Facing Foreclosure in Philly?

Facing Foreclosure in the Philadelphia Area?

by Robert Peronne

What are your options?

1. Do a workout with the lender - A workout is simply a negotiation where you make an agreement with your lender to resume making payments to get caught up on your payment.  In most cases a lump sum of cash will be required.  In some rare cases the workout may involve a forebearance where the lender allows you to stop making payments for some period of time.  All you have to do is call the lender BUT remember they are attempting to collect money from you.  Make sure that you receive a written agreement from the lender before you resume making payments.
2. Do a loan modification - The difference between a loan modification and a workout is subtle.  Typically loan modifications involve some change in the terms of your loan based primarily on your ability to pay.  Loan mods are great for people who suffered some temporary financial problem and are now trying to get back on their financial feet.  The place to start with a loan mod is to make an appointment with a housing counsellor.  http://www.phillyshortsale411.com/housing-counseling/  If you live in Philadelphia and it is your primary home the loan modification process is supervised by the courts.  There are court initiated programs in some of the surrounding counties.
3. Sell the Property - If the property is worth more than the balance due on the loan you can sell the property and recover your equity rather than lose it in a foreclosure.  If you owe more than what the house is worth a short sale will enable you to avoid a foreclosure and give you the chance to rebuild your credit.  The basic qualification for a short sale is that you can not afford to make your payment or you have to move.  You need to work with a licensed Realtor who has experience in the foreclosure and short sale process.  The place to start is http://www.phillyshortsale411.com/
4. Give the property to the lender - In some cases the lender may allow a deed in lieu of foreclosure, where they accept the property as payment  for the loan.  Whether this is a possibility for you depends on if there are other liens or judgements against the property and who owns your loan.  Robert at phillyshortsale411 can help.
5. Bankruptcy - Bankruptcy is only a realistic option for people with other financial issues besides the foreclosure.  While the foreclosure action will temporarily stop while you are in bankruptcy it will ruin your credit and it may affect your ability to obtain employment in the future.  Bankruptcy courts will not order the lender to agree to a workout or loan mod only in rare cases will a bankruptcy solve your problem.
6. Fight the Foreclosure - If you feel that the foreclosure is not legal or that the lender may have committed fraud you can fight back in court.  Some people have been successful fighting without an attorney, a pro-se defense but typically an attorney with foreclosure litigation experience is required.
7. Allow the foreclosure to proceed - If you have no money, no prospects and no place to go allowing the foreclosure to move foward may be your only option.  This option will allow you to stay in your home for some period of time.  To understand the process look at this publication.



Useful information

I recommend that anyone facing foreclosure on their home should speak with a HUD approved Housing Counsellor to understand your options for staying in your home and a licensed Real Estate Broker with foreclosure and short sale experience to understand your options for selling your home.  If you know your options you can make an informed decision.

If the foreclosure is on an investment property you should talk to your lender about negotiating a deal to keep the property and a licensed Real Estate Broker to talk about your options for selling.

I know that everyone who is in foreclosure is being bombarded with letters and calls from investors who want to save you from foreclosure, loan modification companies, bankruptcy attorneys and a variety of other service providers.  There are some cases where one of these services may be of benefit to you.  There are many more cases where you will get ripped off, lied to and end up losing your home. 

Please, Please , Please talk to a Housing Counserllor and Realtor before you make any decision!

For more information visit my website.

How my short sale turned into deed in lieu - I didn't know the BPO

A story with a happy ending.

Closing short sales is a process to be successful you must take the right steps in the right order.  One of the most important steps is working the BPO agent.  I find that sending them the comps is always the right move.  Now, I'm not saying that BPO agents are not going to do their job.  After all they do get $50 bucks for doing a thorough job but if I send them the comps that I want them to use there is a chance (90%) that they will just use them AND thank me for sending them.

One of my favorite parts of doing short sales is the phone call to the BPO agent.  I love doing my Stoned Real Estate Agent routine.  "Oh well...I don't know what it's worth man.  I had the place up on the market for like 3 month and nobody would even look at it till I dropped the price to 145.  The place is like a totally ghetto.  I was like almost afraid to go in... Watch out for the fleas... I can't take that smell.  etc, etc, etc.."  and always "how much do you think it's worth?"

Then it's the call to the seller reminding them of all of the things I told them about making the house show well AND TO DO THE OPPOSITE!  Don't do the dishes.  Leave that dirty underwear on the doorknob.  Don't clean up the dog piss on the floor.   etc, etc, etc...  Worst of all this seller was a clean freak.  He needed me to stay at the house for a couple of days.

I need to shape the BPO because I know when I am talking to the negotiator 3 or 4 weeks later they will be using that BPO as the basis for their financials. 

So, how did my short sale turn in to deed in lieu.  The bank gave the owners phone number to the BPO agent and the owner gave him the lockbox combo.  I did take the listing off eshowings.  I did tell the owner not to let anyone show the house and to make them call me.   I did send the BPO contact info (call me) to the bank but...

By the time I found out the BPO was in the deal had already been turned over to the negotiator and the negotitor had already sent it to fannie mae, the investor.  GAME OVER.

Value $150K.  Offer $138K.  Counter $185K NOT NEGOTIABLE.  Asking $145K.

So I of course I sent comps and tried to negotiate.  The email came back $185K NOT NEGOTIABLE.

So I said to the negotiator, "Even if I could get $185K it won't appraise anyway.  Can we order an appraisal?"   "$185K NOT NEGOTIABLE."    Then I got the short sale declined letter. 

The 10th time I called the negotiator after the decline.  She said we could do deed in lieu.

The sheriff's sale is in January.  We may be able to get the sale postponed and start over on the short sale and then maybe there will be new BPO but it would be a long shot and the deed in lieu option will probably be off the table. 

While I was waiting for the seller to decide, I got an email from the negotiator saying that they would offer me an incentive if the seller would do the deed in lieu.

"OK, How much?"  I replied.

"$3,000," they said.

So the seller decided to do the deed in lieu and I got $3,000 (the happy ending).

I do feel bad for the buyer but what can I do.

What is the zoning on my listing?

I don't know how many times agents have asked me this question 100, 200, 300?


The answer depends on how I feel that day.  If I am feeling a little angry...

"I don't know, what does the city cert say?

"Uhhhh, we don't order it till we have an executed agreement," they reply.

"Why don't you order it now?"

"How do I do that?"

"You go on the Internet (it's a remarkable tool for Real Estate information) and order it for $103."

"I don't want to spend $103.  I just want you to tell me!"

"This is your $700,000 listing, right?  The one that you will make a $20,000 commission on but you don't want to spend a hundred bucks?  Well, how about the rental license?"

"Ohhhh, the client didn't give me that."

"Did you ask for it?"

"Uhhhh, I just want to make sale.  The client said it was 5 units and I'm going to list it as a 5 unit building"

"That sounds smart.  Why don't you take the listing, market it as a 5 unit, negotiate the deal then 3 days before the settlement when you get the cert and it says 3 units you can say that my deal fell through because L&I screwed me.  NO, you screwed yourself because YOU DIDN'T DO YOUR JOB!  Maybe, lead generation is not the only productive use of your time..."

"You're an asshole, Peronne you won't help me!"

Perhaps...



If I'm in a calmer mood...

After a gentle conversation about City Certs and rental licenses being the most authoritative source you as Real Estate agent can use and how your client may need to consult with a local zoning attorney,  it's let's sit down and figure it out.

There 3 sources of information we need to look at and they are all free and online.

1. Zoning maps.
2. Zoning files.
3. Title 14 of the City Code - Zoning.

In the file there are usually several zoning applications.  We need too find the most recent one and any documents dated after that.  These files tell a story.  You need to figure out what the story is.

On the first page the application will show what use was applied for.  There should be a stamp on it with the date the application was received.  This means it was received.  It does not mean it was approved.

On the back page it will say if it was approved or reason for refusal.  There may be documents related to a zoning hearing.  Like a Notice of Decision or Variance Issued.

If the use was approved on the applicaton AND rental licenses are current there is a 99% chance that your good.  The cert will say what was on the application.  If not, go to a local zoning attorney.  They can probably fix it.

If the use was approved on the applicaton AND rental licenses are not current there is still an excellent chance that your good.  The cert will say what was on the application.  If not, go to a local zoning attorney.  They can probably fix it.

If the use was NOT approved on the applicaton BUT a variance was issued AND rental licenses are current there is still an excellent chance that your good.  The cert will say what was on the application.  If not, go to a local zoning attorney.  They can probably fix it.

If the use was NOT approved on the applicaton BUT a variance was issued AND rental licenses are NOT current there is a slim chance that your good.  The cert probably will NOT say what was on the application.  If not, go to a local zoning attorney.  They may be able to fix it BUT it will take months and mucho dinero.  Now, we are talking about new zoning, parking and the latest building codes WILL be issues.

If the use was NOT approved on the applicaton AND NO variance was issued AND rental licenses are NOT current your probably screwed.  The cert probably will NOT say what was on the application.  If not, go to a local zoning attorney.  They may be able to fix it BUT it will take months and mucho dinero.  Now, we are talking about new zoning, parking and the latest building codes WILL be issues.


To sum it up. 

• Variances can dissapear if licenses are not maintained. 
• Approvals by right usually stay with the property even if licenses are not maintained BUT this is a gray area if the same approval would not be approved today.
• If licenses are maintained everything should be fine.
• If there are issues you need to send your client to an experienced, local zoning attorney.  Most attorneys know less about local zoning than is in this blog.

Wait a minute.  I did say there were two more sources of information.  What can we do with those.

The zoning map will show you the zoning for the property.  Common examples are R9, R9A, R10A, R10A, C2, G2.  The zoning must be on your agreement of sale for properties that are not primarily residential.

Title 14 of the City Code explains what is allowed in each zone BUT remember, "a little knowledge is a dangerous thing. "  Just because the zoning code says that your use is allowed does not mean you can do it.  There maybe special restrictions.  You may not get approval from the Planning Commission.  There may not be adequate sewer lines or drainge.  Maybe a spotted bluebird is nested there or piece of grass is growing in a puddle and you have wetland...

What is an Approved Short Sale Listing?

Before I explain what an approved short sale listing is let me first differentiate it from a Pre-Approved short sale.  There is no such thing as a Pre-Approved Short Sale.  There is such a thing as a previously approved short sale, meaning that the deal was approved and the buyer backed out.  If the sale was approved and a new buyer is obtained within the time allowed on the short sale approval letter then there is an excellent chance that  a new buyer can step in and make the same deal but there is no guarantee. 

Particularly troubling is the sale that was approved and now the "investor-buyer" tries to flip his deal to someone else.  Typically this investor-buyer will be looking for some sort of negotiation or assignment fee.  It is possible that a deal like this could be legitamate but probably not.  The lender is a party to the sale.  They must be made aware of these facts.  The lender must approve the fees charged by the investor-buyer and these charges must be clearly indicated on the HUD-1. 

The technique is called flopping, http://www.businessweek.com/news/2010-06-10/banks-face-short-sale-fraud-as-home-flopping-rises-update2-.html   The investor-buyer has an approved short sale agreement to buy for one price.  Then the investor-buyer and his agent (maybe the listing agent) put the property on the market for a higher price and sell the deal to you/your buyer for the higher price and keep the difference.  This is a fraud against the lender.  Don't be a party to it.  You could go to prison.

Everytime you put a short sale on the market you will get calls and emails from investor-buyers offering to make an offer and negotiate the short sale for you.  They are usually trying to Flop the deal.  If you do one of these deals you may not be guilty of fraud OR your lawyer may get you off after you spend the next 2 years in court.

So what is an approved short sale?

An approved short sale is a deal that has been approved through HAFA http://makinghomeaffordable.gov/hafa.html   The HAFA (Home Affordable Foreclosure Alternative) program is part of the Obama, Making Home Affordable Program.  It is for homeowners with non-gse (not Freddie or Fannie) loans, AND either do not qualify for or have defaulted on a loan modification.  If approved for HAFA a participating lender will state the minimum acceptable proceeds for the sale.  Now the price is approved.

The program is virtually unheard of in reality.  Has anyone ever done a HAFA deal?  I have just initiated my first HAFA application.  I found a seller with a legitamate hardship, who is in default for the second time has a non-gse loan and does not qualify for their loan payment.  The loan servicer has contracted with another service company to process the application.  They say it will take two months we will see what happens.

Why I would not buy a REO

     I always wondered why are bank owned (REO) properties sold with Special Warranty Deeds and what exactly does that mean.  Recently after hearing about all of the alleged mortgage fraud I decided to look in to the question, "why are bank owned (REO) properties sold with Special Warranty Deeds?"  After doing some research I set up a Q&A with a local Title Insurance Attorney.  We did agree to keep his identity anonymous.

PhillyRealEstate411:  What is the difference between a Special Warranty Deed and a Fee Simple Deed?

Atty: Your question is wrong Special Warranty and General Warranty are both types of  fee simple deeds.


PhillyRealEstate411:  OK, am I correct that with a General Warranty Deed the seller guarantees that the title is clear for all time prior to the sale but with a Special Warranty Deed the seller only guarantees that no defects to the title occured while he owned the property?

Atty:  Yes and that is why you buy title insurance.


PhillyRealEstate411: That is good news.  The concern I have is that, with all of the mortgage fraud in the news title insurance doesn't cover fraud.

Atty: Of course title insurance covers fraud unless the buyer committed the fraud.  Didn't you say that you have Real Estate License?


PhillyRealEstate411: Yes, Associate Broker actually.

Atty: Well they must be giving them out like candy these days.  Are we done?


PhillyRealEstate411:   I guess so.  I just want to be sure.  I looked on the internet and read that there are cases today where commercial banks assigned the same mortgage to two different investment securities.  After one mortgage was foreclosed and a new cash buyer was obtained a second loan servicer foreclosed on the same property.  Now mortgage fraud has been alleged.  Are you saying that I am covered by my title policy?

Atty:  Well no.  That isn't a bona fide sale.



PhillyRealEstate411:  So what would happen?

Atty:  A judge would have to decide.  You would have to sue the lender.



PhillyRealEstate411:  But they are just a loan servicer.  They only owned the property from the day of the Sheriffs Sale. 

Atty:   Then sue the Commercial Bank who sold the mortgage twice


PhillyRealEstate411:  But they no longer exist.

Atty:  Well who foreclosed?


PhillyRealEstate411:  The Pooling Service Asset Manager.

Atty:  Then sue them.


PhillyRealEstate411:  But they only manage a Mortgage Backed Securitized Financial Instrument.

Atty:  Well I doubt that would happen.



PhillyRealEstate411:  But mortgage foreclosure fraud is happening everyday.  Could the loans servicers be offering Special Warranty Deeds instead of a regular deed like we use on every other deal because they know the title may not be clear?

Atty:  No, you are not an attorney.  Only attorneys know anything about Real Estate.   Look at the time.  I have a 1:55 Tee Time at the club.  You know what?  You ask too many questions Peronne.


PhillyRealEstate411:  But does my policy cover me?

Atty:  You have leave now!


PhillyRealEstate411:  But, but.

Atty:  Don't let the door hit your...  SLAM!


     So there you have it.  I ask too many questions and I am not buying a foreclosed property.


Robert Peronne
Philadelphia Realty Exchange
1608 Spruce Street
Philadelphia, PA 19103

http://www.phillyshortsale411.com/
robertsells@gmail.com

215-545-6111