banks will have to pay to the state. Unlike the larger multistate agreement, which is enforceable in a federal court in Washington, D.C., this payment provision empowers the Attorney General to summon the banks to California state court.

California’s separate guarantee also creates important incentives to ensure that banks will reduce the principal mortgage balance of underwater homeowners in California’s hardest-hit counties and that the principal reductions in these communities will occur within the first year of the settlement.

To speed investigations and strengthen prosecutions of these mortgage cases, California will expand its Mortgage Fraud Strike Force, adding to the more than 42 members already working on the team. The state will continue its investigative alliance with Nevada, that allows the sharing of resources, information and strategies, and will look to collaborate with additional states focused on a law enforcement response to the wave of mortgage fraud.

The national multistate agreement and California commitment will provide substantial relief for thousands of Californians whose mortgages are owned by the five banks in the settlement, but thousands more will still need help as they struggle to stay in their homes.

“I will continue to fight for principal reductions for the approximately 60 percent of California homeowners whose loans are owned by Fannie Mae and Freddie Mac,” Attorney General Harris added.

Attorney General Harris will propose a comprehensive legislative agenda to protect homeowners in the mortgage market. This legislation will build on the three-year reforms agreed to as part of the California commitment, including a single point of contact for mortgage-holders and an end to the unfair and confusing system of dual-track foreclosures.

“This is an historic amount of relief for California homeowners, but it is one piece of a broader focus. We will continue our crackdown on mortgage fraud and quickly move to pass legislation that will simplify, reform and upgrade our broken mortgage system,” Harris added.

The financial benefits of this historic agreement extend to homeowners whose loans are owned or serviced by one of the five largest mortgage lenders. Benefits include:

  • More than $12 billion is guaranteed to reduce the principal on loans or offer short sales to approximately 250,000 California homeowners who are underwater on their loans and behind or almost behind in their payments.
  • $849 million is estimated to be dedicated to refinancing the loans of 28,000 homeowners who are current on their payments but underwater on their loans.
  • $279 million will be dedicated to offering restitution to approximately 140,000 California homeowners who were foreclosed upon between 2008 and December 31, 2011.
  • $1.1 billion is estimated to be distributed to homeowners for unemployed payment forbearance and transition assistance as well as to communities to repair the blight and devastation left by waves of foreclosures, targeted at 16,000 recent foreclosures.
  • $3.5 billion will be dedicated to relieving 32,000 homeowners of unpaid balances remaining when their homes are foreclosed.
  • $430 million in costs, fees and penalty payments.

County-specific payments are based on the number of homeowners and the depth of the foreclosure crisis. It is estimated that homeowners in the following counties will accrue the following level of benefits over the three-year life of the commitment.

  • Los Angeles: $3.92 billion
  • Riverside: $1.59 billion
  • San Bernardino: $1.13 billion
  • Sacramento: $820 million
  • Stanislaus County: $368 million

Additional details on the settlement, including how homeowners can apply for relief, can be found at www.oag.ca.gov.

Eligible homeowners should be contacted by the five participating banks.  However, individuals who are interested or concerned may wish to initiate the process by contacting the banks for more information.

Ally / GMAC…………………….. 800-766-4622

Bank of America……………….. 877-488-7814 (M-F 7:00 am to 9:00 pm Central Time and Saturday, 8:00 am to 5:00 pm)

Citi………………………………… 866-272-4749

JPMorgan Chase……………….. 866-372-6901

Wells Fargo……………………… 800-288-3212 (M-F, 7:00 am to 7:00 pm Central Time)

The HUD Home Process – From Offer to Closing Day

Purchasing a HUD home or a home where the mortgage was insured by the FHA and has gone into foreclosure is not as hard of a process as you may think. Whether you are looking at a hudhome as part of the Good Neighbor Next Door (GNND) program or looking to purchase the home as an investor, there are some guidelines these homes have and you should know about them and adhere to them to ensure your purchase. Here we will go through the process of purchasing government homes from offer to closing day.

Who Can Buy a HUD Home?

Anyone can purchase a hudhome and the foreclosed homes may be purchased as an owner-occupied home or investors. Buyers who are seeking a foreclosed home on an owner-occupied basis have a priority bid period over investors of ten days.

How Are they Priced?

They are sold at market value price or what is called the appraised market value. A buyer can make any offer, but usually, they will accept only those offers close to the market value price, unless they offer a price reduction on a hudhome that isn’t selling.

All these homes are sold “as is,” meaning there are no warranties nor do they guarantee the home’s condition. Home inspections are recommended and required prior to buying a hudhome to ensure any needed repairs will fall within your budget or if you can roll them into your new mortgage. Home inspections are ordered and paid for by the buyer and you should only hire a licensed inspector.

What Are Offer Timelines/Deadlines?

Unlike a conventional home purchase where you and the seller may negotiate for as long as you wish, there are certain deadlines. To be fair to every buyer, the timelines that you must meet in your bid otherwise the bid you make on the hudhome will face cancellation. For example, once your real estate broker sends your bid in to be considered and it is accepted as the highest bid, your real estate broker must send your signed sales contract within 48 hours of the bid or your bid will be canceled-also preference is given to closings within 45 days of bid.

How Are Bids or Offers Submitted?

You must have your bid or offer submitted through a real estate broker who is licensed to sell a HUD home. Offers are submitted through an electronic bidding process by your broker. Each bid is stored within a computer and after the set time period, the computer calculates the highest bidder automatically. Your broker is then notified if you are the winning bidder and asked to submit a signed sales contract within 48 hours of your bid. Failure to abide by the 48-hour period will cancel your bid.

How Are Homes Listed?

All new listings are released weekly each Friday morning. During the first ten days of any new listing on each Friday morning, they only accepts bids from owner-occupied bidders. It doesn’t matter if you submit a bid on day one, day five, or day ten, as long as the bid has been received electronically, all owner-occupied bids to be submitted simultaneously. On the 10th day, all owner-occupied bids will be reviewed and winning bids are posted daily at 1:00 pm. This initial 10-day period is called the Exclusive Listing Priority Period.

After the 10-day period has passed and no winning bids are confirmed, HUD will open up the bidding to the general public. These general public bids are reviewed and in the event the property still remains unsold after general public bids, all daily bids received by 11:59 pm will be reviewed and winning bid results are posted the next day by 1:00 pm. All Bids are reviewed after 1:00 pm on Friday afternoon or on Saturday or Sunday on the Monday following.

What is the Closing Process?

Once your signed sales contract has been submitted through your real estate broker within the 48 hour time period, they will acknowledge your sales contract and provide your real estate agent a letter letting you know that you now have 45 days to close. A closing agent is assigned to you and will work with your broker to ensure you close on time with all the required documents. It is important to note that if your real estate agent uses a recommended closing agent, as they will pays the closer’s fees. If you use your own closing agent, you are responsible for paying all closing cost fees.

What Else Should I Know?

If you are buying a HUD foreclosed home, they will pay up to 5% commission to the selling broker, or your real estate agent. They will also pay up to 3% of standard closing costs if you use one of their closing agents. They may reimburse loan origination fees of up to one percent on your new mortgage. You can also ask your real estate agent to explain how earnest money can be returned and what requirements must be met. Be sure to ask about how earnest money is refunded because if this happens to you, certain guidelines must be followed to receive all or half of your earnest money if you fail to close on the home.

What If I Need More Time?

If for any reason, you feel you and your real estate agent or financial institution can’t complete the closing process within 45 days, your real estate agent must notify the closing agent at least two weeks prior to your 45 day deadline and submit the required form “Request For Extension of Closing Date,” and you may get to extend your timeframe for another 15 days. Your real estate agent must provide appropriate documentation on why you need an extension in additional to certain monies required.

For example, with every approved extension request, they must also receive a cashier’s check, money order or other certified funds made payable to HUD that are considered extension fees. The extension fees are based on the contract sales price. For example, if the hudhome you are purchasing is less than $25,000, you pay $10 per day or $150, homes sold at $25,001 to $50,000 have a $15 per day fee or $225. Homes that sell for over $50,000 and require the 15-day extension will pay a fee of $25 per day or $375. Whether you need to pay $150, $225, or $375, these fees must be submitted to in certified funds or money order as described above.

Purchasing one of these types of foreclosure homes requires you to keep in close contact with your real estate agent, especially if you require an extension. All 15-day extensions applied for owner-occupied buyers will have no fees if your real estate agent provides the documentation indicating a timely loan and loan application was made and that your mortgage approval is very close. Further, if you are charged an extension fee, all fees are retained whether you close on time or not and then used as part of your closing costs.

Summing It All Up

Purchasing HUD homes for sale is an easy process if you utilize a real estate broker who is licensed to sell these homes and understands the government regulated buying process. When going through any approved real estate broker, ask them how knowledgeable they are about the entire process of buying a home from offer day to closing day.

HUD Homes in MN are explained in more detail at http://www.MinnesotaHUDhomes.org John Mazzara is involved with financial services in the Twin Cities, MN. Officing out of Edina, Minnesota-John is centrally located within the 7 county MN metropolitan area. John owns three separate businesses-a licensed real estate broker associate selling Minnesota real estate since 1986-affiliated with RE/MAX Associates Plus http://www.MinneapolisStPaulHomes.com , an independent CFP-certified financial planner since 1989 with an independent Minnesota financial planning firm-Financial Planning Associates and the owner of a Minnesota mortgage broker firm-Venture Development Inc-specializing in residential, commercial and investment mortgages for purchases of single family homes, investment properties and commercial property. Venture brokers FHA, VA, Conventional loans and lines of credit. If you are looking for someone to help you in the areas of real estate sales/purchase, mortgages, or and/or financial planning and insurance you should call John for a free 1 hour consultation to see if he can meet your needs. 952-929-2577. RE/MAX Associates Plus and Venture Development are located at 7300 France Ave S, Suite 410, Edina, MN 55435

Author: John Mazzara
Article Source: EzineArticles.com
Excise Tax

Website Resources for Foreclosure Help

Here are some legitimate resources to help you fight the foreclosure crisis.

You’ve been warned about foreclosure scams. But sometimes it’s really hard to tell if something is a scam or not. Some less-than-reliable outfits have even taken to including “hud” or “gov” in their URLs to fool you into thinking they are legitimate foreclosure counselors. It pays to be wary. Below are some websites from government and non-profit agencies that can help you with foreclosure. Some are seeking volunteers and donations to help stop the foreclosure crisis.

Research your options with this web form (http://www.hopenow.com/homeowner-options.php)
Find your mortgage lender (http://www.hopenow.com/mortgage-directory.php)
Find a foreclosure counselor in your area (http://www.hopenow.com/hopenow-counseling.php)
Focused on helping homeowners in crisis, this alliance helps you determine your options

Find a foreclosure counselor (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre26.shtm)
Raise your own credit score (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm)
Fix mistakes on your credit report (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm)
The Federal Trade Commission has expert advice

Find a legitimate foreclosure counselor near you (http://www.findaforeclosurecounselor.org/network/nfmc%5Flookup/)
This non-profit organization was created by Congress to provide financial support, technical assistance, and training for community-based revitalization efforts

Making Home Affordable (http://www.makinghomeaffordable.gov/)
Making Home Affordable: short sale documents (https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html)
Making Home Affordable: deed in lieu documents (https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html)
The official government site for loan modifications and foreclosure alternatives

Find resources to avoid foreclosure in your state (http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure/local)
Consult state and local resources

Improve You Credit Score
(http://www.myfico.com/CreditEducation/ImproveYourScore.aspx) Credit Q&A (http://www.myfico.com/crediteducation/questions/)
Credit Basics ( http://www.myfico.com/crediteducation/articles/)

Understand credit and your credit scores

See your credit report (https://www.annualcreditreport.com/cra/index.jsp)
Get all the details on late payments and other information, but not your actual credit score

The Center for Responsible Lending (http://www.responsiblelending.org/)
A non-profit organization that works to stop predatory lending practices

Volunteer to be a credit counselor (http://www.crediteducation.org/Become-a-Volunteer.aspx)
Non-profit agency that works to provide financial literacy

United Way (http://www.liveunited.org/income/)
Donate or volunteer to decrease the number of families that are financially unstable

Donate to the National Community Reinvestment Coalition (http://www.ncrc.org/index.php)
Send a donation to help NCRC “ensure that people in traditionally underserved communities are treated fairly and justly when applying for credit, opening a bank account, getting a mortgage, a loan, or other financial product or service.”

The Mortgage Forgiveness Debt Relief Act (http://www.irs.gov/individuals/article/0,,id=179414,00.html)
Get the details about when you might owe taxes on any debt that is canceled through a short sale or deed in lieu of foreclosure

Download a PDF on identifying a loan modification scam (http://www.occ.gov/ftp/advisory/2009-1.pdf)
The Office of the Comptroller of the Currency provides detail about scams, including “10 Warning Signs of a Loan Modification Scam.”

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

Notice of Default & Investor Purchase Agreement

A general understanding of the Home Equity Sales Contracts Law (California Civil Code Sections 1695 through 1695.17, referred to as HESC below) is essential for any real estate professional who handles sales of residential properties.  This law applies only if ALL four of the following conditions are met:

(1)  the property being sold is residential one-to-four units;
(2)  the owner currently occupies the property;
(3)  a Notice of Default (NOD) has been recorded against the property; and
(4)  the buyer does not intend to occupy the property (i.e., buyer is an investor).

If any one or more of the four conditions has not been met, then the HESC doesn’t apply and none of the conditions or restrictions discussed below apply (e.g., no special contract need be used, there is no special rescission period).

The primary purpose of this legal article is to assist the real estate licensee in adequately and safely handling such a transaction when all four conditions are met, and to present the licensee with a working knowledge of general concepts for dealing with such situations. The highly technical forms, precise language, and exacting notice requirements mandated by law are not included here.

Whenever in doubt of their individual circumstances, readers should seek the advice of an attorney for legal advice in this highly technical area.

1.  Why did the legislature enact these laws?

A   These laws were enacted in response to practices that occurred in connection with sales of property in foreclosure. Although a variety of schemes were used, the results of such practices were generally the same. For example, loans, offers of services or sales contracts often involved an unsophisticated homeowner under financial duress signing complex documents with contractual terms which were financially impossible to meet. They frequently included transferring title to the equity purchaser at the same time as the contract was signed, giving the seller no opportunity to consider the transaction. Sometimes, by way of clandestine financial structuring or by hidden transfer language, the homeowner’s equity and/or title was mistakenly transferred without the owner’s intention to do so. The ultimate result was that the homeowner lost his/her property and/or equity to these unscrupulous individuals.

2.  What is the intent and purpose of Home Equity Sales Contracts law (HESC)?

A   The intent and purpose of this law is to:

  • Provide homeowners with information necessary to make informed, intelligent sales decisions;
  • Require written sales agreements;
  • Safeguard the public against deceit and financial hardship;
  • Insure fair dealing in the sale and purchase of homes in foreclosure;
  • Prohibit misleading representations;
  • Restrict unfair contractual terms;
  • Provide homeowners reasonable opportunity to rescind sales to equity purchasers; and
  • Protect homeowners’ equity.

(Cal. Civ. Code § 1695.)

II.  Definitions

3.  What is a Home Equity Sales “Contract”?

A   Basically, a Home Equity Sales Contract is any contract of sale between an equity purchaser and an equity seller of a residence in foreclosure.   However, see the exemptions in Question 15.  (Cal. Civ. Code § 1695.1(e).)

4.  In the above general definition, the word contract has been emphasized. Why is that?

A    The law defines a Home Equity Sale Contract in very particular manner. This contract is defined as any contract, agreement, or arrangement, or any term thereof between an equity purchaser and equity seller incident to the sale of a residence in foreclosure. However, the Code additionally defines an equity contract as any offer incident to the sale of a residence in foreclosure between these parties.  (Cal. Civ. Code § 1695.1(e).)

5.  Why would a mere offer be given the same protection as a contract?

A    Here again, the law provides a far-reaching special protection to residential owners in foreclosure. Even before entering into a traditional contract, it is unlawful for any person to initiate or negotiate a sale of a residence in foreclosure to an equity purchaser if the person takes unconscionable advantage of the seller.  (Cal. Civi. Code § 1695.13.)

6.  Who is an equity purchaser?

A    An equity purchaser is defined as any person who acquires title to any residence in foreclosure unless exempt as discussed in Question 15 (Cal. Civ. Code § 1695.1(a)).

7.  What is a “residence in foreclosure”?

A    A residence in foreclosure means residential real property consisting of one-to-four family dwelling units one of which the owner (seller) occupies as his or her principal place of residence, and against which there is an outstanding notice of default properly recorded (Cal. Civ. Code § 1695.1(b)).

The court of appeal has found this law to apply only when the owners/victims actually live in the residence subject to foreclosure.   (In re Phelps, 93 Cal. App. 4th 451 (2001).)

III.  Legal Effects

8.  What actions must the equity purchaser avoid?

A   This law require precise and exact conduct of the equity purchaser and the various prohibitions are as follows:

  • Do not make any untrue or misleading statements regarding value, proceeds, contract terms, seller’s rights, or obligations (Cal. Civ. Code § 1695.6(d));
  • Do not induce equity seller to execute or accept any executed instrument of conveyance until the seller’s 5-day cancellation period has elapsed (Cal. Civ. Code § 1695.6(b)(1));
  • Do not record any instrument of conveyance signed by the seller until the seller’s 5-day cancellation period has elapsed (Cal. Civ. Code § 1695.6(b)(2));
  • Do not transfer or encumber or purport to transfer or encumber any interest in such property to any third party until the seller’s 5-day cancellation period has elapsed (Cal. Civ. Code § 1695.6(b)(3));
  • Do not pay equity seller any consideration until the seller’s 5-day cancellation period has elapsed (Cal. Civ. Code § 1695.6(b)(4));
  • Return any documents signed by equity seller within 10 days following receipt of notice of cancellation, without any conditions (Cal. Civ. Code § 1695.6(c)).

9. What are the remedies of an equity seller in the event these laws are violated?

A   An equity seller has been provided a multitude of legal rights under these laws in addition to the traditional legal rights of a party to a contract.  If the equity purchaser violates any requirements in Question 8 or takes unconscionable advantage of the owner in foreclosure, the seller may file a court action for recovery of all damages, injunction, other equitable relief, or a combination of these remedies (Cal. Civ. Code § 1695.7).

Furthermore, fraud or deceit upon the equity seller may result in criminal penalties on the equity purchaser up to $25,000 or up to one year in jail (Cal. Civ. Code § 1695.8).

10. What are the damages that an equity seller can recover?

A    In an action for damages, the equity seller can recover:

  • Actual damages;
  • Attorney’s fees and costs; and
  • Mandatory exemplary damages in an amount not less than three times the seller’s actual damages or a civil penalty of up to $2500 if no exemplary damages are awarded.

(Cal. Civ. Code § 1695.7.)

11.  What are the legal rights of an equity seller under the HESC?

A    The seller has the following legal rights:

  • FIVE-DAY CANCELLATION PERIOD: Cancellation of the purchase contract by the equity seller forfive full business days from when the equity seller signs the contract or up to 8:00 a.m. of the trustee’s sale date whichever occurs first;
  • TWO-YEAR CONTRACT RESCISSION PERIOD: Rescission of any transaction found to be unconscionable within two years of recordation of the conveyance (Cal. Civ. Code § 1695.14);
  • NO WAIVER BY SELLER: Any waiver of any provision of these laws by the equity seller is void (Cal. Civ. Code § 1695.10); and
  • NO LIMITATION ON PURCHASER’S DAMAGES: Any contract provision which attempts or purports to limit the liability of the equity purchaser from damages resulting from the statement or conduct of his/her representative is void (Cal. Civ. Code § 1695.16).

12.  Who is a “representative” of the equity purchaser?

A   Under the law, a representative of the equity purchaser is a person who in any manner solicits, induces, or causes any property owner in foreclosure to transfer title to the equity purchaser (Cal. Civ. Code § 1695.15(b)).

A representative of an equity purchaser is also a person who solicits any member of the property owner’s family or household to induce or cause the equity seller to transfer title to an equity purchaser (Cal. Civ. Code § 1695.15(b)).

13.  What does HESC require of a representative of the equity purchaser?

A   A representative of the equity purchaser must:

  1. Provide written proof to the equity seller that the representative has a valid, current “California Real Estate Sales License” (Cal. Civ. Code § 1695.17(a)(1));
  2. Provide a written statement, under penalty of perjury, that the representative of the equity purchaser has the above license.  The written statement under penalty of perjury must be provided to both the equity seller and equity purchaser prior to transfer of any interest in the subject real property. (Cal. Civ. Code § 1695.17(a)(2).)

Should these requirements not be fulfilled, the equity seller may choose to have the purchase contract voided by the court.  Even if the seller cancels, the equity purchaser is liable for all damages caused by the failure to comply with these requirements. (Cal. Civ. Code § 1695.17(b).)

C.A.R. form DPL, “A Declaration and Proof of Real Estate License” satisfies this written statement requirement.

14.  What about the bond requirement found in Civil Code Section 1695.17?

A    The Fourth District Court of Appeal in Schweitzer v. Westminster Investments held that the bond requirement under Civil Code Section 1695.17 for an equity purchaser’s representative is “void for vagueness under the due process clause and may not be enforced.” The California Supreme Court has declined to review this case which means that the previous bond requirement has been eliminated from HESC. (Schweitzer v. Westminster Investments, 157 Cal. App. 4th 1195 (2007),review denied March 26, 2008.)

Equity purchasers and their representatives, however, must still comply with the other requirements of HESC as discussed in this article.

IV.  Exemptions from the Home Equity Sales Contract Law (HESC)

15.  When does HESC not apply?

A    HESC applies only if ALL four of the following conditions are met:

(1)  the property being sold is residential one-to-four units;
(2)  the owner currently occupies the property;
(3)  a Notice of Default (NOD) has been recorded against the property; and
(4)  the buyer does not intend to occupy the property (i.e., buyer is an investor).

If any one or more of the four conditions has not been met, then HESC does not apply and none of the conditions or restrictions discussed in this article apply (e.g., no special contract need be used, no give-day cancellation period, and there is no two-year rescission period). (Cal. Civ. Code § 1695.1.)

In addition, HESC does not apply when a buyer acquires title in the manner as follows:

  • By a deed in lieu of foreclosure of any voluntary lien or encumbrance of record;
  • By a deed from a trustee acting under the power of sale contained in a deed of trust or mortgage at a foreclosure sale;
  • At any sale of property authorized by statute (such as a tax sale);
  • By order or judgment of any court (such as probate or family law court); or
  • From a spouse, blood relative, or blood relative of a spouse.   (Cal. Civ. Code § 1695.1(a).)

16.  What if an notice of default (NOD) is recorded while the transaction is in escrow or right after the contract is signed but before opening escrow?

A   The language of Civil Code Section 1695.1(b) in defining a “residence in foreclosure” refers to a residence against which there is an outstanding recorded notice of default.  HESC does not address the issue of whether the law applies if the NOD is recorded after the execution of a sales contract.  There is no appellate case dealing with this issue.  However, a Riverside County Superior Court has considered this issue and has made the determination that HESC does not apply if the NOD has not been recorded at the time the parties entered into the sales contract.  (Davis v. Varney, Case No. RIC 425604.)

With no recorded NOD, the transaction is not subject to HESC when the parties sign the contract.  It certainly does not seem reasonable to make the transaction subject to HESC and to force a purchaser, in essence, to start all over again just because an NOD is later recorded.

Unfortunately, a superior court decision is not binding law.  Thus, the law is not clear on this issue.

V.  Agency and Other Issues

Q 17.  Is a real estate licensee subject to the civil and criminal penalties imposed by HESC when representing the equity seller or equity purchaser?

A   No. HESC imposes these penalties on the equity purchaser. (Cal. Civ. Code § § 1695.7, 1695.8, 1695.15, 1695.17(b).)  Of course, all the penalties for violation of the real estate law and laws governing fiduciaries still apply.

18.  My buyer claims to be purchasing for the purpose of using the property as a personal residence. However, I don’t feel comfortable about that statement. What should I do?

A  Normally a licensee is not responsible for the hidden undisclosed true intent of a buyer. However, be aware of possible red flags that may arise. For example, the conduct and actions of the buyer may raise questions about his/her veracity when the loan application indicates non-occupier status or title vesting in another person.  You may want to urge the buyer to comply with HESC to avoid the potential civil and criminal penalties to which the equity purchaser is liable.  (Cal. Civ. Code § 1695.8 ($25,000 fine and/or imprisonment in jail for a up to a year).)

19.  Does C.A.R. have the applicable forms required by this law?

A  Yes.  The following forms for HESC transactions are available at http://store.car.org  or on WINForms®:

  • Notice of Default Purchase Agreement (C.A.R. Form NODPA). The NODPA is the purchase agreement to be used for HESC transactions printed in the statutorily-required format.
  • Declaration and Proof of California Real Estate License (C.A.R. Form DPL). The DPL satisfies the duty of the representative to provide proof .
  • Notice of Cancellation of the Notice of Default Purchase Agreement (C.A.R. Form HENC). The HENC is the form for the equity seller to use if the seller desires to cancel the sale within 5 business days of signing the contract.   Two copies of the HENC must be completed in full except for the equity seller’s signature.  The cancellation date and time to be written on this form is midnight of the date 5 business days after the equity seller signs the contract or 8:00 am of the trustee’s sale if that will occur sooner (Cal. Civ. Code § 1695.4(a)).

20.  Where can I obtain additional information?

A  This legal article is just one of the many legal publications and services offered by C.A.R. to its members. For a complete listing of C.A.R.’s legal products and services, please visit car.org.

Readers who require specific advice should consult an attorney. C.A.R. members requiring legal assistance may contact C.A.R.’s Member Legal Hotline at (213) 739-8282, Monday through Friday, 9 a.m. to 6 p.m. and Saturday, 10 a.m. to 2 p.m.  C.A.R. members who are broker-owners, office managers, or Designated REALTORS® may contact the Member Legal Hotline at (213) 739-8350 to receive expedited service. Members may also submit online requests to speak with an attorney on the Member Legal Hotline by going to http://www.car.org/legal/legal-hotline-access/.  Written correspondence should be addressed to:

Member Legal Services
525 South Virgil Avenue
Los Angeles, CA 90020

The information contained herein is believed accurate as of March 9, 2011. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney. Revised by Sonia M. Younglove, Esq.

Copyright© 2011 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). Permission is granted to C.A.R. members only to reprint and use this material for non-commercial purposes provided credit is given to the C.A.R.Legal Department. Other reproduction or use is strictly prohibited without the express written permission of the C.A.R. Legal Department. All rights reserved.

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Why Is JPMorgan Chase Paying Up to $30,000 for Short Sales?

Apparently Chase has been pursuing homeowners to enroll in their Short Sale Outreach Program. They are sending letters to certain mortgagors, offering up to $30,000 to people who are behind on their mortgages, to try to short sell the property, rather than letting it go to foreclosure. They promise to give approval within a short period of time, and to forgive any deficiency. There is one catch, the mortgage has to be owned by Chase (not merely serviced by Chase).

Click Me! To Find Out Everything
You Need to Know About
Foreclosures and Short Sales

Why would they do this? Because they understand the math involved in a foreclosure. The mortgagee (holder of the mortgage) usually loses a huge amount of money if the property goes to foreclosure. In Florida, the average time from beginning to end of a foreclosure is over 600 days! [Editor’s note: nationally, the average is over 500 days.] That’s almost two years worth of interest lost, real estate taxes and legal fees that have to be paid and association dues owed.

When you include the deterioration to the property, the loss in value overall, lenders are lucky to recoup 50% of the money owed on any foreclosure. The average price discount on a short sale is 12%, while on an REO it is 25%. It is much cheaper to pay the delinquent homeowner to get out, than to go through the entire foreclosure process.

The real question is why are they not being as aggressive on the loans which they service? Again, they understand the math involved. Since it is not their money being lost in the process (they already sold the loan to an investor, who is taking the loss), there is little incentive to stop the bleeding. And, the financial remuneration involved in servicing the loans actually goes up once a loan becomes delinquent.

As the servicer of a loan, a bank gets paid a small percentage (usually about 0.25%) of the principal balance of the loan, to take in the monthly payments, and distribute the money (taxes, insurance, interest, principal). But, when a loan becomes delinquent, they raise the percentage (to over 0.5% – doubling their income), charge late fees and make money on force-placing insurance. This means that if they encouraged modifications or short sales of these loans, servicing income would decrease dramatically (since the principal balance of the loans they service would decrease). Instead, the longer a property remains delinquent, the more money they earn.

But wait, how can they be making money when no payments are coming in? Because their servicing agreements state that they are entitled to be paid first out of any proceeds from the sale of the property. So, when the property is finally foreclosed, all of their fees (together with interest on any money they had to front) gets paid to them first, with anything left over going to the investors.

Chase’s program only underscores what many inside the industry have always known. If borrowers and investors could directly deal with each other to modify or allow a short sale, the real estate industry would recover much faster. However, it would mean that banks would not be able to make as much profit, so they do everything possible to keep the communication lines cut. [Bank of America, alone, reported a profit of $2 billion in the 2011 first quarter.]

Peter J. Pike is an attorney, working for a title company located in Orlando, Florida. He has spent the better part of the last four years assisting buyers and sellers of distressed real property, and is a frequent lecturer on the topics of short sales and foreclosures. Mr. Pike has been a practicing attorney for over 25 years, first in New York, where he was the founding partner of Pike & Pike, PC, a law firm in which he concentrated on real estate transactions and litigation. About 10 years ago, he moved to Destin, Florida, where he worked as in-house counsel for a local title agency. Mr. Pike can be reached at Peter.J.Pike@gmail.com.

from http://shortsaledailynews.com/why-is-jpmorgan-chase-paying-up-to-30000-for-short-sales/

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