Losing your home in a short sale process has got to be about as much fun as having a dozen root canals done all at once.  But once it’s over….it’s over….right?  Not necessarily; a short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.^[1] It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.   The following CNNMoney article explains this in a little more detail.

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Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.

"My understanding was that the deficiency was negotiated away," she said. "Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it."

Click here to read the entire article: CNNMoney

In order for a short sale with two loans to happen, the second lien holder has to drop the lien.

If they don't, and there's no short sale, the home goes to foreclosure and the first lien holder gets the house because second liens are subordinated debt to the primary loan.

In short, the second lien holder gets nothing. In order to get the second lien holder to drop the lien, the first lien holder generally negotiates some partial payment to the second lien holder. The second lien holder doesn't have to agree, but more and more are doing so.

That's all legal.

But here's what's not legal and what's apparently happening quite often recently. Since many second lien holders are getting very little, they are now allegedly requesting money on the side from either real estate agents or the buyers in the short sale. When I say "on the side," I mean in cash, off the HUD settlement statements, so the first lien holder doesn't see it.

"They are pretty clear and pretty upfront about the fact that if the first lender knows they are getting paid, the first lender will kill the short sale," says Brandt. "So these second lenders are asking for the payments off the closing documents, off the HUD statement, usually in a cashiers check prior to closing. Once they receive that payment, they will allow the short sale to go through, which according to RESPA laws and the lawyers that we have spoken to on the topic is not legal."

Click here to read the entire story: Short Sales

A post from The Real Estate Bloggers  web site.  I couldn’t of said it better myself.

A Rant on Congress, The President, and Commercial Real Estate

Posted: 02 Feb 2010 07:28 AM PST

Can I be blunt. Our government is nuts.

On one hand it is sending signals to the New York Times that they are worried about commercial real estate, yet at the same time they are following a White House that recommends a 1.9 trillion dollar tax increase on businesses and the wealthy and wants to punish banks with an additional tax increase.

Morons.

I understand that they ran on helping the little guy, but let’s face it, the problems we face in commercial real estate are big boy problems. If there is no money to invest in labor, you need smaller offices, and smaller factories, and smaller distribution centers.

And when the government takes more money, there is less to invest in the private sector. Not exactly rockey science.

And when you announce new programs on a monthly basis that will impact the private sector with additional costs and regulations that may or may not pass, the private sector stops taking risks.

Again, not exactly rocket science.

If you in Washington want to experiment, that is fine. The people elected you to your offices and you have that right.

But what you can not do is then not expect consequences from your experiment.

Like the little boy who does the science experiment and makes a mess of his Mom’s kitchen when it blows up, you have to deal with the consequences.

The problem is these folks are running their experiment, making the mess, and then using a credit card to try to pay the folks to clean it up. And the guys who are supposed to clean it up are not going to take a credit card from a 9 year old boy.

So let’s be serious. If you want to worry that the credit markets, commercial real estate markets, and the residential real estate markets start functioning again, you need to change your game.

• Stop printing money and making us worry about devaluation and inflation.
• Stop changing the rules of the game every few few days so we know if we can make any money or not. We make investments to earn money.
• Stop making us look stupid by backing one initiative and then changing it mid game.
• Stop threatening us and making us look like the bad guys when all we are trying to do is keep the system going and feed our families.

Right now we are all on eggshells and we don’t want to play another round of Russian Roullette with your administration.

Well, as Ronald Reagan said “Government doesn't solve problems; it subsidizes them."  I guess all the stories out there about tarp funds going to waste and a revamping of a revamping of the government’s efforts to stave off foreclosures are a modern day example of Reagan’s infamous quote.  The government helped create the mortgage crisis by “regulating” or should we say ‘deregulating” the banking industry via Fannie and Freddie back in the 1990’s. This was the government’s effort to make sure that those that wanted to own a home could, regardless of their ability to pay the loan back.   Today, the government blames the “fat cats” for the problems and vows to fix them.  Anybody ever wonder what would happen if the government just stepped back and let the market sort thing out?

The following story from CNNMoney is just another in hundreds about the government helping us all out:

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Under fire for the low number of people receiving long-term mortgage help, the Treasury Department on Thursday announced new guidelines that will require applicants to provide all paperwork before getting a trial modification.

The new policy will make it harder for troubled homeowners to start the process, but it should make it easier for them to qualify for permanent assistance under President's Obama foreclosure prevention plan.

Click here to read the entire story: CNNMoney

Existing-home sales plunged in December, dropping lower than expected after three straight increases that were fed by a fat government tax credit.

Home resales fell by 16.7% to a 5.45 million annual rate from an unrevised 6.54 million in November, the National Association of Realtors said Monday.

Monday's data said inventories shrank, and prices rose year over year for the first time in more than two years.

Economists surveyed by Dow Jones Newswires expected an 11.6% decrease in sales during December, to a rate of 5.78 million.

Banks are making it difficult for some people to get loans. Joblessness in the U.S. is high, muting the economy's recovery.

"The market is going through a period of swings driven by the tax credit," NAR economist Lawrence Yun said. "We'll likely have another surge in the spring as home buyers take advantage of the extended and expanded tax credit."

Click Here to Read the Entire Story: WSJ

Barney Frank, the Democratic Representative from Massachusetts and Chairman of the House Financial Services Committee, has called for the abolishment of Freddie Mac and Fannie Mae.

Frank, you should remember, is the Congressman who said that the companies were in great shape just before they imploded and are now on the hook for over 400 billion in public assistance. Oh, and Frank is also the one who drove the companies into that situation as he used them as tools of a social experiment forcing lending downstream to borrowers who could never repay their loans.

But ignore all that, it does not matter anymore. Now Congressman Barney Frank has a real plan. Just get rid the evidence of Congressional excess and experimentation and let’s start again.

Sorry Congressman, we have long memories here.

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"The remedy here is...as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," said Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee.

His comments initially rippled through bond markets on concerns that the government might pull away from the mortgage market. Many believe that's unlikely and that any revamp would include continued government involvement. The government took over the companies in September 2008 as loan losses mounted.

Some Republicans have argued that the companies should ultimately be reduced in size and privatized, while at other end of the spectrum, some analysts have recommended turning the companies into government agencies. But several industry groups and academics have suggested that the government is likely to continue playing at least some role in the future of the companies.

Click here to read the entire article: WSJ

With an unemployment rate of at least 10% and an underemployment rate of 17.3% (See Underemployment) it should be no surprise that people are going to have a hard time making mortgage payments.

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Almost 3 million homeowners received at least one foreclosure filing during 2009, setting a new record for the number of people falling behind on their mortgage payments.

RealtyTrac, the online marketer of foreclosed homes, reported that one in 45 households -- or 2,824,674 properties nationwide -- were in default last year. That's 21% more than in 2008, and more than double 2007's total.

Click here to read the entire story: CNNMoney

President Obama announced another new tax the other day on banks to get the taxpayers money back that was given to the banks in the bailout.  He forgot to mention that most of those banks have already repaid the money with interest and some of the banks that he is targeting didn’t even take any money from the government.

Now I’m no rocket scientist but something tells me that you and I will be paying this additional tax in the form of new fees.  Just like the new credit card legislation that went through recently to “help” consumers.  The credit card companies just implement new fees to make up the difference……like the $19 inactivity fee that I was just charged on one of my credit cards.

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"It's going to be more expensive for the consumers," Rep. Thaddeus McCotter, R-Mich., told Fox News. "You're going to see less credit. You're going to see higher unemployment as a result of the inability to get credit. Other than that, I think it's a fine idea."

The president is proposing a levy of 15 basis points, or 15 percent, on the liabilities of large financial institutions. The tax, which officials are calling a "financial crisis responsibility fee," would apply only to financial companies with assets of more than $50 billion. Those firms -- estimated to amount to about 50 institutions -- would have to pay the fee even though many did not accept any taxpayer assistance and most others already paid back the government lent to them.

Click here to read the entire story: Fox News