Foreclosure Rescue Program

FEDERAL
FORECLOSURE
RESCUE
PROGRAM
Developed by the U.S. Treasury
Homeowner Guide
provided by
Mark Armitage
RE/
RE/MAX College Park Realty
12518 Valley View
Garden Grove, CA 92845
DRE No 01330129
Participating Banks
I am here to help.
Your local foreclosure specialist
DRE # 01330129
Subject
Page
Cover
1
You’re Not Alone
2
Table of Contents
3
Foreclosure VS Short Sale
4
Home Affordable Foreclosure Alternative Program
5
Short Sale Alternatives
6
Understanding Short Sales
7
Short Sale Qualification
8
Short Sale Process
9
Foreclosure Timeline
10
Short Sale Qualified Hardships
11
Common Mistakes
12
Short Sale Glossary
13
How Certified Distressed Property Experts Help
14
Short Sales & Foreclosures by City & County
15
What To Do Next?
16
Short Sale sellers should seek the advice of a knowledgeable accountant and attorney
to advise them as to the tax and other implications of a Short Sale.
Mark Armitage
3
714-360-4444
FORECLOSURE
RISKS
SHORT SALE
Future Loan
For the next 7 years you will be required to
disclose that you have been foreclosed upon
in mortgage applications. This will assuredly
impact your eligibility & interest rate.
You will not have to disclose a foreclosure because you avoided it by completing a Short Sale.
Credit Score
Your credit score can be lowered substantially
for several years if you allow a foreclosure on
your record.
While a Short Sale can impact your credit score
it is generally not as substantial as a foreclosure.
Credit History
A foreclosure remains as a public record on
your credit history for as long as 7 years.
The words “Short Sale” do not appear on your
credit report. The sale is typically reported as “paid
In full”, “paid settled”, “paid for Less than agreed”.
Security Clearance
Foreclosure is a challenging issue for employment that requires security background checks.
A security clearance may be revoked or denied
with a foreclosure on your record.
A Short Sale in and of itself does not challenge
most security clearances.
Current Employment
Employers can check the credit of their employees.
If you are an employee in a sensitive position you
could be reassigned or terminated.
A Short Sale in and of itself would not be a challenge to current employment.
Future Employment
Many employers require credit checks on job applicants. A foreclosure can be detrimental for an
applicant and can challenge employment.
A Short Sale in and of itself would not challenge
future employment.
Deficiency Judgment
Depending on the character of the loan that
forecloses, the lender may be permitted to
seek a deficiency judgment against you.
Lenders are required by law to file a form
1099A which you may have to report as income for tax filing purposes.
Mark Armitage
In a Short Sale I can negotiate with your lender
to fully discharge the loan at the time of sale.
Taxes Lenders are required by law to file a form 1099C
which you may have to report as income for tax
filing purposes.
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714-360-4444
What is it?
Home Affordable Foreclosure Alternative Program (HAFA) is a program under the Home Affordable
Modification Program which is an effort by U.S. Treasury to avoid foreclosures and encourage Short
Sales and Deed-in-lieu transactions.
Who Qualifies?
To be considered for HAFA the borrower must also qualify under HAMP.
The HAMP requirements include:

The property must be the principal residence;

The mortgage must be a first-lien mortgage which originated on or before January 1, 2009;

The loan must be delinquent or default is reasonably foreseeable;

The unpaid balance on the loan must be under $729, 750; and

The borrower’s total monthly mortgage payment must exceed 31% of their gross income.
How does it help?
HAFA institutes the following requirements:

Requires the Borrower to sign a Short Sale Agreement which is valid for 120 days.
Theoretically this is the timeframe in which the Short Sale is to be completed.
 When a buyer is found and the appropriate documents are submitted the lender has 10
business days to approve or deny the Short Sale.

Information provided by a borrower who has already applied for HAMP is to be shared
with HAFA to eliminate duplicate information requests.

If a successful Short Sale is completed the borrower can receive $1500 in relocation costs.
 Any pending foreclosure must not proceed during the term of the Short Sale Agreement.
Will HAFA help me?
The answer to this question depends on a number of factors:


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If you qualify under HAFA. You must meet each of the requirements noted above to qualify.
HAFA does not apply to loans owned or guaranteed by Fannie Mae or
Freddie Mac. However, a servicer can “opt in” to participate in the program.
How many loans you have on your property. The biggest hurdle in completing a successful
Short Sale is obtaining agreement between multiple lien holders as to payoff amounts and
potential deficiency issues. HAFA provides for minimal payments to be made to junior
lien holders while requiring a full release of all claims and liability relating to the lien.
How does a Certified Distressed Property Expert help?
I provide the attention to detail, follow-up and negotiation power to work directly with all
lenders to seek resolution in the best possible terms for Short Sale sellers, whether your Short
Sale is part of HAFA or not.
For more detailed information regarding HAFA please refer to Supplemental Directive 09-09
provided by the U.S. Treasury: https://www.hmpadmin.com/portal/programs/hamp.jsp
Short Sale sellers should seek the advice of a knowledgeable accountant and attorney
to advise them as to the tax and other implications of a Short Sale.
Mark Armitage
5
714-360-4444
In determining the best option for a distressed homeowner it is important to understand the
options available. Remember, time is of the essence.
Foreclosure If no action is taken the property will most likely be taken by the lender
through a foreclosure auction. This option would negatively impact any future loan applications and credit ratings.
Refinance This option permits a property owner to replace their original mortgage with a
new one. This option requires that the property owner qualify for a new loan and may also
include a higher interest rate and possibly a prepayment penalty.
Reinstatement This option requires a property owner to make a payment of the entire defaulted amount as well as interest and late fees. This option may also require the payment of
attorney’s fees and taxes.
Loan Modification A permanent change in one or more of the terms of a mortgagor's loan
which results in a payment the property owner can afford. The mortgage company generally
requires the property owner to demonstrate a reason (or hardship) for this adjustment, and
the owners’ ability to qualify, and likelihood to stay consistent with the payments.
Forbearance In this option the existing mortgage company permits the property owner leeway in bringing the defaulted loan current. It may take the form of extra time allowed to pay
overdue payments in return for the promise to make regular payments in the future.
Partial claim This option allows the property owner to obtain a second loan to cover back
payments, costs and fees.
Deed in lieu of foreclosure In this option the property owner essentially gives the property
back to the bank instead of proceeding with a foreclosure. This option would negatively impact any future loan applications and credit ratings.
Bankruptcy This option can liquidate debt and postpone a foreclosure sale. Lenders may
impose requirements as to property condition and tax status.
Sale of the property If a property has equity the property owner may sell the subject property without lender approval through a conventional sale. If the amount owed on the property
is more than the property’s value a Short Sale can be negotiated with your lender.
I negotiate with the lenders to obtain the best possible Short Sale terms.
The information provided is for informational purposes only. I recommend each individual
consult with a knowledgeable accountant or attorney as to how any of the above choices
may impact them.
Mark Armitage
6
714-360-4444
What is a Short Sale?
A negotiation process which permits a homeowner to sell their home for less than what is owed.
Will the bank pursue me for the deficiency?
It depends. Some of the factors that can determine if a bank will pursue a deficiency can include the character of the loan and where the property is located. I negotiate with your best interest in mind and seek a
release of future deficiency liability in writing from the lender.
Does a “hardship” have to be present for a Short Sale to occur?
Yes, a Short Sale is for people suffering financial and/or personal hardship. A Short Sale is not simply an
escape from a bad investment or an ill-suited loan, a true hardship must exist. Some lenders place a
heavy emphasis on whether a sufficient hardship exists while other lenders take a more fiscal approach. I
help you submit a compelling hardship letter to demonstrate the difficult hardships that exist.
Why do I have to submit a Short Sale package?
All lenders require a Short Sale package. It includes tax returns, bank statements, paystubs and a financial statement, among other documents, which are required to demonstrate that a genuine hardship exists. I help take the guesswork out of what lenders want and help clients submit a complete Short Sale
packet to avoid unnecessary delays.
Can I sell my property for any price?
No, lenders research comps in the area and will generally not accept an offer that is below the market value. In general, if your lender believes it is better off financially to foreclose, it will do so. A lender can also
proceed to foreclosure if the borrower does nothing, submits an incomplete Short Sale packet, or submits
unreasonable low offers. I work with the Buyer’s Agent to ensure all parties have the information they
need to close the Short Sale.
What are the tax implications of a Short Sale?
The tax implications of a Short Sale can be significant. The Seller could receive a 1099-C (cancellation of
debt) from their lender for the amount of debt that was cancelled as a result of the Short Sale. Cancellation of debt relief may be available from the Mortgage Debt Relief Act of 2007 and other state legislation.
I recommend that anyone contemplating a Short Sale seek the advice of a knowledgeable accountant
and/or attorney.
How long does a Short Sale take?
It depends on your lender. Some sales have closed very quickly while others have been delayed by unresponsive banks. The only way to know is to begin the process. I work diligently with professionalism and
dedication to ensure your file is not forgotten or at the bottom of the pile. I also provide an on-line tracking
system which allows for monitoring of the file by our clients.
Will a short sale hurt my Credit?
When a Short Sale is completed the words “Short Sale” do not appear on your credit report. Lenders can
report the sale in a variety of ways, including “Paid Settled”. However, if you are late with your payments,
your lender may report this and your credit can be affected. I can negotiate with lenders to report the
Short Sale in the least damaging manner possible.
Mark Armitage
7
714-360-4444
VERY CHALLENGING FACTORS
The more factors present in this category the more difficult a Short Sale will likely be.
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Borrower is in bankruptcy.
Borrower cannot demonstrate a valid hardship (keep in mind, simply being upside
down alone does not qualify as a hardship).
Borrower’s income largely exceeds monthly expenses.
Borrower’s expenses are exaggerated or not considered necessities.
Borrower’s assets exceed liabilities.
Liens that may require extensive negotiation and legal support, including: IRS, HOA,
child support, private lenders & mechanic’s liens.
Offer is below fair market value.
A foreclosure sale is imminent and the property not listed and/or no offers.
Call us for more details.
Borrower is difficult to work with and is unlikely to cooperate with the lender.
CHALLENGING FACTORS
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A first that is refinanced and the lender does not want to give any funds to a second.
A second that is refinanced. Some lender may be willing to cooperate if it makes financial sense.
The existence of challenging liens.
Loans with private mortgage insurance (PMI). The insurer may require a substantial
amount of money to and may impose considerably delays.
OPTIMAL FACTORS

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Borrower can demonstrate a valid hardship.
Borrower’s expenses exceed income.
Borrower’s liabilities exceed Borrower’s assets.
The offer is at or above the fair market value.
Only one loan exists that was a Purchase Money loan.
Two loans exist and both are Purchase Money loans.
No liens exist from the HOA, IRS or private investors and no PMI issues.
Borrower has a great attitude and is likely to fully cooperate with the lender.
Mark Armitage
8
714-360-4444
How does a Short Sale work?
In a Short Sale, a homeowner is permitted to sell their home for less than what is owed.
This negotiation process becomes necessary when a selling homeowner owes more than it is
worth. A Short Sale is also referred to as a pre-foreclosure sale.
A Short Sale is generally available to those who suffer financial or personal hardship. This negotiation process is not simply an escape from a bad investment or an ill-suited loan, a true
hardship must exist. As part of the Short Sale negotiation a lender can release the borrower
from any future liability on the mortgage.
A Typical Short Sale Situation
Victor R., Costa Mesa
2006 –Bought house for $701,000
100% financing
$570,000 1st loan
$131,000 2nd loan
2010–House is valued at $570,000
Short Sale –negotiated with 1st lender to accept $433,000 and give $3,000 to 2nd lender.
1st lender also paid 5% commissions, termite repairs & closing costs.
2nd lender agreed to $3,000 settlement and released their lien.
Victor was able to sell his house minimizing the impact on his credit
& avoided foreclosure!
Mark Armitage
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714-360-4444
Timeline
1 day late:
The borrower’s credit can be affected.
After a few days: The Lender starts the collection process.
After 90* days:
The Lender begins by sending a Letter of Intent to Foreclose.
30* days later:
The Notice of Default can be filed and recorded.
90 days later:
The Lender files a Notice of Sale.
21* days later:
The property is sold on the steps of the courthouse.
*These are general timeframes, actual timeframes may vary.
1. If you are starting to experience financial difficulties... BE PROACTIVE!
Call Mark or Bea NOW before it’s too late.
2. If you are already late or if you received a Notice of Default... NOW IS THE TIME TO ACT!
Mark Armitage
10
714-360-4444
Qualified Hardships:
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Job Loss or significant reduction in pay
Increase in Household Expenses (Mortgage Rates Adjusting)
Divorce, Legal Separation
Illness/Disability
Relocation
Military
Impact of Hardships:




Late mortgage payments
Depleted savings
Jeopardizing the future
Ruin credit and ability to borrow
Mark Armitage
11
714-360-4444
Experience is critical to the short sale process. Knowing what the bank
expects, when they expect it and how they expect it, fosters respect. In
many cases the bank contacts Certified Distressed Property Experts
like myself before the home is put on the market.
The following mistakes are often committed by well meaning agents
and homeowners with very costly results.
 Negotiating with the wrong department… Customer Service or Collection
 Giving too much information or saying too much
 Not providing all required documentation at one time
 Not knowing what information the lender needs
 Not understanding their mortgage types & guidelines
 Not understanding the banks process
 Not properly completing an effective hardship letter
 Not providing a proper financial statement
 Lack of consistent follow-up
Mark Armitage
12
714-360-4444
Deficiency Judgment
A deficiency judgment is a civil judgment obtained by a lender to receive payment in the full
amount of the unpaid principal balance of a promissory note when only partial satisfaction of the
note has been obtained. The character of the loan, the type of foreclosure action pursued
(judicial or non-judicial) and where the property is located are among the factors that can determine if a deficiency judgment is permitted. Keep in mind the character of a loan can change (i.e.
via a refinance).
Judicial Foreclosure
A costly and time consuming foreclosure method wherein the property which secures a promissory note is sold through a court proceeding. This process requires compliance with standard legal steps to be valid.
Lien
In California, liens are generally given priority based on their recording date. Title insurance
serves the purpose of ensuring that a purchase money lender will take first position.
Non-Judicial Foreclosure
A foreclosure method that does not require court involvement but in California requires compliance with California Civil Code requirements.
Non-Recourse Loan
A non-recourse loan is a loan in which the lender, upon default, is limited to the sale of the property to satisfy the unpaid promissory note.
One-Action Rule
The one-action rule limits the way in which a lender can be recompensed for a default on a purchase money loan. Under this rule a lender is essentially required to choose their best option: a
civil judgment of the unpaid principal balance of the promissory note or seek title to the property
through a foreclosure.
Recourse Loan
A recourse loan is a loan in which the lender, upon default, is permitted to seek a judgment
against the borrower personally to satisfy the unpaid promissory note. Many times a “refinance”
or a “second” are classified as recourse loans.
Short Sale
A Short Sale is a negotiation process which permits a homeowner to sell their home for less than
what is owed.
Mark Armitage
13
714-360-4444
Certified Distressed Property Experts are trained in conjunction
with banks to make the short sale process as smooth as possible.
We provide the following services:
 A confidential consultation to review your circumstances and determine if a Short Sale will work for you.
 Proper preparation of your Short Sale file for lender review in a format
anticipated by the lender.
 Guidance in writing for an effective and accurate hardship letter for a
strong Short Sale package.
 Provide consistent follow-up with the decision makers for your lender.
 Negotiate to have lender report in such a manner to have minimal impact on your credit score.
 Negotiate to have lender forgive outstanding balances on loans as part
of Short Sale agreement.
 Leverage existing Lender relationships to your benefit.
 Provide documents necessary to stop collection calls.
Short Sale sellers should seek the advice of a knowledgeable accountant and attorney to advise
them as to the tax and other implications of a Short Sale.
Mark Armitage
14
714-360-4444
CITY
Anaheim
Buena Park
Costa Mesa
Cypress
Fountain Valley
Fullerton
Garden Grove
Huntington Beach
Irvine
La Palma
Lakewood
Long Beach
Los Alamitos
Midway City
Newport Beach
Orange
Placentia
Rossmoor
Santa Ana
Seal Beach
Stanton
Tustin
Westminster
Yorba Linda
Total
COUNTY
Orange
Los Angeles
Total
Mark Armitage
SHORT
SALE
1,307
370
406
139
177
570
766
670
928
33
348
1,303
22
23
164
588
193
19
1,409
31
153
447
299
356
10,757
SHORT
SALE
15,059
24,225
39,284
15
REO
SALES
2,257
529
387
156
171
716
1,180
570
600
46
492
2,815
28
30
146
811
267
5
3,181
17
268
486
362
355
15,934
REO
SALES
17,972
47,310
65,282
SHORT STANDARD
SALE &
SALES
REOs
3,564
899
793
295
348
1,286
1,946
1,240
1,528
79
840
4,118
50
53
310
1,399
460
24
4,590
48
421
933
661
711
26,691
2,677
949
1,403
850
924
2,113
1,852
4,043
4,902
235
1,433
5,743
184
62
1,608
2,107
854
234
2,385
346
317
1,346
996
1,616
39,515
SHORT STANDARD
SALE &
SALES
REOs
33,031
71,535
104,566
52,318
56,708
109,026
714-360-4444
Take Action Today!
I can help you regain peace of mind.
It can take months to go through the Short Sale process.
Don’t Wait!
CONSEQUENCES OF FORECLOSURE
(See page 4 for details)
Bad Credit for 7 years
Lose Your Job
Future Employment
Deficiency Judgment
Huge Tax Liability
A foreclosure is a public record for 7 years.
A security clearance may be revoked as a result of foreclosure.
A foreclosure can be detrimental on an employment application.
The lender may seek a deficiency judgment against you.
You may have to report the loss as income for tax filing purposes.
Call Today!
714-360-4444
[email protected]
Disclaimer: The information presented here is general information and should not be confused with legal advice. If you require
legal advice for your individual circumstances, please consult with your attorney. All information provided is deemed reliable,
but not guaranteed. YOU MUST SEEK ADVICE FROM A KNOWLEDGEABLE ATTORNEY OR EXPERIENCED
TAX SPECIALIST REGARDING YOUR LEGAL RIGHTS AND TAXI MPLICATIONS OF A SHORT SALE.
Mark Armitage
16
714-360-4444