Short sale and foreclosure scammers come out of the woodwork when opportunity presents itself, and in today’s market, when as many as one in four homeowners are underwater in some areas, “foreclosure expert” scammers see the tree ripe for picking.

   Understandably homeowners will buy in when a person or “company” says they can make the problem disappear.  That is human nature.  The first red flag is when the “foreclosure consultant” asks for money up front.  If you, or someone you know,  has been victimized by such a “forclosure consultant”, gather as much information as possible and report that to the Better Business Bureau, a local and state Consumer Protection office,  and the Attorney General’s office.

   These “experts” prey on people who have little understanding of the law and are adept at presenting a believable case.  Always ask for credentials and write that information down in case you need it later.  Ask for as much information as possible and if that information is not forthcoming, cease dealing with that person. 

      Many of these people are high powered salespeople, and they may present information to you which you thought was confidential.  Remember, many documents relating to real estate are public information. Any liens, late taxes, the date the home was purchased,  quit claim deeds and other documents are in the public domain. 

    If the homeowner is going to pay up front money up, he/she is better off hiring a competent attorney for up to the minute legal advice.  Many attorneys will not charge an “upfront” fee, but will bill when the problem is resolved.  An attorney on board, can advise whether filing for bankruptcy is prudent, and can direct the homeowner and often postpone have any foreclosure action postponed.  

    Several states have laws on the books, or are passing laws, banning upfront fees.  Consumer fraud divisions are rift with complaints and are burdened by cumbersome consumer fraud laws when apprehending and bringing these people to justice.

    A CDPE (Certified Distressed Property Expert) or a Realtor with the National Association of Realtors Short Sale, Foreclosure Resource (SFR) designation will not ask for up front money.  They will present their credentials and lay out a plan.  These are people licensed by the state, and in many instances, fingerprinted, and they do not get paid unless the transaction is consumated.  It is easy to check with the State Department of Real Estate to make sure the person is licensed which can often be done on line.

    The HUD.gov site has information about non profit organizations which are approved by HUD to give information about loan modificaitons, short sales, and foreclosures. 

    Know with whom you are dealing.  That is your best defense against fraud.

Resources:

Department of Housing and Urban Development - housing counselorshud.gov/portal/page/portal/HUD/i_want_to/talk_to_a_housing_counselor

Certified Distressed Property Expert:  http://www.cdpe.com/find-cdpe-results.html

National Association Realtors:   http://www.realtor.org/home_buyers_and_sellers/

Arizona Foreclosure Workbook from the Arizona Attorney General’s Office:

http://www.azag.gov/consumer/foreclosure/documents/StateTaskForceWorkbook.pdf

    Short sales?  Many people mistakenly believe they must be delinquent on the mortgage payment prior to doing a short sale.  However, a short sale can be initiated by the homeowner if a hardship exists. 

     If hours or salary is cut, a medical expense, an extraordinary expenditure, a death, an incarceration, a job loss,  any number of life’s problems—these situations should spur the homeowner to request that the lender agree to a short sale if the homeowner believes there will be a problem making the mortgage payment(s).

   The fact that the property is no longer worth what it was when originally bought is not grounds for a  short sale. 

    Being proactive is the key to a successful short sale.  The credit rating will suffer, but not as much as with a foreclosure.  Contacting the lender(s) immediately to inform the lender(s) of the situation is paramount. 

    Working with a Realtor who understands short sales and foreclosures such as a CDPE (Certified Distressed Property Expert) or an SFR, the new National Association of Realtors designation for Short Sale and Foreclosure Resource, can help the homeowner immensely.  The Realtor should first try and do a loan modification for which there is generally no compensation.  Only after knowing this is not possible should the Realtor embark upon a short sale.

    Under no circumstances should a homeowner pay someone for a loan modification or sign up for a “rescue program”.  Scams abound, and many are illegal.  Often a homeowner is worse off, having spent precious funds on a bogus solution.

    Realtors trained in short sales know how to document and talk with lender negotiators, and in many instances, cut through the red tape by preparation and understanding of lender systems.   

     The lender(s) does not want to take back the property;  Lenders are not in the business of owning property and a successful short sale is beneficial to all parties involved.  Pricing properties accurately for a short sale is paramount.  The lender is looking for a fair market value, not a deal and a half for a buyer. 

     Sellers must be prepared to document their hardship, provide pay stubs, income tax returns, copies of savings and retirement accounts, as well as details of assets and liabilities.

    Tomorrow:  Options other than Short Sale

    Terry Bishop, a Realtor with RE/MAX Excalibur in Tucson, Arizona has earned her CDPE and her SFRas well as other designations.  She can be contacted at terry@terrybishop.com for further information.

   Purchasing real esate is one of the prirmary reasons the consumer should make sure the credit score does not contain errors.   A difference of 1 % between a 5.5% loan and a 6.5% loan is $128.56 a month.  At 5.5%, payments principal and interest are $1135.57 and and 6.5%, $1264.13 a month,   Over a 30 year loan, this totals $46,283…that is a lot of money!

    When information on a credit report is inaccurate, it should be corrected by the consumer as soon as possible.  The consumer can correct and request deletion of information. The Federal Trade Commission has a web page devoted to credit report including a brief online video.   According to the FTC, check the credit report annually

Resources:

The Federal Trade Commisison:    http://www.ftc.gov/freereports

Patrick Ritchie  http://www.TheCreditRoadMap.com

About credit cards and divorce:    http://www.creditcards.com/credit-card-news/dividing-credit-card-debt-divorce-1282.php

Equifax Credit Information Services, Inc.    http://www.equifax.com

P O Box 740256      Atlanta, GA   30374 -0241     (800) 685-1111

Trans Union Corporation    http://www.tuc.com

P O Box 2000  Chester, PA  19022    (800) 916-8800

Experian   Http://www.experian.com

P O Box 2104   Allen, TX  75013   (888) 397-3742

    One of the provisions of the Housing and Economic Recovery Act of 2008 is to provide funding for programs approved by the Department of Housing and Urban Development (HUD) to increase the financial knowledge and decision making capabilities of prospective homebuyers.

   The programs will be designed to help people learn to establish monthly budgets, build personal savings for major purchases, reduce debt, implement financial stability and teach people to set and reach financial goals. 

   Additionally these programs will be designed to help people understand their credit scores and the relationship between credit history and credit scores.  Building savings for long term and/or short term goals is also an objective.

   Grants will be distributed for approved programs.  Documented behavioral changes in savings and spending patterns must be evident.  Additionally, five pilot programs will be authorized and tracked for effectiveness.

   The legislation also provides for some people working within HUD to transfer to the Federal Housing Finance Agency without loss of pay, status or tenure.  All benefits are to be equivalent between the two agencies.

    The Director will establish the amount of critical capital necessary for the Home Loan Banks.  Capital requirements will be established by the Director for adequately capitalized banks, undercapitalized banks, significantly undercapitalized banks and critically undercapitalized banks.  The capital reserves of the banks will be monitored and remedies established for those banks failing to meet the requirements.  Supervisory actions are spelled out including conservatorship and ultimately receivership for critically undercapitalized banks.

    Provisions for claims, disposition of assets, notification of potential claimants, and the legal procedures to be followed are delineated in the legislation. 

     Title II concerns the Federal Home Loan Banks whose job is to provide liquidity to member banks, encourage affordable housing and community development, and provide a capital structure.  Semi annual reporting to Congress by the Director regarding these objectives is mandated.

     The legislation abolishes the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development and tranfers many of these objectives to the Federal Housing Fianance Agency.   As with other areas of HUD where employees will be transferred, status, pay, and benefits will not be impacted.

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221eas2.pdf

Next- HOPE for Homeowners, S.A.F.E. Mortgage Licensing Act, and Foreclosure Prevention

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