San Diego Short Sales

Poway Home for Sale Short Sale - 5 bedroom home under 600,000

2010-09-22T14:55:00.000-07:00

Great opportunity to buy a 5 bedroom home in Poway school district for under $600,000
Short sale opportunity.

www.Favoriterealestate.com for more information.

Vista CA Short Sale

2010-03-03T13:19:00.000-08:00

Short Sale in San Diego. Vista CA - just listed March of 2010.

Foreclosures reach new high water mark

2009-12-27T18:27:00.001-08:00

More prime mortgages default in 3rd quarter -- latimes.com

Reporting from Washington - Troubled home loans continued to mount in the nation's banks in the third quarter as even once-solid borrowers increasingly fell behind on their mortgage payments.

For the first quarter ever, the number of homes in foreclosure with mortgages serviced by U.S. national banks and savings and loans topped the 1-million mark, according to figures released Monday by the Office of Thrift Supervision and the Office of the Comptroller of the Currency.

The percentage of prime borrowers whose loans were 60 or more days past due doubled from the July-to-September period a year earlier. And more than half of all homeowners whose payments had been lowered through modification plans defaulted again.

737 De La Toba, San Diego California

2009-12-24T17:42:00.000-08:00

Pictures from our new san diego short sale

to find more san diego short sales

REALTOR® Magazine-Daily News-4 out of 10 Recent Buyers Used FHA Loans

2009-12-18T13:15:00.000-08:00

REALTOR® Magazine-Daily News-4 out of 10 Recent Buyers Used FHA Loans: "4 out of 10 Recent Buyers Used FHA Loans
According to the most recent REALTORS® Confidence Index, 39 percent of recent buyers purchased a home with a Federal Housing Administration-insured loan. REALTORS® who took part in the November survey also reported that the number of first-time home buyers continued to climb to 51 percent."

many of our short sales receive offers from fha buyers.

The concern is that with so little down what will stop these homeowners for walking away in the future

short sale buyers

short sale or walkaway - credit damage

2009-12-04T15:36:00.001-08:00

REALTOR® Magazine-Daily News-Should Underwater Borrowers Stay or Go?

ncreasing numbers of home owners are struggling with the decision to walk away from their homes because their mortgages are so far underwater.

Whether it is a good idea or not is an open question with strong arguments on both sides of the decision.

Leaving a home and a mortgage ruins a credit score, complicating future transactions, and makes it more difficult to rent another residence and buy a car.

Despite this potential pain, Glenn Kelman, chief executive of Zillow.com, believes that people should consider giving up.

"I think there are a lot of people who don't walk away from their house for moral reasons that are economically irrational," he said.

Some experts believe that credit-evaluation companies will view foreclosures differently in this era. "This is a once-in-a-century real estate market. The question that FICO will be asking itself is, is a foreclosure in 2008 and 2009 the same as a foreclosure in 1998, 1999 or 2003 and 2004?" said Todd J. Zywicki, a bankruptcy expert at George Mason University School of Law in Arlington, Va.

credit scores foreclosures and short sales

foreclosure info

Foreclosures hitting more people with prime loans - San Jose Mercury News

2009-11-26T10:18:00.000-08:00

Foreclosures hitting more people with prime loans - San Jose Mercury News: "WASHINGTON — A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery."

for more on short sales

Market Snapshot

2009-10-22T17:13:00.000-07:00

Market Snapshot: "RECENT ACTIVITY

Number of Sales:
66
Number of New Listings:
108
Avg # of Homes for Sale:
81"

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

2009-10-13T13:41:00.000-07:00

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation: "The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:

What is Cancellation of Debt?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

Is Cancellation of Debt income always taxable?
Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

* Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
* Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
* Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
* Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
* Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.

These exceptions are discussed in detail in Publication 4681.

What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

What does exclusion of income mean?
Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing
separately.

Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.

How long is this special relief in effect?
It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.

Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?
The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982 and the detailed example in Publication 4681.

If the forgiven debt is excluded from income, do I have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and this form must be attached to your tax return.

Do I have to complete the entire Form 982?
No. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.

Where can I get this form?
If you use a computer to fill out your return, check your tax-preparation software. You can also download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.

How do I know or find out how much debt was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by February 2, 2009. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982.

Can I exclude debt forgiven on my second home, credit card or car loans?
Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion. See Publication 4681 for further details.

If part of the forgiven debt doesn't qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?
Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not required to include forgiven debts in income to the extent that you are insolvent. You are insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses each of these exceptions and includes examples.

I lost money on the foreclosure of my home. Can I claim a loss on my tax return?
No. Losses from the sale or foreclosure of personal property are not deductible.

If I sold my home at a loss and the remaining loan is forgiven, does this constitute a cancellation of debt?
Yes. To the extent that a loan from a lender is not fully satisfied and a lender cancels the unsatisfied debt, you have cancellation of indebtedness income. If the amount forgiven or canceled is $600 or more, the lender must generally issue Form 1099-C, Cancellation of Debt, showing the amount of debt canceled. However, you may be able to exclude part or all of this income if the debt was qualified principal residence indebtedness, you were insolvent immediately before the discharge, or if the debt was canceled in a title 11 bankruptcy case. An exclusion is also available for the cancellation of certain nonbusiness debts of a qualified individual as a result of a disaster in a Midwestern disaster area. See Form 982 for details.

If the remaining balance owed on my mortgage loan that I was personally liable for was canceled after my foreclosure, may I still exclude the canceled debt from income under the qualified principal residence exclusion, even though I no longer own my residence?
Yes, as long as the canceled debt was qualified principal residence indebtedness. See Example 2 on page 13 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

Will I receive notification of cancellation of debt from my lender?
Yes. Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any debt of $600 or more. The amount cancelled will be in box 2 of the form.

What if I disagree with the amount in box 2?
Contact your lender to work out any discrepancies and have the lender issue a corrected Form 1099-C.

How do I report the forgiveness of debt that is excluded from gross income?
(1) Check the appropriate box under line 1 on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to indicate the type of discharge of indebtedness and enter the amount of the discharged debt excluded from gross income on line 2. Any remaining canceled debt must be included as income on your tax return.

(2) File Form 982 with your tax return.

My student loan was cancelled; will this result in taxable income?
In some cases, yes. Your student loan cancellation will not result in taxable income if you agreed to a loan provision requiring you to work in a certain profession for a specified period of time, and you fulfilled this obligation.

Are there other conditions I should know about to exclude the cancellation of student debt?
Yes, your student loan must have been made by:

(a) the federal government, or a state or local government or subdivision;

(b) a tax-exempt public benefit corporation which has control of a state, county or municipal hospital where the employees are considered public employees; or

(c) a school which has a program to encourage students to work in underserved occupations or areas, and has an agreement with one of the above to fund the program, under the direction of a governmental unit or a charitable or educational organization.

Can I exclude cancellation of credit card debt?
In some cases, yes. Nonbusiness credit card debt cancellation can be excluded from income if the cancellation occurred in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See the examples in Publication 4681.

How do I know if I was insolvent?
You are insolvent when your total debts exceed the total fair market value of all of your assets. Assets include everything you own, e.g., your car, house, condominium, furniture, life insurance policies, stocks, other investments, or your pension and other retirement accounts.

How should I report the information and items needed to prove insolvency?
Use Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to exclude canceled debt from income to the extent you were insolvent immediately before the cancellation. You were insolvent to the extent that your liabilities exceeded the fair market value of your assets immediately before the cancellation.

To claim this exclusion, you must attach Form 982 to your federal income tax return. Check box 1b on Form 982, and, on line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately prior to the cancellation. You must also reduce your tax attributes in Part II of Form 982.

My car was repossessed and I received a 1099-C; can I exclude this amount on my tax return?
Only if the cancellation happened in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See Publication 4681 for examples.

Are there any publications I can read for more information?
Yes.
(1) Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals) is new and addresses in a single document the tax consequences of cancellation of debt issues.

(2) See the IRS news release IR-2008-17 with additional questions and answers on IRS.gov."

High end Real Estate still showing signs of weakness

2009-10-05T17:36:00.001-07:00

Seeking Real Estate Bargains? Try High-End Homes - WSJ.com

Falling real estate prices are becoming as much a feature of high-end neighborhoods as ocean views, infinity pools and four-car garages.

While the latest data suggests prices for mainstream homes may be stabilizing after several years of pain, the news for luxury homes isn't looking as good.

That's bad news for sellers, naturally, but anyone in the market for a home listed for $2 million or more will find deeply discounted asking prices—and may be able to command even lower prices.

On Tuesday, data from the Federal Housing Finance Agency showed that average home prices ticked up 0.3% nationwide between June and July, including a 1.6% bounce on the west coast. The gains are modest, and they are partly influenced by the season—higher-end homes tend to sell better in late spring and early summer, as families try to move before the school year. Analysts are disappointed the rise was not higher.

Those who lose homes may face state tax hit

2009-08-28T11:25:00.000-07:00

Those who lose homes may face state tax hit: "The state-tax hit could be substantial and the rules are complex. People in mortgage trouble should consult a qualified tax professional.

Normally, when a lender forgives debt, the forgiven amount is taxed as income.

One exception is nonrecourse debt. On nonrecourse debt, if a borrower defaults, the lender can seize the collateral but can't go after the borrower's other assets. Forgiveness of a nonrecourse mortgage generally does not result in tax on canceled debt income.

A mortgage used to buy a home is usually nonrecourse. But if the borrower refinances the loan and takes cash out, or takes out a home equity loan or line of credit, that debt usually is recourse debt. Canceled recourse debt is subject to income tax.

Exceptions to the tax also apply if the borrower is bankrupt or insolvent."
-------------------------------
"People are starting to notice that California taxes may be significant."

Attorney General says Foreclosure Consultants must register

2009-08-28T10:50:00.003-07:00

Note the California Association of Realtors states that Realtors are acting as foreclosure consultants when they contact the lender on behalf of upside down homeowners.

Note 2: California Attorneys are not Foreclosure consultants when they render service as part of their Attorney practice.

Consumers - Foreclosure Consultant Registration - California Dept. of Justice - Office of the Attorney General

After July 1, 2009, with certain limited exceptions, it is illegal to operate as a mortgage foreclosure consultant in California unless the foreclosure consultant has obtained from the Department of Justice a Certificate of Registration as a Mortgage Foreclosure Consultant. In order to obtain the Certificate of Registration required by California Civil Code section 2945.45, a foreclosure consultant must complete the application and provide all required documents to the Department of Justice.

If you are a foreclosure consultant, to be certain that you obtain your Certificate of Registration by July 1, you should submit your application no later than June 15, 2009. Be certain to submit with your application, a copy of the contract you will use with clients and all of the other documents required by the application form. You should send this information along with your check for the $850 filing fee made payable to the “California Attorney General’s Office” to:

Foreclosure Consultant Registration Program California Attorney General's Office Consumer Law Section 300 South Spring Street, Suite 1702 Los Angeles, CA 90013

Before a Certificate of Registration can be obtained, it will be necessary for you to obtain a bond in the amount of $100,000, and to file a copy of the bond with the Secretary of State. The Certificate of Registration will not be issued until the Secretary of State acknowledges that the bond has been properly filed. Please contact the Secretary of State to obtain the necessary bond forms at the address below:

Secretary of State Special Filings Unit 1500 11th Street Sacramento, CA 95814

You can also contact the Secretary of State’s Office via the web at: http://www.sos.ca.gov/business/sf/

If you would rather make a $100,000 deposit in lieu of obtaining the bond, you should contact us at the above address for the Attorney General’s Office and we will provide you with the form.

Your application will not be processed until the completed application form, all required documents, and the $850 fee have been received, and the Secretary of State has acknowledged receipt of the bond, or you have made the necessary $100,000 deposit in lieu of the bond.

After a Certificate of Registration is issued to you, you must inform us each time there is a material change in any of the information or documents you supplied with your initial application. Failure to do so can result in the revocation of your Certificate of Registration.

You can obtain a copy of the application form PDF logo [PDF 304 kb / 5 pg] to register as a Mortgage Foreclosure Consultant, and can read a copy of the law to learn important information about additional requirements of the Mortgage Foreclosure Consultant Law. PDF logo [PDF 94 kb / 12 pg]

* Application Form PDF logo [PDF 304 kb / 5 pg]

* Mortgage Foreclosure Consultant Law PDF logo [PDF 94 kb / 12 pg]

Short sale specialists

2009-08-28T10:50:00.001-07:00

REALTOR® Magazine-Daily News-Specialists Offer Short-Sale Help

Specialists Offer Short-Sale Help
Short sales now account for the majority of some real estate agents' transactions. To ensure they have plenty of time to list and show properties, many of these agents are working with short-sale negotiators, who spend much of their time on the phone negotiating with lenders on behalf of sellers.

The short-sale process can take six months or more, as the presence of second loans, increased consolidation among lenders, and the large number of short-sale transactions make it more challenging.

Gmail - Common Ways to Hold Title - jmcconnin@gmail.com

2009-07-07T12:20:00.000-07:00

Ways to hold title under California Law.

Many people ask if they should change the names on title when when they are facing a foreclosure or a short sale.

The answer is it depends on what you are trying to accomplish and if by doing so you might give the bank a piece of evidence it might need to argue you should not be protected by California's anti deficiency protections.

Additionally, changing the name on title may not accomplish your goals.

It may protect credit if done in time, it is unlikely to change responsibility for the loan balances.

You should definitely speak with an attorney before you change title.
(beware of foreclosure consultants suggesting you put title in someone else's name.

Gmail - Common Ways to Hold Title - jmcconnin@gmail.com

for more on short sales and foreclosure law.

short sales and foreclosures buyers may be slowing down

2009-07-02T13:51:00.001-07:00

We noticed a massive increase in interest in a our san diego short sale listings when interest rates dropped. Now that they are rising again we see that mortgage applications hit a new 8 month law.

We new buyers were payment sensitive but not this much.

This should be a note for the administration and the Fed. If inflation gets out of control and rates increase real estate prices may start falling again.

REALTOR® Magazine-Daily News-Mortgage Applications Hit 8-Month Low

Mortgage Applications Hit 8-Month Low
Mortgage applications declined 18.9 last week compared to the previous week, hitting the lowest level since Nov. 21, 2008, according to the index compiled weekly by the Mortgage Bankers Association.

Application volume decreased from 548.2 the previous week to 444.8 last week on an adjusted basis. On an unadjusted basis, the index declined 18.5 percent and was down 7.4 percent compared with the same week a year ago.

The decline was driven by refinances, which fell 30 percent compared to the previous week. The purchase index was down 4.5 percent.

short sale strategy

Short Sale of Luxury Homes

2009-05-06T23:07:00.001-07:00

Rich Default on Luxury Homes Like Subprime Victims (Update1) - Bloomberg.com

California is hardest hit by luxury-home foreclosures. More than 1,500 borrowers with properties in the state that once sold for more than $1 million defaulted on their mortgages in February, said Mark Hanson, managing director of the Field Check Group, a real estate company in Palo Alto, California.

About 3 percent, or 254,745, of the state’s 8.5 million houses are assessed for more than $1 million by county assessors, according to San Diego-based MDA DataQuick, a real estate monitoring company.

While sales for all homes in the state increased 2.5 percent last year from 2007, sales of homes valued at more than $1 million declined 43 percent to the lowest since 2003, MDA DataQuick reported. Part of the reason is falling prices as California’s median home price dropped 41 percent in February to $247,590, according to the state’s Association of Realtors.

Another explanation may be stricter lending guidelines, Hanson said.

“You have to have income of $250,000, a 20 percent down payment and near perfect credit to buy a $1 million home now, so the number of buyers isn’t what it was,” Hanson said. “There just aren’t enough buyers to sop up supply. We’re seeing the collapse of the high-end market.”

short sales

Fed is now buying Home Loans - this should help a few sellers

2009-01-15T19:58:00.001-08:00

Fed begins purchasing mortgage securities - San Jose Mercury News

NEW YORK — The Federal Reserve Bank of New York said today it has begun purchasing mortgage-backed securities in an effort to bolster the battered housing market.

The program, initially announced Nov. 25, allows the Fed to spend $500 billion to buy mortgage-backed securities guaranteed by mortgage giants Fannie Mae and Freddie Mac and another $100 billion to directly purchase mortgages held by Fannie, Freddie and the Federal Home Loan Banks. The program is aimed at driving down the price of mortgages and making home loans more available.

The New York Fed is overseeing the program for the Federal Reserve. The New York Fed is working with four investment managers — BlackRock Inc., Goldman Sachs Asset Management, PIMCO and Wellington Management Co. — to purchase the securities.

Up to $500 billion in securities will be purchased by the end of the second quarter.

The mortgage-backed securities being purchased are considered investment grade and are not the packages of loans that helped ignite the current credit market turmoil. An initial sharp rise in defaults in 2007 among subprime mortgages — loans given to customers with poor credit history — helped touch off the ongoing credit market downturn. As defaults continued to rise, the value of securities backed by subprime mortgages plummeted and investors shied away from purchasing the risky debt.

for more information short sales

Foreclosure Sale Suspension

2009-01-15T16:09:00.001-08:00

This suspension give time to sellers to get short sale offers into the lenders.

Media: News Releases > Fannie Mae Extends Foreclosure Sale and Eviction Suspension

Fannie Mae Extends Foreclosure Sale and Eviction Suspension

WASHINGTON, DC -- Fannie Mae (FNM/NYSE) today announced that it would extend the suspension of foreclosure sales and evictions from single-family properties through January 31, 2009.

This action will enable the company to work with mortgage servicers to further implement the Streamlined Modification Program (SMP) announced on November 11, 2008 and initiated on December 15, 2008. The extension will also provide additional time for the company to operationalize its new National REO Rental Policy, which will allow renters in company-owned foreclosed properties to stay in their homes. Details of the new policy are expected to be announced shortly.

The temporary suspension of foreclosures will allow affected borrowers facing foreclosure to retain their homes while Fannie Mae works with mortgage servicers to implement the SMP. Foreclosure attorneys and loan servicers have been instructed to use the additional time to reach out to borrowers and continue to pursue workout options. The initiative applies to loans owned or securitized by Fannie Mae.

Economists make predictions about home prices

2008-12-05T13:32:00.001-08:00

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.
========================

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.

2008-11-07T12:32:00.001-08:00

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

2008-09-25T14:01:00.001-07:00

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

2008-09-11T15:59:00.001-07:00

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

2008-09-08T12:01:00.001-07:00

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

2008-09-01T12:09:00.001-07:00

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

2008-09-01T12:06:00.001-07:00

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.

2008-08-22T16:16:00.001-07:00

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

2008-08-20T17:47:00.001-07:00

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

2008-08-20T17:45:00.001-07:00

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

2008-08-20T17:40:00.001-07:00

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

2008-08-20T17:29:00.001-07:00

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

2008-08-20T17:26:00.001-07:00

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

2008-07-21T16:20:00.001-07:00

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.

2008-07-17T14:01:00.001-07:00

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

2008-07-02T17:32:00.000-07:00

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

2008-07-02T17:27:00.001-07:00

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

2008-06-26T16:36:00.001-07:00

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

2008-06-17T15:20:00.001-07:00

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

2008-06-16T18:17:00.001-07:00

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

2008-05-22T18:06:00.000-07:00

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

2008-05-09T10:47:00.000-07:00

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

2008-04-06T10:35:00.000-07:00

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

2008-02-21T14:12:00.000-08:00

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

2008-02-15T22:00:00.000-08:00

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)

2008-02-15T21:59:00.000-08:00

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

2008-02-13T09:04:00.000-08:00

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

2008-02-11T17:33:00.000-08:00

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

2008-02-01T11:01:00.000-08:00

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

2008-01-26T11:13:00.000-08:00

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

2008-01-26T10:59:00.000-08:00

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

2008-01-26T10:56:00.000-08:00

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?

2008-01-26T10:41:00.000-08:00

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

2008-01-21T13:02:00.000-08:00

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

2008-01-15T15:07:00.000-08:00

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".

california short sale - Google Search

2007-12-30T16:32:00.000-08:00

f you are looking to do a short sale in San Diego or anywhere else in California, I say buyer beware. Do not work with a newly minted short sale specialist. Do now work with a Realtor who claims to loss mitigator or any of the other terms they like to put on their cards, unless they truly have the experience to get the job done. And even then you still have to have a back up plan. Ask your Realtor what you are going to do you don't find a buyer or the lender does not accept your offer. Ask them what percentage of their short sale listings have sold in the last there months.

A short sale is only one part of the pre-foreclosure workout. For reference I put the sponsor searches for California short sale below. The first paid advertiser was in the horizontal space. The next group was on the side and can be seen below.

california short sale - Google Search: "Sponsored Links
National Short Sale Inc.
How to Short Sale Your Home. Free
Advice & Information for Homeowners
www.shortsalecenter.com
San Diego, CA

Short Sale San Diego Home
We are San Diego Short Sale Experts
Find out about Your Options
www.BuyMySanDiegoHome.com
San Diego, CA

Short Sale
Easy HUD-1 for Short Sale Packages
Approved By All Banks & Lenders!
www.EasyHUD.com

Step-by-Step Short Sales
Make Huge Profits Doing Short Sales
Proven System - Step-by-Step Course
www.ShortSaleDeals.com

How To Do A Short Sale
My Realtor Business Needs Help!
Show Me How To Do A Short Sale.
RealEstateProGuides.com
California

The Foreclosure Experts
Foreclosure Doesn't Have To Happen
To You. Free Initial Consultation.
www.California-Mortgage-Saver.com
California

RETRAN Foreclosure Lists
Most Trusted Foreclosure Listings,
Training, and Resources since 1984.
www.retran.net
California

Short Sales Course
Low Cost Realtor Training
Easily Become A Short Sales Expert
www.LearnToShortSell.com"

Deed-In-Lieu of Foreclosure

2007-12-21T11:26:00.000-08:00

Deed-In-Lieu Frequently Asked Questions - HUD: "A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. A DIL of foreclosure may not be accepted from mortgagors who can financially make their mortgage payments.

QUESTION 1 - When a mortgagor has been approved for utilizing a DIL of foreclosure, how much time does a mortgagee have to complete the DIL?

ANSWER -A DIL of foreclosure must be completed within 90 days of initiation of the process.

QUESTION 2 - Does HUD allow $2,000 to pay off second liens when determining if a mortgagor is eligible for a DIL?

ANSWER - Effective with Mortgagee Letter 2002-13, HUD increased the DIL of foreclosure consideration to not to exceed $2,000. Therefore, with the mortgagor's consent, this consideration may be utilized to pay off junior liens to clear the title as stated in Mortgagee Letter 2000-05."

California Deed in Lieu of Foreclosure

2007-12-21T11:25:00.000-08:00

What is a Deed in Lieu of Foreclosure?

As defined by HUD a A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. A DIL of foreclosure may not be accepted from mortgagors who can financially make their mortgage payments.

A mortgagor and lender have about 90 days to complete the process.
Once you have decided to offer a deed in the lieu, the lender will probably wish to send out an appraiser.

Can a deed in lieu be done if there is more than one lien holder.
Yes, but it takes negotiation and we recommend that you have a lawyer drafting or at least reviewing all the paperwork. Working with the second can be especially tricky and you might wish to get your attorney involved before you stop paying your loans.

San Diego short sale Specialist - watch out for scams

2007-12-20T15:13:00.000-08:00

If your Realtor is claiming or claimed to be short sale specialist or short sale expert. The problem with the Real Estate industry is that it is not well self regulated. The association of realtors is self regulating to a large extent and they allow their Realtors to make all sort of scary claims.

Ask your short sale specialist how many short sales he or she has closed in the last three months and in their career. Ask to see their short sale package. Ask them if they have a lawyer reviewing the closing paperwork.

Ask what clauses you should add to the listing agreement in addition to the Short Sale Listing addendum.

Ask them what clauses you should have in your purchase and sale agreement in addition to the Short Sale addendum.

Ask them if you can speak with the attorney on their team about alternatives to a short sale such as a deed in lieu. Ask the attorney what you should do when the Notice of Default shows up and the notice of sale.

Ask the realtor what to do if the loan broker inflated your earnings on the loan app.

Ask you Realtor if he or she understands why you should or should not be concerned about a sold out junior.

The list goes on and on. You Realtor should have experience negotiating a sale with the lender and your Realtor should also have a lawyer on to make sure you are protected as well. A short sale specialist without a lawyer is hack.

Ask your short sale specialists a few questions.

san diego short sales - tax liablity

2007-12-19T14:01:00.000-08:00

GovTrack: H.R. 3648: Text of Legislation: "Resolved, That the bill from the House of Representatives (H.R. 3648) entitled `An Act to amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income, and for other purposes.', do pass with the following

AMENDMENT:

Strike out all after the enacting clause and insert:

SECTION 1. SHORT TITLE.

This Act may be cited as the `Mortgage Forgiveness Debt Relief Act of 2007'.

SEC. 2. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL RESIDENCE EXCLUDED FROM GROSS INCOME."

San diego short sales and short sales in San Diego county

2007-12-13T10:11:00.001-08:00

Should you short sale a San Diego property if you have purchase money protection under california code of civil procedure 580b.

Have negotiated a release from deficiency in writing
Has the bank agreed in writing to not report a 1099.
Do you have a letter from a lawyer explaining you don't have to self report the loan forgiveness as income
Did you get a lawyer to draft specific language in the purchase agreement - language which is not in any Caliornia Association of Realtors addendum?

Are you legally insolvent?

Short sales and non recourse loans

2007-12-02T21:00:00.000-08:00

This topic is discussed in the comments a many blogs. Below is a sample. I think the post author probably has a good understanding of the issue. If the security does not go back to the lender, why would the entire debt be wiped out. Consequently loan forgiveness tax liability might attach.

Why would Seller with non recourse loans agree to do a short sale without legal advice. A non recourse seller may be able to protect her/himself by negotiating certain language into the transaction, but I am willing to bet not one transaction done without the aid of california real estate attorney has that language.

Below is the quote:

L.A. Land : Los Angeles Times : Sept. sales: 67% below bubble peak: "he non-recourse deal doesn't just apply for short sales where the borrower sells before they lose title to the property. It applies for foreclosures/trustee sales too, where the bank takes possession, and sells it at auction or as an REO. If their recovery from that process still does not cover loan amounts due, the borrower is still personally liable for the debt, except when the loan is non-recourse. Short sales can occur on recourse loans too. If the note-holder wants to cut its losses and avoid costs of later litigation and rapidly declining asset value, it can approve a short sale AND forgive the personal liability of the loan. Forgiveness is possible but not likely, since it costs relatively little to get a debt judgment in court, then monitor property records to make sure the borrower doesn't win the lottery or something."

Cancellation of debt income - non recourse loan

2007-12-02T00:44:00.000-08:00

Should a California homeowner with purchase money loans - agree to do a short sale?
One of the major issues is whether the short sale will create tax liability for loan forgiveness.

As I review some of the case law on this issue - my first question would be whether the loan is a non recourse loan on its own. (non necessarily as a result of California anti deficiency statutes). A careful and detailed review of the situation should be conducted by an attorney before an owner consents to a short sale.

Debt Forgiveness - Deed in lieu of foreclosure

2007-12-02T00:09:00.000-08:00

Note the information below is consistent with the information provided by the legal department of the California association of Realtors. Please consider there are at least to concerns. You must consider capital gains and loan forgiveness.

Debt Forgiveness Outside the B Word: "In a true nonrecourse situation, there is no debt forgiveness because the debtor never has any legal obligation to respond personally on the debt. IRC § 61(a)(12) is, therefore, inapplicable. That does not mean, however, that no adverse tax consequences exist as a result of a nonrecourse foreclosure, because they most certainly do. A foreclosure on a nonrecourse debt is treated the same as a sale or exchange of the property securing the nonrecourse debt [Treas.Reg. § 1.1001-2(a)(1)]; a 'sale' also occurs when a debtor voluntarily conveys (e.g., deed in lieu of foreclosure) [Freeland v. CIR, 74 TC 970 (1980)] or abandons [Middleton v. CIR, 77 TC 310 (1981) aff'd per curiam, 693 F2d 124 (CA11 1982)] the property. The amount of the nonrecourse obligation extinguished is treated as the amount realized. A taxpayer computes the amount of the gain (or loss) realized and recognized by comparing the tax basis in the property to the amount of the nonrecourse obligation extinguished at the time the foreclosure sale is completed [Commissioner v. Tufts, 491 US 300 (1983)]. The character of the entire gain (or loss) is determined by the character of the property securing the obligation: if the property is a capital asset, the gain (or loss) is capital [subject, of course, to the recapture rules of IRC §§ 1245 and 1250]; if the"

San Diego Short Sale - Notice of Default

2007-11-25T13:16:00.000-08:00

Real Estate Blog - San Diego Short Sale - Notice of Default: "And then she sort of asked if the short sale process takes about 4 months in CA. I said that would be about the minimum but I said it looks to me like you send out notices but don't always start the process right away. Which brings up a difficult choice for all owners... Right now countrywide has a deed in lieu track and a separate short sale track. How can anyone (lawyer or Realtor) make that choice for a client. All you can do is give them good info. And some of that info must include the ways they can use the court process to slow down a sale. There are legal ways to slow or perhaps even prevent a foreclosure sale. But you can't wait to the last minute to bring a lawyer on board. Most lawyers will not review a case if they do not have time to come up to speed. Once that NOD shows up, someone who holds themselves out as a fiduciary - has to start making sure the client is properly advised. This whole process is filled with traps. If your seller all of a sudden your seller gets upset and says why wasn't I on the deed in lieu track - how they heck can a Realtor even respond? No response will satisfy a plaintiff's attorney. (actually all your responses but one will please the plaintiff's attorney)."

California short sale attorney

2007-11-21T16:38:00.000-08:00

I asked the following questions about California short sale law to one of the lawyers at the California association Realtors. I look forward to the answer. Almost everyday I am challenged by a short sale issue which brings up a huge range of legal complications. I am concerned for all the non represented sellers out there. This is a difficult field and mistakes may costs the short seller 10s of thousands of dollars.

Questions

At what point in the process should the agent make sure the seller has legal advice. For instance - Can the Realtor review the financial paperwork to determine what to disclose to the bank? Can an agent legally represent the homeowner in Negotiations with the bank or review the paperwork with respect to deficiency and loan forgiveness?

How about when the NOD is filed - you know sellers are going to say the Realtor said don't worry we will sell the house - Shouldn't the agent make sure the seller has legal counsel at the time and NOD is filed?

In fact being that a short sale is really part of a set of pre-foreclosure options which have serious and diverse legal and financial impacts should a Realtor even list a short sale before the owner consults an attorney?

Lawsuits - Los Angeles Times - protection from creditors

2007-11-19T13:29:00.000-08:00

Homeowners considering short sales in California are starting to wonder if their other assets are exposed to potential deficiency judgments.

Here is an L.A. Times story on the subject. Please note - the IRS may be able to collect in situations where a third party creditor might not.

IRAs Could Be Fair Game in Lawsuits - Los Angeles Times: "Wong was all set to do just that when a co-worker warned him that, in California, IRAs were more vulnerable than 401(k)s to lawsuits. 'He said a qualified 401(k) plan is safe from any court taking it in the event of a personal liability case, such as if someone slips and falls on your property, whereas IRAs are subject to available assets to pay out such claims,' Wong said. Actually, California law does shelter money in IRAs and Roth IRAs that is deemed necessary to support the saver and his or her dependents in retirement, said Bill Norman, a certified tax specialist and estate planning attorney in Century City. Any excess, however, is indeed subject to creditors' claims in a lawsuit or bankruptcy. Exactly how much would be protected is open to a judge's interpretation, Norman"

Short sales and tax liability

2007-11-19T10:25:00.000-08:00

Below is a link to an excellent page from the IRS. Please note that when a short sale happens the loan does not go back to the lender as full satisfaction. So it seems to me the correct legal strategy would involve something much more complicated that saying this is a non recourse loan so no loan forgiveness liability for a short sale. Also do not forget to factor in the potential for capital gains liability.

Questions and Answers on Home Foreclosure and Debt Cancellation: ". Can you provide examples? A borrower bought a home in August 2005 and lived in it until it was taken through foreclosure in September 2007. The original purchase price was $170,000, the home is worth $200,000 at foreclosure, and the mortgage debt canceled at foreclosure is $220,000. At the time of the foreclosure, the borrower is insolvent, with liabilities (mortgage, credit cards, car loans and other debts) totaling $250,000 and assets totaling $230,000. The borrower figures income from the foreclosure as follows: Use the following steps to compute the income to be reported from a foreclosure: Step 1 - Figuring Cancellation of Debt Income (Note: For non-recourse loans, skip this section. You have no income from cancellation of debt.) 1. Enter the total amount of the debt immediately prior to the foreclosure.___$220,000__ 2. Enter the fair market value of the property from Form 1099-C, box 7. ___$200,000__ 3. Subtract line 2 from line 1.If less than zero, enter zero.___$20,000__ The amount on line 3 will generally equal the amount shown in box 2 of Form 1099-C. This amount is taxable unless you meet one of the exceptions in question 2. Enter it on line 21, Other Income, of your Form 1040."

san diego short sales seminar (part 1)

2007-11-11T13:07:00.000-08:00

Yesterday I had the opportunity to attend a short sale class for san diego realtors give by an attorney and realtor. She sits on boards for Realtor associations, does some short sales and defends Realtors when they get sued.

She had a great deal of credibility with the audience of close to 200 as many had seen here lectures previously.

The take away from the class for me and I am sure for almost every Realtor there, is that a Realtor should not take a short sale listing until the client sees an attorney and tax advisor.

Here is just a beginning list of considerations why a Realtor should not list a short sale until the seller has spoken with an attorney and perhaps a tax advisor:|

1. No amount of disclaimers can make up for the fact that a short sale may harm many sellers and no amount of signed disclaimers will allow a Realtor to practice law, analyze the situation and declare a short sale is the right choice for the seller. A seller must consider and weigh the consequences of a deed in lieu of foreclosure and foreclosure.

2. No amount of disclaimers will avoid the fact that a lawyer needs to go over the paperwork to ensure the seller is well advised and protected. A short sale without agreements will probably get the Realtor sued.

3. A Realtor may not advise the client on deficiency. To do so could get the Realtor sued.

Just think about the fun plaintiff's attoneys will have. Did you get paid for the short sale? Were you an agent? For whom, the lender? Did you have any duties? What were they? Was your client at risk for a deficiency? (you lose when you answer this one) How did you know? Do you ever mention anything about deficiency to the seller? Why not? So you made a legal choice for the seller? Are you licensed to make legal choice? Give counsel on California law? Why don't you explain 580b to me. So prior to the property going back to the bank does the owner have personal liability on the loan? So why do the short sale? Did you negotiate with the bank. As a representative, isn't that what attorneys do? Do you draft the release? Do you understand the legal consequences, did the seller etc, etc.

4. A Realtor may not advise the client on taxation for loan forgiveness. Even if they could they are not license to suggest that a short sale may be a better solution than a foreclosure. So again how can a short sale happen without legal advice?

5. A Realtor may not advise the client on taxation for capital gains. To do so or not do so could get the Realtor sued for the reasons seen above.

1. I think it is safe to say no Realtor should take a short sale until the client has been advised by a lawyer and perhaps a tax advisor. No amount of disclaimers will get around the fact that without proper legal advice a Realtor is taking on way too much liability.

Why? because a short sale is just one of the pre-foreclosure remedies a homeowner can consider. And for many it is not the best option. A short sale may introduce liability for deficiency and taxes to many homeowners who would not be exposed to such liability if a foreclosure or deed in lieu of foreclosure is selected.

In our next blog we will talk about the liability associated with the short sale package.

In future sales we will speak about negotiations and releases.

San Diego short sale specialists

2007-11-09T16:13:00.000-08:00

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Now I ask - if you are going to dispose of an asset worth hundreds of thousands of dollars for which you could be held responsible for the the banks losses - or for which you could pay taxes on the the losses. Are the Students of these courses really the type of people you can trust as your San Diego short sale expert?

California has a very complex set of consumer protections, protecting homeowners against lenders and protecting people in "foreclosure" from realtors and investors. Before you sell your house and perhaps change your status from fully protected to fully exposed - speak with an attorney. It does not matter if the attorney is a foreclosure attorney, a real estate attorney, or a bankruptcy attorney. If you get your answers in writing and the attorney has mal practice insurance it will be the best use of your time -- period.

short sale tax consequences - recourse vs non recourse

2007-11-06T10:43:00.000-08:00

Hi I'm a REALTOR & Certified Mortgage Planning Specialist in San Diego. Thank you for this valuable info.

Question 1:

I read somewhere that you may still have tax consequenses for the deficiency amount even if foreclosure was non-recourse(purchase money & lender chose NON judicial process), because although lender understands you are protected from being sued/judgement actions, it does not prevent them from taking a tax deduction, which from what the article mentioned is required by law(as I understood). Being that tax consequences based on lender taking a deduction & suing you for deficiency are two different things, this leads me to believe that it does not matter wether you have Deficiency protection from from lender going after you personally, you still may face the equivalent in taxes due to lender having the right to claim a tax deduction. Please correct me?

I have researched the IRS rulings and publications. I am comfortable giving my client an opinion letter saying they are not subject to loan forgiveness taxation after a foreclosure or deed in lieu. A short sale is very different. Since the property does not go back to the lender - I am truly surprised to talk to realtors who think they can advise their clients that are protected from tax liablity for loan forgiveness.

Those are arguments for California license Real Estate attorneys.

If you send me an email I will try to locate some of my research for you

anti deficiency case law

2007-11-06T10:23:00.000-08:00

FindLaw for Legal Professionals - Case Law, Federal and State Resources, Forms, and Code: "Cal. Civ. Proc. Code S 580b. California's anti-deficiency statutes are intended 'to limit strictly the right to recover deficiency judg- ments, that is, to recover on the debt more than the value of the security.' Brown, 259 P.2d at 426. The bankruptcy court reasoned that S 580b applies only when there is a deficiency, defined as ' `that part of a debt secured by mortgage not real- ized from sale of mortgaged property,' ' and thus concluded that S 580b did not apply to prohibit East Bay's unsecured"

Recourse vs non recourse loan

2007-11-06T10:21:00.000-08:00

The 9th circuit stated that California anti deficiency laws did the following including "requring the debtor be credited with the fair market value of the secure property before be subjected to personal liability.

FindLaw for Legal Professionals - Case Law, Federal and State Resources, Forms, and Code: "Moreover, even if the creditor does rely on the security first, his right to a judgment against the debtor for any defi- ciency may be limited or barred by the anti-deficiency statutes found in SS 580a, 580b, 580d, or 726. See Walker v. Commu- nity Bank, 518 P.2d 329, 331 (Cal. 1974). The purposes behind these provisions are 'to prevent multiplicity of actions, to compel exhaustion of all security before entry of a defi- ciency judgment and to require the debtor to be credited with the fair market value of the secured property before being subjected to personal liability.' Id. at 333."

Questions and Answers on Home Foreclosure and Debt Cancellation

2007-11-02T12:23:00.000-07:00

If you are selling a san diego short sale property short you should compare your position on short sale to you or your clients status after a foreclosure

Questions and Answers on Home Foreclosure and Debt Cancellation: "2. Is Cancellation of Debt income always taxable? Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve: * Bankruptcy: Debts discharged through bankruptcy are not considered taxable income. * Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.You are insolvent when your total debts are more than the fair market value of your total assets.Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception. * Certain farm debts:If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.The rules applicable to farmers are complex and the assistance of a tax professional is recommended if you believe you qualify for this exception. * Non-recourse loans:A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case "

san diego short sale vs foreclosure - IRS tax billl

2007-10-27T18:41:00.000-07:00

The first question an upside down homeowner must ask themselves is why do a short sale.
Do I wish to help the lender?
Do I wish to help the buyer?
Do I wish to make money for the Realtors?

What am I doing for myself?

Am I really saving my credit?
Maybe, for now it looks like a short sale is better for your credit score, but that could change.

Am I risking tax for loan forgiveness by doing a short sale?
If you are a california homeowner you may be hitting yourself with a very large tax bill for loan forgivness. If the bank writes off $100,000 you could get hit with a tax bill as if you received $100,000 in income. That might even jump your tax bracket.

I have heard many realtors and loan brokers say there is no way around it.
Wrong, a foreclosure or deed in lieu does not cause loan forgiveness for some california home owners where a short sale does. (there are other ways to eliminate or minimize the tax bill)

In our next post will show how some short sales have credited deficiencies for home owner where none existed before.

Sold out juniors in California foreclosure law

2007-10-27T18:30:00.000-07:00

A further exception to consider is that 580 d does not bar recourse seconds from pursing deficiencies against homeowners.

We have read that Indy Mac says it is going to seek deficiencies against California homeowners.

Because properties values have slid about 20% many of those 100% financing 80 20 loans will put the second into a sold out junior status. If you do not have purchase money protection you might want to review all our pre-foreclosure solutions including a short sale.

Sold out junior situations are one of the situations in which a San Diego homeowner could really benefit from a short sale

Exception to Recourse loans and deficiencies

2007-10-27T18:23:00.000-07:00

A lender may have the right to pursue a deficiency but it still has to decide whether to go the longer tricker route of pursuing a judicial foreclosure or using a non judicial foreclosure or trustees sale.

Many if not most people tell homeowners not to worry about deficiency after a foreclosure. (watch out for short sales, many lenders do seek a deficiency after a short sale to the financial ruin of the homewowner and dismay of Realtors who practice law without a license and call themselves short sale specialists and loss mitigators)

It is true that most banks sought non judicial private sales in the early and mid 90s, but back then the amount were much smaller and much of the real estate mess in san diego was caused by restructuring and relocation.

This time around many people still have high paying jobs whose salaries could be attached and whose deficiencies are greater than six figures.

We have already seen many banks say they will seek deficiencies on seconds.

California Recourse loans and Short Sales

2007-10-27T18:19:00.000-07:00

If you loan does not fit within one of the exception cited in the previous post, you most likely have a recourse loan. (some loans may be written as non recourse loans as part of retirement planning vehicles so you may wish to read your loan document)

What does it mean if a San Diego homeowner has a recourse debt. It means the lender could elect to go after the homeowner for a deficiency between the amount of the loan and the amount it got paid after a foreclosure sale.

Recourse vs non recourse loans and short sales

2007-10-27T18:08:00.001-07:00

As seen in a previous blog entry -

barring certain exceptions a loan is a non recourse loan when the loan is made to purchase 1-4 units, the money goes into the purchase and the owner intends to occupy at least one of the units.

or, when the seller "carries back" some or all of the financing for the purchase of real property.

It has been noted that some exceptions to the purchase money protections might be waste, and fraud.

Practice tip, a short sale might be an opportunity to draft a release which could extinguish any problems which may have been part of the original loan transaction for both the lender and the borrower.

Now some people contemplating a short sale may have to consider whether their loan applications were less than perfect.

If there were problems with your loan application do not despair. Speak with your San Diego attorney. You have many options including short sale, deed in lieu or perhaps even looking into whether the loan broker made mistakes

Deficiency - Sold out juniors

2007-10-27T18:01:00.000-07:00

Deficiency After Nonjudicial Foreclosure: "Cal. Code Civ. Pro. 580d does not bar a deficiency for a sold out junior (see Walter E. Heller Inc. v. Bloxham, 176 Cal.App.3d 266 (1985)), although, as we have seen, section 580b will bar some sold out juniors from recovery of a deficiency. However, the holder of a junior deed of trust that has sold itself out through non-judicial foreclosure on its senior lien will be barred from a deficiency on the note secured by the junior lien. In Simon v. Superior Court, 4 Cal.App.4th 63 (1992), a bank gave two separate, sequential loans to a debtor. The first loan, for $1,575,000, was secured by a first deed of trust on the debtor's personal residence. The second loan, for $375,000, was secured by a second deed of trust on the same property. Neither loan was purchase money. After default, the bank non-judicially foreclosured the first, credit bidding less than the amount due, and then sued the debtor for $375,000 on the second note. The court barred the bank from recovery on the second note, holding that it amounted to a deficiency barred by 580d."

Deficiency After Nonjudicial Foreclosure

2007-10-27T18:00:00.000-07:00

Deficiency After Nonjudicial Foreclosure: "Cal. Code Civ. Pro. 580d bars a deficiency following a non-judicial foreclosure. Prior to its enactment in 1940, creditors could obtain a deficiency (unless barred by Cal Code Civ. Pro. 580b) following either judicial or non-judicial foreclosure, but judicial foreclosure was (and still is) subject to redemption for a year following sale and non-judicial foreclosure was (and still is) free of any right of redemption following sale. Enactment of Cal. Code Civ. Pro.580d is therefore said to have created a 'parity of remedies,' allowing the creditor to elect between judicial foreclosure (with a right to a deficiency but subject to a statutory right of redemption) and non-judicial foreclosure (with no right to a deficiency but free of the right of redemption). By barring a deficiency following non-judicial foreclosure, the hope was to discourage underbidding, a result supposedly accomplished for judicial foreclosure sales by the statutory right to redeem, following foreclosure, for the amount bid at the foreclosure."

Short sales vs. non judicial foreclosure law

2007-10-27T17:58:00.000-07:00

When considering a short sale a san diego homeowner should assess whether the lender will be able to utilize a judicial or non judicial foreclosure.

580: "580d. Rendition of deficiency judgment after foreclosure under power of sale forbidden; Exceptions 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)."

San Diego short sale law purchase money protection

2007-10-27T17:44:00.000-07:00

This law is one of the basic consumer protection laws for owners of California real estate.

It is the basis of purchase money protection. And no short sale should be considered unless an recourse non recourse evaluation is undertaken.

A person with protection on this statue could be left much worse off after a short sale vis a vis a foreclosure. A upside down homeowner must make sure the short sale transaction has releases which leave them in an protected position.

580: "580b. Conditions under which deficiency judgment forbidden 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."

California law 580a - deficiency judgments

2007-10-27T17:39:00.000-07:00

580: "580a. Deficiency judgments 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"

San Diego Short Sale Definition

2007-10-27T17:05:00.000-07:00

You see lots of definitions of a short sale in which people state that the Lender agrees to accept less than what it is owed as full settlement of the loan.

That is a very dangerous definition. It is found in most of the websites on the net, it is found in most of the training materials I have seen for Realtors. And it is certainly stated by most Realtors.

It is also proof that you need an attorney to oversee your short sale transaction. The lender is trying to get its best deal and so is the buyer. The listing Realtor has to have the sale go through to get paid.

So who is going to be smart enough to make sure the seller is released from the deficiency. I have seen paperwork in which the lender states that is releasing he lien against the property but it is not releasing the seller from his or her liability on the note.

Whose is being paid to watch out for the sellers interest. More than one seller has contacted me and said, I sold my property via a short sale and now the bank is trying to collect the deficiency.

A short sale should be protecting your future not destroying it.

The note does not even have to part of the dea