1. “Can you help me, they just sold my house without warning, I got no notice of the sale…..?”
   
2. “Can I sue my lender, I was in a trial plan modification agreement (on my second or third payment, etc.) and my lender just foreclosed on me.  What’s the deal, I thought I was approved by HAMP….?”
   
3. “My house was sold but the lender did not follow the foreclosure laws….can you sue those &^!**#* to get my house back?”
   
4. “The lender has posted a notice of sale on my door, but I think they are trying to work out a modification with us so I am not going to do anything for the meantime hoping they will give me a modification that allows me to keep my house.”
   
5. “Truth in Lending (“TILA Audits”), what’s that?  My loan was 2.5 years ago, and it was a refinance transaction but I will not deal with that issue right now, I have a “law center” working on my case, they are in control of everything.”
   
6. “I am just going to file for Chapter 7 Bankruptcy, that will save my house from foreclosure right?”
   
7. “I just made my final trial plan modification payment so that will stop the foreclosure sale right?”
   
8. “the lady on the phone at the lenders office told me to stop making payments and they will work out the loan modification for me, that should do the trick right?”
   
9. “my loan modification file has been submitted to a negotiator for review, therefore, I do not have to worry about them foreclosing on me.”
   
10. “the loan servicer said they were willing to work with me to save my home, and that after submitting financial information over the phone they said I qualify, that puts me in a good and safe position right?”

This is just a sample of the kinds of things we hear from callers to our law firm.  We are a bit surprised of the gullibility and naieviety of some of the people who think the banks are their friends, and their to help them share in the bailout money.  This couldn’t be further from the truth.  In our experience, yes, there are loan modifications getting done, but NO, everyone does not qualify, and everyone will not be helped by HAMP, HAFA and similar programs.

THE “LENDER LENDER PLEASE DONT MAKE ME TENDER” PROBLEM

Here is the crux of the “having trust and faith in your banks, lenders, and loan servicers” of the problem, if a lender forecloses on your property, whether you were in the middle of HAMP review, HAFA review, etc., and regardless of whether the foreclosure laws in Arizona or California were followed, if your house is foreclosed, the first thing a lender will say when we file a lawsuit is “your client cannot tender the full balance of the loan so therefore you cannot challenge the foreclosure sale process.”

What?  Say that again?  OK, If your house is sold, and you want to try to set aside the sale challenging a wrongful foreclosure, and if you file a civil lawsuit, the lenders will cite several cases as precedent that you cannot challenge the unlawful acts of a lender, loan servicer, trustee, MERS (whatever the case may be) in an attempt to set aside the foreclosure sale UNLESS YOU CAN ALLEGE THAT YOU ARE READY, WILLING AND ABLE TO TENDER THE FULL BALANCE OF THE MORTGAGE YOU OWE.

Yes, I know that sounds a little strange, unfair, and inequitable.  They will argue in their answer, motion for demurrer, motion in opposition to preliminary injunction etc., that you have no right to “ask for equity” (i.e. to quiet title or set aside a trustee sale) unless you “do equity.”

Does this hold up, well folks, it is the law, and judges are supposed to follow the law.  Of course, there is at least one challenge, there is a 100 year old rule that says the Courts do not have to require a full tender “where it would be unjust to require such.”  So, I suppose there is always hope, but perhaps the same chances of winning a lottery, who knows.

At any rate, the moral of this story is this:  THINK CAREFULLY BEFORE YOU TRUST A SINGLE WORD YOUR LENDER OR LOAN SERVICER SAYS.  THEM TELLING YOU THAT YOU ARE ELIGIBLE FOR HAMP OR HAFA (SHORT SALES) OR A LOAN MOD, OR THEM GIVING YOU A TRIAL PLAN, ETC., THIS DOES NOT MEAN THEY WILL NOT SECRETLY AND DECEPTIVELY SELL YOUR HOME UNDER A CLOUD OF DECEPTION AND THEN HAVE THEIR LAWYERS TELL THE JUDGE “YOUR HONOR, THEY CANNOT CHALLENGE MY CLIENT’S NONSENSE AND ILLEGAL ACTIVITIES UNDER THE FORECLOSURE LAWS BECAUSE THE BORROWER CANNOT TENDER.”

Just giving you a heads up.  The minute you are facing foreclosure (i.e. you get a notice to accelerate or a notice of default, do yourself a favor, seek out the services of a foreclosure attorney.  Have your loan reviewed for a TILA violation that may raise an extended three year rescission right, and/or find other predatory lending violations that may be compensible/actionable in a court of law.  The lenders and loan servicers fear very little in this process, and they have lawyers working on their side telling them how they can use the law in their favor, avoid compliance with foreclosure laws, remove cases to federal court etc.  You need someone on your side to see if you have any legal rights, see if you can rescind your loan, see if you can obtain an injunction to stop foreclosure where the lenders refuse to play by the rules, file bankruptcy where applicable, or pursue a short sale that may save your credit from the harmful effects of foreclosure, etc.  In the war on foreclosure, you have to be decidedly proactive, rather than reactive.  The house you save may be your own.

Steve Vondran, Esq. is an attorney licensed to practice law in California and Arizona.  He is currently assisting homeowners in foreclosure defense cases, bankruptcy chapter 7, predatory lending litigation, TILA audits, Short sales, Deed-in-lieu of foreclosure, injunctions, lis pendens, and deficiency judgment issues.

He can be reached at (877) 276-5084 or emailed at steve@vondranlaw.com

Now, in the context of shot sales, there are a few things to consider:

(1)  Will you be liable for a deficiency judgment (meaning if the lender allows you to sell your home for less than its worth, can the lender come back against you for a deficiency judgment?

We have talked about deficiency judgments in Arizona on one of our other websites: Click here for more general legal information: http://www.arizonadeficiencyjudgment.com/

(2)  Are there tax implications involved with the lender forgiving debt owed?

(3)  Are you entitled to $1,500 relocation expenses following a short sale under the HAFA (Short Sales Incentives law)?

(4)  Do you qualify for HAFA?

We outlined the general qualifications for HAFA and some of the general rules on our HAFA short sale blog which can be found here: http://activerain.com/blogsview/1546150/short-sales-overview-before-and-in-anticipation-of-hafa

(5)  Can a forensic loan audit and letter to your lender help assist in them accepting a short sale over forcing you into foreclosure?  Do you have any predatory lending violations that you can leverage?  Is it better to file a lawsuit against your lender?

We have previously outlined some of the things we look for in an Attorney forensic loan audit on this website: http://vondranlegal.com/2009/08/15/what-is-a-forensic-loan-audit/

(6)  What other options might you have if the lender refuses to accept your short sale?  Options such as filing bankruptcy or pursuing a deed-in-lieu of foreclosure?

Our Arizona bankruptcy website can be found at www.ArizonaBankruptcyResourceCenter.com

(7)  If the lender insists on denying your short sale, have they followed the foreclosure process that would permit them to legally foreclose on you?

(8)  Are there outstanding issues that can be solved with a Qualified Written Request under RESPA?

We have discussed in general terms the topic of Qualified Written Request under another blog that can be found here: http://www.foreclosuredefenseresourcecenter.com/forensicloan-loan-audits/qualified-written-request/

(9)  Do you have a right to rescind your loan under Truth in Lending (TILA) extended three-year right to rescind?

We have a website dedicated to truth in lending rescission rights (TILA) which can be found here: http://www.rescindmyloan.net/a-general-overview-of-truth-in-lending-law-and-the-right-to-rescind/

These are some of the loss mitigation and foreclosure defense questions/issues we deal with on a daily basis.  If you are facing any of the above legal issues, you might want to think about retaining a real estate and foreclosure lawyer to protect your interests.  The banks, lenders, and loan servicers have lawyers on their side and they are probably hoping you don’t take this step on your end.  In California, the lenders backed SB94, a law that prevents any lawyer or broker from accepting any advance fees for loan modifications which has literally allowed lenders to force California homeowners to be unrepresented in the loan modification context.  This is the way they wanted it done, and the California legislature went along with it.   In Arizona, you may still hire a lawyer to assist you, at least for the time being.

For  more information about hiring a Phoenix Short Sale Lawyer, please visit our website at www.PhoenixShortSaleLawyer.com

KEYWORDS:  PHOENIX SHORT SALE LAWYER / SCOTTSDALE SHORT SALE LAWYER / ARIZONA SHORT SALE LAWYER / SHORT SALE ATTORNEY / PHOENIX SHORT SALE ATTORNEY / SCOTTSDALE SHORT SALE ATTORNEY / ARIZONA SHORT SALE ATTORNEY / ARIZONA FORECLOSURE LAWYER / PHOENIX REAL ESTATE LAWYER / SCOTTSDALE FORECLOSURE ATTORNEY / PHOENIX BANKRUPTCY LAWYER / PHOENIX BK LAWYER / REAL ESTATE LOSS MITIGATION / DEED-IN-LIEU OF FORECLOSURE / ARIZONA INJUNCTION / FILING LIS PENDENS / PHOENIX LOAN MODIFICATION / SCOTTSDALE LOAN MODIFICATION / ARIZONA LOAN MODIFICATION / TILA RESCISSION / RESPA QUALIFIED WRITTEN REQUEST

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This is an advertisement and communication pursuant to state bar rules.  All websites listed herein are provided as general legal information only.

GENERAL LEGAL PRINCIPLES BY STEVE VONDRAN ATTORNEY. Mr. Vondran is licensed to practice law in California and Arizona and maintains an office in Newport Beach, California and Phoenix, Arizona. He currently practices in the area of Real Estate, Foreclosure Defense, and Bankruptcy. He can be reached at (877) 276-5084.

The following is general legal information only and is not to be relied upon as legal advice or a substitution for legal advice. As law frequently change, and as new cases interpret the law, the following may be inaccurate, out-of-date or missing law pertinent to you case. Therefore, do not rely on the following and seek the assistance of a qualified real estate and foreclosure attorney to assist you in your case. Where tax issues are involved, you should also seek the advice of a tax attorney or CPA.

1. WHAT IS A “DEFICIENCY JUDGMENT” IN ARIZONA?

Let’s say you have a first mortgage for $500,000 and your house is worth $350,000. If the lender/loan servicer refuses to provide a meaningful loan modification, or any modification for that matter, and if they will not permit a short sale (yes, lenders and loan servicers can and do frequently deny both), then your house gets scheduled for a foreclosure sale.

Most properties in California and Arizona are sold via a Private Trustee Sale (partially so they can get away with whatever they want), but let’s say the private sale only generates a bidder who bids $350,000 and let’s say this represents fair market value and the lender decides to sell the property for this amount.

Following the sale, the lender will recoup its $350,000, but will obviously be short $150,000 from the $500,000 it was originally owed. For most lenders, they want the homeowner to pay the difference (the $150,000), and if the lender persists they can seek to file a lawsuit seeking a “deficiency judgment” against you, as homeowner.

Obviously the only thing worse than being foreclosed on is having the lender try to come back after you for the $150,000 they feel they are owed pursuant to the terms of the note you signed.

As a homeowner, this can keep you up at night wondering “can they come back at me?” This is a question we get all the time as real estate foreclosure defense and loan modification counsel.

The routine answer we give is “the lenders can try anything they want and don’t be surprised to see them pull anything.” Now, we also tell them that in Arizona, if you have a “purchase money” loan there is a good chance the lender can get NOTHING from you following a foreclosure sale that does not net the full value of the outstanding loan balance owed. That is good news for you. But then, the big question becomes, what is a purchase money loan? And what if I have a first and second mortgage? Let’s take a look at these issues.

1. WHAT TYPES OF ARZIONA PROPERTY ARE PROTECTED FROM DEFICIENCY JUDGMENTS? A REVIEW OF A FEW OF THE ARIZONA CASE LAW DEALING WITH THE TOPIC OF DEFICIENCY JUDGMENT.

As we discussed above, purchase money loans in Arizona are protected against deficiency judgments. But does this cover residential AND investment properties or one or the other?

Arizona protects people who purchase property. If you had to worry about losing both your down payment, and facing a deficiency judgment if the loan goes bad, many potential Arizona home buyers may choose to rent instead. This would prohibit new developments.

Under the Arizona Revised Statutes (A.R.S. 33-729(A)), when a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price of a residential property TWO AND ONE HALF ACRES OR LESS that is limited to and utilized for either a SINGLE ONE FAMILY OR SINGLE TWO FAMILY RESIDENCE the mortgagee cannot collect a deficiency judgment out of any of the other assets of the homeowner (the lien of the property shall not extend to any other property of the judgment debtor).

Here is what this section says:

Note: this section says only the “judgment debtor” is not liable, but it does not mention any co-guarantors of the loan. Therefore, it is quite likely a guarantor on the loan could still be liable for a deficiency judgment.

What about investment properties? The statute above says there is no deficiency judgments if the property is a “single one family” or “single two family” but it says nothing about whether this property must be owner-occupied. In the case of Northern Arizona Properties v. Pinetop Properties Group, 151 Ariz. 9, P.2d 501 (App. 1986) the court held that an “investment condominium” was protected against a default judgment even though the unit was not utilized as a dwelling by borrower. The Court held that the investment condo unit was nevertheless a “shelter where people live.” This case is good for owners of residential investment property in Arizona that is deemed purchase money as there would be no deficiency judgment under these circumstances.

What about a “Blanket” Deed of Trust that secures the repayment of six individual condo units and their 6 separate promissory notes? The Court addressed this situation in PNL Credit v. Southwest Pacfiic Investments, Inc. 179 Ariz. 259, 877 P.2d 832 (App. 1994). In this case, the lender held ONE (1) blanket deed of trust over 6 individual condo units. The owner wanted to be deficiency judgment free and argued that the Arizona deficiency judgment statute protected him from personal liability for the deficiency balance. The Court disagreed saying that the plain meaning of the statute was to protect “single one family” and “single two family” dwellings, and that in this case, the owner was trying to protect “multiple single family dwellings” (which was not protected given the plain meaning of the statute. Had their been a deed of trust for each of the individual condo units, each would have been protected, but there was only one blanket deed of trust covering all 6 properties and this did not qualify for deficiency judgment protection.

Here is some language from the case for your reading enjoyment:

Applicability of the Arizona Anti-Deficiency Statute:

PNL argues that the trust property encumbered by its deed of trust is not protected under the anti-deficiency statute because it consists of four condominium units and is thus not limited to a single one-family or a single two-family dwelling. We agree. That statute reads in relevant part:

“If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.”

PNL’s loan to SW Pacific’s predecessor was secured by a single blanket deed of trust originally encumbering six separate condominium units. At the time of the trustee’s sale, four units remained encumbered by the deed of trust. Although the loan was evidenced by multiple promissory notes, A.R.S. section 33-814(G) focuses on the nature of the “trust property,” not the number of underlying obligations. Courts generally must follow a statute’s language when that language is plain and unambiguous. Mid Kansas, 167 Ariz. at 128, 804 P.2d at 1316.Thus, the anti-deficiency statute protects “trust property” that is “limited to and utilized” as “ single one-family or single two-family dwellings.”

In contrast to this case, in Mid Kansas the lender sought to waive its security and sue on four separate construction loans, each secured by four separate deeds of trust, and each encumbering a single substantially completed home. 167 Ariz. at 124-25, 804 P.2d at 1312-13. The lender had previously conducted a trustee’s sale on a second-position blanket deed of trust on the four properties. The borrower in Mid Kansas argued that the anti-deficiency statute prevented the lender from suing on the first-position notes after having non-judicially foreclosed the second-position blanket deed of trust. The supreme court held that the anti-deficiency statute did not apply because the uncompleted, unoccupied homes did not constitute “dwellings.” Because the court concluded that the borrower was not protected by the anti-deficiency statute, the court did not consider the issue of whether trust property consisting of multiple single-family homes falls within the protection of the anti-deficiency statute. In the court of appeals’ Mid Kansas opinion, however, this court did reject the lender’s argument that the four lots combined were not “trust property of two and one-half acres or less,” stating that, if the four lots had been owned by four individual homeowners as opposed to the one developer, this court would construe the anti-deficiency statute broadly enough to protect the homeowners from deficiency judgments. 163 Ariz. at 239, 787 P.2d at 138.

The Orians claim that there were in effect four separate but concurrent trustee’s sales. We do not agree. There was but one deed of trust and, consequently, one trustee’s sale. The Orians also claim that the trial court made specific findings that the four condominium units involved were four single family dwelling units. However, PNL does not challenge the finding that the condominium units constitute “dwellings,” which is what the trial court focused on. As PNL correctly argues, the anti-deficiency statute requires the trust property to not only be utilized as a dwelling, but also be limited to a single one-family or a single two-family dwelling. The trust property here consisted of four single-family condominium units. Interpreting the statute to protect trust property consisting of multiple single-family dwellingswould violate the language of the statute.

The Orians further argue that PNL is attempting to exclude commercial developers from the protection of the anti-deficiency statute. The supreme court in Mid Kansas held that the anti-deficiency statute’s protection extends to commercial owners of qualifying residential property. 167 Ariz. at 128, 804 P.2d at 1316. PNL’s argument correctly focuses on the type of property protected, not the type of borrower protected. The trust property here simply does not qualify as protected property.

What about mortgaging one home (a borrowers primary residence) to purchase another (second home in Oregon)? Many people have purchased second homes in the housing boom, especially given the availability of stated income loans, ARM loans, option arm loans with teaser rates, etc.. The case of Cely v. Deconcini, McDonald, Brammer, Yetwin, and Lacy, P.C., 166 Ariz. 500, 803 P.2d 911 (App. 1997) answered this question holding that the borrower who used their primary residence as collateral for a second home was not protected by the Arizona anti-deficiency statute. Here are a few golden nuggets from that case:

“In Baker v. Gardner, our supreme court held that the holder of a note and security device may not waive the security and sue on the note to hold the maker personally liable for the unpaid balance when the security falls within the limited class of purchase money mortgages and deeds of trust described in Arizona’s anti-deficiency statutes. We hold in this case that when one home is mortgaged to secure the purchase of a second home, the mortgage is not a purchase money security interest and the mortgage anti-deficiency statute does not apply.”

“Arizona’s mortgage anti-deficiency statute, A.R.S. § 33-729(A), restricts the remedy upon default of creditors with purchase money mortgages. The statute provides that a creditor may not foreclose on a purchase money mortgage and then pursue the debtor for a deficiency. Further, as the Arizona Supreme Court held in Baker v. Gardner, the creditor may not waive the mortgage altogether and sue the debtor personally on the note. 160 Ariz. at 104, 770 P.2d at 772.

A.R.S. § 33-729(A) provides:

Purchase money mortgage; limitation on liability:

If a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.”

THE GROPP MORTGAGE WAS NOT ORIGINALLY A PURCHASE MONEY MORTGAGE

Our supreme court has relied on the similarity between Arizona’s anti-deficiency statutes and those in California to interpret our statutes. Baker v. Gardner, 160 Ariz. at 102, 770 P.2d at 770. California case law indicates that in the standard purchase money transaction, the seller retains an interest in the land sold to secure payment of part of the purchase price. Roseleaf Corp. v. Chierighino, 59 Cal.2d 35, 41, 378 P.2d 97, 100 (1963). California’s anti-deficiency statute, Cal.Civ.Proc.Code § 580b (West 1976), provides in pertinent part as follows:

§ 580b. [When deficiency judgment forbidden: Exceptions]

No deficiency judgment shall lie in any event after any sale of real property for failure of the purchaser to complete his contract of sale, or under a deed of trust or mortgage, given to the vendor to secure payment of the balance of the purchase price of real property….

Gropp did not retain an interest in the Oregon home to secure the Celys’ note; he took an interest in the Tucson home, an asset unrelated to the sale. Thus, if Arizona law should follow California in this respect, the mortgage was not a purchase money interest when the Celys gave it to Gropp.

The defendants argue, however, that the California cases discussed in Baker v. Gardner are inapposite because the origin and purposes of the California statute differ from the Arizona anti-deficiency statute. We disagree. The Baker court stated that it read the Arizona and California statutes as similar in purpose. 160 Ariz. at 102-03, 770 P.2d at 771. The California Supreme Court has explained the application and purposes of that state’s anti-deficiency statute as follows:

Section 580b was apparently drafted in contemplation of the standard purchase money mortgage transaction, in which the vendor of real property retains an interest in the land sold to secure payment of part of the purchase price. Variations on the standard are subject to section 580b only if they come within the purpose of that section.

Section 580b places the risk of inadequate security on the purchase money mortgagee. A vendor is thus discouraged from overvaluing the security. Precarious land promotion schemes are discouraged, for the security value of the land gives purchasers a clue as to its true market value. If inadequacy of the security results, not from overvaluing, but from a decline in property values during a general or local depression, section 580b prevents the aggravation of the downturn that would result if defaulting purchasers were burdened with large personal liability. Section 580b thus serves as a stabilizing factor in land sales. Roseleaf Corp. v. Chierighino, 59 Cal.2d at 41-42, 378 P.2d at 100-01 (citations omitted) (emphasis added).

In Roseleaf, buyers purchased a hotel from the plaintiff and financed the transaction with four notes, three of which were secured by a second deed of trust on property other than the hotel. 59 Cal.2d at 38, 378 P.2d at 98. The first note was secured by a purchase money trust deed and was not involved in the case. Id. The court, analyzing the purposes of California’s anti-deficiency statutes, determined that the second trust deed was not a purchase money interest and that the plaintiff could sue the buyers personally on all three notes. The court stated:

To apply section 580b here would mean that the [buyers] would acquire the hotel at less than the agreed price. Furthermore, if there is any merit in the theory that “the vendor knows the value of his security and assumes the risk of its inadequacy,” that theory does not apply here. There is no reason to assume that [seller] had any greater knowledge of the value of the [buyers'] land than did the [buyers].

59 Cal.2d at 43, 378 P.2d at 101.

The purposes served by Arizona’s mortgage anti-deficiency statute are identical to those served by California’s statute and are equally inapplicable to the transaction between Gropp and the Celys. When the Celys mortgaged their Tucson home, they were in a better position to know its value than Gropp. The anti-deficiency statute could not ensure that Gropp priced the Oregon home appropriately because the mortgage was not taken on that home. Nor did the Celys risk losing their residential purchase in Oregon through foreclosure while remaining liable for its purchase price. See Roseleaf, 59 Cal.2d at 41-43, 378 P.2d at 101. The Tucson home served in the Oregon transaction as non-purchase money collateral-no different conceptually than an art work or an heirloom or the family jewels. We conclude that the anti-deficiency statutes do not apply.

We conclude on the basis of these authorities that a purchase money mortgage is one that encumbers the property being sold. We accordingly conclude that the Celys did not give Gropp a purchase money interest when they bought Gropp’s Oregon home.”

What about a consolidated loan that originally consisted of $240,000 in purchase money funds (but later also adding $75,000 in non-purchase money funds) both of which were later the subject of a loan modification agreement? Can this loan be considered protected purchase money not subject to a deficiency judgment? The case of Bank One (Arizona) v. Beauvais, 188 Ariz. 245, 934 P.2d 809 (App. 1997) addressed this question. In this case the Court held that since most of the funds were purchase money funds (the $75,000 was for the purpose of exercising stock options) that the consolidated loan would be treated as purchase money and protected from a deficiency judgment. The property was a qualifying property as discussed above. The Court held that the loan workout was NOT A NEW LOAN as the bank argued, but that the workout note retained its characteristic as a purchase money loan. You want a fresh snippet? I though you would never ask, here you go:

“In summary, we hold that regardless of whether the workout note was an extension, renewal, or refinancing of the 1989 consolidated loan, it retained its character as a purchase-money note. See Lucky Invs., Inc. v. Adams, 183 Cal.App.2d 462, 7 Cal. Rptr. 57 (1960). (Cancellation and replacement with new notes, secured by the same property, transfers purchase-money status to new notes.). Accordingly, the Bank is prohibited from waiving the security under the deed of trust and suing on the note – Per Baker v. Gardner. We affirm the trial court’s dismissal of the Bank’s complaint.”

What about the Arizona borrower who has both a first and second mortgage? It appears if both the first and second mortgage were taken out at the same time, and the money was borrowed to secure all or part of the purchase price of a single one family, or single two family dwelling on two and a half acres or less, that both the first and second mortgage would be protected from a deficiency judgment. Let’s take a look at the cases.

1. Southwest Sav. and Loan Assn. v. Ludi, 122 Ariz. 226, 594 P.2d (1979). In this case the lender held a security interest on a purchase money first mortgage and a non-purchase money second mortgage. The borrower Ludi defaulted on both. The lender foreclosed on the purchase money first mortgage, and tried to waive the security and sue on the note (like a breach of contract action) on the second mortgage. In this case, the Arizona Supreme Court allowed this action holding that there was nothing wrong with suing on the non-purchase money second (and waiving the security). The Court likened this to an action on the second to enforce the debt, which was permitted. The key here is the 2^nd mortgage was NOT PURCHASE MONEY!! The court held that the lender was not prohibited from pursuing for foreclosure on one note and suing on the debt on the second mortgage all in the same action.(2) Wells Fargo Credit Corp. v. Tolliver, 183 Ariz. 343, 903 P.2d 1101 (App. 1995). Wells Fargo was a junior lien holder that was permitted to sue on the note. The property in question was not protected by the Arizona anti-deficiency statutes. The Court held:

“The statute (Arizona anti-deficiency statute) does not apply because Wells Fargo’s action is on the note, not one for a deficiency. This Court has previously held that a junior lienholder who did not institute trustee’s sale proceedings may waive its security and sue directly on its note, provided that it is not precluded by the anti-deficiency statutes. Again, the anti-deficiency statutes protect purchase money mortgages. This holding is consistent with Baker v. Gardner.

(3) Nydam v. Crawford, 181 Ariz. 101, 887 P.2d 631 (App. 1994) – This case involved a second mortgagee (junior lien holder) trying to sue on the note following a foreclosure sale by the first mortgage holder. The Court declined to allow the sue on the note theory by the second mortgage lender because the second mortgage was also purchase money and protected in Arizona against a deficiency judgment or action on the note. Here the court held:

“Baker is nearly, but not quite, on all fours with this case. In Baker, defendants’ purchase was financed in part by a loan from ICA Mortgage Corporation (“ICA”), and the sellers took a note for the remainder. ICA had a first-position deed of trust, with the sellers’ deed of trust in second position. When the defendants defaulted on both notes, ICA noticed a trustee’s sale. Before the trustee’s sale took place, the second-position deed-holders filed suit on their promissory note. The trial court ruled the action prohibited by the anti-deficiency statute (then numbered A.R.S. § 33-814(F) and (E)), and our supreme court affirmed. The court concluded that the Legislature intended to take away from creditors the option of suing upon the note in [the specified type of] transaction. This construction of the statute not only prevents its evasion, but also gives effect to the Legislature’s intent. Baker, 160 Ariz. at 104, 770 P.2d at 772 (quoting Ross Realty Co. v. First Citizens Bank & Trust, 296 N.C. 366, 250 S.E.2d 271, 275 (1979)).”

“Like the Bakers, plaintiff is a second-position deed-holder, attempting to collect on her note in the face of the first-position deedholder’s trustee’s sale. Plaintiff attempts to distinguish Baker, however, because she filed her lawsuit after the trustee’s sale, whereas the Bakers sued the Gardners before the trustee’s sale. Plaintiff argues that, unlike the Bakers, she did not commit the forbidden act of waiving her security and suing on her note; instead, because the trustee’s sale extinguished her security, she had no security to waive. She adds that she did not seek a deficiency judgment because, in the absence of security, there could be no deficiency.”

“Plaintiff’s argument is defeated by the plain wording of the anti-deficiency statute. Although that statute covers cases under A.R.S. § 33-722 in which one has elected to waive security and sue directly on the debt, it is not restricted to such cases. Nor, as Baker illustrates, is it restricted to cases in which the person seeking the deficiency also conducted the trustee’s sale. Section 33-814(G) provides more comprehensively that no deficiency judgment may be obtained if qualifying “trust property … is sold pursuant to the trustee’s power of sale.” Because this qualifying property was sold pursuant to the trustee’s power of sale, it falls within the express wording of the statute. Section 33-722 provides: “If separate actions are brought on the debt and to foreclose the mortgage given to secure it, the plaintiff shall elect which to prosecute and the other shall be dismissed.”

“Plaintiff’s argument is also defeated by the reasoning of Baker. Our supreme court there defined the purpose of the anti-deficiency statute as protecting homeowners from “the financial disaster of losing their homes to foreclosure plus all their other nonexempt property on execution of a judgment for the balance of the purchase price.” Baker, 160 Ariz. at 101, 770 P.2d at 769. The Baker court expressly contemplated the tandem impact of a first-position deed-holder’s trustee’s sale followed by a second-position deed-holder’s suit on a second note:

“The Gardners presumably lost whatever equity they had in the house on the non-judicial sale noticed by ICA under the first trust deed. Under the court of appeals’ opinion, the Gardners would have faced sale of their other assets on execution of the judgment on the note secured by the Bakers’ second deed of trust. In our view, the legislature would not have protected homeowners from deficiency judgments but still permitted the holder of a mortgage or deed of trust to obtain essentially the same result by waiving the security and bringing action on the note. This statutory construction seems inconsistent with the patent legislative objective.

There are many other scenarios that can be analyzed under the Arizona Anti-Deficiency Statutes. I do not have time to review them all. Each foreclosure case and attempt to collect on the debt is fact-specific, but the foregoing should give you a flavor of Arizona law.

1. CONCLUSION

If you are an Arizona homeowner facing foreclosure, you need to think about whether your first mortgage and second mortgage (if you have one) will be treated as “purchase money” loans and protected from deficiency judgments under Baker v. Gardner.If your loans are purchase money, at least in my opinion, you are in a better position to negotiate a loan modification, deed-in-lieu-of-foreclosure or short sale. Why? Because the lender(s) can take your lousy upside-down property and do what they want with it, but they cannot come after you for the amount of the loan they do not recover following a foreclosure sale. This is one of the rare cases in foreclosure defense when something may be considered good for you and bad for them. Keep in mind, Baker v. Gardner does not prevent a non-purchase money junior lien holder from “waiving the security” and “suing you on the note” where the Arizona anti-deficiency statute does not apply. Another issue that arises often in Arizona is whether construction loans are protected. If you are unsure of your legal standing or the liability you may face, contact our office to discuss your situation. The price you pay for a consultation and some legal research consutling the recent case law could make a huge difference to your pocket-book and future plans.

More information about Arizona Deficiency judgments can be found at www.ArizonaDeficiencyJudgment.com

By Real Estate Attorney Steve Vondran.  Our firm currently handles Real Estate, Foreclosure, and Chapter 7 Bankruptcy cases in California and Greater Phoenix Arizona.  We can be reached at (877) 276-5084 or steve@vondranlaw.com

1. Sign a listing agreement between the real estate agent and the homeowner.  Typically the listing agreement will be for 6 months, and will list the commission as 6%.  A 60 day “broker protection period” is also a good idea to protect the short-sales agent.
   
2. The Property then needs to be listed in the local MLS. Once the listing agreement is signed, the property pictures get taken and the listing goes in the local MLS.  It should be clearly disclosed that the sale is a short sale is subject to lender / lien-holder approval.  The 6% commission might be stated to be split 50/50 – between buyers agent and seller’s agent – if the short sale deal is approved. In some circumstances, it may be possible to act as a “dual agent” in which case it might be wise to execute a dual agency amendment to escrow.

SHORT SALE LISTING TIP: It is probably a good idea to list the property 5-10% below current “comps” (comparative sales within last 6 months) in order to try to generate as many qualified offers as possible.  Because there is usually a “sale date” (foreclosure sale date) pending when a short sale is being pursued, it is wise to have as many offers as possible that the lender/lien holders can consider if the first deal falls through.  The lenders will often set a foreclosure sale date just a few days past the scheduled date for close of escrow after an offer is accepted, and if the accepted deal falls through, your Client will be staring a foreclosure sale date right in the face, and in that event you will want to be able to submit other qualified offers immediately, in the hopes of further extending the sale date.

1. Client needs to start thinking about getting financials together, preparing a hardship letter /affidavit and seeing if there are any legal financial maneuvers that may make the loss mitigation package look more attractive to the lender and/or may help facilitate the short sale.  For example, this may be a good time to convert Trust Fund money or other cash assets into an IRA account, 401K, etc., (as these would not normally have to be disclosed on a lenders short sale or loss mitigation package).  Most lenders will make you disclose all of our bank account, savings, money market, CD’s, stocks and bonds, etc., under penalty of perjury.  Some items such as alimony, child support, separation maintenance, value of life insurance, retirement plans, etc., DO NOT NEED TO BE DISCLOSED.  If you disclose 100,000k in assets, the lender may not be so willing to do a short sale (especially a second mortgage holder who may be facing the prospects of getting very little money for their lien), and instead, they may want you to sign a deficiency agreement as a condition to permitting a short sale.  At this stage (before an offer comes in) it is a good time to examine the lenders loss mitigation application and see exactly what type of financial information they will be requiring you to disclose as part of the short sales process. Obtain all of the requested financial documentation, prepare the hardship letter/affidavit, and be ready to submit these materials when you receive an offer.

1. Once your short sales agent obtains a short-sale offer, you will need to prepare your short sale / loss mitigation package to the bank. Basically, you will want to include, at a minimum, the following items:

1. Copy of the Listing Agreement between homeowner and short sale agent disclosing the commission agreement;
2. Homeowner financials, hardship letter, and loss mitigation package required by the lender/lien holder;
3. Copy of the offer (purchase and sale agreement), typical is to put that the escrow should close 45 days after acceptance by the bank.  Also include the short sale addendum;
4. Copy of Estimated HUD;
5. Broker Cover letter / Opinion of Value / Comps etc.
6. If Client has a refinance transaction within three years, you may also want to include a Truth in Lending (TILA) audit summary if a “material” truth in lending violation was found.  This especially if the borrower has some ability to “tender” (see a foreclosure lawyer to discuss this point).  If your Client has an ability to rescind their mortgage under TILA, this may provide additional motivation for the lender to accept the loan modification over pursuing a foreclosure sale.
7. There may be other documents to submit depending on the borrowers situation

SHORT SALE TIP: Make this submission as neat, complete, and comprehensive as possible.  Time is of the essence and you do not want to have to spend all your time re-submitting missing or incomplete documents.

1. Once the lender receives your short sale submission package, usually a processor and/or negotiator will be assigned to the file.  Your short sales agent will work with the representatives of the lender to get them what they need, and generally to try to get the deal accepted.
   
2. If the lender is inclined to accept the deal, the lender must accept in WRITING and the escrow period is then opened (as we mentioned, usually a 45 day escrow will allow time for inspections, appraisal, title search, seller disclosures, etc.).
   
3. At this point, it is a typical real estate transaction for the most part in that the financing must be arranged, inspections, appraisal, etc. and DONT FORGET a check with the Homeowner’s Association (“HOA”) should be made to ascertain whether the HOA is solvent or in litigation (if they are not solvent due to homeowners not paying their dues, or facing litigation over some other legal issue, then it may be impossible for the proposed short sale purchaser to obtain financing – mandating that only a full cash buyer will be able to close a short sale on the property).  This is an important factor to look into at the early stages of a short sale.  If you need an all cash buyer you might as well figure this out as soon as possible.
   
4. If the offer is accepted in writing, escrow opened, no HOA issues, and all other parts of the sales process are performed, and all lien holders agree to the short sale then the deal will close and commissions will be paid per the listing agreement and any dual agency addendums.

NOTE: Where agreeing to a short sale will result in a lender or lien holder in receiving less than they are owed (for example you owe $500,000 to Bank of America and the short sale offer is only for $250,000) Bank of America may try to get you to sign a deficiency agreement whereby you agree to pay them the $250,000 deficiency amount that you owed them under the terms of your note.  This is where most people will want to consult with both a real estate lawyer to consult on the law of deficiency judgments, and a tax advisor or CPA to address issues of loan debt forgiveness being treated as income (thus creating a taxable event).  These are very serious and important issues that should be reviewed in every short sale setting.

NOTE: What some short sales agents might do is to agree to contribute a portion of their commission for the short sale to pay a portion of a borrowers agreed deficiency if such is required and the homeowner agrees to sign such.  This should be clearly disclosed in writing on the HUD closing statement.

As an example, in Arizona, if you have a “purchase money mortgage,” (topic of another blog posting) it is quite possible that you are NOT LIABLE FOR ANY DEFICIENCY LOAN BALANCE AND THE LENDER COULD NEVER COLLECT SUCH EVEN IF IT WANTED TO.  In these circumstances, the homeowner should think carefully before signing any agreement to pay any portion of an alleged deficiency balance.  Again, you should consider contacting a real estate or foreclosure lawyer to discuss this issue, and a separate advisor to discuss any tax ramifications of a short sale.  PROTECT YOURSELVES – THE LENDERS ARE USING LAWYERS YOU MIGHT BE WELL ADVISED TO GET ONE FOR YOURSELF.

Another question we get quite frequently is what If I have two mortgages?  Both a first mortgage and a second mortgage. For example, two loans with EMC / Chase Mortgage?  In these cases the second lien holder normally wants to get cashed-out of its lien, and in many short sales the first mortgage will see if they can pay the holder of the second mortgage a certain amount of money (ex. $5,000) to release their lien and allow the short sale to proceed.  Again, the second lien holder is concerned with getting something from the borrower for the second mortgage note that was signed.  In these cases, depending on the assets and future income potential of the applicant, the second mortgage holder may want a deficiency agreement signed in order to proceed with the short sale and release its lien.  This is again a good time to see a foreclosure or short sale lawyer.

Finally, it may be good to know whether your loan has any potential grounds for filing a lawsuit.  This is where the forensic loan audit by a qualified real estate lawyer may help you in your short sale negotiation. If a lender was the original lender of your loan, and held the loan in its portfolio, there is a possible chance that explaining the lenders potential liability to them following an audit may compel them to accept a short sale they may not otherwise be interested in accepting.  The situation becomes a bit more difficult where you are dealing with securitized loans and lenders claiming to be holders in due course.  But again, these issues may be worth looking at to try to ensure your short sale is accepted.   As a short sale will normally look better on your credit report than a foreclosure, there is incentive to look into these issues.

NOTE REGARDING: Home Affordable Foreclosure Alternatives Program (HAFA): make sure to check out our Blog on HAFA to see some of the recently enacted rules designed to make short sales more attractive to lenders and loan servicers.  The process is different than that explained above.  You can see the HAFA process, timelines, and forms at this blog post:

http://activerain.com/blogsview/1546141/foreclosure-defense-basics-understanding-the-home-affordable-foreclosure-alternatives-program-hafa-short-sales-deed-in-lieu-of-foreclosure-and-deficiency-judgments

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Our Real Estate Law Services:

1. Loan Modifications / Loan Workouts (World Savings and Wachovia Loans)

2. Commercial Lease Modifications

3. DRE audits, hearings and investigations

4. Real Estate Broker admissions cases

5. Foreclosure Defense

6. Mortgage Law & Predatory Law

7. Phoenix Real Estate Zoning Attorney – Greater Phoenix (Scottsdale, Goodyear, Buckeye, Casa Grande etc.)

8. Phoenix Eminent Domain Attorney / Inverse Condemnation / Prop 207 (Greater Phoenix)

9. Real Estate Arbitration, Litigation and Mediation

10. Foreclosure Consultant Contracts / Loan Modification Contracts

11. Real Estate LLC’s & Incorporations

12. Real Estate Partnership Law

13. Quiet Title Actions / Lis Pendens

14. Forensic Loan Audits – Greater Phoenix (Truth in Lending (TILA), RESPA, HOEPA, Fraud, etc.)

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KEYWORDS: PHOENIX SHORT SALE / SCOTTSDALE SHORT SALE / ARIZONA SHORT SALE / GOODYEAR SHORT SALE / BUCKEYE SHORT SALE / FOUNTAIN HILLS SHORT SALE / PEORIA SHORT SALE / SHORT SALE LAWYER / DEFICIENCY JUDGMENT / HAFA SHORT SALE PROGRAM / PURCHASE MONEY LOANS / PHOENIX FORECLOSURE LAWYER / SCOTTSDALE LOAN MODIFICATION  / LOSS MITIGATION / DEED-IN-LIEU OF FORECLOSURE.

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HELPFUL FORECLOSURE DEFENSE LINKS:

1. SUBMIT YOUR FORECLOSURE / LOAN SCENARIO: WWW.LOANMODSOLUTIONS.NET

2. SUBMIT YOUR LOAN MODIFICATION SCAM SCENARIO: WWW.LOANMODIFICATIONRIPOFF.NET

3. LITIGATING OPTION ARM LOANS WWW.OPTIONARMLAWYER.COM

4. CALIFORNIA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM

5. ARIZONA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM

6. STEVE VONDRAN REAL ESTATE WEBSITE WWW.VONDRANLAW.COM

7. INFORMATION ON TRIAL PLAN FRAUD: WWW.TRIALPLANFRAUD.COM

8. FORECLOSURE DEFENSE RADIO SHOW: WWW.LOANMODRADIO.COM

9. INFORMATION ON TRUTH IN LENDING LOAN RESCISSION: WWW.RESCINDMYLOAN.NET

10. INFORMATION ON PRODUCE THE NOTE: WWW.PRODUCETHENOTEATTRORNEY.COM

NOTE: WE CONSIDER TAKING SOME CASES ON A CONTINGENCY FEE BASIS.  SEE OUR PROFILE AT THE WWW.CONTINGENCYCASE.COM WEBSITE WHICH IS A WEBSITE DIRECTORY FOR CONTINGENCY CASE LAWYERS ACROSS THE UNITED STATES.

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NOTICE:

The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice.  If you have specific legal questions about your foreclosure case, short sale, or loan modification case you should seek out the advice of a real estate attorney.  In addition, the information posted above may not be 100% complete, accurate or up-to-date.  The Law Offices of Steven C. Vondran, P.C. is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.  He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules.  Please do not send us private or confidential information through any of our above-listed websites.   Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).

So many homeowners are fighting for reasonable loan modifications that will save their homes from foreclosure.  Other people are seeking refuge in a bankruptcy Court (Chapter 13 Bankruptcy, and Chapter 7 Bankruptcy).  Still others are seeking a Deed-lieu-of-foreclosure strategy, while other homeowners who are completely upside down on their properties are either walking away, or seeking to short sale their property.  This is the current state of affairs in the United States, and banks (who have been generously bailed out) are picking and choosing who gets what.  It seems like if you want the bank to perform any loss mitigation for Arizona of California homeowners, you have to basically incentivize them to do something (e. HAMP – Making Home Affordable).

We have previously published an article on the Lender/loan servicers HAMP report card.  The results are not overwhelming.  Click here to view that blog post:http://www.loanmodradio.com/2010/03/hamp-trial-plan-fraud-or-just-off-to-a-slow-start-hamp-lender-report-reveals-some-insights/

So now comes along yet another incentive program that may help some homeowners obtain short sale relief and deed-in-lieu-of-foreclosure relief (and of course stuff more cash into the pockets of the bankers and loan servicers).  This new loss mitigation program is called HAFA – Home Affordable Foreclosure Alternatives Program.  Pretty cool name!  HAFA supplements HAMP.  Servicers implementing HAMP must also comply with the HAFA directives and consider people for short sales and deed in lieu of foreclosure.

What is a short sale? A short sale is a transaction whereby a lender agrees to accept less as a payoff than is owed by the homeowner/borrower by allowing the property securing the debt to be sold for less than the lender is owed.  In some cases the lender will forgive the outstanding debt owed and in other cases the lender may want an agreement from the borrower to pay the deficient loan balance.

What is a deed-in-lieu? This is basically where a homeowner/borrower hands over the deed to the property (with marketable title) to the lender who agrees to accept the deed, thereby eliminating the need to pursue a foreclosure sale.  Sometimes a lender will require short sale efforts before they would accept the deed in lieu of foreclosure.

Why would a lender agree to a short sale or deed in lieu of foreclosure? It costs less for a lender to do a short sale or accept a deed in lieu than it does to pursue a foreclosure.  So where it makes financial sense, the lenders will entertain these loss mitigation measures.

Ok, so let’s take a look at the major points under HAFA:

(1) Program is for HAMP-eligible borrowers who were (a) nevertheless denied under HAMP, (b) qualified but were not given a trial plan, (c) could not make 2 or more trial plan payments, or (d) completed trial plan but no permanent modification was given.  To see what types of borrowers qualify for HAMP see this link: http://www.treas.gov/press/releases/reports/guidelines_summary.pdf(generally must be borrowers principle residence, first mortgage loan must not exceed 729,500, and payment must be in excess of 31% of borrowers gross monthly income).

(2) Program takes effect April 5, 2010 and “sunsets” December 31, 2012.

(3) The hardship letter and financials on file with the lender / loan servicer can be used for the short sale or deed-in-lieu.  (Goal is to make easy for those denied under HAMP to be reviewed for the short sale or deed in lieu).

(4)  HAFA allows borrowers to receive pre-approved terms (ex. minimum acceptable net proceeds) before listing their property for sale.

(5)  All short sales must be at “arms length” (meaning, you cannot sell the property to any relatives or other persons with a close personal or business relationship).  The buys of the property are bound to not re-convey the property – ex. back to the borrower – within 90 days.

(6) HAFA prohibits loan servicers from requiring a commission reduction in the agreed real estate listing agreement between the seller and agent (up to 6% is protected).  However, Servicers may use short sale assistants on their end that must be paid a specified portion of the commission.

Here is Freddie Mac’s Short Sales commission policy: http://www.realtor.org/wps/wcm/connect/c126d4804f53ab6586b8c74e813808c1/Freddie+Mac+Short+Sales+Policy+10.27.09.pdf?MOD=AJPERES&CACHEID=c126d4804f53ab6586b8c74e813808c1

And here is Fannie Mae’s short sales commission policy: http://www.realtor.org/wps/wcm/connect/7e6786804018046f8d0cfd205f470b6e/Fannie+Mae+Short+Sales+Policy+10.27.09.pdf?MOD=AJPERES&CACHEID=7e6786804018046f8d0cfd205f470b6e

(7) Requires borrowers to be fully released from facing deficiency judgment liability judgments on the first mortgage (and on the second mortgage as well if the junior lien holder receives any incentives under HAFA).  This means they cannot require a deficiency promissory note be signed, seek a deficiency judgment in a court of law, or demand any other cash contribution from the homeowner seeking the short sale.

(8) HAFA requires the use of Standard forms, process, timelines, and deadlines.  See Supplemental Directive 09-09 here: https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf

(9) HAFA requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy consistent with investor guidelines.   This means the servicer can have its own internal policies for implementing HAFA which policy can take into account local markets and the severity of financial loss, timing of pending foreclosure actions, etc.  Yes, the discretion on all loss mitigation efforts is always left to the discretion of the servicers.  Good for them, potentially bad for homeowners.

Other factors that may be taken into account in dealing with whether the homeowner will be permitted to seek a short sale or deed in lieu of foreclosure are (i) Expected recovery if foreclosure is pursued; (ii) current condition of title / encumbrances, (iii) borrowers financials submitted under HAMP, (iv.) property valuations, and (v.) effect of short sale/deed in lieu and perhaps (vi) predatory lending litigation and truth in lending (TILA) rescission risks.

(10) HAFA permits a 90-day timeline that gives homeowners the ability to sell their homes in a short sale without risk of foreclosure.  See our timeline discussion below.

Here is a list of the HAMP participating loan servicers:  http://www.foreclosuredefenseresourcecenter.com/2010/03/hamp-trial-plan-permanent-modification

(11)               HAFA provides financial incentives for borrower relocation assistance following the short sale ($1,500); incentives to the servicers to cover short sale processing costs ($1,000); and incentives for investors matching up to $1,000 for each lien holder ($3,000 total).

(12) Credit impact following a short sale or deed in lieu of foreclosure: following a short sale, the creditor will report to the credit reporting agencies that the mortgage was settled for less than full payment (this will still impact your credit score but should not impact as much as a foreclosure).

(13) Potential tax implications for debt forgiveness following a short sale or deed in lieu: Borrowers pursuing a short sale must investigate the potential tax ramifications involved, usually by discussing this with a tax accountant, CPA or tax lawyer prior to selling their property.  In some cases, debt that is forgiven that does not exceed the amount borrowed to acquire, construct, or rehabilitate property may not be treated as taxable income.  Again, contact a tax professional.  We will be writing a separate blog on general overview of tax issues in the loss mitigation context.

GENERAL TIMELINE UNDER HAFA:

(1) BORROWER IS REVIEWED FOR HAMP LOAN MODIFICATION BUT IS DENIED, OR CANNOT COMPLY WITH TRIAL PLAN OR IS NOT OFFERED A TRIAL PLAN ETC.  SEE CONDITIONS ABOVE;

(2) BORROWER EITHER REQUESTS A SHORT SALE OR DEED IN LIEU OF FORECLOSURE AND/OR THE LOAN SERVICER SENDS BORROWER NOTICE OF RIGHT TO BE REVIEWED FOR HAFA’S SHORT SALE AND DEED IN LIEU OPTIONS WITHIN 30 DAYS:

(3) IF BORROWER FAILS TO RESPOND WITHIN 14 DAYS, THE RIGHT TO BE REVIEWED UNDER HAFA IS LOST;

(4) IF REQUESTED, BORROWER RECEIVES A SHORT SALE AGREEMENT FROM LOAN SERVICER.  THIS AGREEMENT DISCLOSES THAT BORROWER HAS AT LEAST 120 DAYS TO SELL PROPERTY FREE FROM FORECLOSURE RISK AND HAS SPACES FOR THE BORROWER AND REAL ESTATE BROKERS SIGNATURES.  THE LISTING AGREEMENT SHOULD BE ATTACHED AND RETURNED WITH THIS DOUCMENT AS SHOULD THE HARDSHIP FORM AND INFORMATION ON JUNIOR LIEN HOLDERS AND THE PROGRESS OF ANY NEGOTIATIONS WITH THESE LIENHOLDERS.

NOTE:  YOU WILL MOST LIKELY BE DENIED A SHORT SALE IF YOU HAVE NOT NEGOTIATED YOUR SECOND MORTGAGE AND GET THEM TO RELEASE YOUR LIEN.  THIS SEEMS PRETTY BRUTAL BUT ALSO SEEMS TO BE A REQUIREMENT TO GET YOUR SHORT SALE APPROVED.

(5) BORROWER HIRES A SHORT SALES AGENT AND LISTS PROPERTY FOR SHORT SALE IN LOCAL MLS;  (SHORT SALE BROKER MUST SIGN DOCUMENT LISTED ABOVE);

(6) SELLER GETS AN OFFER TO PURCHASE THE PROPERTY (MUST BE AN ARMS LENGTH TRANSACTION);

(7) BORROWER SUBMITS A COMPLETE SHORT SALE PACKAGE TO LENDER INCLUDING A REQUEST FOR APPROVAL OF SHORT SALE (RASS); LOAN PREQUALIFICATION LETTER FOR THE BUYER, AND MUST FILL OUT A FORM INDICATING THE TRANSACTION DETAILS.  A COPY OF THE PURCHASE AND SALE AGREEMENT MUST ALSO BE ATTACHED AND CERTAIN REPRESENTATIONS, MADE UNDER PENALTY OF PERJURY, MUST ALSO BE GIVEN.

(8) THE LOAN SERVICER CONDUCTS AN EVALUATION OF THE SHORT SALES TRANSACTION USING THE FACTORS DESCRIBED ABOVE TO SEE IF BORROWER QUALIFIES FOR THE SHORT SALE OR DEED IN LIEU OF FORECLOSURE PROGRAM;

(9) THE LOAN SERVICER MUST ACCEPT OR DENY THE RASS WITHIN 10 BUSINESS DAYS OF RECEIVING THE RASS FORM AND ADVISE BORROWER ACCORDINGLY.

(10) IF LOAN SERVICER AGREES TO THE SHORT SALE IT MUST ALSO AGREE TO WAIVE ANY DEFICIENCY JUDGMENTS FOLLOWING THE RECEIPT OF SALE PROCEEDS AND CANNOT DEMAND ANY NOTES BE SIGNED AGREEING THE PAY THE DEFICIENCY;

(11) ESCROW IS OPENED – TYPICALLY A 45 DAY ESCROW – AND THE TYPICAL REAL ESTATE TRANSACTION FUNCTIONS PROCEED (APPRAISAL, FINANCING, SELLER DISCLOSURES, INSPECTIONS, ETC.);

(12) THE BUYER OF THE SHORT SALE MUST BE A BONA FIDE PURCAHSER (ARMS LENGTH TRANSACTION) AND THEY CANNOT RE-CONVEY THE PROPERTY FOR AT LEAST 90 DAYS AND CANNOT HAVE AN AGREEMENTIN PLACE TO LEASE THE PROPERTY TO THE FORMER HOMEOWNER AS A TENANT ON THE PROPERTY;

(13) FOLLOWING THE SHORT SALE RECEIPT OF FUNDS, THE SENIOR LIEN HOLDER MUST RELEASE THEIR FIRST MORTGAGE LIEN WITHIN 10 DAYS AND CANNOT PURSUE ANY DEFICIENCY JUDGMENTS.

(14) THE SELLER WILL THEN BE ENTITLED TO $1,500 RELOCATION ASSISTANCE PAID OUT OF ESCROW PROCEEDS.

(15) TAX AND CREDIT IMPLIACATIONS ARE DISCUSSED ABOVE AND IN OTHER BLOGS.

IF YOU ARE A CALIFORNIA OR ARIZONA HOMEOWNER INTERESTED IN PURSUING HAFA SHORT SALE OR DEED IN LIEU OF FORECLOSURE YOU NEED TO ACT FAST.  CONTACT OUR OFFICE TO DISCUSS YOUR CASE AND DISCUSS IMPLICATIONS COCERNING DEFICIENCY JUDGMENTS AND NEGOTIATING WITH SECOND LIEN MORTGAGE HOLDERS AND JUNIOR LIEN HOLDERS.

KEYWORDS: Arizona deficiency judgment / Phoenix HAFA lawyer / Scottsdale HAFA lawyer / Short sale attorney / Short sales lawyer / HAMP short sale program / deed-in-lieu-of foreclosure / Arizona foreclosure lawyer / Phoenix Foreclosure Lawyer / Phoenix foreclosure attorney / Scottsdale loan modification lawyer / Phoenix loan modification lawyer / Phoenix loan modification attorney / Lis Pendens / Quiet Title / Injunction / Arizona loan modification lawyer

Google our other foreclosure defense blogs on Arizona Deficiency Judgments and HAMP Loan Servicer report Card and Tax Issues in Arizona Short Sales (use keyword Vondran).

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First let’s take a look at the official government spin on the progress made under HAMP.  You can check out this link here http://www.makinghomeaffordable.gov/pr_03122010.html but let’s post below what it says:

WOW, NOW THAT SOUNDS FANTASTIC DOESN’T IT?

The February HAMP report can be found here:
http://www.makinghomeaffordable.gov/docs/Feb%20Report%20031210.pdf

LET’S GO OVER SOME OF THE THINGS THEY ARE NOT SAYING IN THIS REPORT:

1. LOOK AT ALL OF THE TRIAL PLANS STARTED IN SEPTEMBER 2009 (553,031), AND OCTOBER 2009 (711,085).  TOTAL IS APPROXIMATELY 1.26 MILLION TRIAL PLANS.  THESE TRIAL PLANS ARE SUPPOSED TO BE THREE MONTHS IN LENGTH.  IF THAT IS TRUE, WHERE ARE ALL THE PERMANENT MODS THAT ARE SUPPOSED TO BE COMING WHEN THERE IS NO MATERIAL CHANGE IN A BORROWERS FINANCIAL AND OTHER CONDITIONS?  THE REPORT SAYS THERE ARE 170,000 PERMANENT MODS IN PLACE.  DOES ANYONE ELSE SEE THE MAJOR GAP HERE?  EVEN WITH THE “PENDING PERMANENT MODS” (91,800) THERE IS STILL MUCH LEFT TO BE DESIRED.
   
2. WE ARE FORCED TO CONTINUE ASKING THE QUESTION, THE BANKS (INCLUDING WALL STREET) GOT THEIR BAILOUT, NOW WHERE IS THE HONEST, GOOD FAITH HELP FOR MAIN STREET?

Here is a list of the loan servicers mentioned in the report, and you can see breakdowns by lender and state, etc.  Check out the report, it is very interesting.

Allstate Mortgage Loans & Investments, Inc.

American Eagle Federal Credit Union

American Home Mortgage Servicing, Inc

AMS Servicing, LLC

Aurora Loan Services, LLC

Bank of America, N.A.1

Bank United

Bay Federal Credit Union

Bay Gulf Credit Union

BayviewLoan Servicing, LLC

Carrington Mortgage Services, LLC

CCO Mortgage

Central Florida Educators Federal Credit Union

Central Jersey Federal Credit Union

Chase Home Finance, LLC

CitiMortgage, Inc.

Citizens 1st National Bank

Citizens First Wholesale Mortgage Company

Community Bank & Trust Company

CUC Mortgage Corporation

Digital Federal Credit Union

DuPageCredit Union

Eaton National Bank & Trust Co

Farmers State Bank

Fidelity Homestead Savings Bank

First Bank

First Federal Savings and Loan

First Federal Savings and Loan Assn. of Lakewood

First Keystone Bank

First National Bank of Grant Park

Franklin Credit Management Corporation

Fresno County Federal Credit Union

Glass City Federal Credit Union

Glenview State Bank

GMAC Mortgage, Inc.

Golden Plains Credit Union

Grafton Suburban Credit Union

Great Lakes Credit Union

Greater Nevada Mortgage Services

Green Tree Servicing LLC

Harleysville National Bank & Trust Company

Hartford Savings Bank

Hillsdale County National Bank

Home Financing Center, Inc

HomEqServicing

HomeStarBank & Financial Services

Horicon Bank

Horizon Bank, NA

Iberiabank

IBM Southeast Employees’ Federal Credit Union

IC Federal Credit Union

Idaho Housing and Finance Association

iServeResidential Lending LLC

J.P.MorganChase Bank, NA2

Lake City Bank

Lake National Bank

Litton Loan Servicing

Los Alamos National Bank

MarixServicing, LLC

Members Mortgage Company, Inc

Metropolitan National Bank

Mission Federal Credit Union

MorEquity, Inc.

Mortgage Center, LLC

Mortgage Clearing Corporation

National City Bank

NationstarMortgage LLC

Oakland Municipal Credit Union

OcwenFinancial Corporation, Inc.

OneWestBank

ORNL Federal Credit Union

Park View Federal Savings Bank

PennyMacLoan Services, LLC

PNC Bank, National Association

Purdue Employees Federal Credit Union

QLending, Inc.

Quantum Servicing Corporation

Residential Credit Solutions

RG Mortgage Corporation

Roebling Bank

RoundPointMortgage Servicing Corporation

Saxon Mortgage Services, Inc.

Schools Financial Credit Union

SEFCU

Select Portfolio Servicing

ServisOne Inc., dbaBSI Financial Services, Inc.

ShoreBank

Silver State Schools Credit Union

Sound Community Bank

Specialized Loan Servicing, LLC

Spirit of Alaska Federal Credit Union

Stanford Federal Credit Union

Sterling Savings Bank

Technology Credit Union

Tempe Schools Credit Union

The Bryn MawrTrust Co.

The Golden 1 Credit Union

U.S. Bank National Association

United Bank of Georgia

United Bank Mortgage Corporation

VantiumCapital, Inc.

Verity Credit Union

Wachovia Mortgage, FSB3

Wells Fargo Bank, NA

WescomCentral Credit Union

Yadkin Valley Bank

BOTTOM LINE – BANKS NEED TO GIVE MORE RELIEF TO STRUGGLING HOMEOWNERS FIGHTING TO SAVE THEIR HOME FROM FORECLOSURE.  FORECLOSURES HURT COMMUNITIES, AND EVEN HURT THE HOMEOWNERS WHO ARE PAYING THEIR MORTGAGES.  WHAT GOOD DOES IT DO TO  ARTIFICIALLY PROP UP FAILED BANKS (WHO SHOULD HAVE BEEN FORCED INTO BANKRUPTCY THEMSELVES) ONLY TO CREATE A SOCIETY WHERE THE BANKS HAVE ALL THE MONEY, AND 10-25% OF THE GENERAL PUBLIC HAS NO ABILITY TO ACCESS CREDIT DUE TO CREDIT SCORES THAT REFLECT BANKRUPTCIES, FORECLOSURES, AND LATE PAYMENTS, AND SHORT SALES?

MORE INFORMATION ABOUT HAMP TRIAL PLANS CAN BE FOUND AT WWW.TRIALPLANFRAUD.COM