Here's another great stolen post from my friend Cari Drolet at the Lotus Realty Group. Call her if you'd like help getting your short sales closed in 2011.
Full Discharge of Indebtedness On First Trust Deeds
I am sure most of you are aware of the law that was passed effective January 1, 2011 which states the following:
(a) No judgment shall be rendered for any deficiency under a note secured by a first deed of trust or first mortgage for a dwelling of not more than four units, in any case where the trustor or mortgagor sells the dwelling for less than the remaining amount of indebtedness due at the time of the sale with the written consent of the holder of the first deed of trust or first mortgage. Written consent of the holder of the first deed of trust or first mortgage to that sale shall obligate that holder to accept the sale proceeds as full payment and to fully discharge the remaining amount of the indebtedness on the first deed of trust or mortgage.
(b) If the trustor or mortgagor commits either fraud with respect to the sale of, or with respect to the real property that secures the first deed of trust or first mortgage, this section shall not limit the ability of the holder of the first trust deed or first mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any third party for fraud or waste.
(c) This shall not apply if the trustor or mortgagor is a corporation or political subdivision of the state.
Does this apply to Second Trust Deeds?
The answer is Simply NO.
Does this include investment properties?
It appears to include investment property when dealing with quote, a dwelling of not more than 4 units. There is no reference in this statute to owner occupied property.
What incentive does a homeowner have to do a short sale?
I have been asked this question a lot and the answer is still the same. A foreclosure will impact a homeowner’s credit far more and for far longer than a short sale. Furthermore, a home owner who is foreclosed on will not be eligible for a Fanny Mae or Freddie Mac backed loan for 5 years. This increases to 7 years if it is an investment property and it stays on their credit report for the same amount of time. With the right credit recovery program you can help turn your client back into a home buyer again in 18-24 months. Granted, you will get the angry homeowner who does not care anymore but I believe with the right delivery, you can help your client see the value in a short sale. Foreclosure is much more damaging to our economy which is already in dire need of repair. I also believe a short sale shows good faith and integrity to the lenders instead of the homeowner just walking away. However, the homeowner should always seek the advice of an attorney and CPA before making the ultimate decision to Short Sale or Foreclose.
How can we ensure that our client is released from full liability?
We will always encounter situations where laws and guidelines are not being followed properly. With the volume the lenders have on their plates in regards to short sales and foreclosures, there is no guarantee that there will not be a mistake made along the way due to the negligence of one or more of the parties and the homeowner could suffer the consequences. Here are some helpful tips moving forward:
1. Read the TERM SHEET (Approval) thoroughly.
2. The verbiage you are looking for is still the same “Released from liability of the NOTE” and any deficiency following the short sale.
3. If the term sheet only states the borrower is released from liability of the lien, then understand that this is not the same as a release from liability under the note and from a deficiency after the short sale.
4. Please recommend to the homeowner to have the term sheet reviewed by an attorney and CPA before the homeowner accepts or rejects the term sheet.
This is just an extra precaution that will give you and your client a peace of mind
Please note that Lotus Realty Group does not give legal advice. Please seek advice from an attorney and CPA before providing this information to your clients.
Again, I would like to extend my gratitude to all of our REALTOR clients who have allowed Lotus Realty Group to expedite and close your short sale transactions and assist you in growing your business. It is my belief that this will be a massive year for short sales and I look forward to working with all of you in 2011.
To your success!!!!
(Quote) A promise is a cloud; fulfillment is rain. ~Arabian Proverb
PROFESSIONAL SHORT SALE NEGOTIATORS
At Lotus Realty GROUP, helping people ethically succeed is at the forefront of who we are...
Call today to find out how Lotus Realty Group can assist you in closing your short sale transactions or go to WWW.LotusRealtyGroup.com
Cari Drolet - Founder
Lotus Realty Group
Lotus Realty Group
Certified Distressed Property Expert
400 S. Sierra Ave. Ste. 102
Solana Beach, CA 92075
(858) 764-7300 P.
(858) 755-7544 F.
(760) 707-3072 C. Cari@LotusRealtyGroup.com www.LotusRealtyGroup.com
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