SHOCKER!!   Buyer of a short sale doesn’t own the property he just purchased (or does he?).  Seller of the short sale paid off the wrong party (or did he?).

The below email was sent to Neil Garfield at Living Lies.  Sadly this is not shocking at we know of two other lawsuits where the seller and the buyer acted in good faith and sold the property and the money was sent to BofA (and MERS was involved as well) and later the “real” owner of the deed of trust came forward and demanded that the transaction be undone due to a mistaken release of the deed of trust by the wrong party.

What does this mean to a real estate agent involved in the transaction?

Get an attorney involved – preferably BEFORE the short sale closes.  Why?  Quite simply you need to make sure that the transaction is buttoned up tight.   Many of the short sales that involve an attorney and litigation against the pretender lender will require a settlement agreement to be signed at closing (or at least have enough documentation that the seller & buyer have some ground to stand on).

But what does a settlement agreement do and how does it help you as the real estate agent?

First, the pretender lender whose is receiving the proceeds of the short sale “swears” they are the real lender or working for the real lender (like Fannie Mae).  Second, a well crafted settlement agreement will indemnify the seller (or whichever parties are named) – meaning that the lender getting the money has to defend the seller if they are sued over the specifics related to the settlement, i.e. the short sale.

Does the buyer lose the house and does the real estate agent have to give back their commission?

Very likely the answer is no.  But you will have to hire an attorney to fight this battle for you.   The title company should be on the hook for the value of the home – meaning they will either have to pay off the “real” lender or the new homeowner.   The downside is that it could cost more than the commission just to fight this type of suit AND the title insurance is only good for the amount of the policy (if the house was bought for less than full value or thousands of dollars in updates/remodeling has been performed you could lose this amount).

Bottom Line

Short sales and even purchasing foreclosure can be great equity and value builders for the buyers and assist the seller with disposing of a property but a good title company and good lawyer can help you keep this value hopefully keep your sanity and commission.

Seek legal counsel from a real estate attorney and one who has experience in dealing with short sale and foreclosure.

- The Bank Slayer

NAR is touting a new bill the “Prompt Decision for Qualification for Short Sale Act of 2011” which has been introduced in the U.S. House of Representative and will mandate that mortgage servicers respond to short sale requests within 45 days!

Sounds good but guess what? They already tried this once.  It was called Prompt Decision for Qualification for Short Sale Act of 201o. It never made it out of committee.

You think to yourself, “But hey, at least they are trying again.”   (You can track the progress of the 2011 attempt here:  http://www.govtrack.us/congress/bill.xpd?bill=h112-1498 )

But the real problem is that the bill is virtually worthless.  Why?

First, it provides exceptions – meaning it doesn’t apply – for most mortgages.

Example #1 – It doesn’t apply to any loan that has been securitized. – READ: Fannie or Freddie Loans. This covers over 50% of all mortgages in the U.S.

…except as provided in subsection (b) and notwithstanding any other provision of law or of any contract, including a contract between a servicer of a residential mortgage loan and a securitization vehicle or other investment vehicle…

Example #2 – It doesn’t apply to any loan where the short sale process or review of that process (such as HAFA, HUD’s ATP, etc.) is already in the works.  Furthermore, the bank can claim that the “procedure” for handling a loan in default is already spelled out in a written agreement such as the deed of trust (which governs foreclosures as well).

…shall not apply with respect to any residential mortgage with respect to which the mortgagor and the mortgagee or servicer have entered into a written agreement before the date of the enactment of the Prompt Decision for Qualification of Short Sale Act of 2011.

Second, the time limit of 45 days does little to help Texas homeowners.  Why? Because it won’t stop a foreclosure which takes only 21 days.

…may not be construed to preempt, annul, or otherwise affect any other provision of law or of any contract or program that provides a shorter period than is provided under subsection (a)…

Third, there are no real teeth or penalties if the mortgage servicer doesn’t abide by the 45 day period.

…any creditor who fails to comply with any requirement imposed under this part…any actual damage sustained by such person as a result of the failure OR not less than $400 or greater than $4,000.

Bottom line is this:

• It is unlikely this bill will ever make it out of committee and into law.
• It doesn’t apply to most mortgages.
• There are few if any remedies available to the homeowner.
• Unless you have MASSIVE equity in your home you are not going to be able to prove actual damages that are in excess of what is owed on the mortgage AND even if the homeowner is awarded the maximum damage of $4,000 it will likely be used to offset missed mortgages payments, taxes, insurance, and whatever else the bank tacks on.

Oh and by the way…the response within the 45 days could still very well be NO.

We still maintain that in most cases, direct and aggressive litigation against the bank is the best way to secure: short sale approval, maximum commission for the REALTOR, and debt forgiveness for the homeowner.

Use a local real estate lawyer in your area not just to threaten, but SUE THE BANK.

- The Bank Slayer

December 10, 2011 at 11:30 AM staff members from Home Solution Counselors & The Gore Law Firm will be presenting at Katy’s Keller Williams Signature office.

Leveraging Short Sales

Maximizing Commissions &   Minimizing Risks

Lunch will be provided.

Although some of the largest mortgage banks (servicers of mortgages) such as Bank of America, Wells Fargo, Chase and GMAC have announced in varying releases that they are halting foreclosures while they review their procedures, they haven’t stopped posting and prepping to auction off over 5,000 homes in the Greater Houston Area.

How many folks are posted for sale tomorrow?    Yes, tomorrow – November 2, 2010.

Harris : 3,857

Brazoria: 251

Ft Bend: 675

Galveston: 279

Montgomery: 400

Total: 5,462

How many will go tomorrow?  Good question.   On average about 20-25% actually go to sale.   The best commitment most get out of the foreclosure attorneys is “that file is on HOLD.”

On Hold huh?   Like I’m holding this piece of paper…wait, not any more.  I just let it go.

Pulling the sale or postponing the sale is what we want to hear.  On Hold?  Does this mean I need to call back tomorrow and check again?

Whether you are a homeowner facing foreclosure or a concerned REALTOR assisting a family in a tough situation don’t just assume that the “On Hold” means the foreclosure is postponed.  Maybe you’ll still be on hold, maybe you won’t when the clock strikes 10:00AM on Tuesday.

If every mortgage was “on hold” then why did a couple of our homeowner clients need to secure a Temporary Restraining Order last Friday…Hmmmm.

- The Bank Slayer

The following FAQ is a reprint of the FAQ provided to Texas Realtors and on the affect to various types of foreclosure related transactions such as REO sale, Short Sales, Evictions and Foreclosures.

>>>>>   TAR – FAQForeclosureMoratorium100610

Much of this remains to be seen but it is worth reading and noting possible issues that may arise.

- The Bank Slayer

The following is the list of mortgage servicers (lenders) that have been initially targeted by Texas Attorney General Greg Abbot’s office for possible foreclosure fraud.

If your loan is in a foreclosure status or you have been wrongfully foreclosed within the last four years please seek assistance immediately.

- The Bank Slayer

Looks like the banks collectively thumbed their noses at the Texas Attorneys General Office and marched forward with foreclosures yesterday, except for GMAC/Ally.  The Houston Chronicle caption reads…

“Foreclosure sales go forward as Texas AG pushes moratorium“

But here at BustMyBank we predict that the banks’ excrement is about to make physical contact with an electric powered oscillating air device.

Below are comments we received from the Texas Association of REALTORS® Legal Department.

To: Texas REALTORS®

From: Texas Association of REALTORS® Legal Department

RE: Texas Attorney General halts foreclosures and sales of foreclosed properties

The Texas Attorney General’s office has halted all foreclosures, all sales of properties previously foreclosed upon, and all evictions of persons residing in previously foreclosed upon properties, until mortgage companies have completed a review of their processes, including whether employees or agents “robosigned” affidavits and other documents recorded in Texas.

The AG suspension notices were sent to 30 mortgage-loan servicers doing business in Texas.

Further, here is a copy of the letter sent to Bank of America.

Texas AG letter to Bank of America on foreclosure halts

Seems pretty clear to me that BofA is going to be in a heap of trouble with any foreclosures wrongfully prosecuted.   Seems to me that those folks facing evictions have a little more time to work things out.  Semms to me that if you are trying to buy a foreclosure you may want to cool your heels and definitely do some title examination.

If you have been foreclosed upon and suspect something was not done properly then contact us immediately.

9 out of 10 foreclosures we analyze have document issues such as: fraduelent assignments, “missing” links in the chain of title, fabricated ownership claims, and/or the foreclosure mill attorney signing documents making themselves the trustee, seller’s authority, purchasing bank’s agent, and overall uber-agent all rolled into one.

It seems VERY likely that there are THOUSANDS of foreclosures that are in violation of many of the statutes and laws put into place to protect homeowners.

Does this mean that no one deserves to be foreclosed upon for not paying their bills?  No it doesn’t.  What it means is that there is a right way for a creditor to claim what is his and there is a wrong way and experience tells us that the banks are enriching themselves at the expensive of the downtrodden and down on their luck.  The guy paying his mortgage and those families paying taxes are getting the shaft from “the too big to fail” banks who have sucked up our taxes dollars and now are “too big to play by the rules” when it comes to stealing someone’s homestead.

Don’t let the banks roll over you.  Stand up for your rights.

- The Bank Slayer

“Texas Attorney General Greg Abbott called for a halt on foreclosures Monday amid nationwide scrutiny over the way they are processed.”

The fraud in the mortgage industry has finally hit a raw nerve.   27 mortgage servicers have just been put on Notice to HALT the sale of foreclosures and homes in the foreclosure processes.

Just a minute there...let's look at your papers.

Mortgage servicers have until October 15th to respond to questions about their processes and the now infamous “robo-signers”.

On 650 AM, in the Houston area, I fielded calls and questions about the impact of this request by Greg Abbot’s office.   This hits a raw nerve for lots of folks: buyers, sellers and homeowners.

A general halt or freeze of all foreclosure related activity has far reaching consequences not just to homeowners who might have fallen behind on their payments but to anyone involved in the “foreclosure” process.  If you are buying a foreclosure this could affect you as well as those involved in insuring the sale such as title companies.

For homeowners struggling to make their payment and facing a foreclosure this COULD provide a little more time to resolve payment problems.

Will the major banks continue forward with today’s foreclosure sales?  We’re making calls today to determine just that and we’ll  stay tuned to see the reaction of the “big three” – Bank of America, J.P. Morgan Chase & Wells Fargo.

For REALTORS working a short sale, this might buy some more time to complete the sale.

Below is the press release in the Houston Chronicle

– The Bank Slayer

State moves to halt foreclosures and sales of foreclosed property

By NANCY SARNOFF, PURVA PATEL and JENNIFER HILLER
HOUSTON CHRONICLE / SAN ANTONIO EXPRESS-NEWS

Notices to suspend foreclosures were sent to 27 loan servicers doing business in Texas, including Bank of America and JPMorgan Chase, the Attorney General’s Office said. It did not have the full list of companies available late Monday.

The state office also called for a halt on the sales of properties previously foreclosed upon — possibly affecting auctions scheduled Tuesday —  and on evictions of people living in such properties.

The office said it began investigating foreclosures last month after reports that an employee of Ally Financial, a large mortgage lender, acknowledged signing thousands of foreclosure documents without reviewing them as required.

Ally has since suspended foreclosures on certain properties in 23 states, as have JPMorgan Chase and Bank of America, to investigate whether their employeesrushed foreclosures, a practice called “robosigning.”

In the state’s letter to JPMorgan Chase, Paul D. Carmona, chief of the attorney general’s consumer protection and public health division, said robosigning practices can include signing documents without reading them, signing thousands of documents a month, signing documents without proper notarization, and signing affidavits falsely claiming personal knowledge of facts.

Court order not sought

A JPMorgan Chase spokesman declined to comment on the attorney general’s move, and Bank of America officials could not be reached late Monday.

Chase and Bank of America, along with Wells Fargo, service more than 50 percent of the outstanding loans nationwide, said David Zugheri, co-founder of Houston-based Envoy Mortgage.

Abbott sought the foreclosure suspension Monday “in an effort to determine the full harm Texas homeowners may have suffered or could suffer as a result of these business practices,” according to a statement released late Monday by Jerry Strickland, a spokesman for the office.

The Attorney General’s Office has not sought a court order, and wouldn’t say what kind of action, if any, it might take if companies don’t comply.

“This is a demand from the Attorney General’s Office that they thoroughly review their business practices to ensure they comply with Texas law and are not unlawfully harming Texas homeowners,” Strickland said.

The move could have a widespread impact on Texas borrowers and lenders.

“If the AG can really do this, it’s huge,” said Zugheri.

George Roddy, president of the Addison-based Foreclosure Listing Service, which tracks foreclosures in 19 North and Central Texas counties, questioned the attorney general’s authority to seek the suspensions. “I’m not sure how the AG could do that unless there’s some type of fraud,” he said .

And stopping the sale of properties already lost to foreclosure could prove particularly complicated.

“This could be opening up a real can of worms if they’re actually talking about properties already sold,” Roddy said. “Title has been passed back to the lender or a third party has purchased it at the foreclosure auction. Someone else could be living in the house.”

‘An October surprise’

Gregg Stanley of RexReport.com, a San Antonio-based foreclosure listing service, said that the 23 other states where foreclosures have been suspended require lenders to go to court to foreclose.

Texas has non-judicial foreclosures, which don’t require court orders. But in its letter, the Attorney General’s Office said the state nonetheless requires various documents with foreclosures and wants to be certain that paperwork is handled properly and in compliance with state law.

“It could be a bit of an October surprise,” Stanley said, noting that foreclosure auctions are scheduled across the state today. Harris County’s auction is scheduled to start at 10 a.m. in the Family Law Center downtown.

In its letters to JPMorgan Chase and Bank of America, the Attorney General’s Office outlines steps the banks must take, including identifying employees or agents who participated in “robosigning.”

The letters ask the lenders to respond by Oct. 15.

Tuesday, September 7th is Foreclosure Tuesday.   Here is a quick look at the Houston area foreclosure stats:

Posted Homes for Foreclosure

Posted foreclosures for the Greater Houston Area total 6,689 which is a 43% jump from last month’s 4,478.   Galveston County continues to rocket forward with a 53.7% increase over August’s posted foreclosures.  Fort Bend County was not far behind with a 49.1% increase in postings.  Harris County and Brazoria County finished neck to neck with increases of 38.2% and 36.7% respectively.   If there was a winner it is Montgomery County with only a 30% increase.

Regardless of county, the local Greater Houston Area is seeing a big leap in lenders pursuing foreclosures.

• 309 vs 226 for August – Brazoria County (Pearland, Alvin, Lake Jackson, etc.) +36.7% increase
• 874 vs 586 for August – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.) +49.1% increase
• 375 vs 244 for August – Galveston County (Galveston, Clearlake, Texas City, etc.) +53.7% increase
• 4,649 vs 3,361 for August – Harris County (Houston, Pasadena, Baytown, etc.) +38.2% increase
• 482 vs 371 for August- Montgomery County (Montgomery, Conroe, Splendora, etc) +30.0% increase
• 6,689 – Total

With such a large number of postings, although not every house will be sold, the local real estate market is going to struggle to absorb the increase in foreclosure inventory.  As an example let’s look at the numbers moving through the Houston Association of Realtor Multiple Listing Service.

Currently there are 54,926 properties for sale in the greater Houston area.  Of this number, 4,778 are REO (real estate owned), commonly called foreclosures; this accounts for 8.2% of the market.  Add in Short Sale listings for another 1,807, which is 3.3% of the market and you now have 11.5% of listings which are distressed sales. Distressed sales typically drive down prices.  Especially when roughly one out of every ten homes for sale is a distressed sale.   But if the market can absorb them, in other words they are selling as fast as they come in, then everything is still OK.

Let’s look at how fast the distressed sales are moving.  Last month, in the Greater Houston Area, 941 of the properties in MLS sold as “foreclosures” and another 109 sold as “short sales”.  That means that only 1,050 properties out of the 6,585, or 16% of the distressed sale category actually sold through.  At this rate it would take roughly six months to sell through the distressed inventory – but this assumes that no new properties are listed for sale.  But remember we have 6,689 properties posted for the foreclosure sale.

We’ll have to closely watch the sell through rate as well as the actual number of properties that foreclose to see if our market can handle the inevitable and eventual and likely substantial increase of distressed listings.

Foreclosures for Sale* -4,778

• 264 – Brazoria County (Pearland, Alvin, Lake Jackson, etc.) +3.2% (+0.9% MOM)
• 551 – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.) +8.2% (+12.2% MOM)
• 360 – Galveston County (Galveston, Clearlake, Texas City, etc.) +9.1% (+5.0% MOM)
• 3,155 – Harris County (Houston, Pasadena, Baytown, etc.)  +0.4% (+2.1% MOM)
• 448 – Montgomery County (Montgomery, Conroe, Splendora, etc.) +2.6% (+7.7% MOM)

Short Sales for Sale on MLS – 1,807

• 78 – Brazoria County (Pearland, Alvin, Lake Jackson, etc.) +8.9% (+4.0% MOM)
• 226 – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.) +1.4%  (-5.4% MOM)
• 106 – Galveston County (Galveston, Clearlake, Texas City, etc.) +16.5% (+8.2% MOM)
• 1,260 – Harris County (Houston, Pasadena, Baytown, etc.) + 1.8% (+1.7% MOM)
• 137 – Montgomery County (Montgomery, Conroe, Splendora, etc) -5.6% (-2.8% MOM)

Foreclosures Sold in MLS in July – 1,070

• 47 – Brazoria County (Pearland, Alvin, Lake Jackson, etc.)
• 118 – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.)
• 67 – Galveston County (Galveston, Clearlake, Texas City, etc.)
• 741 – Harris County (Houston, Pasadena, Baytown, etc.)
• 97 – Montgomery County (Montgomery, Conroe, Splendora, etc)

Short Sales Sold in MLS in July – 109

• 3- Brazoria County (Pearland, Alvin, Lake Jackson, etc.)
• 15 – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.)
• 3 – Galveston County (Galveston, Clearlake, Texas City, etc.)
• 77 – Harris County (Houston, Pasadena, Baytown, etc.)
• 11 – Montgomery County (Montgomery, Conroe, Splendora, etc)

Foreclosures Sold in MLS in August- 941

• 46 – Brazoria County (Pearland, Alvin, Lake Jackson, etc.)
• 91 – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.)
• 54 – Galveston County (Galveston, Clearlake, Texas City, etc.)
• 659 – Harris County (Houston, Pasadena, Baytown, etc.)
• 91 – Montgomery County (Montgomery, Conroe, Splendora, etc)

Short Sales Sold in MLS in August – 69

• 3- Brazoria County (Pearland, Alvin, Lake Jackson, etc.)
• 14 – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.)
• 3 – Galveston County (Galveston, Clearlake, Texas City, etc.)
• 42 – Harris County (Houston, Pasadena, Baytown, etc.)
• 7 – Montgomery County (Montgomery, Conroe, Splendora, etc)

* Foreclosures & Short Sales are combination of HAR MLS & non-MLS REO/Corporate sales, averaged over 2 months.

**MOM = Month over preceding Month

Tuesday, August 3rd is Foreclosure Tuesday.  Here is a quick look at the Houston area foreclosure stats:

Posted Homes for Foreclosure

• 226 – Brazoria County (Pearland, Alvin, Lake Jackson, etc.)
• 586 – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.)
• 244 – Galveston County (Galveston, Clearlake, Texas City, etc.)
• 3,361 – Harris County (Houston, Pasadena, Baytown, etc.)
• 371 – Montgomery County (Montgomery, Conroe, Splendora, etc)

Foreclosures for Sale on MLS

• 262 – Brazoria County (Pearland, Alvin, Lake Jackson, etc.) +5.6%
• 491 – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.) +4.2%
• 343 – Galveston County (Galveston, Clearlake, Texas City, etc.) +13.2
• 3,091 – Harris County (Houston, Pasadena, Baytown, etc.)  -1.3%
• 416 – Montgomery County (Montgomery, Conroe, Splendora, etc.) -2.4%

Short Sales for Sale on MLS

• 75 – Brazoria County (Pearland, Alvin, Lake Jackson, etc.) +13.7%
• 239  – Fort Bend County (Missouri City, Sugar Land, Richmond, etc.) +8.1%
• 98 – Galveston County (Galveston, Clearlake, Texas City, etc.) +24.1%
• 1,239 – Harris County (Houston, Pasadena, Baytown, etc.) + 1.8%
• 141 – Montgomery County (Montgomery, Conroe, Splendora, etc) -8.4%