DISCOVERY LIVE - Paul Mahan

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CLICK HERE TO FOLLOW ALONG WITH POWERPOINT © 2009 Paul Mahan & Associates

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Get the Factson ForeclosureYour rights and alternatives in today’s market. Presented by Paul MahanCertified Mortgage Planning Specialist

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Avoid Foreclosure by Re-Finance (pay-off) Forbearance Loan Modification Reinstatement Bankruptcy Sale / Short Sale Once foreclosure is initiated only MONEY will prevent its completion. © 2009 Paul Mahan & Associates

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Your OptionsWhich one is best for me? When mortgage payments cannot be made RE-FINANCE is first consideration. Once payments have been missed homeowner should attempt to negotiate FORBEARANCE or LOAN MODIFICATION. After foreclosure initiated homeowner may seek REINSTATEMENT - pay arrearage in lump sum thru sale of assets, insurance policy/retirement fund loan, loan/gift from relative. EQUITY SALE - Find buyer, pay lender, pocket difference. SHORT SALE - More debt than value - Lender takes discounted pay-off, homeowner gets nothing. BANKRUPTCY - last resort - eliminate all other debt so mortgage payments can be made and home saved. © 2009 Paul Mahan & Associates

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Foreclosure Time Line 3 to 4 months - Pre-Foreclosure 3 to 4 months - Post Foreclosure 6 to 8 months to complete the foreclosure process. In today’s market, the process can take up to 24 months! People wait too long to seek help. Be pro-active! Foreclosures have a long timeline.

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The Foreclosure Process Service of Summon - 20 days to respond Default entered unless an answer is filed and homeowner denies delinquency Summary Judgment Motion filed - hearing within 30 days Proof: Affidavit of Indebtedness/Affidavit of Fees and Costs Unless refuted Summary Judgment entered Sheriff’s sale scheduled 30 days later © 2009 Paul Mahan & Associates

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Straight ShootingaboutShort Sales © 2009 Paul Mahan & Associates

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What is a Short Sale? A Short Sale occurs when there is not enough equity (i.e. Short) to sell the property (i.e. Sale) and satisfy the whole balance of the mortgage. The lender then discounts the mortgage payoff rather than foreclosing. © 2009 Paul Mahan & Associates

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Why do Lenders Short Sale? Lenders are overloaded with foreclosures in the current market. The objective of a Short Sale is to convince the lender to take a loss now instead of later. © 2009 Paul Mahan & Associates

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Who is involved in a Successful Short Sale? The Realtor’s Job is to: List the property Sell the property Keep up with the Market Conditions The biggest challenge is to find a buyer and negotiate a realistic Short Sale Purchase Agreement. © 2009 Paul Mahan & Associates

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Who is involved in aSuccessful Short Sale?(continued) The Attorney’s Job is to Negotiate the Short Sale One thing to consider is that a disinterested third party (i.e. an Attorney) has a much better chance of dealing with the lender than the Realtor alone. The Attorney works on behalf of the seller to settle the mortgage debt and protect the seller’s interests so the Realtor can concentrate on selling the property and finding qualified buyers.

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The Attorney Assembles the Short Sale Package A Short Sale Package consists of: Authorization to Release Financial Statement Hardship Letter Income Verification Asset Verification Tax Returns Preliminary HUD - 1 Purchase Contract © 2009 Paul Mahan & Associates

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The Short Sale Process The Short Sale Process requires the following steps: Submit Authorization to Release Information to the lender Submit complete Short Sale package Lender reviews the package Lender orders Broker’s Price Opinion (BPO) The Lender’s Loss Mitigator reviews the numbers Negotiations begin between the Lender and the Attorney CAVEAT: Short Sales can require 3 to 6 months for an experienced Short Sale Specialist to negotiate!

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Short Sale vs. ForeclosureWhich one is better for me? Foreclosure: Credit Score may drop 300 points or more Seller can finance again in 3-7 years Short Sale: Credit Score may drop 80 to 100 points Seller can finance again in only 2-3 years © 2009 Paul Mahan & Associates

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Repercussions of aShort Sale Credit will be minimally affected; Less effect negatively than a foreclosure. Lender may require a promissory note. By using an attorney, this can be negotiated to a very positive outcome. IRS requires lender to submit Form 1099. Check with a CPA for forgiveness options. © 2009 Paul Mahan & Associates

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Contact Information Email comments and questions to webinar@discoverychurch.org