First American Title Aar Conference Escrow+Foreclosure

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Information about First American Title Aar Conference Escrow+Foreclosure

Published on March 11, 2009

Author: aarwc

Source: slideshare.net

Escrow and Foreclosing Properties AAR 2009 Winter Real Estate Conference Janette Waller Vice President Maricopa County Operations Manager Michael Oman Account Manager, REO Services Arizona-Nevada March 12 th , 2009

ESCROW HOT TOPICS 2008 and 2009 Facts and Figures Pre-Foreclosure and Short Sales Foreclosed and REO Properties Questions? with Major Audience Participation

2008 and 2009 Facts and Figures

Pre-Foreclosure and Short Sales

Foreclosed and REO Properties

Questions?

with Major Audience Participation

Facts and Figures Measure Twice and Cut Once

Nationwide Facts 2008 3,183,701 properties received at least one foreclosure related filing. There were 1,805,022 foreclosure re-sales with an average sale price at $288,987.

3,183,701 properties received at least one foreclosure related filing.

There were 1,805,022 foreclosure re-sales with an average sale price at $288,987.

Arizona Facts 2008 In 2008 a total of 152,505 Arizona properties reported at least one foreclosure filing. Up 110% over 2007 The 3 rd Highest Rate in the US for 2008

In 2008 a total of 152,505 Arizona properties reported at least one foreclosure filing.

Up 110% over 2007

The 3 rd Highest Rate in the US for 2008

REO HOT SPOTS This Foreclosure Rate Heat Map shows the relative rate or percentage of Foreclosure activity in each Arizona County. REALTYTRAC.COM JAN 2009

January 2009 REALTYTRAC.COM JAN 2009

2009 YTD Arizona Activity 45,863 Arizona Properties Have Had a Foreclosure Filing through February. 34,735 of those are in Maricopa County 4216 are in Pinal County 2751 are in Pima County All in Pre-Foreclosure FORECLOSURE.COM MAR 2009

45,863 Arizona Properties Have Had a Foreclosure Filing through February.

34,735 of those are in Maricopa County

4216 are in Pinal County

2751 are in Pima County

All in Pre-Foreclosure

ARIZONA TRENDS 2006-2008 Sub-Prime Loans Adjust Relatively New Properties Located in Newer Suburbs – Communities 2009+ Alt-A and No Doc Loans Adjust Somewhat Higher Priced Properties Core Cities and Neighborhoods Economic Factors Banking and Credit, Layoffs, Home Values, More Conservative Consumer Outlook

2006-2008 Sub-Prime Loans Adjust

Relatively New Properties

Located in Newer Suburbs – Communities

2009+ Alt-A and No Doc Loans Adjust

Somewhat Higher Priced Properties

Core Cities and Neighborhoods

Economic Factors

Banking and Credit, Layoffs, Home Values, More Conservative Consumer Outlook

Pre-Foreclosure and Short Sales We Can Work it Out

PRE-FORECLOSURE What is happening in Pre-Foreclosure? What are the homeowners’ options? What do Realtors ® need to know?

What is happening in Pre-Foreclosure?

What are the homeowners’ options?

What do Realtors ® need to know?

PRE-FORECLOSURE If a borrower is late on a payment or failed to follow the guidelines of their loan repayment, the lender may choose to Foreclose on the property. A Notice of Trustee’s Sale is recorded with the County. A Sale Date, Time and Location are Set.

If a borrower is late on a payment or failed to follow the guidelines of their loan repayment, the lender may choose to Foreclose on the property.

A Notice of Trustee’s Sale is recorded with the County.

A Sale Date, Time and Location are Set.

PRE-FORECLOSURE Homeowners have a number of options. Make Up the Missed Payments Work to Forebear the Missed Payments Loan Modification and Refinance Options Possible Government Assistance Offer a Deed in Lieu of Foreclosure Short Sale of the Property Allow Foreclosure Historically, the Majority of Notices of Foreclosure or Trustee’s Sale are corrected and cancelled.

Homeowners have a number of options.

Make Up the Missed Payments

Work to Forebear the Missed Payments

Loan Modification and Refinance Options

Possible Government Assistance

Offer a Deed in Lieu of Foreclosure

Short Sale of the Property

Allow Foreclosure

Historically, the Majority of Notices of Foreclosure or Trustee’s Sale are corrected and cancelled.

SHORT SALES Know your numbers The Short Sale process What you can look for from an escrow officer?

Know your numbers

The Short Sale process

What you can look for from an escrow officer?

SHORT SALES What is a Short Sale? When a property owner wants or needs to sell a property but does not have sufficient sale proceeds to pay the existing mortgage, liens and all of the normal closing costs usually incurred in a transaction. The property owner must ask their existing lender to agree to accept less money than what is owed and provide a FULL release of the sellers obligations.

What is a Short Sale?

When a property owner wants or needs to sell a property but does not have sufficient sale proceeds to pay the existing mortgage, liens and all of the normal closing costs usually incurred in a transaction.

The property owner must ask their existing lender to agree to accept less money than what is owed and provide a FULL release of the sellers obligations.

SHORT SALES Credit and Creditor Considerations Having a portion of the loan forgiven may have an adverse affect on the seller’s credit. The IRS requires lenders to submit a 1099 stating the forgiven amount, which is treated as income. * We encourage all sellers to seek legal and tax advice from their attorney or tax professional. *President George W. Bush signed the Mortgage Forgiveness Relief Act of 2007 on September 1st, 2007. The Act sought to give borrowers and lenders added incentive to refinance troubled properties and relieve American families from additional Federal Tax burdens. The Act offered a three year window for such relief.

Credit and Creditor Considerations

Having a portion of the loan forgiven may have an adverse affect on the seller’s credit.

The IRS requires lenders to submit a 1099 stating the forgiven amount, which is treated as income. *

We encourage all sellers to seek legal and tax advice from their attorney or tax professional.

*President George W. Bush signed the Mortgage Forgiveness Relief Act of 2007 on September 1st, 2007.

The Act sought to give borrowers and lenders added incentive to refinance troubled properties and relieve American families from additional Federal Tax burdens. The Act offered a three year window for such relief.

SHORT SALES Know the Numbers The first step to determining if you have a short sale is performing an Estimated Settlement Statement. Gather any outstanding debt and the cost of selling such as real estate commissions, taxes, title and escrow charges and repairs. Current challenges for sellers are the depressed housing market and heavily reduced appraisal values for most properties. If the bottom line shows cash to the seller a short sale is not needed.

Know the Numbers

The first step to determining if you have a short sale is performing an Estimated Settlement Statement.

Gather any outstanding debt and the cost of selling such as real estate commissions, taxes, title and escrow charges and repairs.

Current challenges for sellers are the depressed housing market and heavily reduced appraisal values for most properties.

If the bottom line shows cash to the seller a short sale is not needed.

SHORT SALES Obtain Creditor Approval Coordinate with the Lender Submit Letter of Authorization Approval Request Estimated Settlement Statement (HUD-1) A Hardship Letter Proof of Income and Assets Copies of Bank Statements Comparative Market Analysis (Comps) Purchase Agreement and Listing Agreement

Obtain Creditor Approval

Coordinate with the Lender

Submit Letter of Authorization

Approval Request

Estimated Settlement Statement (HUD-1)

A Hardship Letter

Proof of Income and Assets

Copies of Bank Statements

Comparative Market Analysis (Comps)

Purchase Agreement and Listing Agreement

SHORT SALES Timelines (45-60 days) The lender can expedite a request when the Trustee’s Sale date is approaching. The transaction can close when the escrow officer has received the lender’s payoff statement, authorizing the payoff amount. Buyer’s documents must be signed and their funds received.

Timelines (45-60 days)

The lender can expedite a request when the Trustee’s Sale date is approaching.

The transaction can close when the escrow officer has received the lender’s payoff statement, authorizing the payoff amount. Buyer’s documents must be signed and their funds received.

SHORT SALES Commissions The lender will not allow a commission of more than 5% total If you are acting as a dual agent lenders often expect the commission to be at 4%

Commissions

The lender will not allow a commission of more than 5% total

If you are acting as a dual agent lenders often expect the commission to be at 4%

SHORT SALES Questions Does the title company communicate with the short sale lender or does the agent? The agent must always be talking with the lender. This is not a standard loan payoff situation. Submitted by AAR Members

Does the title company

communicate with the short sale lender or does the agent?

The agent must always be talking with the lender. This is not a standard loan payoff situation.

SHORT SALES Questions Do payoff requests need to be signed by the seller? Every lender is different. Make sure you contact your lender and follow their instructions. Submitted by AAR Members

Do payoff requests need to

be signed by the seller?

Every lender is different.

Make sure you contact your lender

and follow their instructions.

SHORT SALES Questions Can we conduct a title search prior to receiving a contract and earnest money? What do you need from the seller? Yes. This is not the customary way we do things, however we can do this as requested. We need the parcel # or the property address. Both would allow us to conduct a title search. Submitted by AAR Members

Can we conduct a title search prior

to receiving a contract and earnest money?

What do you need from the seller?

Yes.

This is not the customary way we do things,

however we can do this as requested.

We need the parcel # or the property address.

Both would allow us to conduct a title search.

SHORT SALES Questions What can a REALTOR ® do to make these transaction close? Primarily, list the property based on COMPS or BPO acceptable to the lender and present contracts based on fair market value. The lender has internal guidelines they must meet to complete a short sale. Patience. Follow-Up. Persistence. Submitted by AAR Members

What can a REALTOR ® do to

make these transaction close?

Primarily, list the property based

on COMPS or BPO acceptable to

the lender and present contracts based

on fair market value. The lender has internal

guidelines they must meet to complete a short sale.

Patience. Follow-Up. Persistence.

Foreclosure and REO Properties A Really Excellent Opportunity

REO DISCUSSION “Real Estate Owned” The Previous Owner was Foreclosed Most Liens Wiped from Property The Property is now Owned by the Lender Institutional Sellers/Investors make for a very different transaction process. Contract and Addendum Escrow Process and Closing

“Real Estate Owned”

The Previous Owner was Foreclosed

Most Liens Wiped from Property

The Property is now Owned by the Lender

Institutional Sellers/Investors make for a very different transaction process.

Contract and Addendum

Escrow Process and Closing

REO PROPERTIES The bank who has ownership of a property wants to get rid of it. They supervise the process through staff members called asset managers. A bank may have a Loss Mitigation Department or they may hire an asset management company to supervise the process.

The bank who has ownership of a property wants to get rid of it.

They supervise the process through staff members called asset managers.

A bank may have a Loss Mitigation Department

or they may hire an asset management company to supervise the process.

REO PROPERTIES Asset Managers Service and Market the Property Hire a Listing Agent or Auction Service Communicate with Agent Regularly List Price, Marketplace and Condition Ultimately Pay for Carrying Cost Approve Contracts Within Guidelines Some Offers Must be Escalated

Asset Managers

Service and Market the Property

Hire a Listing Agent or Auction Service

Communicate with Agent Regularly

List Price, Marketplace and Condition

Ultimately Pay for Carrying Cost

Approve Contracts

Within Guidelines

Some Offers Must be Escalated

REO PROPERTIES REO Properties represent a large percentage of the available inventory in Arizona. In some AZ communities REO properties make up over 60% of the available listings. Most REO listing agents are require to adjust list price monthly (or even more frequently) based on a new BPO REO Properties represent over 40% of SOLD properties in many Arizona Communities. REO Sales are resetting the Market Value in some communities.

REO Properties represent a large percentage of the available inventory in Arizona.

In some AZ communities REO properties make up over 60% of the available listings.

Most REO listing agents are require to adjust list price monthly (or even more frequently) based on a new BPO

REO Properties represent over 40% of SOLD properties in many Arizona Communities.

REO Sales are resetting the Market Value in some communities.

REO ESCROW TIPS REO Purchase Contract-Addendum No Seller’s Property Disclosure (As is) Inspections and Responses Financing Time Frames Changes to the Close of Escrow Date COE Penalty for Delayed Closing Seller Concessions

REO Purchase Contract-Addendum

No Seller’s Property Disclosure (As is)

Inspections and Responses

Financing Time Frames

Changes to the Close of Escrow Date COE

Penalty for Delayed Closing

Seller Concessions

Preferred Title Company Why does Seller have a preferred Escrow/Title Company? Seller may have already ordered a title commitment from their preferred vendor to address curative issues prior to sale Seller wants one point of contact for all communication on their REO inventory Seller wants spreadsheets and/or reporting of status of all of their REO inventory Seller wants consistent communication via various electronic platforms

Why does Seller have a preferred Escrow/Title Company?

Seller may have already ordered a title commitment from their preferred vendor to address curative issues prior to sale

Seller wants one point of contact for all communication on their REO inventory

Seller wants spreadsheets and/or reporting of status of all of their REO inventory

Seller wants consistent communication via various electronic platforms

Owners’ Title Policy How can the seller “force” us to use their Title Company? Isn’t that a RESPA violation? The Seller does “encourage” the Buyer to work with their preferred vendor for title and escrow Seller offers to pay for Buyer’s Owner’s Policy if Seller’s preferred vendor is used Buyer may have additional expense if Seller’s preferred vendor is not used

How can the seller “force” us to use their Title Company? Isn’t that a RESPA violation?

The Seller does “encourage” the Buyer to work with their preferred vendor for title and escrow

Seller offers to pay for Buyer’s Owner’s Policy if Seller’s preferred vendor is used

Buyer may have additional expense if Seller’s preferred vendor is not used

REO PROPERTIES REO Escrow and Closings Buyers should not expect to take possession immediately after signing their loan documents or depositing closing funds. It may take up to an additional 5 business days to get final Sellers HUD approval and seller signed closing documents. For this reason it is recommended that Buyer loan documents be delivered to First American Title a minimum of 5-7 days PRIOR to the close of escrow date specified in the contract.

REO Escrow and Closings

Buyers should not expect to take possession immediately after signing their loan documents or depositing closing funds.

It may take up to an additional 5 business days to get final Sellers HUD approval and seller signed closing documents.

For this reason it is recommended that Buyer loan documents be delivered to First American Title a minimum of 5-7 days PRIOR to the close of escrow date specified in the contract.

REO PROPERTIES REO and Agent Commissions Based on the Sales Price Less Seller Concessions Verify available commission with the listing agent at time of offer. Confirm the commission on the HUD prior to close of escrow . Notify your Escrow Officer of any conditions regarding a possible Bonus being paid by Seller.

REO and Agent Commissions

Based on the Sales Price

Less Seller Concessions

Verify available commission with the listing agent at time of offer.

Confirm the commission on the HUD prior to close of escrow .

Notify your Escrow Officer of any conditions regarding a possible Bonus being paid by Seller.

REO PROPERTIES REO Cancellations Earnest Money can only be refunded to the Buyer if they strictly adhere to the terms of the Sellers’ Addendum (time-frames and documentation, etc.) Earnest Money generally deemed to be forfeited if timely written notice is not given or documentation not provided

REO Cancellations

Earnest Money can only be refunded to the Buyer if they strictly adhere to the terms of the Sellers’ Addendum (time-frames and documentation, etc.)

Earnest Money generally deemed to be forfeited if timely written notice is not given or documentation not provided

Questions? “… There are Only Dumb Answers.”

?

Thank You Realtors ® !

GLOSSARY BPO Broker Price Opinion, analysis of Market Value COMP Comparative Market Analysis Deed in Lieu of Foreclosure Deed given by the owner to a lender to prevent the lender from bringing foreclosure proceedings. The validity of the deed depends to some degree on “fairness” under the circumstances. Deficiency Judgment The amount for which the borrower is personally liable on a note and mortgage if the foreclosure sale does not bring enough to cover the debt. Federal Tax Lien A lien attached to a property for non-payment of a federal tax. A federal tax lien is not automatically wiped out by foreclosing on a mortgage or trust deed recorded before the tax lien. FHLMC Freddie Mac Federal Home Loan Mortgage Corp Semi Governmental Purchaser of First Mortgages (Recently Nationalized) FNMA Fannie Mae Private Corporation dealing in the purchase of First Mortgages Forbearance The waiting for payment of a debt by a creditor after the debt becomes new. Foreclosure A proceeding in or out of court, to extinguish all rights, title, and interest of the owner of property in order to sell the property to satisfy a lien against it. HUD US Depart. Of Housing and Urban Development Notice of Default/of Trustee’s Deed The official recorded document acknowledging the missed payments of the borrower, an intent to sell the property to satisfy the lien and the date time and place of the sale. Short Sale A sale of property which includes some forgiveness of debt by the lender under a mortgage or deed of trust. The amount of debt forgiven may be considered income to the seller and taxable.

BPO

Broker Price Opinion, analysis of Market Value

COMP

Comparative Market Analysis

Deed in Lieu of Foreclosure

Deed given by the owner to a lender to prevent the lender from bringing foreclosure proceedings. The validity of the deed depends to some degree on “fairness” under the circumstances.

Deficiency Judgment

The amount for which the borrower is personally liable on a note and mortgage if the foreclosure sale does not bring enough to cover the debt.

Federal Tax Lien

A lien attached to a property for non-payment of a federal tax. A federal tax lien is not automatically wiped out by foreclosing on a mortgage or trust deed recorded before the tax lien.

FHLMC Freddie Mac

Federal Home Loan Mortgage Corp

Semi Governmental Purchaser of First Mortgages (Recently Nationalized)

FNMA Fannie Mae

Private Corporation dealing in the purchase

of First Mortgages

Forbearance

The waiting for payment of a debt by a creditor after the debt becomes new.

Foreclosure

A proceeding in or out of court, to extinguish all rights, title, and interest of the owner of property in order to sell the property to satisfy a lien against it.

HUD

US Depart. Of Housing and Urban Development

Notice of Default/of Trustee’s Deed

The official recorded document acknowledging the missed payments of the borrower, an intent to sell the property to satisfy the lien and the date time and place of the sale.

Short Sale

A sale of property which includes some forgiveness of debt by the lender under a mortgage or deed of trust. The amount of debt forgiven may be considered income to the seller and taxable.

Janette Waller Vice President Maricopa County Manager [email_address]

Vice President

Maricopa County Manager

[email_address]

Michael Oman Account Manager REO Services Arizona - Nevada [email_address]

Account Manager

REO Services

Arizona - Nevada

[email_address]

Document Appendix We have included clips from various REO addenda. Each REO seller is unique. Please review all contract documents with your client to best understand your rights and responsibilities with any REO transaction. Thank You.

No Warranties - As Is

No Warranties - As Is

Inspections and Repairs

Inspections and Repairs

Financing Time Frames

Financing Time Frames

Financing Time Frames

Closing Date Changes

Closing Date Changes

Delayed Closing Penalty

Delayed Closing Penalty

Seller Concessions

Seller Concessions

Seller Approval for COE

Sellers May Extend COE

Preferred Title Company

Cancellations Inspection Contingency Be sure that you know what the Sellers’ Addendum indicates is necessary, i.e. copies of inspection reports, etc. along with written notice

Inspection Contingency

Be sure that you know what the Sellers’ Addendum indicates is necessary, i.e. copies of inspection reports, etc. along with written notice

Cancellations Financing Contingency Again, be sure you know what the Sellers’ Addendum requires to cancel, i.e., 1003, Credit Denial Letter & Written Notice 1003, etc.

Financing Contingency

Again, be sure you know what the Sellers’ Addendum requires to cancel, i.e., 1003, Credit Denial Letter & Written Notice 1003, etc.

Thank You Realtors ® !

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