Foreclosures & Short Sales | Homes for sale in Blue Bell, Ambler, Lower Gwynedd

Foreclosure: The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.*

REO (Real Estate Owned): Industry jargon for a foreclosure property that has been repossessed by a bank or lender. If a lender or bank is the highest bidder at a foreclosure auction, or if no third party bids at the auction, the property reverts back to the lender and becomes an REO. REOs are owned by banks.**

Short Sale: A transaction where title transfers; where the sale price is insufficient to pay the total of all liens and costs of sale; and where the seller does not bring sufficient liquid assets to the closing to cure all deficiencies.***

I'm often asked about foreclosure* opportunities and my response is that I see very few of these "opportunities" in our area. Furthermore, foreclosures often involve a great deal of patience as it takes 9 months and longer for a home to foreclose in PA. The houses are often left in poor condition by angry owners and the sheriff's sales can require cash to purchase. Homes often cannot be inspected, are sold "as is", homeowners may not voluntarily leave and sherrif's sale homes are subject to liens and second mortgages that buyers are not aware of without running a thorough title report. Very few houses at a sheriff's sale are actually sold at the sheriff sale; the lender retains the property. Bottom line-they are risky business!

REO's** may be better opportunities for a buyer. A potential buyer can inspect the property and the house will be conveyed with clear title. See below for some REO properties for sale.

A short sale ***is a home that is being sold in which the proceeds from the sale of the home will not cover the money owed on the property and potentially the sales commission and other fees. Often, this is a home that has been overfinanced above its current market value. The seller must prove a financial hardship to the lender. These also involve a great deal of patience to negotiate, typically around 3+ months with the lenders. Approximately 75% of short sale offers are not accepted, so don't think that the lender will just give it away. Short sales are a potentially good way for a seller to avoid foreclosure and bankruptcy and may have much less effect on his credit then a foreclosure. See below for some potential or known short sale properties in the area.

Home Affordable Foreclosure Alternatives Program (HAFA)

On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA. A list of servicers participating in HAMP is available at MakingHomeAffordable.gov.

HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks.

HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure. HAFA:

Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.

Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).

Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

Uses standard processes, documents, and timeframes/deadlines.

Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on December 31, 2012.

AVOID FORECLOSURE-NEW GOVERNMENT PROGRAMS

https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html/

Government Issues New Short Sale Guidelines
The U.S. Treasury Department announced a new program

that will provide financial incentives to mortgage servicers and borrowers who use a short sale or a deed-in-lieu to avoid foreclosure on a loan facilitated through the Home Affordable Modification Program (HAMP). The new Home Affordable Foreclosure Alternatives Program aims to simplify and streamline the use of short sale and deed-in-lieu options so they are more viable alternatives for borrowers.

The program:

• Uses a borrower’s financial and hardship information collected in conjunction with HAMP to determine eligibility.
• Allows borrowers to receive pre-approved short sale terms prior to the property listing.
• Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction of the real estate commission agreed upon in the listing agreement.
• Requires that borrowers be fully released from any future liability for the debt.
• Provides financial incentives to borrowers, servicers and investors.

The guidelines become effective April 5, 2010.

If you are a seller in a potential short sale situation, please contact me for more information and your options at ListWithElise@aol.com. A loan must be 60 days in arrears before you are in arrears, at which time the lender can file an Act 6/Act 91 notice-intent or notice to foreclose. Homeowners can consider credit counseling through PHFA (Pennsylvania Housing Finance Agency) which adminsters the Homeowner’s Emergency Mortgage Assistance Program. Visit:
http://www.phfa.org/consumers/homeowners/hemap.aspx

http://www.phfa.org/lenders/counselingagencies/counselingagencies.aspx

Please note recent Federal housing bills may help you:

1)The Mortgage Debt Forgiveness Tax Act. Until 2007, a homeowner who liquidated her home through a short sale was charged income tax on the forgiven debt. This law temporarily eliminates the income tax obligation on short sale-related mortgage debt that was forgiven by a mortgage lender, making it less burdensome for a seller to get rid of her home through a short sale. For a homeowner who owes more than her home is worth and needs to try to sell it short, this law makes it worth your while to try to avoid foreclosure through a short sale, without fearing any tax penalty. Note -- this act is also temporary, providing an exemption from the income tax on mortgage debt that is forgiven only through the end of 2009. (has been extended through 2010)

2). The Housing and Economic Recovery Act of 2008. Passed in early August, this housing bill promises to impact the real estate market in several different ways. First, it will allow about 400,000 homeowners who owe more than their homes are currently worth to refinance into federally backed loans, and provides incentive for these homeowners' current mortgage lenders to simply erase the loan balance down to 90 percent of the current value of the home. In exchange, those who refinance under this law will agree to give the feds some portion of the future appreciation of their homes.