As many more people fall behind on their mortgage payments, so it seems does the ability to pay HOA dues.  Many assume that the short sale or foreclosure will resolve any missed HOA payments, penalties and even attorney fees.   The fact is, the debt will survive foreclosure and will most certainly reak havoc for the short sale process.

HOA’s have more Power than we think.   They have the ability to follow the individual after a foreclosure.  While a short sale requires resolution to clear title, the past HOA dues and penalties can nix a deal.  

In Arizona there are so many foreclosures and short sales, where homeowners have not paid the dues.   These bills have mounted up, and in some communities have caused serious financial hardship to the HOA management – which in effect – impacts those still living in the community and paying their dues.   The current homeowners are feeling the affects of the HOA debts.

Take for example the community that has over 75% of the homes in either foreclosure or short sale status.  Imagine all or even half, of these homes are behind on their dues.  The money that is collected was to be used to maintain the streets, community common areas, landscaping, and even lighting.   Now this particular community’s HOA is so far behind, the HOA has stopped landscape, street and common area maintenance.  If that isn’t bad enough for the remaining homeowners, the street lights were turned off due to the inablity of the HOA to pay the bill.  

While we understand the hardship many homeowners are going through in paying their mortgage and other bills, there are some steps that can be taken to avoid the HOA issues.   First, if you are planning to short sell your home, continue to pay the HOA.   If not, this will only come back to bite you in the end.   Banks are not paying past HOA dues or penalties.  If you have not paid your dues, you are not only incurring monthly penalties, but could also be levied additional attorney fees when the HOA decides to exercise their option to persue you.  The bank will not pay for these, and buyers are smart enough to recongnize they aren’t responsible and will refuse to pay them as well.  That leaves the Homeowner. 

If it is impossible for you to continue paying HOA dues during your short sale…..be prepared for the end.  Remember that HOA’s are liens to the property and must be cleared in order to complete the short sale.   In some cases, the HOA will negotiate with you for a reduced number.  For example a recent homeowner had an HOA debt of  $3,500 and the HOA accepted $1,200.  There is no guarantee that the HOA will negotiate, so be prepared either way.

HOA’s and their lien on a property can be the kiss of death to a deal.    Make sure you are communicating with your HOA – it will go a long way to resolving the debt when the time comes.

If you are considering short selling your home, don’t hesitate to call or email us for more information

By now many of you have experienced the pains of a short sale with Bank of America. As much as they have tried over the last year, they continue to fall short on their promises to improve their process and procedures.As realtors, we have a huge influence on where we send our clients for new financing. Bank of America’s performance on short sales have left such a sour taste in our mouths, that we cringe at the mere mention of a new loan with Bank of America.We recently attended a round table event with a Bank of America negotiator. He was very honest with us and was not in the least surprised at the negative comments slung at him from fellow realtors. While he truely understands the frustrations we are feeling, he was also quick to agree that we as realtors, are the future referrals for Bank of America.This gentleman went on to explain his purpose….to obtain information to send back to the higher up’s so that the short sale process could be improved. Lots of notes were taken, and as a courtesy he has even reached out to help those realtors in need.The new Equator (old REOTRANS which was adopted from the bank owned tracking system) is to be the new method for tracking and escalating short sales. Unfortunely from our experience this has not helped the cause. In fact, some of our short sales were within days of investor approval and were moved to Equator only to sit for another 30+ days. While the news continues to report that the next wave of foreclosures are still coming, Short selling a home is still the best option for most homeowners. As we move into 2010, I’m hopefully that Short Sales will no longer have such a bad reputation in the industry and banks such as B of A get their act together.

If you had mortgage debt forgiven this past year, whether it was through a short sale or perhaps mortgage modification then you may be able to claim special tax relief and exclude the debt forgiven from your income. That is because the Mortgage Debt Forgiveness Debt Relief Act of 2007 allows for owners of primary residences to avoid paying taxes on this forgiveness under certain circumstances. Here are 10 facts directly from the IRS in regard to the Mortgage Debt Forgiveness as we approach the April 15^th tax filing deadline:

1) Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2) The limit is $1 million for a married person filing a separate return.

3) You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4) To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5) Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6) Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

7) If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.

9) If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10) Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, please visit http://www.IRS.gov and as always consult a tax professional with specific questions you may have.

1. “Pay us $1,000, and we’ll save your home.”
Some legitimate housing counselors may charge small fees, but fees that amount to thousands of dollars are likely a sign of potential fraud – especially if they charge up-front, before the ‘counselor’ has done any work for you. Be wary of companies that require you to provide a cashier’s check or wire transfer before they take any action on your behalf.

2. “I guarantee I will save your home – trust me.”
Beware of guarantees that a person or company can stop foreclosure and allow you to remain in your house. Unrealistic promises are a sign that the person making them will not consider your particular circumstances and is unlikely to provide services that will actually help you.

3. “Sign over your home, and we’ll let you stay in it.”
Be very suspicious if someone offers to pay your mortgage and rent your home back to you in exchange for transferring title to your home. Singing over the deed to another person gives that person the power to evict you, raise your rent, or sell the house. Although you will no longer own your home, you still will be legally responsible for paying the mortgage on it.

4. “Stop paying your mortgage.”
Do not trust anyone who tells you to stop making payments to your lender and servicer, even if that person says it will be done for you.

5. “If your lender calls, don’t talk to them.”
Your lender should be your first point of contact for negotiating a repayment plan, modification, or short sale. It is vital to your interests to stay in close communication with your lender and servicer, so that understand your circumstances.

6. “Your lender never had the legal authority to make a loan.”
Do not listen to anyone who claims that ‘secret laws’ or ‘secret information’ will be used to eliminate your debt and have your mortgage contract declared invalid. These scammers use sham legal arguments to claim that you are not obligated to pay your mortgage. These arguments don’t work.

7. “Just sign this now; we’ll fill in the blanks later.”
Take the time to read and understand anything you sign. Never let anyone else fill out paperwork for you. Don’t let anyone pressure you into signing anything that you don’t agree with or understand.

8. Call 1-800-Fed-Loan
This may be a cam. Some companies trick borrowers into believing that they are affiliated with or are approved by the government or tell you that you must pay them high fees to qualify for government loan modification programs. Keep in mind that you do not have to pay to participate in legitimate government programs. All you need to do is contact your lender to find out if you qualify.

9. “File for bankruptcy and keep your home.”
Filing bankruptcy only temporarily stops foreclosure. If your mortgage payments are not made, the bankruptcy court will eventually allow your lender to foreclose on your home. Be aware that some scammers will file bankruptcy in your name, without your knowledge, to temporarily stop foreclosure and make it seem as though they have negotiated a new payment agreement with your lender.

10. “Why haven’t you replied to our offer? Do you want to live on the streets?”
High-pressure tactics signal trouble. If someone continually contacts you and pressures you to work with them to stop foreclosure, do not work with that person. Legitimate housing counselors do not conduct business that way.

When thinking of doing a short sale, be prepared with documentation the banks will request.

Simular to when you purchased a home, negotiating a short sale is like a reverse purchase and requires certain documents.

Have the following information ready:
– Bank or Lending Institution and Loan #
– Last 2 years of tax returns
– Lastest 2 months of bank statements
– Latest 2 paystubs

Create a filing system so that you can continue to add to the file, as the banks will request updated information during the short sale process. Keeping a good file system in place will remove some of the stress of finding documents when needed.

If you have any questions about the Short Sale process, we provide FREE confidential consultations. Don’t hestitate to contact us.

Rivera/Mueller Team
Al Rivera @ 602-750-7141
Brigitte Mueller @ 480-620-8593

Let’s face it, there are many of us struggling on a day to day basis to stay on top of our monthly bills. The rate of unemployment climbs, the rate on our mortgages climb, and many of us have fallen behind.

The so-called Loan Modification programs out there have not saved those in trouble. The percentage is so low and the reality is that it does not resolve your problem. It may give you temporary relief, if that, and while you are waiting for the banks to modify your loan you are falling further and further behind. It’s a known fact that you cannot short sell your home when you are in the loan modification cycle, and by the time you find out you don’t qualify for the modification – you are so far behind there is no hope of catching up.

The sad truth is that many of us must give up our homes, but think twice before you go to foreclosure. Foreclosure may not be the best solution for you.

While selling your home may be a tough decision, the dream of homeownership is NOT dead. A typical homeowner can purchase a new home within 2-3 years after the short sale of their current home, while a foreclosure prevents you from purchasing for 7-9 years on average.

We offer FREE private consultation to help answer your questions about the option of a Short Sale.

Give us a call.

Rivera/Mueller Team

Brigitte @ 480-620-8593
Al @ 602-750-7141

Just recently, new mortgage regulations were originated by the Federal Reserve with the goal of increased disclosure requirements for mortgages to protect consumers from non-refundable fees and higher interest rates. And these new mortgage regulations may help in this regard in certain instances of potential misrepresentations. However, it will also certainly lead to delays in closings in many purchase and refinance transactions where that is not an issue.

These new rules came into place at the end of July and may lead to longer closing times in the coming months. Specifically they require lenders to:

-Provide a good faith estimate (GFE) of a mortgage’s full cost within three business days of receiving an application.

-Not charge any fees until consumers receive the GFE. The only fee lenders can ask for upfront is a “reasonable fee” for obtaining the consumer’s credit history.

-Wait seven business days after providing the initial loan costs before closing the loan.

-Offer a new estimate of the loan costs three business days before the closing date if the original annual percentage rate (APR) increases by more than one-eighth of a percentage point.

These new regulations are in effect now and as mentioned you may begin to see these lengthening the time frame to complete purchase and refinance transactions in the coming months. How much impact they have on increased transparency is yet to be seen. What we do know for now, is that one additional piece of regulation has been added to the mortgage lending process with the goal of protecting consumers, but the only guarantee at the moment is a lengthier loan process.

Legislation Updates

NAR Information on Revised TILA Disclosure Requirements Take Effect on July 30, 2009

Lenders will be subject to new disclosure requirements for mortgage loans under the Federal Reserve Board Truth in Lending Regulation (Reg Z). The new requirements apply to loan applications filed on or after July 30, 2009. The new rules are complex and compliance will be a challenge for lenders. REALTORS® will want to learn the basics so they can advise clients of potential delays and the new procedures. Here are key highlights of the changes:

– The new requirements apply to all mortgages secured by a borrower’s home, including primary and second homes and refinancings. Investor loans continue to be exempt.

–Lenders must give good faith estimates of mortgage loan costs within 3 business days after the consumer applies for a loan (early disclosure). The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.

–The closing may not take place until expiration of a 7 day waiting period after the consumer receives the early disclosure.

–If the annual percentage rate (APR) increases by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan. The APR includes not only the interest rate on the loan but certain other costs related to settlement, so it will be important for any fees that affect the APR to be as accurate as possible, as early as possible, to minimize the need for a corrected TILA disclosure.

–The consumer may modify or waive both waiting periods for a documented personal financial emergency, but must receive the disclosures no later than the time of the modification or waiver.