Zombie Foreclosure–What is it?

Zombie foreclosures happen when the homeowner assumes they have lost their home and moves when the bank begins foreclosure, but the foreclosure process is never completed. So both the homeowner and their title are caught in between this world and the next, like a zombie.

The problem is that once the homeowner leaves, there’s an opportunity for real estate taxes to go unpaid and the property to go unmaintained, which often leads to code enforcement violations, vandals, and even squatters. You wind up with a whole slew of new problems—which the homeowner, not the bank, can still be liable for without even knowing it

Your first step when fighting back against a zombie foreclosure is to check the county or tax records. These are online in most areas now and will show you if you’re still on the title.

Anyone who has been foreclosed on might want to do this, if only to be sure. If you see that the bank has started but not finished a foreclosure, contact the bank and try to find out what their plans are.

The good news is that most banks are far more open nowadays to negotiate a short sale, deed in lieu of foreclosure, or agree to a loan modification than they were when most of these foreclosure cases were started.

The next step is to review current records for past due taxes, code violations, or other liens, and check out the property condition. You want to make sure you do what you can to avoid any more damage than what has already occurred and to also secure the home.

Depending on the circumstances, you may be able to rent the home or move back into it—a happier ending than most zombie movies get to see.

 

Advertisements

New Short Sale Guidelines In Effect November 1

Starting today, Nov. 1, 2012, new short sale guidelines spearheaded by the
Federal Housing Finance Agency (FHFA) go into effect. The new rules impact all
mortgages under the federally controlled Fannie Mae and Freddie Mac.

One part of the change allows a handful of the nation’s larger mortgage servicers to
approve a short sale without needing Fannie or Freddie to sign off on it.
Servicers include in the agreement are:

CMG Mortgage Insurance
Company
• Essent Guaranty Inc.
• Genworth Mortgage Insurance
Corporation
• Mortgage Guaranty Insurance Corporation
• PMI Mortgage
Insurance Company
• Radian Guaranty, Inc., Republic Mortgage Insurance
Company

“We applaud the nation’s mortgage insurers for committing to work
with us and our servicers to help more borrowers obtain short sales and other
foreclosure alternatives,” says Tracy Mooney, senior vice president, servicing
and REO at Freddie Mac. “By paving the way for more borrowers to avoid
foreclosure, today’s announcement will support the housing recovery and help
reduce taxpayer losses.”

In addition to quicker short sale approval,
other changes become effective today. They including new guidelines for
homeowners hit by a financial hardship, moved by the military or held back by a
home’s second mortgage:

• Borrowers facing an approved hardship don’t
have to be delinquent.

• Service members with Permanent Change of Station
orders have greater flexibility, including the elimination of back-end
debt-to-income ratios or a cash contribution promissory note.

• Fannie
Mae and Freddie Mac won’t pursue deficiency judgments in certain cases under new
rules. Servicers will evaluate borrowers as part of the short sale approval
process.

• FHFA gave servicers more consistent guidelines to process and
execute short sales, and consolidate existing short sales programs into a single
uniform program.

• Fannie Mae and Freddie Mac will offer up to $6,000 to
second lien holders to expedite a short sale.

New Guideline Will Make Short Sales Easier for Military Homeowners

Under a new guideline, military members with Fannie Mae or Freddie Mac loans will now have an easier time with short sales.

Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco announced in a release Thursday that military homeowners who receive Permanent Change of Station (PCS) orders can sell their homes via short sale without having to go into default first.

“It is in everyone’s interest for the men and women serving in our armed forces to focus on the important job they are doing defending our country, rather than worry about the maintenance and leasing of a property in another jurisdiction,” said DeMarco in a release. “These Fannie Mae and Freddie Mac policy changes, in combination with related guidance last fall, should now provide military homeowners with access to the immediate and automatic full range of foreclosure alternatives.”

Last year, Fannie Mae and Freddie Mac issued guidance to servicers to have PCS orders count as a hardship for military members seeking relief.

The new policy takes an even greater step forward and will allow military members with PCS orders to sell a primary residence purchased on or before June 30, 2012 for less than the balance on their mortgages even when current on their payments. Short sales transactions typically require homeowners to be delinquent on their mortgage.

The GSEs also won’t pursue a deficiency judgment or a contribution under the new policy. Typically, borrowers contribute to closing costs and can also be pursued for the remaining balance after a short sale is completed.

Since PCS orders require military members to relocate, they can create a hardship, especially at a time when millions are underwater and can’t sell their home due to negative equity. This led many service members to be stuck with two residences or to default on their mortgage.

In response to the new guideline, Freddie Mac’s Interim Head of Single Family Business and Information Technology Paul Mullings said, “We look forward to working with our servicers on this new short sale policy. Together we can help ease the challenge of relocation for military families when Permanent Change of Station orders are received.”

The guideline was issued by the Consumer Financial Protection Bureau, Fed’s board, FDIC, National Credit Union Administration, and the OCC.

The new rule is only applicable to military homeowners with a GSE-backed mortgage; this information can be checked by visiting Fannie Mae or Freddie Mac online.

Help for Short Sale Process

The legislation, also known as the Prompt Notification of Short Sale Act, will require a written response from a lender no later than 75 days after receipt of the written request from the buyer.

The lender’s response to the buyer must specify acceptance, rejection, a counter offer, need for extension, and an estimation for when a decision will be reached. The servicer

will be limited to one extension of no more than 21 days.

The bill will also allow the buyer to be awarded $1000, plus “reasonable” attorney fees if the Act is violated.

According to a release from Short Sale New England, short sale homes do not bring down neighboring home values like foreclosed homes do, and 83 percent of short sale buyers are satisfied with their purchase, according to a 2012 Home Ownership Satisfaction Survey conducted by HomeGain.

“The current short sale process can be time consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a homeowner from foreclosure,” said Moe Veissi, president of the National Association of Realtors. “As the leading advocate for homeownership, realtors are supportive of any effort to improve the process for approving short sales.”

Equi-Trax released a survey last year on the issues real estate agents face when completing short sales. Guy Taylor, CEO at Equi-Trax, said 71.9 percent of respondents reported that a short sale can take four to nine months to complete, and they think that is simply too long.”

The survey also found that 18.2 percent of deals require less than three months to complete, with 10 percent requiring more than 10 months.

When agents in the survey were asked to how the short sale process can be improved, 57.6 percent said lenders should take less time to close transactions, 14 percent said borrowers should be better educated about short sales, and 40.4 percent said both of these changes are necessary to improve the process.

In April 2011, a similar bill was introduced by Reps. Tom Rooney (R-Florida) and Robert Andrews (D-New Jersey), but this version requested a response deadline of 45 days instead of 75 from lenders. The legislation never came up for debate before a House committee.