LEGAL PITFALLS OF SHORT SALES AND FORECLOSURES
DATE: Wednesday, March 9, 2011, 10:30 am to 12:00pm
LOCATION: SAMCAR, 851 Woodside Way, San Mateo, CA 94403
SPEAKER: HOWARD L. HIBBARD, REAL ESTATE ATTORNEY FOR THE LAW OFFICE OF HOWARD L. HIBBARD
Howard Hibbard’s professional expertise in real estate law has earned him a reputation as a successful litigator, including matters involving REALTORS about issues surrounding short sales and foreclosures in San Mateo County. Get the scoop on how to avoid litigation when you are involved in short sale and foreclosure transactions. This is also a great opportunity to ask about other issues you may be currently dealing with, as well.
SYLLABUS: Legal Pitfalls Involving Short sales and Foreclosures
1. IMPORTANT SOURCES OF INFORMATION AND DEFINITIONS
• U.S. Government website: www.MakingHomeAffordable.gov. This website offers eligibility information, forms, instructions, and helpful articles related to all government programs including HAMP, HARP, HAFA, and 2MP.
• Home Affordable Modification Program (HAMP), The Federal Loan Modification Program for loans with Freddie Mac and Fannie Mae and other lenders who have agreed to the program. Currently, loans do not need to be delinquent to be eligible for modification. Homes must be owner-occupied, 1-4 units. The unpaid principal balance must be equal to or less than $729,750 (one-unit) and originate prior to January 1, 2009 and the payments must exceed 31% of the borrower’s gross monthly income to be eligible. Further there must be “imminent risk” of default or in default. Evidence of financial hardship or change in income is required.
• Home Affordable Refinance Program (HARP). The Federal Loan Refinance Program for Freddie Mac or Fannie Mae loans only. Homes must be owner-occupied, 1-4 units, the LTV (loan to value) ratio is above 80% but not more that 125% and payments must be current. The borrower must show income to support the new payments.
• Home Affordable Foreclosure Alternatives (HAFA). Federally backed alternatives to foreclosure.
• Deed In Lieu of Foreclosure. The borrower voluntarily transfers title to the servicer provided that the title is free and clear of encumbrances. HAFA program begins on April 5, 2010 and provides homeowners with up to $3,000.00 for moving expenses.
• Short Sale. The homeowner agrees to list and sell the property for less than the total amount due on the mortgages.
• Second Lien Modification Program (2MP). Federal program to allow homeowners to lower payments on the second mortgage but homeowners’ first mortgage must be modified with HAMP to be eligible.
• Participating servicers include: Bank of America (including Countrywide), Citi Mortgage, Inc., Chase (including WaMu and EMC), Wells Fargo (including Wachovia).
• Mortgage Forgiveness and Debt Relief Act. This 2007 act generally allows taxpayers to exclude income from the discharge of debt on their principal residence for FEDERAL TAX only!
• Agreement to Consult with Legal Counsel and Accountant regarding short sale consequences (FORM)
2. OWNER-OCCUPIED PROPERTY
• Purchase Money v. Non-Purchase Money Loans
• HAMP: YES!
• HARP: YES!
• HAFA: YES!
- Deed In Lieu of Foreclosure
– Short Sale
• Tax Consequences
– NO Federal income tax
– NO State income tax (California Senate Bill 401 as of 4/12/10!!)
– Lien Strip
3. NON-OWNER OCCUPIED PROPERTY
• HAMP: NO!
• HARP: NO!
• HAFA: NO!
– Deed In Lieu of Foreclosure
– Short Sale
• Tax Consequences
– Federal income tax: YES
– State income tax: YES