Borrowers can avoid this exit with a short sale!

The short sale has and will always be, a much better alternative for the banks. In many cases, when modification isn’t an option, a short sale is better for the existing homeowners  as well.

It’s good for the banks because it’s the fastest way to bring down their massive backlog of foreclosures.

Now that more and more foreclosures are lingering in the courts, banks now realize its the simplest way to get these homes back on the market, sometimes in just a few months.

They may not get back the full value of the home but their losses are about 15 percent less than if the home was foreclosed on, according to Bloomberg News.

It’s good for the borrower because they can walk away, legally, with little or no debt at all. Some banks are even offering cash incentives, as much as $35,000 in some cases, to entice homeowners to sell back their homes.

It’s win-win! In fact, it’s better than that. It’s win-win-win! The stress, the headaches, the months and years of inaction, can be put to bed with a short sale.

A short sale, in short, is quite simple. A distressed homeowner can sell the bank their home for less than what they originally owe. Banks will often agree to not go after a deficiency judgement if borrowers agree to a short sale.

JP Morgan, who approves about 5,000 short sales a month,  is giving the largest incentives, but more and more lenders are now agreeing to them.

There’s a ripple effect here that’s good for everyone. The seller gets to leave foreclosure hell once and for all, and can get money to help them transition into a rental and start fresh.

A new family gets to buy the home at a nice discount, and the neighbors don’t have to live next to an abandoned home or deal with having a non-caring faceless entity, namely the banks as their neighbor.

The lawn guy, the bug guy get back to work, and the new owners buy new furniture, new drapes, and suddenly the economy is bouncing back!

Banks might have thought foreclosing was the right idea. It wasn’t then, it isn’t now, and it will never be.

In our last blog we talked about the stories that resonated with Roy Oppenheim in 2011, but what stories mattered to you?

We reviewed the most popular stories on the South Florida Law Blog this year and came up with our list of the top 10 posts for 2011

# 10 — Florida Deficiency Judgments FAQs . . . By Popular Demand

Some of Oppenheim Law’s most popular videos and blog posts this year were on the topic of deficiency judgements. Understanding deficiencies and the Florida rules which pertain to them are key to avoid getting a deficiency judgment.

The unpaid mortgage debt associated with a residence is a deficiency.  A bank can foreclose and force a judicial sale of a home if the mortgage borrower fails to pay the associated mortgage debt.  The deficiency is the difference between the proceeds from the sale and the remaining mortgage loan balance. A deficiency can also result from a short sale, which is an alternative to foreclosure.

The rules pertaining to deficiencies differ from state to state. In Florida, if the bank is successful in obtaining a deficiency judgment, it will be recorded in the public records and collectable for up to twenty years. To avoid the possibility of getting a deficiency judgment, before deciding to walk away from your home, hiring a good foreclosure defense attorney is necessary.

#9 — #Fail – Government Plan to Help #Florida Homeowners

At first glance, it looked  like Florida foreclosure victims were finally getting the help they need from the feds. Reading the fine print it looks like if we had to describe this in one tweet word: #fail.

The two agencies that are in charge of overseeing the Independent Foreclosure Review went  have gone out of their way to keep the details of this program secret.  The most alarming issue is the possible conflict of interest between the consulting firms that were chosen by bank regulators to administer the foreclosure reviews. The fact is these consulting firms are actually getting paid by the banks.

The same banks that ultimately led the economy into the mortgage crisis were placed in control of deciding which homeowners are entitled to compensation for the banks own wrongdoings.  It is doubtful homeowners will receive any meaningful relief from this program.

#8 — Law Review Executive Summary: Black Magic of Securitized Trusts

Deconstructing the Black Magic of Securitized Trusts by Roy D. Oppenheim and Jacquelyn K. Trask-Rahn gives an in-depth analysis of the process of securitizing mortgages and how it has gone awry. The article begins with a focus on the rise of subprime lending, the impact that subprime loans, such as “interest-only” and “negative amortization,” had on the American Dream of home ownership, and how “securitizing” these loans led to a false sense of security for homeowners and investors during the housing bubble.

During the spike in foreclosure filings that followed the implosion of the market, in an effort to prove proper standing to bring the action, banks began producing tens of thousands of assignments predating the filing of the foreclosure action. This mass production of assignments proved that trustees had not properly transferred the mortgages from inception thus the banks laced standing to foreclose.

#7 — Banks Desperately Seeking Short Sales

Oppenheim Law has represented hundreds of homeowners’ short sales over the past few years and as a result has seen millions of dollars of homeowner deficiencies waived by the banks, who are becoming more eager to avoid foreclosure and complete short sales.

On New Year’s Eve we’ll post our top 5 stories for 2011 — Happy Holidays!

Second mortgages refer to any loan taken out on a property that is subordinate to the first mortgage, and include home-equity loans or lines of credit.

According to data from CoreLogic and The New York Times, homeowners with a second mortgage are two times more likely to be underwater on their property.  CoreLogic’s data also shows that homeowners with second mortgages are facing deeper levels of negative equity in their homes – $83,000 compared with $52,000 – than borrowers without second mortgages.

The bright side is that Oppenheim Law is seeing massive principal reduction on second mortgages through loan modifications, according to Oppenheim.  It’s becoming common for the Florida foreclosure defense law firm to negotiate up to 80% in principal reductions of second mortgages, a far greater percentage than first mortgages.

A vast majority of first mortgages were cut up, bundled and sold to investors as mortgage backed securities, the process that played such an enormous role in the Florida real estate crisis. On the other hand, nearly three-quarters of second mortgages are still held by the banks that made the original loans.

The good news for Florida homeowners is that these banks are beginning to treat second mortgages similarly to consumer credit card debt, accepting minimal “pay offs” to settle up with homeowners.

Homeowners who are willing to negotiate a “short payoff” can have tremendous success reducing their second mortgage principal by 50% to 80% and then paying off the remaining balance in cash.  Banks are even starting to solicit Florida homeowners with second mortgages to make initial offers for 40% to 50% reductions, which Oppenheim Law is then able to negotiate to as much as 80%.

Ironically, the first key to success in dealing with a Florida loan modification on a second mortgage is to stop making your monthly payments.

The bottom line is that while a second mortgage is a strong indicator of negative housing equity and can complicate the process of completing a Florida loan modification or short sale, Oppenheim Law is having continued success negotiating principal reduction of second mortgages for South Florida homeowners.

For more information on second mortgages and Florida loan modifications visit oppenheimlaw.com.

The Wall Street Journal is reporting a sluggish start to selling season, typically kicked off by Super Bowl Sunday.  Given the volatile international headlines this week, this news hardly comes as a surprise. From revolutionary tremors spreading throughout the Middle East to the actual tremors of Christchurch, New Zealand’s 6.3-magnitude earthquake, the global outlook seems bleak at best.

Here on the home front, rising gas prices fuel unemployment as every 2.5 cent increase in gas prices translate into 25,000 more Americans out of work. To make matters worse, the housing crash may have been even worse than initial estimates have shown.

Economists are discounting the possibility that recent buying momentum will propel GDP growth to the necessary 5-plus percent necessary to sustain job growth. Latest figures are predicting unemployment to stubbornly remain above 9% nationwide until well into 2012 as well as a continued surplus in housing inventory.

Are we seeing the beginning of a double dip recession? Join Oppenheim Law and Weston Title on March 9 to discuss the latest headlines and economic predictions as we navigate month three of the year of the short sale.

Live from Ustream, it’s Roy Oppenheim with an instant replay available for the next 48 hours!

On a night when Oppenheim Law broadcast its monthly Foreclosure Defense Workshop to over 100 viewers on UStream, the primary message from real estate attorney and legal blogger Roy Oppenheim was one of opportunity and hope.

As we continue to roll through 2010, dubbed “The Year of the Short Sale” by Oppenheim, it is important to remember homeowners always have rights, no matter your financial situation, and options always exist for defending yourself and your home.

April’s workshop was full of advice on executing short sales, avoiding deficiency judgments, defending foreclosure and protecting your assets and rights. We’ve put together a summary of Oppenheim’s main messages, and look forward to seeing you at the next workshop scheduled for May 5 whether in person or online!

• Sluggish Mortgage Servicers – The government’s Making Home Affordable program is not going to solve this real estate and financial crisis. Banks are too slow and too reluctant to provide homeowners adequate relief.

• Short Sale Savings – Short Sales have emerged as an effective way to avoid foreclosure and save homeowners’ credit, and the government’s new short sale incentives will increase this effectiveness.
  • Oppenheim Law has already executed four short sales for clients THIS WEEK, by the time of the workshop Wednesday night, while successfully defending costly deficiency judgments.

• Cash vs. Pennies – Banks are encouraged to approve short sales and receive immediate cash relief as opposed to modifying loans and earning pennies on the dollar of their initial investments.
  • Case in Point – Oppenheim highlighted a letter from Selene Finance offering to pay homeowners $20,000 for moving expenses if they can execute a short sale.

• Know the facts. Deficiency judgments can stay on your record for up to 20 years: Banks may garnish wages and even collect against heirs.

• Oppenheim Law has negotiated reductions in deficiency judgments by as much as 80-85%.

We look forward to hearing your comments on April’s workshop and hope to see you all on May 5 for our next event. Until then, you can check out a replay of the workshop on Oppenheim Law’s UStream Channel. The video will be available through Friday, April 9 at 5 PM EST.

Join Oppenheim Law for the next Free Legal Real Estate Workshop on April 7, as real estate attorney and legal blogger Roy Oppenheim explains the potential government incentives for homeowners to rid their delinquent mortgages through a short sale.

Unable to make it to Weston? Oppenheim Law will broadcast its monthly workshop online through the Oppenheim Law UStream Channel. Participants are invited to ask questions and comment on the presentation through Oppenheim Law’s Twitter account @OPLaw.

What: Short Sales, Deficiency Judgments + More: Free Real Estate Workshop

When: Wednesday, April 7, 2010 – 6:00 to 7:00 PM

Who: Homeowners facing foreclosure, buyers and sellers

Online: The Oppenheim Law UStream Channel

Live: 2500 Weston Road, Suite 404, Weston, FL 33331

Cost: Free with advanced registration

RSVP: To register email roy@oplaw.net or call 954.384.6114

Oppenheim Law looks forward to seeing you on April 7 whether in person or online!

Oppenheim sat down with Asset Protection Attorney Douglass Lodmell for a second time to discuss the specific benefits legal representation can present for homeowners facing foreclosure, attempting a short sale or considering strategic default. We’ve attached the full video at the end of this post.

Oppenheim Law is continuing to defend South Florida homeowners’ deficiency judgments whether the result of foreclosure or improper liquidation and negotiation after a short sale.

“Banks are always going to go after the lowest hanging fruit,” Oppenheim said. “Legal representation and asset protection can make you an unattractive target for the banks and translate into debt settlements for pennies on the dollar.”

Check out the video below to hear Part 2 of Roy Oppenheim’s interview with Asset Protection Attorney Douglass Lodmell and feel free to leave any questions in the comments section of the blog.

There are two caveats to this waiver that you must be aware of.  The first caveat is that the waiver is limited to forward mortgages, so it does not apply to Home Equity Conversion Mortgages.  The second caveat is when the sales price of the property is 20% or more over and above the seller’s acquisition costs, the waiver will only apply if the new buyer’s lender:

(1)     Justifies the increase in value by retaining in the loan file supporting documents and/or a second appraisal verifying that the seller has completed sufficient legitimate renovations, repair and rehabilitation work on the subject property to substantiate the increase, or the appraiser provides appropriate explanation of the increase in property value since the prior transfer of title; AND

(2)     Orders a property inspection and provides the inspection report to the purchaser before closing.

A.     The lender may charge the borrowers for this inspectio

B.     The inspector:

• Does not have to be an FHA-approved or a 203(k) consultant
• Must have no interest in the property or relationship with the seller
• Must not receive compensation from any other party other than the lender
• May not compensate anyone for the referral of the inspection
• May not receive any compensation for referring or recommending contractors to perform any repairs recommended by the inspection.

C.     At a minimum the inspection must include:

• The property structure, including the foundation, floor, ceiling, walls and roof;
• The exterior, including siding, doors, windows , appurtenant structures such as decks and balconies, walkways and driveways;
• The roofing, plumbing, electrical, heating and air conditioning systems;
• All interior; and
• All insulation and ventilation systems

So to all of you real estate investors… go ahead and buy these lemons and make a profit by selling lemonade.

“Why go through the hassle of a short sale?”

The thought process might be technically correct, but only in a state described as a “non-recourse state.” Florida is not one of those states and is in fact a RECOURSE state. This means the banks can and will likely come after you for the difference between the principal value of your Florida mortgage and the value of your home at the time of the Florida foreclosure sale.

In non-recourse states, like California, people can walk or stay, and either way the banks cannot come after you. In Florida, New York and other recourse states the banks can come after you for as long as 20 years. The banks have the right to try and garnish your wages and bank accounts and even depose you under oath. In fact they can and will likely come after you even if you are long dead. You can read my Op-Ed piece in the Sun-Sentinel for a more detailed description of the difference between recourse and non-recourse states.

However, if you get out by orchestrating a South Florida short sale, you’ll likely be released from the amount the bank does not recover at closing. In fact the reason it is called a “Short Sale” is because the bank is coming up short at closing.  Now the Bank has a few options. They can take the hit as they do frequently, and as they may well be required to do according to new rules coming out of the Obama Administration, or they can negotiate some payment plan with you. Sometimes the terms are good, and other times they are truly oppressive. However, remember whatever you negotiate is not written in stone or blood and is unsecured.

Thus, the Bank will likely sell the Note (here we go again) to a hedge fund, or collection agency for pennies on the dollar. So you once again will have an opportunity to renegotiate the terms. And even if you don’t make any payments at all, are the banks really going to spend thousands of dollars to find you, serve you and hire attorneys to sue? Maybe… but my bet is they will first go after the low hanging fruit: the poor folks who never read the Oppenheim Law blogs and now have deficiency judgments entered against them.

So, to recap, The Oppenheim Law bottom line:

Explore a short sale first before throwing in the Florida foreclosure towel.