Thinking of a Loan Modification - WATCH THIS VIDEO!

If you are considering applying for a loan modification under the government's Home Affordable Modification Program (HAMP), there is a very helpful video that explains the process.

To watch this two-part video entitled "Navigating the Home Affordable Modification Program," click here.

FHA Limits Short-Sale Loans

Let's say that, three years ago, you bought a house for $200,000. You put down $50,000 and borrowed $150,000. Today, similar homes in your neighborhood are selling for $100,000. You feel like a chump. So why not just dump your old house in a short-sale, then buy another? Loan rates are low, especially FHA loans. Sounds tempting?

Before you decide, you better be aware of the latest HUD guidelines.

Starting right now, if you apply for a new FHA mortgage, you will be turned down if you sold your principal residence via a short-sale to “take advantage of declining market conditions,” or to “purchase a similar or superior property at a reduced price within a reasonable commuting distance” of the house you sold using a short-sale.

OK - so what if you keep your present home and rent it out? That way, you can use the rental income to qualify for a new loan, snap up that great short-sale deal down the street, and move in.

Don't count on it.

FHA guidelines will allow the lender to include the income from the rental, but only under very strict guidelines.

Basically, the lender may only include this rental income when the loan-to-value ratio on the vacated home is 75% or less. So if your house is worth $100,000, but the loan is $150,000, then the rental income will not be included when qualifying you for your new purchase loan.

If you are moving because of a job change, the rules may be more lenient. But you had better check with your lender to see if you still will qualify under these new guidelines.

Loan Modification Impacts Credit Score

Under the government's loan modification program, before a borrower's loan is permanently changed, they are given a trial modification. This can last for several months before a decision is made whether or not to permanently alter the loan.

What borrowers need to understand is the effect this trial period will have on their credit score. According to the Treasury Department, even if you have been current on all your loan payments, your FICO score will drop about 100 points. And if you had late or missed payments before the trial period, your score will drop even more. The longer you are in this trial period, the greater the impact will be on your score.

Once the modification is approved, the borrower's mortgage credit status will be listed as current which should improve the score. Even so, the delinquency remains on credit reports for up to seven years and can make getting credit for something else like a car difficult and expensive.

Federal Help For Military Personnel

The Department of Defense has expanded the Homeowner's Assistance Program (HAP) to help members of the military who are involved in a short sale. HAP is a law that is managed by the U.S. Army Corps of Engineers "to assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement."

Rather than list all the benefits and requirements here, I just wanted my readers to know that this option exists. If you want the details, go to the HAP website, http://hap.usace.army.mil.

Lenders to Halt Foreclosure Evictions Over the Holidays

Fannie Mae and Freddie Mac will suspend foreclosure evictions from December 19, 2009 through January 3, 2010. To help struggling families over the holidays, both owner-occupants and tenants living in properties foreclosed upon by Fannie Mae will not be evicted. Freddie Mac's suspension of evictions will be limited to properties up to four units.

In a similar move, Citigroup Inc. will suspend foreclosure sales and evictions for 30 days through January 17, 2010 for loans it owns. Citigroup's foreclosure moratorium, however, does not extend to loans it services on behalf of other investors. Given these developments, other lenders may follow suit, so check with the lender if appropriate.

Copyright © 2009 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)

Property Tax Reduction Scam Alert

In California, property taxes are based on the price you paid when you purchased your home. Every year, that value can increase by a specific percentage. However, the assessed value may never go higher than the actual fair market value of your home.

Let's say you bought your home in 2000 for $100,000. In 2005, that home might have sold for $150,000. But your property tax would still be based on your original $100,000 purchase price (plus the small annual increases).

Up until last year, most homeowners were happy with this arrangement. But with the downturn in the market, some buyers found themselves paying taxes based on values that were no longer valid. If you bought a home in 2006 in California for $200,000, that home today might only be worth $150,000. But your taxes are still based on the $200,000 purchase price.

But the property tax regulation has a provision to DECREASE your taxes if the values go down. In fact, many county assessors have been automatically decreasing values without being asked by the homeowners. But if yours has not gone down, or has not gone down enough in your opinion, you can request a reassessment. And here's where the scammers come in.

In the past couple of days I have received numerous phone calls and emails asking about the “2010 Property Tax Reduction Form” many of us received in the mail.

This mailer promises that, if you send this company $189, they “ will prepare and submit all necessary documentation to the County Office and Assessment appeals Board, and will act as your agent in all dealings with the County Assessor’s Office and at the Assessment Appeals Board Hearings.”

It looks very official, complete with Assessor’s ID number and a reply due date. But it’s all a scam!

If you think your property assessment is too high, you DO NOT need to pay ANYTHING! Reassessment is free. The form can be downloaded from the County Assessor’s website, or you can call them and they will mail the form to you – for FREE.

I have helped many neighbors fill out their reassessment forms. If you want help, call or email and I will assist you. Save your money and please don’t fall for this scam.

New FHA Guidelines Try To Protect Condo Buyers

Beginning February 1, 2010, FHA will implement new approval guidelines for condominium projects. To qualify for FHA mortgages, associations must:

•Maintain a reserve equal to 10% of the annual budget;

•Make sure no more than 15% of its owners are more than 30 days late with condominium fees;

•Allow lenders to review the HOA's financials and insurance policies;

•No more than 10% of the units may be held by a single investor;

•Fidelity insurance must be obtained for 20+ unit projects; and

•No more than 25% of space may be used for commercial purposes.

Though HOA's may find it painful to fulfill these requirements, in the long-term, meeting these new regulations will protect property values.

Associations that have been dragging their feet to update their HOA documentation will now have a financial incentive to "put their house in order". Lenders, knowing a condominium meets these new rules, will be more willing to lend to an approved project.

And FHA approval can only make the condos more attractive to prospective buyers. Knowing the project meets these new, tighter guidelines, a buyer can have more confidence in the quality of their investment.

New Short Sale Guidelines

Short sales are a disaster!

Banks take months before they decide whether or not to allow the seller to do a short sale. Once they do, and an offer comes in, banks take months to approve the offer. And if there are two lenders involved (seller has a first and a second loan against the property) it's even longer before a sale is approved.

This week, the U.S. Treasury Department announced new guidelines which are supposed to help.

In order to qualify under these new guidelines:

The property must be the home owner’s principal residence.
The home owner must be delinquent on the mortgage or close to defaulting.
The loan must have been made before Jan. 1, 2009, and be for less than $729,750.
The borrowers’ total monthly mortgage payment must exceed 31 percent of their before-tax income.

Here's what the plan has to offer:

Borrowers will receive $1,500 from the government for selling homes for less than the amount of their mortgages.
Mortgage-servicing companies will get $1,000 for each completed short sale.
Second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens.
Investors who hold the first mortgage can collect up to $1,000 from the government for allowing the payments.

In addition, borrowers who complete a short sale under these guidelines must be "fully released" from future liability for the debt.

Treasury Department Demands More Action on Loan Modifications

Press Releases

OBAMA ADMINISTRATION KICKS OFF
MORTGAGE MODIFICATION CONVERSION DRIVE

WASHINGTON - The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) today kick off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration’s Home Affordable Modification Program (HAMP) convert to permanent modifications. The modification program, which has helped over 650,000 borrowers, is part of the Administration’s broader commitment to stabilize housing markets and to provide relief to struggling homeowners and is a primary focus of financial stability efforts moving forward. Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year. Through the efforts being announced today, Treasury and HUD will implement new outreach tools and borrower resources to help convert as many trial modifications as possible to permanent ones.

"We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners," said the new Chief of Treasury’s Homeownership Preservation Office (HPO), Phyllis Caldwell. "We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones." In her new role, Caldwell will lead HPO’s conversion drive efforts.

"Encouraging borrowers to move through the process of converting trial modifications to permanent modifications remains a top priority for HUD," said HUD Assistant Secretary for Housing and FHA Commissioner David Stevens. "As a part of our continuing efforts to improve the execution of the HAMP program, HUD is committed to working with servicers, borrowers, housing counselors and others dedicated to homeownership preservation to improve the transition of distressed homeowners into affordable and sustainable mortgages."

With tens of thousands of trial modifications being made each week, the Administration is now working to ensure that eligible borrowers have the information and the assistance needed to move from the trial to the permanent modification phase. (All mortgage modifications begin with a trial phase to allow borrowers to submit the necessary documentation and determine whether the modified monthly payment is sustainable for them.) As the first round of modifications convert from the trial to permanent phase, the Administration has identified several strategies for addressing the challenges that borrowers confront in receiving permanent modifications.

In addition to the conversion drive that kicks off today, the Obama Administration has already taken several steps to make the transition from trial to permanent modification easier and more transparent by:

•Extending the period for trial modifications started on or before September 1st to give homeowners more time to submit required information;
•Streamlining the application process to minimize paperwork and simplify the submission process; meeting regularly with servicers to identify necessary improvement to borrower outreach and responsiveness;
•Developing operational metrics to hold servicers accountable for their performance, which will soon be reported publicly;
•Enhancing borrower resources on the MakingHomeAffordable.gov website and the Homeowner’s HOPE Hotline (888-995-HOPE) to provide direct access to tools and housing counselors.

The Mortgage Modification Conversion Drive will include the following:

•Servicer Accountability. As part of the Administration’s ongoing efforts to hold servicers accountable for their commitment to the program and responsibility to borrowers, the following measures will be added:
◦Top servicers will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers. Treasury/Fannie Mae "account liaisons" are being assigned to these servicers and will follow up daily as necessary to monitor progress against the servicer’s plan. Daily progress will be aggregated by the end of each business day and reported to the Administration.

◦Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.

◦The December MHA Servicer Performance Report will include the data on permanent modifications as well as the number of active trial period modifications that may convert by the end of the year if all borrower documents are successfully submitted, sorted by servicer and date.

◦Servicers will be required to report to the Administration the status of each modification to provide additional transparency about situations where borrowers face obstacles to moving to the permanent phase.

•Web tools for borrowers. Because the document submission process can be a challenge for many borrowers, the Administration has created new resources on www.MakingHomeAffordable.gov to simplify and streamline this step. New resources include:
◦Links to all of the required documents and an income verification checklist to help borrowers request a modification in four easy steps;

◦Comprehensive information about how the trial phase works, what borrower responsibilities are to convert to a permanent modification, and a new instructional video which provides step by step instruction for borrowers;

◦A toolkit for partner organizations to directly assist their constituents;

◦New web banners and tools for outreach partners to drive more borrowers to the site and Homeowner’s HOPE Hotline (888-995-HOPE).

•Engagement of state, local and community stakeholders. Through the conversion drive, the Administration is engaging all levels of government - state, local and county - to both increase awareness of the program and expand the resources available to borrowers as they navigate the modification process.
◦HUD will engage staff in its 81 field offices to distribute outreach tools. HUD will also encourage its 2700 HUD-Approved Counseling Organizations to distribute outreach information to participating borrowers.

◦By engaging the National Governors Association (NGA), National League of Cities (NLC) and National Association of Counties (NACo) the Administration is connecting with the thousands of state, local, and county offices on the frontlines in large and small communities across the country who are hardest hit by the foreclosure crisis. These offices will now have the tools to increase awareness of the program, connect with and educate borrowers and grassroots organizations on how to request a modification and take the additional steps to ensure they are converted to permanent status; and serve as an additional trusted resource for borrowers who are facing challenges with the program.

◦In partnering with the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, state regulators will now have enhanced tools to assist borrowers who are facing challenges in converting to a permanent modification and to report to the Administration on the progress and challenges borrowers and servicers are facing on the ground. Regulators will also be empowered to work directly with escalation and compliance teams to ensure that HAMP guidelines are consistently applied.

More information about the Obama Administration’s mortgage modification program can be found at www.MakingHomeAffordable.gov.

Did You Buy A Home From KB Home?

Hagens Berman Sobol Shapiro has filed a series of class-action lawsuits against KB Home, Countrywide and LandSafe. The suit claims that the builder, lender and appraisal company "conspired to systematically, artificially and illegally rig home appraisals in KB developments in an effort to boost home values and sales prices."

According to the complaint, when a KB homebuyer came to Countrywide for a loan, Countrywide sent all the appraisals to one specific person at Landsafe. This appraiser would write the appraisal at whatever value KB and Countrywide ordered.

Steve Berman, managing partner at Hagens Berman Sobol Shapiro, states “these three created a systemic and tightly controlled process to inflate home values and home sales with no regard for the homeowners or the dangerous loans the companies pushed on unsuspecting purchasers."

The lawsuits represents anyone in Arizona, Nevada, California, Texas, Colorado, Florida, South Carolina or North Carolina who purchased a home through KB Home and whose loan went through Countrywide. The law firm would like to hear from homeowners in these states who purchased their house from KB Home and financed through Countrywide. To contact attorneys please join this case or contact attorneys at kbhomes@hbsslaw.com.

Condo Loans Now Easier to Get

When the real estate market takes a downswing, condominiums are often hit the hardest. Part of the reason for this is that, as condos go into default, it becomes more and more difficult for the overall project to qualify under the lender's guidelines. So even if the individual borrower is qualified, the loan is denied because the complex does not meet the underwriting rules.

HUD has responded to this problem by changing condo lending rules. Some of these changes will make it easier for condominium owners, or would-be owners, to get loans.

Perhaps the most important change is that HUD has relaxed the rule which defines what percentage of a project needs to be sold before FHA will insure the loan. In the past, 50% of a project had to be owned by someone other than the developer. This made it difficult for the developers of new condo projects to find loans for prospective buyers. This percentage has now been dropped to 30%.

HUD still requires that at least 50% of the units be owner-occupied. But they will no longer count vacant or tenant-occupied, bank-owned properties when calculating this percentage.

So if you have tried to get a condo loan, either for refinance or purchase, and were told your condo project did not qualify, try again. It just may be that, under these new guidelines, your loan will be approved.

Fannie Mae Announces Deed for Lease™ Program

Press release from Fannie Mae

WASHINGTON, DC -- Fannie Mae (FNM/NYSE) is implementing the Deed for Lease™ Program under which qualifying homeowners facing foreclosure will be able to remain in their homes by signing a lease in connection with the voluntary transfer of the property deed back to the lender.

"The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications," said Jay Ryan, Vice President of Fannie Mae. "This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities."

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.

For additional information about the Deed for Lease Program, including full details on program eligibility, please review the Guide Announcement on www.efanniemae.com .

Effects of Bankruptcy, Foreclosure and Short Sale On Your Credit

Below is an article from the California Association of Realtors Legal Department. It deals with the credit consequences of bankruptcy, foreclosure and short sale. It's long and detailed. I considered giving you a summary, but the topic is too important to be dealt with in a cursory manner.

If you are considering bankruptcy, foreclosure, or a short sale, you may want to read the entire article. Contact your attorney or credit counselor if you have more questions.
________________________________________
One of the concerns a consumer has after experiencing a bankruptcy, foreclosure, or short sale (referred to as a "preforeclosure sale" by Fannie Mae) is the ability to obtain credit to purchase another home. Fannie Mae has updated its credit guidelines. This legal article summarizes those guidelines in Part I. In addition, since lenders use FICO scores in order to determine the creditworthiness of a borrower, this article covers the impact of a bankruptcy, foreclosure or short sale on FICO scores in Part II.


I. Fannie Mae Credit Guidelines


Q 1. How long is the time period after a foreclosure before a consumer can be eligible to obtain credit to purchase a home?


A Five years from the date the foreclosure sale was completed.


Additional requirements that apply after 5 years and up to 7 years following the completion date are as follows:


. The purchase of a principal residence is permitted with a minimum 10 percent down payment and minimum representative credit score of 680.
. Purchase of a second home or investment property is not permitted.
. Limited cash-out refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time.
. Cash-out refinances are not permitted for any occupancy type.
(Source: FNMA Announcement 08-16, 6-25-08 )


Q 2. Why do the additional requirements for foreclosures in Question 1 only apply from 5 to 7 years following the foreclosure completion date?


A According to Fannie Mae policy in Part X, Section 103 of the Selling Guide, Fannie Mae requires only a 7-year history to be reviewed for all credit and public record information. The 7-year timeframe also aligns with the information provided by the borrower on the loan application relative to disclosure of a past foreclosure action. (Source: FNMA Selling Guide, 4-1-09. )


Q 3. Does a shorter time period apply if the borrower has "extenuating circumstances" that led to the foreclosure?


A Yes. Three years from the date the foreclosure sale was completed. The same additional requirements apply as listed in Question 1 except the minimum credit score of 680 is not required. (Source: FNMA Announcement 08-16, 6-25-08. )


Q 4. What are"extenuating circumstances" ?


A Fannie Mae describes "extenuating circumstances" as follows:


Extenuating circumstances are nonrecurring events that are beyond the borrower's control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.


If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower's claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower's inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, listing agreements, lease agreements, tax returns (e.g., covering the periods prior to, during, and after a loss of employment).


The lender must obtain a letter from the borrower explaining the relevance of the documentation. The letter must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no reasonable options other than to default on his or her financial obligations.
(Source: FNMA Selling Guide, 4-1-09 at 391. )


Q 5. How long is the time period after a deed-in-lieu of foreclosure before a consumer can be eligible to obtain credit to purchase a property?


A Four years from the date the deed-in-lieu was executed.


Additional requirements that apply after 4 years and up to 7 years following the completion date are as follows:


. Borrower may purchase a property secured by a principal residence, second home, or investment property with the greater of 10 percent minimum down payment or the minimum down payment required for the transaction.
. Limited-cash-out and cash-out refinance transactions secured by a principal residence, second home, or investment property are permitted pursuant to the eligibility requirements in effect at that time.
(Source: FNMA Announcement 08-16, 6-25-08. )


Q 6. Does a shorter time period apply if the borrower has "extenuating circumstances" that led to the deed-in-lieu of foreclosure?


A Yes. Two years from the date the deed-in-lieu was executed. The same additional requirements apply as listed in Question 4 after 2 years up to 7 years. (Source: FNMA Announcement 08-16, 6-25-08. )


See Question 4 for the definition of "extenuating circumstances."


Q 7. How long is the time period after a "preforeclosure sale" before a consumer can be eligible to obtain credit to purchase a property?


A Two years from the completion date. No exceptions are permitted to the 2-year period due to extenuating circumstances. (Source: FNMA Announcement 08-16, 6-25-08. )


Q 8. What is a "preforeclosure sale" mentioned in Question 6 and is that the same as a short sale?


A "A preforeclosure sale involves the sale of the property by the borrower to a third party for less than the amount owed to satify the delinquent mortgage, as agreed to by the lender, investor, and mortgage insurer" (Source: FNMA Announcement 08-16, 6-25-08 ).
Although the terms preforeclosure sale and short sale have been used interchangeably, there is a significant difference for purposes of obtaining credit. For Fannie Mae purposes, a preforeclosure assumes that the borrower has been delinquent in paying his or her mortgage and the lender agrees to accept a lesser amount to avoid the time and expense of a foreclousre action. A short-sale, however, can also refer to situations in which the lender of the mortgage agrees to a payoff of a lesser amount than is actually owed, even on a current mortgage, to facilitate the sale of the property to a third party. (Source: FNMA Announcement 08-16 Q&A, 8-13-08. )


Q 9. Does a shorter time period apply if the borrower has "extenuating circumstances" that led to the preforeclosure (short) sale?


A No. There are no exceptions to the 2-year time period. (Source: FNMA Announcement 08-16, 6-25-08. )


Q 10. If a borrower sold his or her property as a short sale but was never delinquent on that mortgage and is now attempting to purchase a new primary residence, will Fannie Mae purchase the loan?


A The loan will be eligible for delivery to Fannie Mae provided that the borrower's previous mortgage history complies with Fannie Mae's excessive prior mortgage delinquency policy--that is the borrower does not have one or more 60-, 90-, 120-, or 150-day delinquencies reported within the 12 months prior to the credit report date--and the borrower has not entered into any agreement with the short sale lender to repay any amounts associated with the short sale, including a deficiency judgment. (Source: FNMA Announcement 08-16 Q&A, 8-13-08 ; FNMA Selling Guide, Part X, Chapter 3, Section 302.09. .)


Q 11. Are preforeclosure (short) sales and deed-in-lieu of foreclosure actions identified on a credit report?


A Preforeclosure sales may be reported as "paid in full" with a "settled for less than owed" remarks code, and the mortgage tradeline would indicate any recent delinquency. A deed-in-lieu may be reported by a remarks code indicating a deed-in-lieu. (Source: FNMA Announcement 08-16 Q&A, 8-13-08. )


Q 12. How long is the time period after a bankruptcy (all except Chapter 13) before a consumer can be eligible to obtain credit to purchase a property?


A Four years from the discharge or dismissal date of the bankruptcy action (Source: FNMA Announcement 08-16, 6-25-08 ).

Q 13. How long is the time period after a Chapter 13 bankruptcy before a consumer can be eligible to obtain credit to purchase a property?


A Two years from the discharge date and four years from the dismissal date (Source: FNMA Announcement 08-16, 6-25-08 ).


Q 14. Does a shorter time period apply if the borrower has "extenuating circumstances" that led to the bankruptcy (all actions)?


A Yes. Two years from the discharge or dismissal; however, no exceptions are permitted to the 2-year time period after a Chapter 13 discharge (Source: FNMA Announcement 08-16, 6-25-08 ).


See Question 4 for the definition of "extenuating circumstances."


Q 15. How long is the time period after multiple bankruptcy filings before a consumer can be eligible to obtain credit to purchase a property?


A Five years from the most recent dismissal or discharge date for borrowers with more than one bankruptcy filing within the past 7 years (Source: FNMA Announcement 08-16, 6-25-08 ).

Q 16. Does a shorter time period apply if the borrower has "extenuating circumstances" that led to the multiple bankruptcies?


A Yes. Three years from the most recent discharge or dismissal date. The most recent bankruptcy filing must have been the result of extenuating circumstances. (Source: FNMA Announcement 08-16, 6-25-08. )


See Question 4 for the definition of "extenuating circumstances."


Q 17. What is the difference between a Chapter 13 bankruptcy and a Chapter 7 bankruptcy?


A Chapter 13 permits a borrower with a regular income to propose a plan to repay some or all of his or her obligations over a period of up to five years. A borrower who files a Chapter 7 is permitted to retain exempt assets and receive a discharge of the borrower's debts. Chapter 7 is a relatively quick liquidation process that is generally completed within 120 days. Chapter 7 cases are rarely dismissed. (Source: FNMA Announcement 08-16 Q&A, 8-13-08. )


Q 18. What is the difference between a Chapter 13 dismissal and a Chapter 13 discharge?


A A borrower who files a Chapter 13 can dismiss the case at any time (voluntary dismissal) or the case may be dismissed by the court based on the borrower's failure to comply with the requirements of the Bankruptcy Code or to make the required payments. If the borrower who files a Chapter 13 case makes all of the payments required by the plan, the borrower receives a discharge at the end of the plan. A borrower who doesn't make all the payment required by the plan may still receive a discharge if the court finds, among other things, that the borrower made a certain amount of the payments and the borrower's failure to make all of the payments was due to circumstances beyond the borrower's control. (Source: FNMA Announcement 08-16 Q&A, 8-13-08. )


Q 19. What are the requirements to re-establish a credit history?


A After a bankruptcy or foreclosure-related action, a credit history must meet the following rquirements to be considered re-established:


. It must meet the requirements for elapsed time (as discussed in this article).
. It must reflect that all accounts are current as of the date of the mortgage application.
. it must include a minimum of four credit references. At least one of the references must be a traditional credit reference, and one of the references must be housing-related.
(1) A housing-related reference must cover the period following the bankruptcy discharge or dismissal, foreclosure, or deed-in-lieu, and can be in the form of mortgage payments or rental payments.
(2) If rental payments wre not reported to the credit repositories, the lender must obtain copies of bank statements, money orders, or canceled checks for the most recent 12-month period as a supplement to the rent verification.
. It must reflect three of the four credit references, including rental housing references, as active in the 24 months preceding the date of the mortgage application.
. It must include no more than two installment or revolving debt payments 30 days past due in the last 24 months.
. It must include no installment or revolving debt payments 60 or more days past due since the discharge or dismissal of the bankruptcy or the completion of the foreclosure-related action.
. It must include no housing debt payments past due since the discharge or dismissal of the bankruptcy or the completion of the foreclosure-related action.
. It must include no new public records since the discharge or dismissal of the bankruptcy or the completion of the foreclousre-related action. Public records include bankruptcies, foreclosures, deeds-in-lieu, preforeclosure sales, unpaid judgments or collections, garnishments, liens, etc.
(Source: FNMA Selling Guide, 4-1-09 at 392. )


II. Bankruptcy, Foreclosure, and Short Sale and the Impact on a FICO® Score


Q 20. What is a FICO® Score?

A A FICO® score is a number representing the creditworthiness of a person or the likelihood that person will pay his or her debts. The three credit reporting agencies, Equifax, Experian, and TransUnion, collect data about consumers in order to compile credit reports. The credit agencies use FICO® software to generate FICO® scores, which are then sold to lenders. Actually FICO® is just one of the several credit scoring systems available. The Fair Isaac Corporation (known as FICO®) created the first credit scoring system in 1958. Others are NextGen, VantageScore, and the CE Score. They all evaluate the creditworthiness of a borrower. However, FICO appears to be the most-used credit scoring system. A FICO® score is between 300 and 850. The higher the better the credit.


Each consumer has three credit scores at any given time for any given scoring model because the three credit agencies have their own databases, gather reports from different creditors, and receive information from creditors at different times.


Q 21. What factors go into determining a FICO® score?

A Credit scores are designed to measure the risk of default by taking into account various factors in a person's financial history. Although the exact formulas for calculating credit scores are closely-guarded secrets, FICO® has disclosed the following components and the approximate weighted contribution of each:


35% — Payment History – Late payments on bills, such as a mortgage, credit card or automobile loan, can cause a consumer’s FICO® score to drop. Paying bills as agreed over time will improve a consumer’s FICO® score.
30% — Credit Utilization - The ratio of current revolving debt (such as credit card balances) to the total available revolving credit (credit limits). Consumers can improve their FICO® scores by paying off debt and lowering their utilization ratio. The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on the FICO® score.
15% — Length of Credit History – As a consumer's credit history ages, assuming the consumer pays his or her bills, it can have a positive impact on the FICO® score.
10% — Types of Credit Used (installment, revolving, consumer finance) – Consumers can benefit by having a history of managing different types of credit.
10% — Recent search for credit and/or amount of credit obtained recently - Multiple credit inquiries for a consumer seeking to open new credit, such as credit cards, retail store accounts, and personal loans, can hurt an individual’s score. Applying for lots of new credit in a short period of time is also viewed as risky and can cause a drop in an individual’s score. However, individuals shopping for a mortgage or auto loan over a short period will likely not experience a decrease in their scores as a result of these types of inquiries.
(Source: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx)

Q 22. How does a mortgage modification affect my FICO® score?


A FICO® credit scores are calculated from the information in consumer credit reports. Whether a loan modification affects the borrower's FICO® score depends on whether and how the lender chooses to report the event to the credit bureau, as well as on the person's overall credit profile. If a lender indicates to a credit bureau that the consumer has not made payments on a mortgage as originally agreed, that information on the consumer's credit report could cause the consumer's FICO® score to decrease or it could have little to no impact on the score.
(Source: http://www.myfico.com/crediteducation/questions/Mortgage_Modification.aspx)


Q 23. How does a bankruptcy affect my FICO® score?

A A bankruptcy is considered a very negative event regardless of the type. A bankruptcy is factored into your FICO® score until it is removed from your credit report. As long as the bankruptcy is listed on your credit report, it will be factored into your score. If you are considering bankruptcy as an alternative to foreclosure, keep in mind that it may have a greater impact on your FICO® score.


Typically, you can expect bankruptcies to remain on your credit report, from the date filed, as follows:


(1) Chapter 11 and Chapter 7 bankruptcies up to 10 years.

(2) Completed Chapter 13 bankruptcies up to 7 years.


These time periods refer to the public record item associated with filing for bankruptcy. All of the individual accounts included in the bankruptcy should be removed from your credit report after 7 years. (Source: http://www.myfico.com/crediteducation/Questions/Bankruptcy-Types.aspx)


If you plan to file a bankruptcy, here are some things you should do to make sure your creditors are accurately reporting the bankruptcy filing:


(1) Check your credit report to ensure that accounts that were not part of the bankruptcy filing are not being reported with a bankruptcy status.

(2) Make sure your bankruptcy is removed as soon as it is eligible to be "purged" from your credit report.


After a bankruptcy has been filed, the sooner you begin re-establishing credit in good standing, the sooner you can expect your FICO® score to rebound. A good practice is to obtain a secured credit card and continually make all of your payments on time. As time passes and the impact of the bankruptcy lessens, you might apply for a traditional credit card and also continually make all of your payments on time.
(Source: http://www.myfico.com/crediteducation/questions/Bankruptcy-Reach.aspx)


Q 24. How does a short sale, deed-in-lieu-of foreclosure. or a foreclosure affect my FICO® score?

A The alternatives to foreclosure, such as a deed-in-lieu of foreclosure or a short sale, aren’t any better as far as a FICO® score is concerned.


The common alternatives to foreclosure, such as short sales, and deeds-in-lieu of foreclosure are all "not paid as agreed" accounts, and considered the same by your FICO® score. This is not to say that these may not be better options for you from a financial or tax perspective, just that they will be considered no better or worse for your FICO® score.


If you are considering bankruptcy as an alternative to foreclosure, that may have a greater impact on your FICO® score. While a foreclosure is a single account that you default on, declaring bankruptcy has the opportunity to affect multiple accounts and therefore has potential to have a greater negative impact on your FICO® score.
(Source: http://www.myfico.com/CreditEducation/Questions/foreclosure-alternatives-fico-score.aspx)


Q 25. What won't affect my FICO® score?

A The following information is not considered by the FICO® scoring formula:
. Your race, color, religion, national origin, sex, or marital status
. Your age
. Your salary, occupation, title, employer, date employed, or employment history
. Where you live
. Any interest rate being charged on a particular credit card or other account
. Certain types of inquiries (such as promotional, account review, insurance or employment-related inquiries)
. Credit counseling
. Any information not found in your credit report
. Any information that is not proven to be predictive of future credit performance
(Source: http://myfico.custhelp.com/cgi-bin/myfico.cfg/php/enduser/std_adp.php?p_faqid=55)


Q 26. Where can I get more information?

A This article is just one of the many legal publications and services offered by C.A.R. to its members. For a complete listing of C.A.R.'s legal products and services, please visit C.A.R. Online at http://www.car.org/.
________________________________________
The information contained herein is believed accurate as of October 13, 2009. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.

Homebuyer Tax Credit Extended & Expanded

The Senate has passed legislation to extend the tax credit for first-time home buyers. The House is expected to quickly approve the measure and send it to President Obama for signature.

Originally set to expire at the end of this month, the credit provides up to $8,000 for qualifying buyers. Now the credit will be available to buyers who sign purchase contract by April 30, 2010, and close their sale by the end of June.

In addition, the credit has been expanded to include qualifying homeowners who have lived in their present home at least 5 years and plan to purchase a new home. This credit would have a cap of $6,500.

Loan Limit Extention Signed Into Law

On Friday, President Obama signed a congressional resolution that extends through 2010 the current conforming loan limits of $417,000 for most areas and $729,750 for high-cost areas. Had he not signed, these limits would have expired at the end of 2009, thus returning to the lower limits set in 2008.

Conforming limits are important to borrowers because they define the maximum loan Freddie Mac, Fannie Mae and FHA will purchase. It is possible to borrower a larger loan amount, known as a non-conforming or "jumbo" loan. But these larger loans usually come with higher interest rates and greater loan fees.

Have Great Credit? Your Loan is DENIED!

You decide to refinance your home. You owe $100,000 and your house will easily appraise for $200,000. Your credit score is 820. You make $75,000 a year. You have no bills. You think this will be a slam-dunk.

Your file is DENIED!

Why? Last year, you disputed a charge on your credit card. The dispute was valid, the account was closed, and the creditor promised to remove the dispute notation from your credit file.

But they didn't. Fannie Mae is telling your lender that they will not buy any loans that have a notation on the credit report. So your lender won't approve your loan, since they can't sell it to Fannie Mae.

Here's what's going on. Fannie Mae has a computerized underwriting program that most lenders use. This program automatically spits out any borrower with a "consumer disputed" item.

If the lender still wants to make the loan and sell it to Fannie Mae, then the lender must manually underwrite the loan and determine if the dispute is credible. The fact is, most lenders don't want to go through the expense of this process. It's simpler and cheaper to just deny the loan.

Why does Fannie Mae have this policy? It is because of phony "credit repair" companies. Seems these weasels "fix" bad credit by disputing any derogatory item on the client's credit report. It doesn't matter if the client "earned" the bad rating; they simply dispute it all.

Why? When an item in a consumer's file is"disputed" most scoring software ignores these items when computing the credit score. So these "credit fixers" tell their clients to dispute ALL negative credit, accurate or not.

Fannie Mae has figured this scam out and they are trying to protect themselves from being defrauded. Meanwhile, honest people who are simply trying to protect their credit by disputing legitimate errors are out of luck.

If this happens to you, talk to your loan agent and push the lender to manually underwrite your loan. And don't give up hope. Fannie Mae is reviewing its policy and may consider changing it.

You Think it's Hard to Get a Loan Now?

Just wait a few weeks!

Starting December 11, Fannie Mae will require every borrower have a loan score of at least 620. And if your down payment is less than 25%, you'll need a score of at least 660. If borrowers don't meet those minimum scores, Fannie won't buy their loans. And if the lenders can't sell the loans to Fannie, they won't make the loans to the borrowers.

But Fannie's not the only agency making life tougher for borrowers. Starting November 17, the FHA will change its "streamline refinance" program to be a lot less "streamline".

This program is for homeowners who already have FHA-insured mortgages. In the past, these loans did not require credit checks or employment verification. And if the refinanced amount did not exceed the original loan amount, an appraisal was not needed.

Come mid-November, borrowers will have to verify that they have paying jobs and will have their credit scores checked. And if the new loan amount exceeds the existing balance (as opposed to the original loan amount) an appraisal will be required.

Say, for example, a couple of years ago you got an FHA insured loan for $100,000. Now you owe $80,000. If you want to refinance for an amount over $80,000, you'll need an appraisal. But remember there are closing costs involved in getting a loan. So, unless you have the cash to pay the closing costs, you'll need that appraisal to roll those costs into the new loan amount.

First-Time Home Buyer Credit Scams

I am always amazed at the amount of energy scammers put into developing new ways to cheat people out of their money. And the person they are cheating is YOU.

In 2008, the First-Time Home Buyer Tax Credit was passed. This allowed first-time homeowners to claim a tax credit on their federal tax return. There are specific requirements the buyer must meet in order to claim this credit. (See article for details.)

To date, the IRS has identified 167 distinct "criminal schemes," involving over 100,000 unjustified or fraudulent claims.

Why should you be concerned? First, your money is being spent trying to catch these crooks. Second, these criminals are not paying their fair share of taxes, so you have to pay more to compensate. And third, the government is considering extending this tax credit. But this extension is now in jeopardy because of these thieves.

California Gets Tough With Loan Scammers

For months I have been harping that loan modification companies are, by and large, scams. For months I have been telling you that, if a "loan modification specialist" request fees up front, you should RUN THE OTHER WAY!

Now California has turned my rants into law. Effective October 11, 2009 through January 1, 2013, it is now illegal for anyone - real estate brokers, attorneys, so-called "short-sale specialists," anyone - from receiving any fees for negotiating or arranging a loan modification until AFTER that person fully performs each and every service as promised. Up-front fees are now illegal in California!

This new law also requires that the borrower receive a special notice telling the borrower that it is unnecessary to pay someone to help you modify your loan. Get it? Even the state is telling you that you do not need these scammers to "help" you. Plain and simple, you are better off without them.

So now, not only have you been warned against these slime buckets, one state has made their scams illegal. Wanna bet there are still those of you still who will email me asking if they should hire a "loan modification specialist?"

Help From Fannie and Freddie to Buy Foreclosed Homes

Fannie Mae and Freddie Mac are offering financing incentives for buyers of foreclosed homes owned by Fannie and Freddie. Home buyers have until Oct. 30 to apply for Freddie Mac’s SmartBuy program, which started in July, and offers up to 3.5 percent of a home’s sale price to help cover closing costs.

To qualify, the home must be a principal residence and must be selected from Freddie Mac’s HomeSteps Web site (www.homesteps.com/homeshoppers.htm ) for its foreclosed properties. Loans must close by year’s end. The HomeSteps properties also include two-year warranties on major appliances and electrical, plumbing, and air-conditioning and heating systems.

Fannie Mae’s HomePath program (www.homepath.com ) is an ongoing program and offers more incentives than Freddie Mac’s. Through participating lenders, Fannie will offer mortgages to buyers who make a down payment of 3 percent. The buyers do not have to secure private mortgage insurance, a common practice with nearly all lenders. Home buyers also can negotiate for Fannie Mae to offer closing-cost assistance. Unlike Freddie Mac’s program, Fannie’s assistance level is not capped. Under the HomePath program, the average participating homeowner has received payments equivalent to 3.75 percent of the loan’s value.

And Last Place Goes To....

Wondering which bank has the worst record for loan modifications? That dubious honor goes to Bank of America!

A report issued last week by the Treasury Department shows that, of those borrowers potentially eligible to have their loans modified under the Making Home Affordable program, only 11% have been given a modification by Bank of America. That places them at the bottom of the list of major banks involved in the program.

Good News/Bad News

The good news is, the economy is getting better. The bad news is.... the economy is getting better.

Banks Making Short Sales Tougher

Banks are backing away from short sales, forcing sellers to pay extra at closing or demanding a promissory note for the amount due. One-third of borrowers owe more on their mortgages than their properties are worth, according First American CoreLogic.

When their situations were really tough, most banks preferred short sales because they were their best opportunity to get the most money back. But with an improving economy, and because the losses on many of these properties have already been written off the books, banks are increasingly reluctant to negotiate a short sale.

Today, banks demand 9.5 weeks to respond to a short-sale request, compared to 4.5 weeks a year ago, according to research firm Campbell Communications. Their reluctance is frequently stymieing sales and frustrating real estate practitioners.

Source: BusinessWeek, Christopher Palmeri (10/09/2009)

Checking the Loan Modification Pulse

The federal Office of the Comptroller of the Currency and the Office of Thrift Supervision released their Mortgage Metric Report for second quarter 2009.

It says, in part, of the homeowners who received loan modifications in the first half 2008, 50% of them were, one year later, more than 2 months late with their payments. But those who received the biggest modifications did better than those who did not.

For example, only a third of the borrowers whose monthly payments were reduced by 20% or more were likely to be late, as opposed to 60% of the borrowers who received smaller modifications.

The report covers 60% of all loans made on US residences. To read the report in its entirely, go to http://www.occ.treas.gov/ftp/release/2009-118a.pdf

NACA Save the Dream Tour Continues

The Neighborhood Assistance Corporation of America (NACA) is out on tour.

NACA is a homeowner advocacy group that uses sometimes controversial tactics to keep people in their homes. Recently NACA decided to start a national tour. Meeting in cities across the US, NACA offers free counselling sessions for homeowners who are being threatened with the loss of their homes.

Armed with financial information, homeowners meet with counselors who help them figure out how much of a housing payment they really can afford. Then, on the spot, the homeowner meets with a bank representative who has the authority to permanently restructure the loan to make it more affordable.

Sometimes this means lowering the rate; sometimes the amount of the principal is decreased; sometimes both are done. But whatever the solution, it is for the life of the loan.

NACA cannot help everyone. But for those who have had their loans restructured, it has allowed them to keep their homes.

To see if NACA will be in your area or to get more information, go to www.naca.com.

Mortgage Problems Are Walloping Borrowers' Credit Scores

Homeowners who find themselves struggling with mortgage payments and unsure how to handle the situation—short sale, foreclosure, or walk away—are advised to consider the impact of each on their credit scores.

Loan modifications that roll late payments and penalties into principal debt owed on the house can actually increase borrowers’ scores modestly, while refinancing underwater mortgages may have little or no negative effect on credit scores, according to Vantage Solutions, a scoring company created by the three national credit bureaus.

Short sales on the other hand can trigger large declines in credit scores, according to researchers. A homeowner with an excellent credit score might see a 120 to 130 point decline after a short sale.

Homeowners who choose to walk away from the home and stop payments altogether should expect their credit scores to fall 140 to 150 points, plus negative marks on their credit bureau files for up to seven years.

People filing for bankruptcy protection covering all their debts will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers’ credit bureau files for 10 years.

Homeowners facing financial stress can experience minimal declines to their scores if they contact their loan servicer or lender when they first discover that they may have trouble making their monthly payments. But good luck in getting them to respond in time to make a difference!

Don't Be a Sucker!

Yes, I know I keep harping on this issue. But the number of people getting ripped off by foreclosure scam artists keeps rising. So let's keep it simple.

Want to be CERTAIN that the company offering to help you avoid foreclosure is a scam? Here are three sure-fire signs. If the modification company does ANY of the following - RUN THE OTHER WAY!

If they guarantee that the lender won't foreclose - THEY ARE SCAMMING YOU!

If they ask for any money up-front - THEY ARE SCAMMING YOU!

If they tell you to send your mortgage payments to them instead of the bank - THEY ARE SCAMMING YOU!

I know we all want to hope for the impossible. But these are evil people taking advantage of us at our most vulnerable. Don't fall for their lies. All they can guarantee is that you will lose your home, as well as any money you give them.

The REAL People's Court

On December 5, 2008, Bank of America shareholders voted to approve a merger with the ailing Merrill Lynch. What both companies neglected to reveal was that, just prior to the merger, Merrill Lynch paid out $3.6 billion in bonuses. The Securities and Exchange Commission stepped in, claiming that Bank of America "materially lied" to its shareholders.

Bank of America agreed to settle with the SEC for a fine of $33 million. The settlement had to be approved by a federal district judge. No one anticipated a problem - Bank of America agreed to pay; the SEC agreed to the amount. All that was needed was the court's stamp of approval. But neither Bank of America nor the SEC anticipated Judge Jed S. Rakoff.

Today Judge Rakoff rejected the settlement, stating that "the proposed consent judgment is neither fair, nor reasonable, nor adequate" to protect the public interest. Judge Rakoff understood that Bank of America's shareholders would be the ones to pay the fine.Yet these are the same shareholders who were allegedly damage by the lack of disclosure! He writes that the settlement "does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the bank's alleged misconduct now pay the penalty for that misconduct."

He also takes the SEC to task for agreeing to such a settlement. The proposed settlement “suggests a rather cynical relationship between the parties: the S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger; the bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth.”

The case will now go to trial. I can only hope the trial judge is as concerned about the "Average Joe" as Judge Rakoff.

Obama's Mortgage Relief Program Growing

By ALAN ZIBEL, AP Real Estate Writer
Wednesday, September 9, 2009
(09-09) 14:10 PDT WASHINGTON (AP) --

The Obama administration's $50 billion mortgage relief program is finally picking up speed after a sluggish and disappointing start: Nearly early one in five eligible homeowners have been offered help so far.

The "Making Home Affordable" plan was launched with great fanfare in March. As of last month, lenders had sent out more than 571,000 offers to reduce borrowers' monthly payments, the Treasury Department said Wednesday.

That's 19 percent of the nearly 3 million homeowners eligible for a loan modification under the plan, up from 15 percent at the end of July.

"There are signs the plan is working," said Michael Barr, assistant Treasury secretary for financial institutions. "But we can do better."

Much better, lawmakers and housing counselors say.

"We think that you're missing the mark," Rep. Maxine Waters, D-Calif., told a panel of mortgage industry executives at a House hearing Wednesday.

Of the modifications offered, about 360,000 borrowers, or 12 percent, have signed up for three-month trial modifications, which are supposed to be extended for five years if the homeowners make their payments on time.

To increase pressure on the industry, Waters and other lawmakers threatened to revive a failed proposal, opposed by banking lobbyists, to let bankruptcy judges rewrite the terms of a mortgage.

That change is necessary, consumer groups say, because getting a lender to do so voluntarily is still a time-consuming, bureaucratic nightmare. Many lenders are still scheduling foreclosure sales, and charging borrowers fees for participating in the Obama plan.

"The administration has got to put some teeth in this and really get some consequences for the lenders and servicers who are not cooperating," said Bonnie Mathias, a board member of the Association of Community Organizations for Reform Now, or ACORN.

But mortgage executives say they are racing to implement the program, hiring thousands of workers to handle an unprecedented flood of calls.

"We fully understand the urgency," Jack Shackett, Bank of America's head of credit loss prevention, told lawmakers. "We understand that we have a long way to go under very challenging circumstances."

Bank of America has doubled its number of trial modifications in two months to nearly 60,000. But it still lags its competitors, having enrolled about 7 percent of its 836,000 eligible loans, compared with 25 percent for JPMorgan Chase & Co.

The Treasury Department's decision to publish those numbers has clearly provided a powerful inventive for many in the industry.

Lenders are "concerned about the report card showing them in a worse light than their peers," said David Stevens, an assistant secretary at the Department of Housing and Urban Development. "Nobody wants to be a low performer on that score card."

Industry executives also say they are planning to work with Obama administration officials on a possible extension of the program to unemployed homeowners. Also under consideration is finding a way to help borrowers with "pick-a-payment" or option ARM loans, which gave borrowers the ability to defer some of their interest payments and add them to the principal.

Treasury says 48 mortgage companies are now involved in the program, up from 38 in July. The companies have requested financial information from almost two-thirds of eligible borrowers and say they are on track to have 500,000 loan modifications in place by Nov. 1.

The program is voluntary, relying on subsidies to encourage mortgage companies to participate. Lenders must agree to reduce the loan payments to 38 percent of a borrower's monthly pretax income. After that, the government and lender split the cost of bringing the payment down to 31 percent.

Borrowers can receive rates as low as 2 percent for five years. Eligible borrowers have to provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify.

But some borrowers are in such dire financial shape that they don't know if getting a modification will be the magic bullet.

Steve Rudolf, 62, a talent agent in Tampa, Fla., has managed to get a modification on his $124,000 home equity line, but has had no luck with his primary mortgage. While he has yet to miss a payment, his savings have nearly run out.

"Some of this I brought on myself," through bad investments, Rudolf said. "But I didn't know that the world's worst economic crisis for housing was going to happen.

From the Trenches - Deadly Appraisals

Today I had three phone calls dealing with appraisal problems.

The first was from a broker who called me for help. His client was in contract to buy a home and the appraisal came in $150,000 under the contract price. Because I specialize in this area, he wanted to know if I could give him some comparables to justify the purchase price to the appraiser.

This same broker contacted me a few weeks earlier when his client first wanted to write an offer. Knowing I was familiar with the area, he asked if I thought the list price was appropriate. At that time I told him the property was overpriced. I pointed out that the listing agent did not price the property in line with other, similar, homes which had sold. I provided him with these addresses and sales prices. In essence, I "appraised" the property for him.

But his client wanted the home anyway and put in a high bid. When it came time for the bank appraisal, the appraiser used the same comparables I gave to the sales agent. Not surprisingly, the appraisal came in at a lower value, the one justified by the comparable sales.

The second call came from one of my clients. His lender had just informed him that the appraisal on the home he wants to buy came in $130,000 below the contract price. The third call was from another appraiser who had also been hired to appraise this same home. That appraisal came in $200,000 under the contract price!

When I looked at the comparables used in these last two appraisals, it became clear that these appraisers, neither of whom are local, were not familiar with the home they appraised. They used comparables that were located in different neighborhoods and did not have the same amenities as my client's property. And because they used inappropriate comparables, they wrote incorrect appraisals.

The saying "all real estate is local" is true, not just for Realtors, but for appraisers. The need for area specialists, people who are intimate with the details of a specific market segment, is more important now than ever. Unfortunately, the trend in the appraisal field has been to move away from local appraisers and towards large companies that cover big geographic areas. It's easier for the lender to schedule a series of appraisals- one phone call can cover a number of appraisal appointments. But it is worse for the client who sometimes gets an incorrect appraisal that can turn out to be a "deal killer".

Tips For Borrowers Dealing With Loan Servicers

Many homeowners have experienced difficulties and frustration getting through to their loan servicer when trying to obtain a loan modification. To help alleviate some of the stress associated with this task, an attorney with the National Consumer Law Center in Boston is offering the following tips:

• Consumers should keep detailed written records of every contact they have with their servicer,
including logs of phone calls and copies of written correspondence.

• If the servicer makes a promise, such as crediting a payment, modifying the loan, or stopping a
foreclosure sale, for example, the homeowner must get it in writing.

• When seeking a loan modification, consumers should send a request in writing asking the servicer who owns the mortgage loan. Some banks and investors have policies on which loans they will modify.

• Consumers should beware of servicers advising them to stop making payments because they have applied for a loan modification. Instead, homeowners should continue making payments for as long as possible, even if they cannot make the payment in full. Otherwise, the loan will accrue
more interest, and will cost more in the long run.

• Borrowers who feel they cannot resolve their problem or those who think their servicer may be
violating their rights are advised to contact a non-profit housing counselor or seek legal help.
Housing counselors can help negotiate a loan modification for free.

• Consumers can visit the Treasury’s homeowners Web site http://www.makinghomeaffordable.gov to find out if they qualify for a loan modification under the Obama administration’s program Making Home Affordable.

California Association of Realtor Mortgage Update

Treasury Announces Home Price Decline Protection Incentives

Press Release

July 28, 2009

WASHINGTON – As part of an ongoing effort to expand relief to struggling homeowners, Treasury released today the Supplemental Directive for its Home Price Decline Protection (HPDP) program, a component of the Home Affordable Modification Program (HAMP). HPDP provides additional incentive payments for modifications on properties located in areas where home prices have recently declined. The purpose of the program is to encourage additional lender participation and HAMP modifications in areas with recent price declines by helping to offset any incremental collateral loss on modifications that do not succeed. HPDP will help ensure that borrowers in areas with recent home price declines have the opportunity to stay in their homes, thereby minimizing foreclosures, which further depress home values.

“This is an important next step in our multi-faceted efforts to bring relief to struggling homeowners and stabilize the housing market,” said Assistant Secretary for Financial Institutions Michael Barr. “Home price decline protection can help homeowners who may not have been reached otherwise.”

All HAMP loan modifications begun after September 1st, 2009 are eligible for HPDP payments.

HAMP offers incentives to investors/lenders, servicers, and homeowners for successful mortgage modifications. The “pay-for-success” structure of HAMP provides incentives to create sustainable mortgage modifications in a manner most cost effective for taxpayers.

Treasury has allocated a total of up to $10 billion for the HPDP program, but the actual amount spent will depend on the home price trends. The funds available to individual servicers to pay HPDP and all other incentives on HAMP modifications will be capped according to the Program Participation Cap included in their Servicer Participation Agreement. Treasury will establish each servicer’s initial cap by estimating the number of modifications that servicer is expected to perform during the term of HAMP.

The Home Affordable Modification Program (HAMP) commits $75 billion dollars, including $50 billion of funds from the Troubled Asset Relief Program, to encourage loan modifications that will provide sustainably affordable mortgage payments for borrowers.

HAMP is one component of Making Home Affordable, the Administration’s comprehensive plan to stabilize the US housing market and offer assistance to millions of homeowners by reducing mortgage payments and preventing avoidable foreclosures. Making Home affordable includes: (1) the $75 billion HAMP program, (2) the Home Affordable Refinancing Program providing increased refinancing opportunities for borrowers with high loan-to-value ratios and (3) a $200 billion commitment to increase confidence in the GSEs and support increased refinancing generally.

From the Trenches - Credit Consequences of Foreclosures & Short Sales

The other day, I was contacted by a couple who wanted to purchase a home. The husband has a secure, long-term job with a substantial income. The husband received a promotion, but it required that he sell his home (which was held only in his name) and move. Because he was "underwater" on his loan (i.e. owed more than the house was now worth) he decided to do a short-sale.

Prior to the short-sale, the husband's credit score was well over 800. After the sale, it dropped about 50 points, still an excellent score. His wife's credit score remained over 800. With his secure, high-income job, great credit score, and almost 50% down payment, he thought they would be able to buy a new home.

He thought wrong. In trying to investigate this issue, I came across Fannie Mae guidelines which state that borrowers must wait four years after a short-sale, bankruptcy, or foreclosure before they can qualify for a new home loan. If they can prove hardship, then this waiting period may be reduced to two years.

Has anyone recently been through a short-sale, foreclosure or bankruptcy and then borrowed money to purchase a home? If so, I would appreciate hearing about your experiences. It could help a lot of people who may be trying to decide if one of these options makes sense for them.

From the Trenches - A Letter to the President & CEO of Bank of America

July 28, 2009

Kenneth Lewis
President and CEO
Bank of America
ken.d.lewis@bankofamerica.com

cc: Timothy F. Geithner
Secretary of the Treasury
United States
timothy.geithner@do.treas.gov

Mr. Lewis:

I am sure you are aware of the myriad of complaints lodged against banks regarding the short-sale process. As someone who has run residential lending divisions of banks and savings and loans, been involved in the closure of lending institutions in the 1980’s, and has held a California real estate broker’s license for 25 years, I am very familiar with and sympathetic towards the lending problems Bank of America inherited from Country Wide. But I wanted to relate to you my most recent experience in an attempt to help you understand why your institution’s short sale program is inefficient.

I listed a home as a short sale in March, 2009. Because this is a condominium, setting a fair market value was not too difficult. In this same complex, there is an identical unit that has gone into foreclosure. I listed our subject property $9,000 above this foreclosure.

Careful to submit all required documents, I had the bank’s approval to move forward with the sale within a month. In May, the seller declared bankruptcy, but in June I received permission, both from the Bank as well as the seller’s attorney, to move forward with the short-sale.

In the middle of June, I submitted an offer to your short-sale department. The offer was at full list price. On July 24 I called to get a status update. I was told the buyer’s offer was rejected. I requested an explanation as to what was wrong with the offer as presented; no explanation was given. I requested a counter-offer; I was told no counter-offer would be supplied. I was simply told to submit a new offer, and the review process would begin again.

Mr. Lewis, I cannot understand how your short-sale department can claim to want to sell this home, yet respond in this manner. This listing is now unsalable. If I raise the list price, I will be so far above market value that, even if another offer comes in, it will not appraise. I can only assume that the bank wishes to foreclose.

Please let me know if the Bank, in fact, prefers to allow the home to go into foreclosure. If that is the case, then I will return the listing to the seller.

Thank for your consideration,

Ida Abelson
Broker
Brickyard Realty

Countrywide Offers Assistance to Former Customers

Bank of America, which acquired Countrywide Financial Corp., one of the most active of the subprime lenders, has begun issuing checks to its borrowers who are eligible for foreclosure assistance under an agreement with attorneys general in 40 states.

Borrowers most likely to be eligible for assistance must have experienced a foreclosure, short sale, or deed-in-lieu of foreclosure after taking out a Countrywide mortgage. Rust Consulting, a third-party administrator, is managing the program, and notifying and paying eligible customers.

Source: Reuters News, Steve Eder (07/23/2009)

"Operation Loan Lies"

Federal and State Agencies Target Mortgage Foreclosure Rescue and Loan Modification Scams

FTC Leads “Operation Loan Lies” to Stop Fraud and Help Distressed Homeowners

Federal Trade Commission Chairman Jon Leibowitz, joined by California Attorney General Jerry Brown, today announced Operation Loan Lies, a coordinated national law enforcement effort to crack down on mortgage modification scams. The operation involves 189 actions by 25 federal and state agencies against defendants who deceptively marketed foreclosure rescue and mortgage modification services. The FTC actions, which affect consumers throughout the nation, are being announced in southern California, where the scams originated.

“These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” FTC Chairman Jon Leibowitz said. “They promise to rescue homeowners in troubled financial waters, but after they take their money they throw them an anchor instead of a lifeline. People facing foreclosure should avoid any company or individual that requires a fee in advance, guarantees to stop a foreclosure or modify a loan, or advises the homeowner to stop paying the mortgage company.”

The FTC announced four lawsuits, bringing to 14 the number of mortgage foreclosure rescue and loan modification scam cases the Commission has brought since April. Twenty-three state attorneys general and other agencies are participating in the operation, taking action against 178 companies engaged in these types of deception. The FTC also announced a settlement in a lawsuit filed last November.

The FTC charged that the defendants falsely claimed that they would either obtain a mortgage loan modification or stop foreclosure, or both, and that some of the defendants falsely represented that they would give consumers refunds if they failed to do so. After charging consumers the equivalent of one month’s mortgage payment or more in advance, these companies often did little or nothing to help homeowners renegotiate their mortgages or stop foreclosure. After failing to provide the promised services, the defendants that promised refunds did not honor those promises. In each case the FTC is asking the court for consumer redress and a permanent bar on the deceptive practices. The FTC would like to thank the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury and the Special Inspector General of the Troubled Asset Relief Program (SIG-TARP) for their invaluable assistance in these cases.

CA State Attorney General Requires Foreclosure Consultants to Register & Post $100,000 Bond

Continuing his fight against scam artists who "prey on" vulnerable Californians, Attorney General Edmund G. Brown Jr. issued a directive forcing foreclosure consultants to register with his office and post a $100,000 bond by July 1, 2009.

Those who fail to do so will be in violation of state law, subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation.

"California is awash with con artists who prey on vulnerable families facing foreclosure," Brown said. "By forcing foreclosure consultants to submit detailed information to my office and post a $100,000 bond, this registry will help bring long-overdue transparency to this shadowy world."

Up and down the state, scam artists pose as legitimate foreclosure consultants, promising homeowners they will prevent foreclosure. In reality, these scam artists charge huge up-front costs, but don't provide an ounce of help.

Earlier this month, Brown's office prosecuted a scam artist who provided hundreds of homeowners with forged bank documents and directed them to send their mortgage payments to accounts she had created, instead of the homeowners' lender.

Additionally, Brown's office has seen a significant increase in the number of complaints from homeowners regarding foreclosure consultants.

The registry unveiled today will provide Californians with information about potential consultants and recourse in the event that a consultant violates the law.

All foreclosure consultants operating in California must post a $100,000 bond and register with Brown's office by July 1, 2009 and submit the following information:
- Name, address, and telephone number;
- All names, addresses, telephone numbers, websites, and e-mail addresses used or proposed to be used in connection with their business;
- Copies of all advertising;
- Copies of each different contract the consultant will use with consumers; and
- A copy of its $100,000 bond.

Foreclosure consultants who provide proper information will receive a Certificate of Registration. Brown's office, however, may refuse to issue, or revoke, a Certificate of Registration if the foreclosure consultant has made any misstatement in its registration form, has been convicted of fraud or misrepresentation, has been convicted of a violation of the state's foreclosure consultant laws, California's false advertising, unfair or deceptive practices laws or other laws dealing with mortgages.

If the company violates the law, a court may order restitution to victims out of proceeds from the $100,000 bond.

In order to obtain a Certificate of Registration by July 1, 2009, foreclosure consultants should send in their registration application and materials as soon as possible so they can be reviewed prior to July 1.

The registry was established through legislation sponsored by Speaker of the Assembly Karen Bass, AB 180, which was signed into law last year.

A copy of the registration forms may be found at http://ag.ca.gov/register.php under the "Foreclosure Consultant Registry."

After July 1, 2009, consumers can call the Attorney General's office to determine whether the company they are considering dealing with has been issued a Certificate of Registration.

Tips for Homeowners

DON'T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.

DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.

DON'T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.

DON'T transfer title or sell your house to a "foreclosure rescuer." Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called "rescuers" use to evict homeowners and steal all or most of the home's equity.

DON'T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

DON'T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the "rescuer."

DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or www.hud.gov.

Why Lenders Don't Want to Modify Loans

The Federal Reserve Bank of Boston just published an abstract ominously entitled Why Don’t Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures, and Securitization. As frightening as the title is, the results are worse.

The authors analyzed 665,410 loans originated between 2005 and 2007 that were over 60 days delinquent. Here are the results:

3% received modifications that resulted in lower monthly payments;
5.5% received modifications, but these did not result in lower monthly payments;
30% were able to fix their delinquency issues without any help from the lenders; and
45% of the approximately 150,000 borrowers who received some kind of aid ended up in arrears again.

The bottom line, according to Boston Fed senior economist Paul S. Willen, is that “loan modification is not profitable for lenders....A lot of people you give assistance to would default either way or won’t default either way. They (the banks) are trying to maximize profits, and at this point maximizing profits does not mean modifying loans.’’

So what's the solution? According to Willen, the feds should give the money directly to the borrower. “You have more money going to the banks and the servicers than you do to the homeowners,’’ he said. “It would make more sense to just give money to the borrowers.’’

Major Change in Government's Foreclosure Prevention Plan

In February, President Obama announced the Home Affordability Program. Under this program, borrowers with loans owned or guaranteed by Fannie Mae or Freddie Mac who had loan-to-value ratios of 80% to 105% and were not delinquent on their loan payments, could refinance at lower rates without buying mortgage insurance, or paying for more insurance than they already had.

Effective today, that top limit has been increased to 125%. This change is an acknowledgment that at least one in five homeowners now has negative equity in their homes. It also is intended to stimulate the home refinance market which has seen a slow-down in the past few weeks as interest rates creep over 5.5%

From the Trenches

Want to know what it's like to be a Realtor these days? Take a look at this New York Times article:

http://www.nytimes.com/2009/06/29/business/29loanmod.html?em

Fraud Alert - Loan Scams

California Department of Real Estate ** CONSUMER ALERT ** (Issued 3/2009) 1 FRAUD WARNINGS FOR CALIFORNIA HOMEOWNERS IN FINANCIAL DISTRESS

I. HOME LOAN MODIFICATIONS.
Because of the current economic situation, you may not be able to afford your mortgage payment. If you are also not able to refinance your home loan, an option that may be available to you is a Loan Modification.

What is a Loan Modification? That is where you and your lender agree to modify one or more of the terms of your home loan. The terms could be a lower interest rate, an extension of the length of the loan (like making a 30 year loan into a 40 year loan), a conversion of an adjustable rate loan (called an ARM) to a fixed rate, the deferring of some of your payments, or any other modification of loan terms.

The goal of a Loan Modification is to help you keep your home and to give you a real, meaningful, sustainable, and long-term adjustment to your current home loan that works for your financial situation.

II. BEWARE OF LOAN MODIFICATION SCAMS AND CON ARTISTS, WHO USUALLY DEMAND THE PAYMENT OF UPFRONT FEES.
Just like after a hurricane hits, where unscrupulous contractors and repair people may collect money for repairs and then not do anything, there are numerous rogue and dishonest operators and companies (many of whom are unlicensed) that have appeared in the wake of the current economic downturn -- and more are popping up every day. They make false promises about their abilities to help get you a loan modification, collect money up front, and then do nothing or next to nothing. They are predators who take advantage of those who are or may be vulnerable.

III. THINGS TO DO TO PROTECT YOURSELF FROM BECOMING A LOAN MODIFICATION OR FORECLOSURE RESCUE SCAM VICTIM.

A. Do It Yourself (and Do It As Soon As Possible) -- You can contact your mortgage servicer and/or lender directly and request a Loan Modification that works for you and your lender. Don’t wait to call if you cannot make or believe you will not be able to make your mortgage payments. Be persistent! - call back many times. Make detailed notes about your attempts to call, when you have left messages, who you speak with, what was said, and what offers are discussed and/or made.

B. Other Free and Safe Options -- If you don’t believe you can negotiate a Loan Modification yourself, or if you do not want to, there are free and safe options available to you.

1. The U.S. Department of Housing and Urban Development ("HUD") offers Foreclosure Avoidance Counseling through non-profit agencies in California. Go to HUD’s web site at www.hud.gov, or call 800-569-4287, to find counselors. HUD also offers information to homeowners facing the loss of their home.

2. HOPE NOW Alliance - this is a cooperative effort of home loan counselors and lenders, and it consists of HUD intermediaries. Go to the HOPE NOW web site at www.hopenow.com or call 888-995-HOPE.

C. Locate and Work with a Legitimate, Licensed, and Qualified person or company ("Log on, Look em up, and Check em out")

1. California licensed real estate brokers can perform loan modification work, and licensed real estate salespersons can do such work under the supervision of their employing broker.

While it is legal for a real estate broker to charge you in advance of performing the loan modification services before a Notice of Default is recorded, you do not have to pay anything in advance of a successful loan modification, and all broker fees are negotiable. If a real estate broker wishes to charge an advance fee, he or she must submit an Advance Fee Agreement and all supporting materials to the Department of Real Estate ("DRE"). If the agreement and materials meet the requirements under the law, DRE issues a no-objection letter. All fees collected in advance must be properly handled as trust funds, which require special handling and must be deposited into the broker’s trust account. A licensee must refund to you any unearned portion of the advance fee(s) collected if any of the promised services are not completed.

But please understand that a no-objection letter does not mean that DRE recommends, approves or endorses the agreement or the services of the real estate licensee. You should go to DRE’s web site at www.dre.ca.gov, review and check the information on advance fees and loan modification services, carefully review the public license information on the real estate broker (that information will include any disciplinary history), and look for any Desist and Refrain Orders (D&Rs) that have been issued against companies and individuals. If a D&R has been issued, that means that DRE has determined the individual and/or company is unlicensed and/or has operated unlawfully.

2. California licensed lawyers can also perform loan modification work, but only when such lawyers render those loan modification services in the course and scope of their practice as an attorney at law.

Lawyers can also charge fees in advance (typically called a retainer), and even after a Notice of Default has been recorded. But lawyers must have a written fee agreement with you. And as is the case with real estate licensees, you do not have to pay anything in advance of a successful loan modification, and all legal fees are negotiable. Any fees that you pay to the lawyer(s) in advance do not have to be placed in their trust accounts.

Just as you should do with real estate licensees, check out lawyers by going to the website of the California State Bar, www.calbar.ca.gov. Check the lawyer‘s bar membership records and look for any discipline.

Unfortunately, some loan modification business models have claimed lawyer involvement but they are just unlawful schemes to avoid the prohibition against the collection of advance fees by a real estate licensee after a Notice of Default is recorded. In others, lawyers are just a "front" or non-participating "magnet" for business from desperate homeowners.

****Be on Guard and Check Them Out -- Do Your Own Homework**** In addition to looking at the license records, contact the Better Business Bureau to see if they have received any complaints about the person or company. But please understand that this is just another resource for you to check, and the loan modification provider might be so new that the Better Business Bureau may have little or nothing on them (or something positive because of insufficient public input).

Also, and very importantly, ask the loan modification "specialists" (whether they are real estate licensees or lawyers) about their financial, mortgage and real estate experience, the options and methods they use to renegotiate home loans, when they were first licensed, whether their license is still active, whether they have ever been disciplined, where they got their experience, and also ask them to define a loan modification and the process that they will undertake and the time that they will spend to negotiate a long-term, affordable and sustainable modification for you.

D. Signals of Fraud/Red Flags to Watch Out For

1. Demand for payment up front (advance fee payment). While not unlawful if paid to licensed persons in the certain limited situations discussed above, the demand or request for advance payment should alert you to the possibility of fraud.

2. Promises or guarantees of success, such as "We Can Save Your Home. We Have Saved Thousands. Free Consultation. Money Back Guarantee". No such guarantees are possible, and there are no assurances of a successful loan modification.

3. Too good to be true testimonials, such as "We Modified Terri G’s Adjustable Rate Loan, Which Had Spiked to 8 Percent, to a 3.5 Percent Fixed Rate Loan".

4. Claims that a loan modification company is attorney-backed, attorney-affiliated, or attorney-based -- especially where no lawyer or law firm is identified or mentioned. Many of these entities are simply using the name of an attorney (the name might be for show only, and/or there might not even be a lawyer involved) and scams skirting the law.

5. Claims that a loan modifier is operating under a California Finance Lender‘s (CFL) license issued by the California Department of Corporations. This is not lawful according to the Commissioner of the Department of Corporations.

6. A request that you grant a "power of attorney" to the loan modifier. The scammer may use the power of attorney to sell the home right out from under you.

7. A request that you transfer title to your home to the loan modifier or some third party. This is likely evidence of a scam where these scam artists will strip all of the remaining equity in your home.

8. Promises that you can repair your credit history by the payment of rent to the loan modifier or some third party.

9. Lease/rent-back scams, where you are told to transfer title to a third party, rent the home from that party, and then buy it back later. Transferring your deed gives the con artists the ability to evict you and sell the home.

10. Instructions to pay someone or some company other than your home loan lender or servicer.
11. Claims that a loan modification company will file a bankruptcy or other frivolous case for you to "force" a lender to negotiate a loan modification. So-called "forensic loan reviews" may fall into this category.

12. Assertions by the so-called loan modifier that you should just sign documents that they have filled out, without reviewing them first. You must carefully read and understand all of the documents you sign. Be especially wary of promises by salespeople that they will "take care of everything" and you just need to sign "a bunch of forms with boring legalese".

13. Lawyers or real estate licensees who tell you that they have no time to meet with you face-to-face.

14. Unlicensed people or companies.

15. Instructions from a loan modification provider that you should not contact your home loan lender or servicer, a lawyer, an accountant, or a non-profit housing counselor.

16. Being advised to miss payments in order to improve your chances of getting a loan modification.

17. High-pressure sales tactics or warnings that "you must act today" or "tomorrow may be too late".

It is impossible to list all of the Red Flags that might suggest fraud, since the scammers and con artists continue to modify and refine their stories, pitches and cons. They are ruthless and clever. Please be alert, be skeptical, and do your own homework.

And remember, Don’t Rush! You are always able to "slow down" or "pause", and you should tell the provider of loan modification services that you want to check out their license status with the DRE or the California State Bar. Any service provider who objects to that request may have something to hide, like no credentials or license (or bogus credentials) – so be wary!!! Log on, Look em up, and Check em out!!! www.dre.ca.gov

IV. WHAT YOU CAN DO IF YOU HAVE BEEN SCAMMED (OR BECOME AWARE OF A LOAN MODIFICATION SCAM)? REPORT FRAUD AND FILE COMPLAINTS WITH

1. The DRE if a real estate licensee is involved, or if the person or company is unlicensed. If the person or company is unlicensed, the DRE will file a Desist and Refrain Order. If the person or company is licensed, the DRE will commence disciplinary action, http://www.dre.ca.gov/cons_complaint.html .

2. The District Attorney, Sheriff, local police and local prosecutor in your community.

3. The California Attorney General, at www.ag.ca.gov/consumers/general.php .
4. The California State Bar if a lawyer is involved, or if an unlicensed person claims to be a lawyer at www.calbar.ca.gov .

5. The California Department of Corporations, at www.corp.ca.gov , if a loan modification claims to be operating under a California Finance Lender License.

6. The Federal Trade Commission, at www.ftc.gov . They have an excellent fact sheet on Foreclosure Rescue Scams.

7. Federal Bureau of Investigation (FBI), at www.fbi.gov .

8. HUD, at www.hud.gov .

9. The Federal Deposit Insurance Corporation (FDIC), at www.fdic.gov .

10. The Better Business Bureau in your community.

11. The Chamber of Commerce in your community.

12. File a Small Claims Court action. These are informal courts where disputes are resolved quickly and inexpensively by a judge. Since 2008, you can recover up to $7,500 in Small Claims Court. You represent yourself, and can request a judgment for money damages. If your judgment is based on fraud, misrepresentation, or deceit, or conversion of trust funds, and the judgment is against a real estate licensee, DRE has a Recovery Fund that may be able to pay your claim. Go to the DRE web site at www.dre.ca.gov , and look under the tab for "Consumers". Also, the California Secretary of State has a "Victims of Corporate Fraud Compensation Fund" that provides restitution to victims of corporate fraud. Go to the Secretary of State’s web site at www.sos.ca.gov/vcfcf for more information.