Eliminating Your Second Lien -- Do Some Checking First

Under a new program by offered by Bank of America for home mortgage second liens, about 150,000 of its borrowers are being contacted to apply for full forgiveness.  Based on the total dollar amount forgiven so far for the number of borrowers, the average is about $69,000. 

If you're currently in a short sale, this could potentially cause a delay, or worse, if you're already on track for closing on the first and time is running as you approach your closing date.  The release time required for completion of the second loan is running about 90 days, so accepting that release will result in a delay of your short sale, or even worse, a loss of that transaction if the investor/servicer on the first will no extend time to close.

Make sure you're really going to get freedom from a difficult mortgage burden.  Say you're not in a short sale, and you receive the offer from Bank of America or one of the other major banks, make sure you get a proper estimate of your home's value from a professional.   If your first loan balance is about $465,000, and your second balance is still around $45,000-$50,000 because you got an 80/10/10 loan (you had 10% down payment, and got a 10% second mortgage) getting your second loan released won't do you any good right now because it will not put you into an equity position--I forgot to mention, you just found out that at best your house is currently worth $450,000 from your neighborhood REALTOR who has checked all the sales within the last 4-6 months in your neighborhood.  If releasing that lien puts you into an equity position, and you're not under a short sale timeline that cannot be extended, then the second lien forgiveness program could be for you.  But make sure you read the entire letter, because if your first is currently in default and on a foreclosure track, getting the second forgiven will not prevent the first's foreclosure. That will still require separate action to stop the foreclosure (there can be different banks and/or different investors on each loan).  Bank of America also makes is very clear that they are choosing who gets invited to this event, you as the borrower cannot pursue it without being invited. (It's not personal, it's just that there are many conditions affecting second mortgage liens.) The fact is, Bank of America took over Countrywide's loans, and Countrywide did a lot of "piggyback" loans, which are probably some of the seconds that are part of this offer. 

It's also wise to review beforehand any possible impact to your credit score (debt cancellation may actually impact your score), reporting to the IRS, and any bankruptcy issues you may have.

If you need an estimate of value on your Long Beach, Cerritos, Lakewood, Seal Beach home, or somewhere near these cities, please contact me.  If you would like more information about a short sale and you're in Long Beach, Cerritos, Lakewood, or in Los Angeles County or Orange County, please contact me.

Julia Huntsman.REALTOR®, CDPE, e-PRO®, SFR, Broker

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Bank of America's Short Sales Programs are Expanding and Improving

Bank of America attended a webinar today with Bob Hora and the CDPE Distressed Property Institute revealing all about new processes in place: The Bank of America will be sending out a package, The Home Transition Guide, to the homeowner explaining owner's options, including a short sale.

2010--90,000 short sales completed by the Bank.
2011--over 100,000 short sales so far.

Their goal is to have a leaner short sale process in the future where the entire process is shorter by several weeks.
More people are hired to do short sales at the Bank, today there are over 3,000 staff members, including those at their call centers. A single point of contact at the Short Sale Department throughout the short sale will be established after the homeowner's initial contact with the Bank of America. Homeowners who go into customer assistance
SLAs (service level agreements) will agree to responses with certain periods of time, and Bank has established a Closing Center in Arizona to handle short sale closings.

The bank has over 500 investors and many MI (mortgage insurance) companies to work with, and get approval from.  Depending on their relationship with these investors, the timeline may be faster or shorter, and it's important that the homeowner understand these relationship.  The short sale specialist can explain who is delegated investor or non-delegated.

If a borrower is having a hard time getting a loan modification, they should turn to an Realtor quickly:  A short sale file needs to be opened with an accepted offer from a buyer at the bank at least 45 days prior to the foreclosure sale date. So if you the borrower has a Notice of Default on your property now, your time is even more limited to market and find a buyer in time.

The Bank also is reviewing every transaction for arms length transactions--the short sale market place is not the venue for questionable "flips" or "deals" during the short sale process, and the Bank ( as well as other legal entities) are on the lookout for practices that do not conform to regular procedures.

The Bank prefers a short sale over a deed-in-lieu, and the bank doesn't consider the DIL the best transaction for the Bank or the investor.
For assistance with a home valuation if you're considering a short sale transaction, either call me or contact me through my website, where I have much information at "Help for Homeowners" at http://www.juliahuntsman.com/.