Economists make predictions about home prices

REALTOR® Magazine-Daily News-Economists Ponder Future of Home Prices

Economists Ponder Future of Home Prices
When will home prices go back up again?

Economists surveyed by The Wall Street Journal say that home prices won’t hit bottom until the second half of 2009 at the earliest and some say the downward trend will continue until 2011 or 2012. After that they may rise again, but not nearly as fast as they have in the last decade. Instead they will rise just a little faster than inflation and stay in line with increases in household income.
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I was and Econ major -  I do loan workouts everyday  and I used to trade the bond market.  My take:

1. A former CNBC economist said the secret to being a good economist is to forecast early and forecast often

2. If anyone was anygood at making predictions they could make a fortune trading the bond market.... bill gross made a fortune trading and managing bonds - but he always seems to talk his book.  So basically there is no one who really knows whats going to happen more than a few months out. There is always some force that is unpredicted that shows up.  Who knew that china would keep buying bonds to keep our interest rates law and skew our real estate market into the largest asset bubble in history.

3.  If you study charts you will see bubble unwinds always seem to go back furhter than expected.  Remember Nasdaq 5000.

4.  In my opinion you have to figure out who will be qualifying for what loans and guessing if consequent "qualified demand" will balance supply.

5. In higher priced homes that could be a while.

6. In that category - I think appraisals will be very tough - the best houses, with the best views, on the best lots are likely to become much more valuable than the nearby competition.   In a rising market putting lipstick on a pig (upgrades, like granite and flooring could get inferior houses high prices)  it is no longer working. 

7.  Buyers are smart.  Some are paying good money for "location" the competition winners - and others are only buying at steep discounts. 

8.  I predict that will go on for years. 

Loan Modification - Stop Forelcosure, Countrywide and Bank of America Programs.

Almost 400,000 Countrywide mortgage holders will get help - USATODAY.com

Nearly 400,000 homeowners will be able to get more affordable loans after Bank of America (BAC) agreed Monday to modify mortgages that originated with its Countrywide Financial unit. The move could be worth more than $8.6 billion and mark the largest predatory lending settlement in history.

Monday's deal settles claims brought by attorneys general in 11 states that accused Countrywide — acquired in July by BofA — of misrepresenting loan terms, loan payment increases and borrowers' ability to afford loans.

Bank of America says it will restructure loans for Countrywide customers holding subprime mortgages and option adjustable-rate loans that permit borrowers to pay only a small portion of interest and principal owed each month. Some might wind up in new fixed-rate loans; others might not.

But the Bank of America deal represents only a fraction of the future defaults and foreclosures facing homeowners. There were more than 2.2 million foreclosure filings in the USA in 2007.

EVEN MORE DETAILS: Read Bank of American's press release

"There could be a couple million more (foreclosures to come), so it begins to put a price tag on the problem and how expensive it is," says economist Joel Naroff at Naroff Economic Advisors.

Pat Lashinsky, CEO of ZipRealty, says as many as 6 million homes will have gone through a short-sale or foreclosure before this housing slump is finished.

1099c, canceled debt, release from a deficiency

In a short sale will you be released from a deficiency if you get a 1099-c ?

Here is what the Irs has to say about the 1099c. 

Instructions for Forms 1099-A and 1099-C (2008)

When Is a Debt Canceled

A debt is canceled on the date an identifiable event occurs. An identifiable event is:

1.

A discharge in bankruptcy under Title 11 of the U.S. Code for business or investment debt (see Exceptions on this page).
2.

A cancellation or extinguishment making the debt unenforceable in a receivership, foreclosure, or similar federal or state court proceeding.
3.

A cancellation or extinguishment when the statute of limitations for collecting the debt expires, or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Expiration of the statute of limitations is an identifiable event only when a debtor's affirmative statute of limitations defense is upheld in a final judgment or decision of a court and the appeal period has expired.
4.

A cancellation or extinguishment when the creditor elects foreclosure remedies that by law end or bar the creditor's right to collect the debt. This event applies to a mortgage lender or holder who is barred by local law from pursuing debt collection after a “power of sale” in the mortgage or deed of trust is exercised.
5.

A cancellation or extinguishment due to a probate or similar proceeding.
6.

A discharge of indebtedness under an agreement between the creditor and the debtor to cancel the debt at less than full consideration.
7.

A discharge of indebtedness because of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. A creditor's defined policy can be in writing or an established business practice of the creditor. A creditor's practice to stop collection activity and abandon a debt when a particular nonpayment period expires is a defined policy.
8.

The expiration of nonpayment testing period. This event occurs when the creditor has not received a payment on the debt during the testing period. The testing period is a 36-month period ending on December 31 plus any time when the creditor was precluded from collection activity by a stay in bankruptcy or similar bar under state or local law. The creditor can rebut the occurrence of this identifiable event if:
1.

The creditor (or a third-party collection agency) has engaged in significant bona fide collection activity during the 12-month period ending on December 31 or
2.

Facts and circumstances that exist on January 31 following the end of the 36-month period indicate that the debt was not canceled.

Significant bona fide collection activity does not include nominal or ministerial collection action, such as an automated mailing. Facts and circumstances indicating that a debt was not canceled include the existence of a lien relating to the debt (up to the value of the security) or the sale or packaging for sale of the debt by the creditor.

Exceptions

You are not required to report on Form 1099-C the following:

1.

Certain bankruptcies. You are not required to report a debt discharged in bankruptcy unless you know from information included in your books and records that the debt was incurred for business or investment purposes. If you are required to report a business or investment debt discharged in bankruptcy, report it for the later of:
1.

The year in which the amount of discharged debt first can be determined or
2.

The year in which the debt is discharged in bankruptcy.

A debt is incurred for business if it is incurred in connection with the conduct of any trade or business other than the trade or business of performing services as an employee. A debt is incurred for investment if it is incurred to purchase property held for investment (as defined in section 163(d)(5)).
2.

Interest. You are not required to report interest. However, if you choose to report interest as part of the canceled debt in box 2, you must show the interest separately in box 3.
3.

Nonprincipal amounts. Nonprincipal amounts include penalties, fines, fees, and administrative costs. For a lending transaction, you are not required to report any amount other than stated principal. A lending transaction occurs when a lender loans money to, or makes advances on behalf of, a borrower (including revolving credit and lines of credit). For a nonlending transaction, nonprincipal amounts are included in the debt. However, until further guidance is issued, no penalties will be imposed for failure to report these amounts in nonlending transactions.
4.

Foreign debtors. Until further guidance is issued, no penalty will apply if a financial institution does not file Form 1099-C for a debt canceled by its foreign branch or foreign office for a foreign debtor provided all the following apply:
1.

The financial institution is engaged in the active conduct of a banking or similar business outside the United States.
2.

The branch or office is a permanent place of business that is regularly maintained, occupied, and used to carry on a banking or similar financial business.
3.

The business is conducted by at least one employee of the branch or office who is regularly in attendance at the place of business during normal working hours.
4.

The indebtedness is extended outside the United States by the branch or office in connection with that trade or business.
5.

The financial institution does not know or have reason to know that the debtor is a U.S. person.
5.

Related parties. Generally, a creditor is not required to file Form 1099-C for the deemed cancellation of a debt that occurs when the creditor acquires the debt of a related debtor, becomes related to the debtor, or transfers the debt to another creditor related to the debtor. However, if the transfer to a related party by the creditor was for the purpose of avoiding the Form 1099-C requirements, Form 1099-C is required. See section 108(e)(4).
6.

Release of a debtor. You are not required to file Form 1099-C if you release one of the debtors on a debt as long as the remaining debtors are liable for the full unpaid amount.
7.

Guarantor or surety. You are not required to file Form 1099-C for a guarantor or surety. A guarantor is not a debtor for purposes of filing Form 1099-C even if demand for payment is made to the guarantor.
8.

Seller financing. Organizations whose principal trade or business is the sale of non-financial goods or non-financial services, and who extend credit to customers in connection with the purchase of those non-financial goods and non-financial services, are not considered to have a significant trade or business of lending money, with respect to the credit extended in connection with the purchase of those goods or services, for reporting discharge of indebtedness on Form 1099-C. See Regulations section 1.6050P-2(c). But the reporting applies if a separate financing subsidiary of the retailer extends the credit to the retailer's customers.

Multiple Debtors

For debts of $10,000 or more incurred after 1994 that involve debtors who are jointly and severally liable for the debt, you must report the entire amount of the canceled debt on each debtor's Form 1099-C. Multiple debtors are jointly and severally liable for a debt if there is no clear and convincing evidence to the contrary. If it can be shown that joint and several liability does not exist, a Form 1099-C is required for each debtor for whom you canceled a debt of $600 or more.

For debts incurred before 1995 and for debts of less than $10,000 incurred after 1994, you must file Form 1099-C only for the primary (or first-named) debtor.

If you know or have reason to know that the multiple debtors were husband and wife who were living at the same address when the debt was incurred, and you have no information that these circumstances have changed, you may file only one Form 1099-C.
Recordkeeping

If you are required to file Form 1099-C, you must retain a copy of that form or be able to reconstruct the data for at least 4 years from the due date of the return.
Requesting TINs

You must make a reasonable effort to obtain the correct name and taxpayer identification number (TIN) of the person whose debt was canceled. You may obtain the TIN when the debt is incurred. If you do not obtain the TIN before the debt is canceled, you must request the debtor's TIN. Your request must clearly notify the debtor that the IRS requires the debtor to furnish its TIN and that failure to furnish such TIN subjects the debtor to a $50 penalty imposed by the IRS. You may use Form W-9, Request for Taxpayer Identification Number and Certification, to request the TIN. However, a debtor is not required to certify his or her TIN under penalties of perjury.
Statements to Debtors

If you are required to file Form 1099-C, you must provide a statement to the debtor. Furnish a copy of Form 1099-C or an acceptable substitute statement to each debtor. In the 2008 General Instructions for Forms 1099, 1098, 5498, and W-2G, see:

*

Part M for more information about the requirement to furnish a statement to the debtor and
*

Part J for specific procedures to complete Form 1099-C for debtors in bankruptcy.

Account Number

The account number is required if you have multiple accounts for a debtor for whom you are filing more than one Form 1099-C. Additionally, the IRS encourages you to designate an account number for all Forms 1099-C that you file. See part L in the 2008 General Instructions for Forms 1099, 1098, 5498, and W-2G.
Box 1. Date Canceled

Enter the date the debt was canceled. See When Is a Debt Canceled on page 3.
Box 2. Amount of Debt Canceled

Enter the amount of the canceled debt. See Debt Defined on page 3 and Exceptions on page 3. Do not include any amount the lender receives in satisfaction of the debt by means of a settlement agreement, foreclosure sale, etc.
Box 3. Interest if Included in Box 2

Enter any interest you included in the canceled debt in box 2. You are not required to report interest in box 2. But if you do, you also must report it in box 3.
Box 4. Reserved

Box 5. Debt Description

Enter a description of the origin of the debt, such as student loan, mortgage, or credit card expenditure. Be as specific as possible. If you are filing a combined Form 1099-C and 1099-A, include a description of the property.
Box 6. Check for Bankruptcy

Check the box if you are reporting a debt discharged in bankruptcy.
Box 7. Fair Market Value (FMV) of Property

If you are filing a combined Form 1099-C and 1099-A for a foreclosure, execution, or similar sale, enter the FMV of the property. Generally, the gross foreclosure bid price is considered to be the FMV. If an abandonment or voluntary conveyance to the lender in lieu of foreclosure occurred, enter the

short sales and 1099s

Foreclosure still rising

Delinquencies and Foreclosures Increase in Latest MBA National Delinquency Survey

WASHINGTON, D.C. (September 5, 2008) — The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 6.41 percent of all loans outstanding at the end of the second quarter of 2008, up six basis points from the first quarter of 2008, and up 129 basis points from one year ago on a seasonally adjusted basis, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 2.75 percent, an increase of 28 basis points from the first quarter of 2008 and 135 basis points from one year ago.

How will the Fannie and Freddie take over effect the housing market

US government takes on big role in mortgage market: Financial News - Yahoo! Finance

Analysts were split on how much the takeover could eventually cost taxpayers although they all agreed the up-front costs will be substantial, possibly hitting $100 billion as the Treasury is called upon to bolster the capital cushions at both institutions.

However, if the plan does the trick of stabilizing the housing market and home prices stop falling and rebound, then the assets of both Fannie and Freddie should rise in value and the government should be able to sell off the companies and recoup its investments.

But it could take a long time to work through that process given all the headwinds facing housing at the moment from the plunge in home prices to soaring defaults on mortgages which are dumping more homes on an already glutted market. The weak economy has pushed unemployment to a five-year high of 6.1 percent, further reducing demand for homes.

"I think the government will end up having to put in far more money then they are planning right now (given all the problems facing housing) but the important thing is the agencies have been taken over by the government," said Sung Won Sohn, an economics professor at California State University Channel Islands. "That means there will be less panic in financial markets."
--

The real question is how will this effect the cost of larger home loans. Will it be easier or tougher to qualify for homes? The future of housing prices in San Diego may be known in the next few weeks.

Home Prices in San Diego Down 24% compared to second quarter 2007

Click on the link below to see how San Diego home prices fared relative to other markets.

Housing market shows a hint of hope - USATODAY.com

Other data released Tuesday also show the market remains weak. The Office of Federal Housing Enterprise Oversight reported that home prices nationally were 1.4% lower in the April-June quarter of 2008 vs. the preceding quarter, and down 4.8% from a year earlier. OFHEO analyzes prices paid nationwide for residences financed through Freddie Mac and Fannie Mae.

In July, according to a report from the U.S. Department of Commerce, new homes sold at a seasonally adjusted annual rate of 515,000. That rate is up 2.4% from June but is 35% below the July 2007 sales rate.

What will happen to the prices of San Diego Homes if Fannie and Freedie cease to exist

Barron's Online

The Endgame Nears For Fannie and Freddie
By JONATHAN R. LAING
The almost inevitable government recapitalization of Fannie Mae and Freddie Mac will likely wipe out investors—and management.

IT MAY BE CURTAINS SOON FOR THE MANAGEMENTS and shareholders of beleaguered housing giants Fannie Mae and Freddie Mac . It is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead on the taxpayer's dime, availing itself of powers granted it under the new housing bill signed into law last month. Such a move almost certainly would wipe out existing holders of the agencies' common stock, with preferred shareholders and even holders of the two entities' $19 billion of subordinated debt also suffering losses. Barron's first raised the possibility of a government takeover of Fannie and Freddie in a March 10 cover story, "Is Fannie Mae Toast?"

Fannie and Freddie may not be around to guarantee loans much longer.

If fannie and freedie go under - once would expect interest rates to rise- significantly. Buffett mentions they were able to mis price their products because they had the federal govt behind them.

Will the government nationalize these companies? Does this action distort the price of homes.




Bloomberg.com: Worldwide

Aug. 22 (Bloomberg) -- Fannie Mae and Freddie Mac, the two largest mortgage finance companies, ``don't have any net worth,'' billionaire investor Warren Buffett said.

``The game is over'' as independent companies said Buffett, the 77-year-old chairman of Berkshire Hathaway Inc., in an interview on CNBC today. ``They were able to borrow without any of the normal restraints. They had a blank check from the federal government.''

Freddie Mac and Fannie Mae touched 20-year lows yesterday on the New York Stock Exchange on speculation a government bailout will leave the stocks worthless. U.S. Treasury Secretary Henry Paulson won approval from Congress last month to pump emergency capital into the companies, which account for more than half of the $12 trillion U.S. mortgage market.

Fannie and Freddie mispriced their products and ``kept existing because they had the federal government behind them,'' Buffett said. Omaha, Nebraska-based Berkshire had been among the largest holders of Freddie until about 2001, when it became apparent the company wasn't being run well, he said.

Short sales - things to consider when turning over your financials to the lender

Realty Times - Short Sales Set Sail Again

Ironically, while you are proving insolvency you also may reveal the dark under side of your original application. Insolvency today could be rooted in financial trouble that began before you purchased your home -- trouble you didn't reveal to your lender who could now consider your tight lip fraud from the past.

That might attract the attention of federal authorities who've been cracking down on mortgage fraud, a federal crime punishable by up to 30 years in a federal pen or up to $1 million in fines -- or both.

According to the FBI's "Financial Crimes Report To The Public Fiscal Year 2006," 20 percent of today's mortgage fraud stems from a home buyer lying about income, debt or other information in order to buy a home.

Much of the remaining 80 percent of mortgage fraud also involves deceit, deception and misinformation, according to the FBI.

In addition to reopening your application, the short sale will look at other liens against the home.

Short Sales and Release from a deficiency

Realty Times - Housing Counsel: What's a Short Sale

The first step is to contact your financial and legal advisors. Do not contact the lender until you fully understand the potential risks involved. Under Federal law, when a debt is forgiven, it can be treated as ordinary income on which tax must be paid. Thus, if your lender allows you to sell the property to $475, less a 2 percent commission, you will pay off your $500,000 mortgage and have a deficit of almost $35,000. According to many tax professionals, you will have to pay income tax on this amount even though you did not actually receive the money.

Furthermore, you want to make absolutely sure that even should the lender approve the short sale, you will not be obligated to make up this difference, which is called a deficiency. Unfortunately, most lenders will not put their agreement in writing, so your legal advisors will have to satisfy themselves -- and you -- on this matter.

Taxation of short sales in California

For some the mortgage debt forgiveness act may apply.
Also, note - you must consider taxation issues with the California Franchise tax board as well as the IRS if you have property in California

Online Exclusive: Short Sales: Taxing What Isn't There

The IRS does recognize four situations in which cancellation of debt will not result in tax liability for the seller. A seller may avoid tax liability:

* When the borrower receives a bankruptcy discharge and the deficiency was included in the bankruptcy
* When the borrower is insolvent at the time of the cancellation of the debt. Insolvency would occur when a borrower’s liabilities exceed assets. Note that seller would have to prove this insolvency to the IRS when filing a tax return.
* When the debt was secured by a nonrecourse loan. Under a nonrecourse loan, the lender does not have the legal right to collect a deficiency judgment from any assets of the debtor not pledged to secure the loan. While most home mortgages are do not fall into this category, purchase money loans on a person’s residence are nonrecourse in some states.
* When the tax liability from the cancellation of debt on an investment property can be offset against other business liabilities and expenses. This exception does not apply to properties occupied as a residence by the mortgagor.

In many short sales, a seller would be able to qualify under the first two of these exemptions, especially since it was almost certainly necessary to show financial hardship in order to convince the lender to agree to a short sale. However, it is the seller’s responsibility to notify the IRS why the amount in the 1099-C should not be counted as ordinary income. Otherwise, the IRS will consider the forgiven debt as income and penalize the seller for unpaid taxes.

Short Sale, Deed in Lieu, Foreclousure - Effect on Credit score

This is a very interesting statement from the creators of the FICO score. It does seem to contradict most everything you read from Realtors.

Two Alternatives to Foreclosure - WSJ.com

A Blow to Credit Scores

What short sales and deeds in lieu of foreclosure don't do is minimize the impact on a borrower's credit score. All three proceedings have roughly the same negative impact on an individual's credit score, says Craig Watts, spokesman for Fair Isaac Corp., which created the widely used FICO score.

Mr. Watts says that to date little analysis has been done distinguishing, for instance, the credit risk of individuals who completed a short sale versus those involved in a foreclosure. For that reason, "the model ends up treating them [a short sale, a deed in lieu of foreclosure, and a foreclosure] all the same."

Short Sales and Deeds in Lieu - alternatives to foreclosure

If you get to read the entirely article - In my opinion they place too little emphasis on the fact that many if not most lenders are not agreeing to release sellers from the deficiency balance. (at least not in the initial paperwork) you must be prepared find ways to gain leverage over the junior lien holders in California, by using California law to your advantage.

Two Alternatives to Foreclosure - WSJ.com

A second benefit of short sales and deeds in lieu of foreclosure is that borrowers will generally face a shorter waiting period before they can obtain another mortgage.

Many lenders primarily make loans that they can sell to big mortgage players Fannie Mae and Freddie Mac. Starting Aug. 1, Fannie Mae generally will not buy loans made to borrowers involved in a short sale in the past two years. That's shorter than the four-year wait time if you have a deed in lieu of foreclosure on your record, and the five-year wait time if you have a foreclosure on record. (The current wait time is four years for a foreclosure or a deed in lieu of foreclosure; there is no existing policy for borrowers with a short sale.)

Freddie Mac generally won't guarantee loans made to borrowers who have had a foreclosure in the past four years, says Freddie Mac spokesman Brad German. (If the foreclosure was due to circumstances beyond the borrower's control, such as a medical emergency, then Freddie Mac will guarantee the loan in two years' time). The company considers short sales and deeds in lieu of foreclosure a significant negative but not an "automatic no," says Mr. German.

A Blow to Credit Scores

What short sales and deeds in lieu of foreclosure don't do is minimize the impact on a borrower's credit score. All three proceedings have roughly the same negative impact on an individual's credit score, says Craig Watts, spokesman for Fair Isaac Corp., which created the widely used FICO score.

Mr. Watts says that to date little analysis has been done distinguishing, for instance, the credit risk of individuals who completed a short sale versus those involved in a foreclosure. For that reason, "the model ends up treating them [a short sale, a deed in lieu of foreclosure, and a foreclosure] all the same."

If homeowners are interested in pursuing a short sale, they should open discussions with their lender or loan servicer before attempting to sell their house.

For both short sales and deeds in lieu of foreclosure, borrowers will have to present a "hardship letter" to the lender or servicer detailing why they are unable to make their mortgage payments.

Lenders have shown increasing willingness to negotiate short sales and deeds in lieu of foreclosure because of the losses they frequently incur in foreclosures.

Fraud at Indymac - a more ammo for California's homeowners looking to walk away or dispute their debts

Free Preview - WSJ.com

IndyMac Is Included In FBI Fraud Inquiry
By Gary Fields and John R. Wilke
Word Count: 319 | Companies Featured in This Article: Bank of America

WASHINGTON -- Failed lender IndyMac Bank is among nearly two dozen banks under scrutiny by the Federal Bureau of Investigation for possible mortgage fraud, U.S. officials said.

The big Pasadena, Calif., bank was seized by regulators last week, the third-largest bank failure in U.S. history. It specialized in home loans to borrowers who lacked full documentation for their income or assets and have a ...


This may provide More fuel for sellers looking to dispute their debts

San Diego Real Estate markert - Is it stabilizing for conventional loans.

We have noticed a great deal of strength in the 400,000 dollar and under market. People sense there are bargains and they wish to buy. The question is can they qualify. Many of our San Diego MLS listings have multiple offers. To see them go to www.favoriterealestate.com.

Here is a quote from the California association of Realtors weekly letter. (it tends to be a bit biased.)

C.A.R. Market Matters July 17 - jmcconnin@gmail.com

· Recent data suggest real estate market pessimism may be overblown. Even economist Karl Case, father of the S&P/Case Shiller Home Price Index, admits many industry pundits and members of the media are ignoring key facts – as demonstrated by their focus on negative year-over-year price figures rather than more recent monthly data. An example: Home prices actually increased slightly in eight of 20 Case Shiller markets between March and April. Instead, the focus of most media reports was on year-over-year figures, which continue to support the notion that the market may not have hit bottom, let alone begun to improve.

· Transaction-related indices may be skewed at present by a far larger than normal share of subprime-derived default and distress sales. In the San Francisco Bay Area, for example, more expensive homes (those priced over $721,548) have dropped in price by only about 10.7 percent from their peak, compared with homes priced under $473,711, which have tumbled by 40.9 percent.

California Code of Civil Procedure 580

580. (a) The relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint, in the statement required by Section 425.11, or in the statement provided for by Section 425.115; but in any other case, the court may grant the plaintiff any relief consistent with the case made by the complaint and embraced within the issue. The court may impose liability, regardless of whether the theory upon which liability is sought to be imposed involves legal or equitable principles.
(b) Notwithstanding subdivision (a), the following types of relief may not be granted in a limited civil case:
(1) Relief exceeding the maximum amount in controversy for a limited civil case as provided in Section 85, exclusive of attorney's fees, interest, and costs.
(2) A permanent injunction.
(3) A determination of title to real property.
(4) Declaratory relief, except as authorized by Section 86.

580a. Whenever a money judgment is sought for the balance due upon an obligation for the payment of which a deed of trust or mortgage with power of sale upon real property or any interest therein was given as security, following the exercise of the power of sale in such deed of trust or mortgage, the plaintiff shall set forth in his or her complaint the entire amount of the indebtedness which was secured by the deed of trust or mortgage at the time of sale, the amount for which the real property or interest therein was sold and the fair market value thereof at the date of sale and the date of that sale. Upon the application of either party made at least 10 days before the time of trial the court shall, and upon its own motion the court at any time may, appoint one of the probate referees provided for by law to appraise the property or the interest therein sold as of the time of sale. The referee shall file his or her appraisal with the clerk and that appraisal shall be admissible in evidence. The referee shall take and subscribe an oath to be attached to the appraisal that he or she has truly, honestly and impartially appraised the property to the best of his or her knowledge and ability. Any referee so appointed may be called and examined as a witness by any party or by the court itself. The court must fix the compensation of the referee in an amount as determined by the court to be reasonable, but those fees shall not exceed similar fees for similar services in the community where the services are rendered, which may be taxed and allowed in like manner as other costs. Before rendering any judgment the court shall find the fair market value of the real property, or interest therein sold, at the time of sale. The court may render judgment for not more than the amount by which the entire amount of the indebtedness due at the time of sale exceeded the fair market value of the real property or interest therein sold at the time of sale with interest thereon from the date of the sale; provided, however, that in no event shall the amount of the judgment, exclusive of interest after the date of sale, exceed the difference between the amount for which the property was sold and the entire amount of the indebtedness secured by the deed of trust or mortgage. Any such action must be brought within three months of the time of sale under the deed of trust or mortgage. No judgment shall be rendered in any such action until the real property or interest therein has first been sold pursuant to the terms of the deed of trust or mortgage, unless the real property or interest therein has become valueless.

580b. No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser.

Where both a chattel mortgage and a deed of trust or mortgage have been given to secure payment of the balance of the combined purchase price of both real and personal property, no deficiency judgment shall lie at any time under any one thereof if no deficiency judgment would lie under the deed of trust or mortgage on the real property or estate for years therein.

580c. In all cases where existing deeds of trust or mortgages are judicially foreclosed, unless a different amount is set up in the mortgage or deed of trust, and in all cases of mortgages and deeds of trust executed after this act takes effect, the mortgagor or trustor may be required to pay only such amount as trustee's or attorney's fees for processing the judicial foreclosure as the court may find reasonable and also the actual cost of publishing, recording, mailing and posting notices, litigation guarantee, and litigation cost of suit.

580d. No judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property or an estate for years therein hereafter executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust.

This section does not apply to any deed of trust, mortgage or other lien given to secure the payment of bonds or other evidences of indebtedness authorized or permitted to be issued by the Commissioner of Corporations, or which is made by a public utility subject to the Public Utilities Act (Part 1 (commencing with Section 201) of Division 1 of the Public Utilities Code).

580.5. (a) For purposes of this section:
(1) “Beneficiary” means a “beneficiary” as defined in paragraph (3) of subdivision (a) of Section 5102 of the Commercial Code.
(2) “Issuer” means an “issuer” as defined in paragraph (9) of subdivision (a) of Section 5102 of the Commercial Code.
(3) “Letter of credit” means a “letter of credit” as defined in paragraph (10) of subdivision (a) of Section 5102 of the Commercial Code whether or not the engagement is governed by Division 5 (commencing with Section 5101) of the Commercial Code.
(b) With respect to an obligation which is secured by a mortgage or a deed of trust upon real property or an estate for years therein and which is also supported by a letter of credit, neither the presentment, receipt of payment, or enforcement of a draft or demand for payment under the letter of credit by the beneficiary of the letter of credit nor the honor or payment of, or the demand for reimbursement, receipt of reimbursement or enforcement of any contractual, statutory or other reimbursement obligation relating to, the letter of credit by the issuer of the letter of credit shall, whether done before or after the judicial or nonjudicial foreclosure of the mortgage or deed of trust or conveyance in lieu thereof, constitute any of the following:
(1) An action within the meaning of subdivision (a) of Section 726, or a failure to comply with any other statutory or judicial requirement to proceed first against security.
(2) A money judgment for a deficiency or a deficiency judgment within the meaning of Section 580a, 580b, or 580d, or subdivision (b) of Section 726, or the functional equivalent of any such judgment.
(3) A violation of Section 580a, 580b, 580d, or 726.

580.7. (a) For purposes of this section:
(1) “Beneficiary” means a “beneficiary” as defined in paragraph(3) of subdivision (a) of Section 5102 of the Commercial Code.
(2) “Customer” means an “applicant” as defined in paragraph (2) of subdivision (a) of Section 5102 of the Commercial Code.
(3) “Letter of credit” means a “letter of credit” as defined in paragraph (10) of subdivision (a) of Section 5102 of the Commercial Code whether or not the engagement is governed by Division 5 (commencing with Section 5101) of the Commercial Code.
(b) No letter of credit shall be enforceable by any party thereto in a loan transaction in which all of the following circumstances exist:
(1) The customer is a natural person.
(2) The letter of credit is issued to the beneficiary to avoid a default of the existing loan.
(3) The existing loan is secured by a purchase money deed of trust or purchase money mortgage on real property containing one to four residential units, at least one of which is owned and occupied, or was intended at the time the existing loan was made, to be occupied by the customer.
(4) The letter of credit is issued after the effective date of this section.

CCP 580 b

580b. No deficiency judgment shall lie in any event after a sale of
real property or an estate for years therein for failure of the
purchaser to complete his or her contract of sale, or under a deed of
trust or mortgage given to the vendor to secure payment of the
balance of the purchase price of that real property or estate for
years therein, or under a deed of trust or mortgage on a dwelling for
not more than four families given to a lender to secure repayment of
a loan which was in fact used to pay all or part of the purchase
price of that dwelling occupied, entirely or in part, by the
purchaser.
Where both a chattel mortgage and a deed of trust or mortgage have
been given to secure payment of the balance of the combined purchase
price of both real and personal property, no deficiency judgment
shall lie at any time under any one thereof if no deficiency judgment
would lie under the deed of trust or mortgage on the real property
or estate for years therein.

Walk Away, short sale, credit issues

Will San Diego home owners be able to use this as leverage against the lender.
This could give San Diego homeowners a valid reason to dispute their. If you plan to walk away or do a short sale and
you may wish to speak with an attorney. This news could give you a great deal of leverage.


SignOnSanDiego.com > News > Business -- Calif. attorney general sues Countrywide Financial

LOS ANGELES – Countrywide Financial Corp. is accused of using misleading advertising and other unfair business practices to trick borrowers into taking on risky home loans they didn't fully understand, in a lawsuit filed Wednesday by the California attorney general's offi

California Taxation - short sales, foreclosures, mortgage debt relief

From the California Franchise Tax Board website...

Foreclosures and the next wave: taxes due on canceled debt

Taxes due on canceled debt

Mortgage defaults and foreclosures are a national concern. Only two states exceed California in rate of foreclosures: Nevada and Colorado. Thousands of Californians are already facing mortgage defaults, or soon will be.

Recent information on national foreclosure rates shows several California cities in the top 15, with Central California counties tending to have higher rates compared to other regions in California 1. The central valley experienced an explosion of homebuilding beginning in 2000, with home prices doubling over a four-year period. For the first half of 2007, California's capital Sacramento had one foreclosure for every 36 households - a 241 percent increase over the same period in 2006. Stockton's rate of one foreclosure for every 27 households in the first half of 2007 puts it at the top of the list: an increase of 256 percent over the same period in 2006 2.

The tax consequences of foreclosure are a second hit for people who have had to walk away from their homes when their adjustable rate mortgages reset to a higher rate. They are often in an upside-down position, owing more on their mortgage than their home is worth. If their lender forecloses on their homes, or accepts an amount less than the loan balance from sale of the home, it may result in taxable gain to the homeowner. The type and treatment of the gain will depend on whether the mortgage is considered non-recourse or recourse debt.

In California, purchase money mortgages, which are mortgages where the borrowed funds are used to purchase the house, are generally treated as non-recourse debt. If the bank forecloses on a non-recourse mortgage, then the homeowner is treated as having sold the home for the amount of the outstanding debt. The difference between the outstanding debt and the homeowner's adjusted basis in the house is considered a gain or loss on the sale of the home. If the home is the taxpayer's principal residence, where they have lived for at least two of the past five years, the gain may be eligible for the gain exclusion on the sale of a principal residence. If the foreclosure results in a loss, the loss may not be taken since it resulted from the sale of a principal residence.

If the mortgage is recourse, such as a non-purchase money mortgage or a refinanced mortgage, any foreclosure may result in a gain on the sale of the house, and/or cancellation of debt income. The difference between the fair market value of the house and the homeowner's adjusted basis will result in a gain or loss on the sale of the home. To the extent the outstanding debt exceeds the fair market value of the house, the amount is treated as cancellation of debt income. Any gain on the portion treated as the sale of a personal residence may be eligible for the exclusion on the sale of a principal residence; however, as discussed above, the loss may not be taken on the sale. The portion that is treated as cancellation of debt income is taxed as ordinary income - subject to ordinary income tax rates. Your clients with canceled or forgiven mortgage debts may receive a Form 1099-C from the lender and will be expected to pay federal and state tax on the canceled amounts, at the ordinary income tax rate.

For example, if the homeowner has a non-recourse mortgage with an outstanding balance of $250,000, and has an adjusted basis of $100,000, the house has a fair market value of $200,000. If the homeowner's lender foreclosed on the mortgage, the homeowner would have taxable gain of $150,000 ($250,000 less $100,000). If the mortgage had been recourse, the homeowner would have gain on the sale of the home of $100,000 ($200,000 less $100,000), and cancellation of debt income of $50,000 ($250,000 less $200,000).

Tax on this seemingly "phantom" type of income is due whether the bank forecloses on the mortgage, or allows a "short sale" (allowing the defaulter to sell the house at below cost, and accepting the proceeds as payment in full). A short sale is preferable to a foreclosure only in the sense that it does less damage to the homeowner's credit rating. The difference between the amount owed to the lender, and the amount received is still considered canceled debt, and taxed at the ordinary income rate. Relief of debt is considered income because the bank gave the buyer cash to purchase the home when it issued the mortgage. This cash was not taxable because it was a loan, and the buyer promised to repay it. When the loan is forgiven or canceled, it becomes income in that year since the buyer will no longer repay it.

Federal legislation to provide relief for the thousands of homeowners caught in the foreclosure squeeze is receiving a lot of attention. Proposed new, bipartisan legislation on Capitol Hill could soften some of the effects on financially stressed homeowners. The Mortgage Cancellation Tax Relief Act of 2007 would amend the tax code to exempt debt forgiveness on principal home mortgages from being treated as income effective on the date of passage. However, if it does pass, it would need to be made retroactive in order to help those homeowners already affected. And, there is no guarantee that California will conform to the potential new federal law immediately.

There are a couple of options for your clients who are caught in this situation:

* Bankruptcy: Debts discharged in bankruptcies are generally not considered debt-cancellation income.
* Insolvency: Tax will not be assessed on the phantom debt-cancellation income if your client can prove insolvency existed when the debt was discharged. Your client must prove that all assets totaled less than all debts.

If you have clients who have exhausted their options and cannot pay the additional tax on the phantom income they "accrued" through debt cancellation, remember to look into our offer-in-compromise and payment arrangement programs.

You may also want to check out the IRS new Web page devoted to foreclosure tax relief, and related FAQs.

Sold out juniors and collections attorneys

Question.

My girlfriend refinanced her property about ____ months ago and took out some cash on an 80/20 loan from the same lender. The lender just foreclosed on the property, but they have accelerated the collection efforts on the SECOND (the 20%). Google is not helping me research the specifics of judicial vs Non Judicial and recourse vs non recourse. So in plain English, can the lender come after her for the second?? Will they issue her a 1099 for a deficiency judgment? will she have to declare BK to protect her other assets??

I know you are busy, but if you could point me to the website that answers these questions and refrences ACTUAL laws rather than opinions. I get differing views, but they are only opinions. I need to know the law to be able to protect her. Thanks in advance.

Answer

Your girlfriend may be liable for the full amount of the note (and perhaps) fees if it turns out the lender is a sold out junior of refinanced loan secured by the property.

There are some questions to review

1. Did the second get any money after the foreclosure
2. Can you show a unity of ownership between the holders of the first and the second notes?

In short you need to learn about sold out juniors. Although it might be a little late to learn.


Bankruptcy may be an option - but it might not protect her other assets.

Your girlfriends situation is complicated and my question is why did she accept the foreclosure without attempting some sort of workout - if she had other assets.

Regarding a 1099 theoretically she should may not get hit with the 1099 if they are going after her for the money. But, if they do not get the money - she might have to report the loan forgiveness herself.


There are many variables and I would say your girlfriend needs to work with an experienced attorney to make sure she gets it right.

Rancho Sante Fe, Del Mar, La Jolla Real Estate

In the last few weeks I have gotten multiple calls from people with upside down luxury properties.

As of a few months ago, people were arguing the luxury market was immune.

If you are dealing with a high end property, make sure you work with an attorney who understands how these deals work.


At the luxury end, home prices are falling - Los Angeles Times: "At the luxury end, home prices are falling

Email Picture
Genaro Molina / Los Angeles Times
Real estate agent Michael Libow is handling the listing of this mansion in the Beverly Hills 90210 ZIP Code. The asking price, which was $12 million more than a year ago, was cut in March to just below $10 million -- 'a psychological break point,' Libow says.
The region's most exclusive neighborhoods suffered big drops in April, data show. Median sale prices fell 13% in Beverly Hills, 34% in one area of Newport Beach.
By Peter Y. Hong, Los Angeles Times Staff Writer
May 20, 2008
The rich may indeed be like the rest of us. Prices of their homes are now falling too.

Gated mansions and hillside estates have held their own through most of the real estate slump, but data released Monday showed big drops in the region's most exclusive neighborhoods.



April sales Southern California pricesSenators reach deal on foreclosure legislation
SUBSCRIBE to World: Mideast, The Times' free daily e-mail newsletter on the Middle East.
High-end slump?"

Doubts Raised on Big Backers of Mortgages - New York Times

Doubts Raised on Big Backers of Mortgages - New York Times: "As home prices continue their free fall and banks shy away from lending, Washington officials have increasingly relied on two giant mortgage companies — Fannie Mae and Freddie Mac — to keep the housing market afloat."

What will happen to san diego real estate if these guys stop throwing away money.
Who will lend money for the short sale transactions?

Short sales San Diego - your chance of success have improved

Right now the the appraiser are coming in with appraisals which reflect the true market value. And sometimes those appraisals are 40% below the value of a year ago.

So your condo in San Diego may be down big or even your single family home. You may wish to offer a deed in lieu and concurrently set your home up as a short sale.

1. make sure you have out clauses in your listing contract
2. make sure you add clauses to your purchase and sale agreement
3. Don't go into default on a first loan if you have two loans until after you speak with a san diego real estate attorney who knows how to negotiate pre-foreclosures.

more information on San diego short sales

Homeowners and Lenders are still in trouble

For those of you who wondered how can the banks survive making all the crazy loans. It seems we may only be 40% of the way there. Imagine what these balance sheets will be like when the lenders accept the fact that their security interests were propped up by their bad loans. Now that they are not making the bad loans their security interests are cracking.

Its seems short sales and foreclosures may only be just beginning.


http://www.cnbc.com/id/15840232?video=659529306

Mish's Global Economic Trend Analysis: Housing - The Worst Is Yet To Come

Mish's Global Economic Trend Analysis: Housing - The Worst Is Yet To Come: "Subprime resets peak this year but Alt-A problems which are just as big do not peak until 2011. In addition the overall economy is slowing dramatically. There is going to be consumer led recession to deal with. Unemployment has bottomed this cycle and is bound to rise dramatically. That will further pressure housing prices in a very significant way. The worst (by a long shot) is yet to come. Remind me to start looking for a true bottom in 2011-2112. Perhaps we get a bounce somewhere along the way."

Mortgage-Rate-Resets.png (image)

Mortgage-Rate-Resets.png (image)

this chart goes with the quote above. The mortgage problems seem to continue to 2011

Mortgage Debt forgiveness - Loan forgiveness - 1009 c

Remember you have to be concerned about Capital Gains and the California Franchise Tax board as well.


Mortgage Debt forgiveness - Loan forgiveness - 1009 c: "Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on IRS.gov.

'The new law contains important provisions for struggling homeowners,' said Acting IRS Commissioner Linda Stiff. 'We urge people with mortgage problems to take full advantage of the valuable tax relief available.'"

Foreclosure-proof homes? - Los Angeles Times

Before you list your home as a short sale -you might want to have a real estate attorney put a little pressure on your lender. We have been doing it for ever since we read about this ruling for the first time.

Foreclosure-proof homes? - Los Angeles Times: "Foreclosure-proof homes?
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Mortgage-backed securities have made many homes legal and financial mazes that put ultimate ownership in limbo.
By Eric J. Weiner
December 3, 2007
Who owns your home?

That seems like a pretty straightforward question. But the answer might not be as clear-cut as you think.

A U.S. District Court judge in Cleveland tossed out 14 foreclosure cases Oct. 31 on the grounds that the bank suing to repossess the properties, Deutsche Bank National Trust Co., didn't actually own them. Deutsche Bank held debt securities that were linked to the mortgage loans on the properties, not the mortgages themselves. And the judge ruled that a security backed by a mortgage is not the same as a mortgage."

New home sales fall

Bloomberg.com: News: "The median price of a new home fell 10 percent in December from the same month a year earlier, the Commerce Department said yesterday.

Ryland's Loss

The U.S. housing market is the ``worst in 30 years,'' Ryland Group Inc. Chief Executive Officer Chad Dreier said on a conference call on Jan. 24.

Ryland, a Calabasas, California-based homebuilder, reported a fiscal fourth-quarter net loss of $201.9 million on Jan. 23, more than analysts had forecast. Dreier said the following day the housing market is ``too uncertain'' to offer an outlook and that the company will continue to offer ``big incentives'' to potential buyers in California.

Lennar Corp., the biggest U.S. homebuilder, reported the largest quarterly loss in its history on Jan. 24. New orders for the period ended Nov. 30 fell 50 percent to 4,761 and the average sales price declined 3.6 percent to"

San Diego short sale and foreclosure attorney

Short sales and Foreclosure Solutions: San Diego short sales and foreclosure: "In addition to purchase money protection laws under California Code of Civil procedure 580 b, a homeowner may also have protection from deficiency creditors through California Code of Civil Procedure 580d.

If you only have one loan and the lender utilizes and non judicial foreclosure - the former owner is protected from a deficiency judgment. (you may need a lawyer to enforce your rights - it may not be automatic)."

deed in lieu vs short sale

deed in lieu vs short sale: "deed in lieu vs short sale | Print |
In terms of credit scores a short sale may be the least damaging to your credit score. A deed in lieu may subtract just as many points from your fico score as a foreclosure. However, according to many, a deed in lieu looks much more responsible.

Five years from now would you rather a lender or a business partner see that you walked away from your creditor or that you worked a deal out with your lender.

A deed in lieu or a short sale do not have to be either or solutions. Many lender wish to have a property marketed for 3 months prior to consider a short sale. The probem with just setting the short sale first is that if you don't leverage your solutions against the lender during those first three months you may lose your leverage and be at your lenders mercy. The time to make sure the lender will not be able seek a deficiency is before you start the short sale process.

A short sale listing in isolation may just be a major mistake in our current market."

San-Diego-Short-Sales

San-Diego-Short-Sales: "San-Diego-Short-Sales | Print |

What is a short sale?


In November 2007. I appeared on a KPBS news show about the housing crisis in San Diego. The reporter's first question was simply -- What is a short sale?

Answer -


'1. In a well negotiated short sale the owner sells the property for less than what he or she owes;"

More about san diego short sales: San-Diego-Short-Sales: "San-Diego-Short-Sales | Print |

San Diego Short Sale Specialist? short sale Expert? Proof?

San Diego Short Sale Specialist: "Since I am a licensed California Attorney it would probably be unethical for a me to call myself a short sale specialist. Even though my law firm did workouts for upside down homeowners in the the 90s.

However, my Real Estate license apparently enables me to call myself anything I wish to call myself. I could be a luxury home specialist on a Ranch Santa Fe website and a foreclosure or short sale specialist on another website. Of course I would not jeopardize my law license so you don't see me calling myself a short sale specialist."

Our practice has seen the business models of Realtors doing short sales all over San Diego, all over California and many places in Florida.

After you see the short sale programs of the Realtors who actually get their short sales sold and approved by the lenders, you will know that the large majority of Realtors claiming to be short sale experts are fooling themselves.

Some Realtors are very good with the law.
Some are good with people
Some are good with evaluating real estate
Some are persistent with the banks
Some may be good negotiators
Some may be good at doing a CMA or BPO
Some may even be professional enough to protect the homeowners interests

Very few have put together a comprehensive program to get homes old in this market.

Do not list your property with a Realtor who can not show you results. The old marketing strategies do not work. Relationship building does not matter. You need a Realtor with the guts to speak the truth to you about pricing, with a lawyer on the team to protect you from the lender's collection departments and plan to make your short sale package looks so good that the lender is compelled to accept your deal.

In short if your Realtor is pretending to be short sale expert, a short sale specialist, or a loss mitigator ask him how many short sales he has closed in the last 4 months and then ask him if he got the sellers released from a deficiency in writing.

more on short sale specialists

San Diego Short Sale

San Diego Short Sale: "an Diego Short Sale | Print |
San Diego Short sales


Homes sales have fallen dramatically. Why aren't more short sales being completed? What happens if at the currently listing price you are not short but the offers you are recieving will require you to bring money to the table? Why are seconds starting to hold out for big money?

How many homes has your Realtor sold in the last three months? how many have been short sale? What percentage of his listings are those sums?

This is a critical time. You and your Realtor should not be experimenting. Homes that sell and homes that sell short are being sold because some Realtors have been smart enough to adapt, negotiate and win.

Our firm has referred listings out all over California and Florida. We have seen many short sale programs in action. Very few are designed to do the job propertly. Most are cobbled together from old techniques which no longer work.
Being a nice person and having great customer service does nothing for lenders.

This market calls for very compent, very skilled, very persistent business minded people.

First a California Realtor must design a program to find buyers in a slow market California real estate market. (very few Realtors know how to sell homes right now. Last years techniques are not working. If you"

San Diego short sale scam

I am going provide a series of blogs on the subject of short sales and loss mitigation.



1. The name of this series will be - Why are the nations largest lenders allowing Realtors to represent sellers in "short sale negotiations". Today will discuss the stealth beauty of the short sale scam as perpetrated by the loss mitigation departments of the largest lenders including lenders like CountryWide and GMAC.


Why are lenders allowing Realtors to represent sellers in mortgage workouts? Lenders require the Realtors to get the seller to sign authorizations which grant the Realtor the authority to represent the seller via the lenders collection department. (Loss mitigation always declares itself to be a collector). I am not sure if non lawyers will remember this but in the past collection departments always required the caller to be an attorney or the debtor. They frequently challenged lawyers to prove their credentials.

Why all of a sudden have these debt collectors changed the their procedures? With one simple authorization the Realtor expands her scope of representation as wide as can be... Tax, bankruptcy, foreclosure, contracts, asset protection, debt collection, pre-foreclosure solutions, accountant and counselor come to mind as just some of the duties a Realtor is implicitly assuming.


In the past bankruptcy lawyers were the persons who negotiated workouts with lenders. Bankruptcy attorneys had leverage against lenders and they knew how to use it.

Today many sellers are being represented by Realtors. Now the lenders have leverage over the Realtors.

For instance lenders frequently request the sellers to sign new promissory notes or they inform the sellers they will release the lien but not they will not release the seller from liability on the note. Attorneys would rarely if ever agree to such a solution. However, many if not most "Short Sale specialists" tell the sellers to go ahead and do the short sale.

The lender gets paid, the buyer gets a good deal, the Realtors get paid, the seller gets screwed - gets very little at best and forfeits a whole lot.

I predict this short sale scam will end badly for the lenders.

Next we will discuss the "short sale package".