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In years past, it was pretty rare to have a short sale or foreclosure on your record. Because of that, mortgage lenders weren’t in a big hurry to lend to people that had one of those. They would often make someone wait 5-7 years until they would approve them for a mortgage loan again. This worked out OK for the lenders back then because they could still make all the loans they wanted.


Fast forward to when the mortgage meltdown happened and a huge swath of Americans experienced a distressed sale of their home. The market appears to be in a recovery now, and lenders are now much more willing to lend money than they were just a few years ago. But they are finding that many of their potential customers don’t qualify because they are still within the 5-7 year waiting period.


I’ve been expecting lenders to start to shorten their waiting periods. A few of them did a year or so again, and now more of them are following suit. There was a recent announcement that one of the major lenders that used to have one of the longest waiting periods is now shortening from 7 years down to 4 years. And there are many other lenders that have dropped their waiting periods to 2 years. I also know of one aggressive lender that has NO waiting period after a foreclosure or short sale. However, that lender only offers adjustable-rate loans for that situation. Most people really want to lock in a fixed rate loan right now. But still it’s nice to know that if you had a distressed sale in the last 5 years, you now have a lot more options to buy a home again sooner than in the recent past.


So there are a LOT of people who went through a foreclosure, short sale or other negative event the last few years. They are watching prices go up and are wondering when they can get back in and buy a home again. Unfortunately, there is no one simple answer. I’ll try to describe some of the basic waiting periods below, but there are a LOT of variables, so contact me or your favorite lender to research your situation. Also keep in mind that different lenders may have different rules. I know of one lender where you can get a loan RIGHT after many of these events, but rates and fees are higher than normal, and it’s an adjustable rate loan, not fixed. Below I’ll look at the two main types of loans, conventional (20% down) and FHA (3.5% down).

Ch 7 bankruptcy: Conv – 4 years from discharge, FHA 2 years from discharge. Ch 13 bankruptcy: Conv/FHA – 2 years from discharge, 4 years from dismissal.

Foreclosure: Conv – 7 years, FHA – 3 years.

Short sale/Deed-in-lieu – 2 years, FHA – 3 years (although possible to do right away if no late payments and you had to do short sale due to job relocation).

Loan modification: Conv 2 years, FHA – 3 years.

There is also a fairly new FHA program called “Back to Work” where you may be able to get an FHA loan in as short as one year after a bankruptcy, foreclosure, short sale or deed-in-lieu if you had job loss or at least 20% loss of income. Lots of fine print and further qualifications on this one.

Check Is In The Mail

If you experienced any kind of distress with your mortgage the last few years, be sure to check and open ALL your mail! There may be a check in there for you!
In March of 2013, about 4.2 million people were sent notices from a company called Rust Consulting that they were going to be receiving a check as a result of an agreement between federal banking regulators and 13 lenders. This is part of the Independent Foreclosure Review process that I’ve written about several times in the past. This was similar to a class-action lawsuit for certain borrowers with certain lenders where foreclosure was started or completed in an improper manner (mostly due to the “robo-signing” fiasco where documents were notarized incorrectly).
98% of the checks have gone out. The problem is that about 500,000 of the checks that went out were never cashed! They think a lot of people just didn’t open their mail, thinking it was just another collection letter from their lender, and threw the checks out! Or they have since moved, and they need your forwarding address. However, Rust Consulting is sending out 1099s to people that were sent a check, WHETHER THEY CASHED THE CHECK OR NOT!
If you remember seeing any notice from Rust Consulting but didn’t receive a check, or you got a 1099 from them, you should contact them. They also still have 2% of the checks that are in dispute over how to split up the money due to divorce, death of one of the borrowers, etc. If you fall into either of these categories, they’ve probably been trying to contact you! Here is their phone number: 888-952-9105.
If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). #1 in Brentwood listings sold since 2000. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.

2013 In Review

Back at the end of 2012, we were wondering if the market was going to be able to sustain the recent gains, or was it a “head-fake”? Many people were predicting that the “shadow inventory” was finally going to burst through in 2013 as banks finally released all the homes they were supposedly hanging onto. There were also predictions of a rise in short sales as people finally gave up hope that their bank would ever approve a “good” loan modification. We started the year with only 42 homes on the market in Brentwood. The surrounding towns also had very low numbers of homes for sale.
Inventory did rise in 2013, peaking at just over 140 homes in Brentwood in the first part of October, but then began to steadily fall again. We ended 2013 at less than 100 homes on the market. So the flood of bank-owned homes never materialized. In fact, bank-owned homes and short sales almost disappeared in 2013. This happened quite rapidly and we got back to regular sellers who had (some) equity. I attribute this shift from distressed sales to regular sales to two main factors. First, I heard of many people finally getting good loan modifications, even after multiple failed attempts, and some even with principal reductions. So they were able to stay in their home with an affordable payment.
The second reason is the rise in prices, which probably had more to do with this shift than anything. 2013 was one of, if not the BIGGEST gain in equity over any 12-month period. Prices went up anywhere from 20-30% depending on the area and how you figure it. This took a LOT of homeowners out of being upside-down and into having some equity.
So 2013 was great if you already owned a home, but distressing if you were looking to buy a home. So where will we go in 2014? And are we entering another bubble? You’ll have to wait for my next article for those answers.
If you have questions on this review or any other real estate topic, call me at (925) 240-MOVE (6683). #1 in Brentwood listings sold since 2000. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.

Huge News About Forgiven Debt Tax!

For the past few years, one of the more complicated and distressing questions my clients had to deal with was whether or not they’d have to pay tax on the forgiven debt in a short sale. Congress passed a law to try to deal with this, which the California legislature tried to mirror. Then the laws expired, but only the federal law was extended, but the state law wasn’t, etc. and it was just a big mess. Some legal and tax experts have told me over the past few year that they thought that after California passed another law saying that in most cases a lender couldn’t pursue the borrower after a short sale, that made the tax issue moot, since there is no forgiven debt tax due on non-recourse loans. Well, see below to read a news release that seems to clear all this up! Keep in mind that this is specific to short sales, so you may still owe the forgiven debt tax on loan mods with principal reduction and/or a foreclosure, so a short sale may be preferred in those cases.
“The CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) announced today it received a letter from the California Franchise Tax Board (FTB), obtained by Board of Equalization (BOE) member George Runner, clarifying that California families who have lost their home in a short sale are not subject to state income tax liability on debt forgiveness “phantom income” they never received in a short sale.
Last month, in a letter to California Sen. Barbara Boxer, the Internal Revenue Service (IRS) recognized that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so-called “cancellation of debt” income to the underwater home seller for federal income tax purposes. Following the IRS’s clarification, C.A.R. sought a similar ruling by the California FTB. Now with the FTB’s clarification, underwater home sellers also are assured that they are not subject to state income tax liability, rescuing tens of thousands of distressed home sellers from California tax liability for debt written off by lenders in short sales.”
I AM NOT A TAX EXPERT. PLEASE CONSULT ONE IN REGARDS TO YOUR SITUATION. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). #1 in Brentwood listings sold since 2000. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.

1099 Court Case

If you had a short sale, foreclosure, deed-in-lieu or loan modification with principal reduction in the last few years, this may interest you. In each of those situations I noted, you probably “enjoyed” some kind of principal reduction and you are probably wondering if your lender can pursue you for it. There is a wrinkle in regards to the issuance of a 1099 that I’ve been keeping my eye on that just got really interesting…

Let’s say that your lender tells you verbally, or even in writing, that they will allow the short sale, loan mod, whatever, to proceed, but they ARE going to pursue you for the deficiency at some point in the future. But then in the mail you later get a 1099-C from them, which is meant to advise the IRS (and you) that the debt was “cancelled” and that you may have to pay tax on it. Now, let’s put aside the TAX issue for a moment, but let’s look at what just happened. Your lender is telling you and the IRS that they have, wait for it….CANCELLED the debt. On top of that, you may have to pay tax on that CANCELLED debt. I’ve always wondered in that situation if the lender were to pursue you later, couldn’t you bring that 1099-C to court and show that the debt was, in fact, “cancelled?” There was a recent bankruptcy court case in Tennessee that is VERY interesting where the judge decided that the 1099-C “reflects” that the lender did, in fact, cancel the debt and incur a possible tax liability. The judge said that regardless of whether the borrower actually had to pay any tax on the forgiven debt was irrelevant.

Now, this court case doesn’t apply exactly to California, but at least it’s a start! So if you’ve received a 1099-C from your lender and then they are trying to pursue you for that deficiency, be sure to hire a good attorney and mention this court case: William Reed case (Eastern District of Tennessee, Bankruptcy Court, Number 12-30049, decided May 14, 2013).

I AM NOT A LEGAL OR TAX EXPERT. PLEASE CONSULT ONE IN REGARDS TO YOUR SITUATION. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). #1 in Brentwood listings sold since 2000. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.

Good News For Buyers!


If you lost a home through a foreclosure, bankruptcy deed-in-lieu or short sale recently and have been biding your time to wait the 2-5 years until you can buy a home again, there is some good news for you! The Federal Housing Administration (FHA) just released some new guidelines for lenders which could allow you to qualify to buy another home in as short as 12 months!

The old rules said that you had to wait at least three years before qualifying for an FHA loan. That could be shortened to two years if you could prove “unforseen circumstances.” But these new rules shorten that even further, although the burden of proof is even higher. Below are the requirements:

You must be able to prove that you lost your home because of a loss of income or employment that was beyond your control, and that the income of borrowers on your old loan dropped at least 20% for a period of at least six months. In addition, you have to undergo housing counseling from a HUD certified counselor. And on top of all that you have to have no late payments on any other obligation for the preceding twelve months.

They will need written verification of all of the above. This means they’ll need to see a termination or income reduction letter, plus they’ll review your tax returns for that year, and you need to provide written proof that you completed the counseling. They may require more documentation for certain situations.

Please note that the above just means that you can APPLY for a loan sooner. There is no guarantee that you will be approved. And since we still have VERY low inventory around here, there is no guarantee you can actually BUY a home.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). #1 in Brentwood listings sold since 2000. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.

Help For Owner-Occupant Buyers

If you are looking to buy a home around here, you have my sympathies. It is just HARD! Seems like there are more investors and cash buyers than there are homes available. If you are using FHA or VA financing and putting very little down, your offer will often not even be considered by a Seller that has 10 cash or high-down payment offers that are willing to waive all contingencies. FHA and VA financing have a reputation for taking longer and having more red-tape than a 20% down loan. And obviously a cash offer can close sooner with less hassle. This is why some sellers will actually take a lower offer just to make sure it closes and on time with fewer hiccups.

So what is a buyer to do? I’ve heard of people that have written 8, 10, 15 or more offers, going over asking price each time, but they still can’t buy a home. I do have one small bit of advice that may increase your odds of success. Several of the larger lenders give owner-occupant buyers a “free-look” period of about 5-10 days on their bank-owned properties when they first hit the market. This means that they won’t look at any offers from investors until AFTER that period is up. This will give the owner-occupant buyers a fighting chance to buy a home!

To look for homes in our area that may have this “free-look” period, go to the websites listed below. And then let your agent know, because they can still represent you on all these homes.

Fannie Mae – http://www.homepath.com/

Freddie Mac – http://www.homesteps.com/

HUD – http://www.hudhomestore.com/Home/Index.aspx

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty


“Flipping” refers to someone buying a home for less than market value through legitimate means like at a foreclosure auction for cash and then fixing it up and selling it for more. “Flopping” is a new term that relates to flipping a short sale, but with the negative connotation that the home wasn’t fully exposed to the market, and that’s why it sold for less than market value, giving the “flopper” room to make a profit at the short sale lender’s expense. What we are seeing quite often is a home goes on the market as a short sale, but no showings are allowed, or gaining access to show is VERY difficult, and then soon after, literally sometimes minutes after it hits the market, the home goes pending. Then after a few months it closes escrow at less than market value, and even less than other offers that were submitted by other buyers. Soon after, it goes back on the market at a much higher price, sometimes with almost no fix-up work.

The “floppers” claim this is legal and ethical because no one is hurt, it’s up to the bank to determine if their offer is a good one or not, and no one ever gets caught. My argument would be that just because a bank is a faceless corporation doesn’t mean it’s OK to defraud them out of tens of thousands of dollars. There are actually state and federal laws against loan fraud, and concealing material facts (like the fact that the home wasn’t exposed to the market, or that the seller passed over much higher offers) is considered loan fraud. And while the bank will order an appraisal, there is no substitute for exposing the home to the market to find out what other buyers may be willing to pay. In addition, many lenders require all parties to sign a short sale addendum where they certify that the home was exposed to the market and that no material facts are hidden from the short sale lender. Lying on this form is also considered loan fraud. There are also many examples of people going to jail over this practice, and many more cases being investigated currently.

I AM NOT AN ATTORNEY. PLEASE SEEK LEGAL COUNSEL. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

Update On Ca Mortgage Forgiveness

Sometimes in a short sale or a foreclosure, you may have to pay tax on the debt that was forgiven. There are many exclusions to this, so many people DON’T pay this tax. Several years ago, the federal government passed a law call the Mortgage Forgiveness Debt Relief Act which added even more exclusions to existing law, which meant that MOST people don’t pay this tax. The State of California mirrored that law. When the federal law first expired, they renewed it through the end of 2012, and the State of California also renewed theirs. When it expired again at the end of last year, the federal law was again renewed through the end of this year, but the State of California has NOT renewed theirs yet.

A bill (SB 30) was put forth to have California law again mirror federal law and it looked likely to pass. However, another bill was recently linked to this bill that now puts doubt on that. This new bill (SB 391) implements a $75 fee on many standard real estate documents that get filed, but not those associated with the sale of a property. So this fee would apply if you were to file a quit claim deed, lot line adjustment, do a refinance, etc. Something other than a sale.

Most real estate trade groups and consumer groups are very much IN FAVOR of SB 30 passing because it helps distressed homeowners and can help our real estate recovery, but are AGAINST  SB 391 because it raises the cost to consumers to do routine real estate activities. Look for this to be hotly debated and hopefully they’ll work it out. If you don’t agree with these two bills being linked, and you want them to pass SB 30, be sure to let them know. You can contact the CA legislature at http://www.legislature.ca.gov.

I AM NOT A TAX EXPERT, PLEASE CONSULT A TAX EXPERT FOR ADVICE FOR YOUR SITUATION. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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