foreclosure secrets e-book_2008

8/4/2019 Foreclosure Secrets E-book_2008

1/127

Foreclosure Secrets Guide 1

Copyright 2008, Orbis Marketing, LLC. All Rights Reserved www.foreclosureinprocess.com

!!""##$%%##&&''((''))''**##$++))##,,--..//--++))##,,$0011''22##$!!33$$

++))33,,$44$553366##778833991166##$::(($;;663377##9999$44((22$


2/127



Copyright Notice

MMVIII Alfonso Inclan and Orbis Marketing, LLC.

This eBook contains material protected under International and Federal Copyright Laws andTreaties. Any unauthorized use, sharing, reproduction or distribution of these materials by anymeans, electronic, mechanical, or otherwise is strictly prohibited.

No portion of these materials may be reproduced in any manner whatsoever, without the expresswritten consent of the publisher.

This eBook is published under Copyright Laws of the Library of Congress and The United Statesof America by:

Alfonso Inclan and Orbis Marketing, LLC.

All questions and inquiries should be directed to the contact information found onhttp://www.foreclosureinprocess.com

Limits of Liability & Disclaimer of Warranty

The information in this eBook is distributed on as is basis without warranty. While everyprecaution and the best effort have been taken in the preparation of the eBook, the author and

publisher shall in no event have no liability to any person or entity with respect to any loss ordamages, including but no limited to special, incidental, consequential or other damages causedor alleged to be caused directly or indirectly by the instructions contained in this book.

The author and publisher make no representation or warranties with respect to accuracy,applicability, fitness, or completeness of the content of this eBook. They disclaim any warranties(expressed or implied), merchantability or fitness for any particular purpose.

As always, the advice of a competent legal, tax, accounting, or other professional should besought.

The author and publisher do not warrant the performance, effectiveness or applicability of anysites or resources listed in this manual. All links are for information purposes only and are notwarranted for content, accuracy or any other implied or explicit purpose. In no way should any ofthis information be considered a source of legal or accounting advice.


3/127



!!"#$%&'(&)'*!%*!+&!

E-BOOK COVER 1

COPYRIGHT NOTICE.. 2TABLE OF CONTENTS 3INTRODUCTION.. 6

Chapter 1

ALL THE SOLUTIONS YOU MAY HAVE 9TYPES OF HOME LOANS.. 10UNDERSTANDING ARMS........................................ 12THE PROMISSORY NOTE. 14THE DIFFERENCE BETWEEN MORTGAGE AND DEED OF TRUST.. 15

Chapter 2

REFINANCE. 18NEGOTIATE. 19

A key for successful negotiations........ 21ALL THE KNOWN WAYS TO NEGOTIATE........................................ 21

Mortgage Modification.... 22Forbearance...... 24FHA Forbearance. 25FHA Partial Claim... 26

Freeze the rate.. 29FHASecure.. 30Full Reinstatement... 34Repayment Plan... 34Veterans Administration Loans... 34Assistance for Service Members on Active Duty.... 35Reverse Mortgages... 35Hard Money Loans.. 35Short Payoff. 36

Short Sale. 37Short Refinance.... 38

How to Qualify for a Short Sale... 39You Must Know about the Deficiency Liability.. 39

Deed in Lieu. 40


4/127



Chapter 3

FORECLOSURE.. 44The Foreclosure Process.. 44

1.

In Default. 442. Notice of Default (NOD). 453. Reinstatement Right 464. Notice of Sale (NOS)... 465. Foreclosure Sale.. 476. Post-Foreclosure.. 48

Redemption Period after Auction Sale 48 Eviction... 49

Beware of Foreclosure Scams. 50Unscrupulous investors... 50Foreclosure Counseling Agencies... 50

Chapter 4

LEGAL DEFENSES OF A BORROWER 52Predatory Lending... 54

Signs of Predatory Lending 55Lender Defense 57

The Scariest Thing Lenders They Dont Want You To Know.. 60Being Practical... 62Validation of Debt.. 64Sending the Request.. 65

Disclaimer.. 66Validation of Debt Example.. 68Lender Response 70Notice of Insufficient Validation Example 71FTC and HUD Complaint.. 72Workout Proposal... 73

Trustee Defense... 74Notice of Validation Example 77Trustee Response... 79Notice of Insufficient Validation Example 80

Court Litigation... 83

Non-Judicial Foreclosures.. 83Judicial Foreclosures.. 84Defendants Motion to Dismiss Example 85Court Complaint. 90Complaint Example 91Court Hearing. 94Court Hearing Questions and Responses Example 96MERS. 98


5/127


6/127



INTRODUCTION

Repossessions of homes by lenders are expected to go up by 50% in 2008 as a result of the creditcrunch, according to the Council of Mortgage Lenders.

RealtyTrac.com reported 1,285,873 properties with Foreclosures Filings in 2007 nationwide.

58% of these repos will be in 2008 from subprime loans or loans with variable (adjustable)terms.

Repossessed properties are resold by lenders at foreclosure auctions. When this is done inmassive transactions along with houses stuck in the market for non-selling, the market sinksdrastically.

Seasoned Investors are expecting a huge decrease in house prices for the next 2 or 3 years, andmy personal expectations are that after we reach the very deep bottom, the house prices will start

rising very, very slow the next 5 years after. So, expect at least 8 years of slow market from now.

Sincerely, I really think we are going to see a relief in the real estate market maybe in 10 yearsat least! (That if we dont have any other national catastrophic impact in the meantime)

So, if you are facing a rise in your monthly payment due to a change in your variable rate term,or simply you cant pay, first of all, dont panic. You just need to know what to do.

I hope that after reading this book you can sleep better and get some understanding to this roughsituation.

Before you read this book, let me tell you that I am not an attorney, accountant, tax advisor orreal estate guru, giving legal, tax or financial advice. This book definitively is not a substitute forthe advice of a competent attorney.

Although I am a Financial Educator in the State of Arizona doing Foreclosure Consulting,Residential and Commercial Loans, Mortgage Training and Consulting, Real Estate investments,Business Coaching, Marketing and Credit Counseling since 2002, I do not claim to give youlegal advice in this book to your specific circumstances.

What you are just going to read is what I have seen in many cases every day at my offices inGilbert and Phoenix, AZ, working closely with clients, and even with some personal cases.

All of these situations directed me to research, ask, study, learn, apply and verify step by stepmost of the solutions you will learn as well.

Many of the strong solutions you will find in this book, Ive been using them since years beforewith excellent results under the protection of federal and state laws that you can enforce too inthe same way.


7/127



Take in consideration that all the suggestions written in this book are the things I would dopersonally in that same situation.

I decided to come at this computer and write this book as a result of that so many calls I stillreceiving EVERY DAY asking for the very same questions every time:

My payment is rising!!! Has my house drop down in value? I couldnt refinance!! Can I sell??? Can I buy another house and walk away from the one I have right now? Nobody could, but would you refinance my house??? Can I still make a profit?? What can I do??!!!

First and foremost, my first recommendation before reading this guide is to pray first with all

your heart asking God for wisdom and discernment (James 1:5) to find and understand the bestsolution within this book.

Then, read this book from the beginning to the end at once, so you can have a general idea.

After that, read it again; I REPEAT, READ IT AGAIN.

And at this second reading, do it very, very slow so you can better learn and understand all thisForeclosure Process, taking as many notes as you can.

Then, apply what you decided the best option is for your case.

Finally, dont stop learning.

Keep improving your financial IQ, forever.

Sincerely,

Alfonso InclanFinancial Educator and Credit Counselor

Gilbert, ArizonaFebruary, 2008

[email protected]

http://www.foreclosureinprocess.comhttp://stop.foreclosureinprocess.comhttp://www.alfonsoinclan.com


8/127



Chapter 1


9/127



ALL THE SOLUTIONS YOU MAY HAVE

When a borrower is facing the monster of Foreclosure, having the power of knowledge willmake him feel more secure in every step to make.

For every problem there is a solution.

The solutions to stop or delay a Foreclosure are the following:

1. Refinance2. Negotiate3. Sell4. Give back the property (Deed in Lieu)5. Legal Defense6. Bankruptcy

The recommended additional solutions are:

1. Improve the income2. Rent to Own3. Transfer the property

It is fundamental also that the borrower study and learn every step of the Foreclosure Process.

A deep understanding of the Promissory Note and the Mortgage or Deed of Trust will be crucialas well.

Everything is included as never before- in this one single educational manuscript.

Good Luck.


10/127



TYPES OF LOANS

The lending industry has been myforte since 6 years ago. In all these years, I have seen manydifferent cases on people wanting to refinance their homes; but the most common thing I foundin most of them, was that they DIDNT KNOW what type of loan they had their last years.

Not even the interest rate!

My personal interest was to proceed educating every single client to understand what he/shewere doing with a home loan.

Today let me share with you the first thing you must know about: The different type of loans thatexists in the market.

Lets start with the most well known.

In the lending market, there are several types of loans, but for purposes of this book, we will seethe most common:

FIXED LOAN ARM INTEREST ONLY BALLON NEGATIVE AMORTIZATION FHA SUBPRIMES 80/20

FIXED LOAN

A Fixed loan is the one that its interest rate will not change. It can be amortized for 40, 30, 20 or15 years; after that, you dont owe anything else. Here you pay principal and interest. However,this is the loan with the higher monthly payment.

ARM

An Adjustable Rate Mortgage (ARM) is fixed just for 2, 3 or 5 years, after that, you still owemoney at a variable interest for the remaining years. For example, a 2/28 means: 2 years fixed,28 years variable (2+28 =30 years in total amortization).

The interest rate is lower than the 30 Yr Fixed loan, but just for a short period of time.


11/127



INTEREST ONLY

As how it says, this loan pays only interest and nothing to the principal. Most of the time, it isused in combination with an ARM, fixed just from 2 to 10 years. Because this loan pays just theinterest part, it is cheaper than a fixed or a normal ARM. If you borrowed $200k, with this loan

your balance will be always $200k, unless you send extra payments to the principal.

BALLON

This loan is used most in second mortgages. It is amortized typically at 30 years, but must bepaid off at 10 or 15 years. If you dont pay the full amount or you cannot refinance at that time,your house may be foreclosed. This type is more common with lower balances, and the interestrate is higher than a fixed.

NEGATIVE AMORTIZATION

This is the cheapest of all, but it is the more dangerous. This is the famous 1% interest ratemassively advertised some time ago. The monthly payment is super-low because the 1%, but ifyou got the 7% interest rate normally, and you are just paying 1%, the other 6% is going to yourloan balance month by month. In this way, your debt is growing, not decreasing over time.

FHA

This type of loan is secured by the Federal Housing Administration (that means from theGovernment). It has to comply with strong guidelines and not many qualify for this loan,although it has very good interest rates. Most of the time it is coming with a Mortgage InsurancePremium included.

SUBPRIME

Good credit means Prime Credit. Below good is SUBPRIME. These types of loans are designedfor people lacking to fulfill the guidelines of the Fixed and FHAs loans to purchase or refinancea house. Those guideline deficiencies are not just bad credit; a borrower can have good credit,but the income is unverifiable, or lack of down payment, recent bankruptcies, collections thatdont have to be paid, etc. etc. etc. Most of subprime loans worked as 80/20s

80/20

Originally, a home loan had to be an 80% of the value of the home. The borrower had to give20% down payment in cash. In this 80/20 program, there are 2 home loans, so the borrowerdoesnt have to spend cash in the down payment. Usually it is an ARM in the 80% and aBALLON in the 20%. It avoids Mortgage Insurance Premiums as well, so it is cheaper than a100% loan.


12/127



UNDERSTANDING ARMS

Adjustable Rate Mortgages (ARM) typically starts with a lower interest rate and then reset to ahigher rate after a few years. After the loan matures in 2, 3 or 5 years, it must be refinanced orsold, if not, the rate will adjust automatically to a VARIABLE rate, according to that current

market.

Variable rate means that the interest rate will vary every 6 months or every year (depending inwhat you signed) and will adjust to the interest rate that is in the market at the time of adjusting.It can go higher, or lower.

It has a cap, though. The interest rate cannot go higher or lower than that cap stipulated in thepromissory note at the moment of signing.

A Fixed loan is the one that its interest rate will not change. It can be amortized for 40, 30, 20 or15 years; after that, you dont owe anything else.

ARMs are fixed for 2, 3 or 5 years, after that, you still owe money at a variable interest for theremaining years. For example, a 2/28 means: 2 years fixed, 28 years variable.

Now, you have to go to the documents you received from the title company the time youpurchased or refinanced.

I know you didnt read it (or maybe you dont have it anymore), but FINALLY TAKE AMOMENT TO READ IT IN DETAIL. I will help you to understand it better.

Just look for THE PROMISSORY NOTE and THE MORTGAGE or DEED OF TRUST, (it mayhave an ADJUSTABLE NOTE addendum as well).

THE NOTE is simply the most important document in that bunch of papers. Look at the Note forinterest rate, prepayment penalty, date when it adjusts to variable, and your cap rate.

You may find the maximum rate in your cap that would double your initial rate or more.Maybe its the one you have right now.

Some people chose this type of loan (variable or adjustable) because they knew they will movein 2 or 3 years to another city or another house, and will sell the house. An ARM is cheaper thana fixed, so it makes a sense in this case.

Other reason was because it was easier and cheaper to qualify for an ARM than qualify for anormal fixed loan; due to bad credit, lack of down payment, unverifiable income, etc.


13/127



This was the kind of loans massively advertised; remember?

YOU CAN BUY A HOUSE EVEN IF YOU HAVE BANKRUPTCY, BAD CREDIT,YOU ARE ILLEGAL IN THE USA OR YOU ARE NOT WORKING!!!

DOESNT MATTER!!! COME ON!!

ENJOY YOUR AMERICAN DREAM RIGHT NOW!!!

Mortgage companies just advertised what the lenders were offering.

Because of these type of loans easy to qualify- house values were going up as crazy in thosetimes; there was too much demand for houses nationwide. Even you could make a big chunk ofmoney in the transaction: you owed $200,000 dollars and you sold it for $300,000. Many peoplemade a lot of money.

Because it was very easy to buy a house, properties went up in value at incredible levels. Anaverage 3 bedrooms 2 bath house in San Francisco, CA was valued at $750,000 dollars!

The problem came when the house values drop down drastically and lenders stopped doingARMs as easy as before.

It started being more complicated to refinance or purchase a house with an ARM or a Fixed loan.

It was over-inflated something called a REAL ESTATE BUBBLE.

That bubble is now shrinking to the normal pricing, loosing the equity built in all the houses ofthe Unites States.

Im seeing right now so many families leaving behind without a house of their own and so manypeople without a job.

Unfortunately, this situation has happened several times before in history. Its a cycling process,and most of the people forget all of this about when it happens again.

Learn what you can do. Be prepared, and you personally will know by sure what would be theright decision.

You will not rely again in no-brain loan officers or will not choose an exotic loan anymore if youare not 100% sure what you are signing.

If you are trapped in the real estate bubble, this book will help you to choose the best option youmay have.


14/127



Before going further, any borrower must know their most important documents in the loan.

PROMISSORY NOTE

A Promissory Note is a legal contract in which the borrower promises to pay back a loan.

The Promissory Note sets forth the terms and conditions that apply to the loan repayment, suchas the interest rate, when payments are due, where payments are made, what happens if paymentsare not made, if the interest rate will change and when, etc.

All the agreed conditions between a lender and a borrower, are placed in this document inwriting, dated, signed and notarized.

This document is governed by state and federal law, giving protection to the lender and to theborrower as well. Any problems concerning this agreement are ruled by those laws.

A Promissory Note will refer to itself as THIS NOTE, meaning that any written compromise isbeing done on that specific physical paper with the signatures printed on INK.

It is understood that a copy will not be enough evidence to proof this document or compromise.

This same document establishes that The Lender may transfer THIS NOTE. So, this originaldocument is the legal compromise itself and not any copy.

Thats why this Promissory Note is a very valuable document that cannot be lost or destroyed;this is the real evidence of a compromise made between BOTH parts.

In order for the lender to protect his interests, he will require the borrower to sign a securityinstrument to protect the Note in favor of the lender.

The Security Instrument may be in the form of a Mortgage or a Deed of Trust.

A Mortgage or Deed of Trust is the guarantee of a property to a lender as a security for aPromissory Note. While this document is not a debt, it is evidence of the debt.

In other words, this document (Mortgage or Deed of Trust) will secure a property to the lender ifthe conditions made in the Promissory Note are not satisfied or paid back.


15/127



THE DIFFERENCE OF MORTGAGE AND DEED OF TRUST

When a Borrower gets a Home Loan, a Borrower is required to sign a security instrument inorder to secure the Promissory Note. Depending in which state a Borrower lives into the UnitedStates, this document can be in the form of a Mortgage or a Deed of Trust.

Mortgage

Most people think that a Mortgage is a Home Loan. It is not. A Mortgage is a security interest aborrower signs and gives to the lender securing the promissory note signed for the home.

This document creates a lien in the property that cannot be transferred or sold until thepromissory note is paid.

A Mortgage involves two parties:

1.

The Mortgagor (borrower)2. The Mortgagee (lender)

The person who holds the title can be either the Mortgagor or the Mortgagee. It will depend inthe state where the property is located.

If the borrower defaults to the guidelines settled in the promissory note, the lender needs to file alawsuit in court to obtain a judgment, which is called Judicial Foreclosure. This process is long,expensive and complicated.

Most of U.S. states use Mortgages in their transactions; the other states use a Deed of Trustinstead of a Mortgage.

Deed of Trust

A Deed of Trust (called also Trust Deed in some states) practically has the same purpose as aMortgage; however, there are significant differences on: the involved parties, the titleholder andthe foreclosure process.

Parties:

The Deed of Trust contains three parties:

1. The Trustor (borrower)2. The Beneficiary (the lender)3. The Trustee (the entity holding the title)


16/127



The Title Holder

A Deed of Trust transfers the title to the Trustee (an attorney or a title company; depending in thestate) which holds the land as security for a loan; this document is available at public records.When the loan is paid off, the title is transferred to the borrower. If the borrower defaults on the

loan, then the Trustee can sell the property and pay the lender from the proceeds.

The Foreclosure Process

If the loan becomes delinquent, the trustee has the authority to sell the property without going tocourt. This means faster, less expensive and easier for the lender.

This is called a Non-Judicial Foreclosure or Trustee Sale.

However, in some states the lender may start a Judicial Foreclosure after a Trustee sale. This isbecause the Deficiency Liability. If the house was sold for less than the balance, the lender may

elect to file a lawsuit against the borrower pursuing any pending debt.

* In Arizona is possible to use Judicial and non-Judicial Foreclosures, but cannot be used both inthe same case. The lender shall elect which to prosecute, and the other shall be dismissed.

If the Foreclosure was on a Deed of Trust (or non-Judicial Foreclosure), after the auction sale thelender cannot pursue the borrower for assets or wages (check your state laws, though).

Also, in most states using a non-Judicial Foreclosure the Redemption Right is not allowed afterthe auction sale.

Borrowers cannot change or choose how your loan is secured. It is completely determined bytheir state law.

Web Information:

Foreclosure Laws by State http://www.foreclosurelaw.org/

Foreclosure Procedures by State

http://www.realtytrac.com/foreclosure-laws/foreclosure-laws-comparison.asp


17/127



Chapter 2


18/127



REFINANCE

In order to keep your house, Refinancing is the first thing you must look for. I assume you havean ARM, so I will focus on this type primarily although you will find more solutions in thisbook.

An ARM was designated to be sold or refinanced after the maturity of the deal. You just learnedit could be at 2, 3 or 5 years. Some ARM loans were fixed at 1, 7 and 10 years as well.

The interest rate and the payment- can go suddenly higher or lower (you may receive 2 or 3months before a notification for the adjustment). At this time, rates are going a lot higher, risingthe monthly payments to unaffordable crazy levels.

This problem is getting more aggravated because most of the houses dont have equity anymore,doing this impossible to refinance.

Equity: difference between the debt and the value of a house

If your house value is lower than the balance in your home loan, (there is a balance of $250,000and the house is worth $200,000) so you dont have equity. You CANNOT do a normalrefinance. Period!

Go to www.zillow.com and see for free what the average of your house value is.

This is just to give you an idea; other thing you can do is to call an experienced loan officer or agood realtor to give you a more accurate comparable of your property for free.

The best you can do is to hire an appraiser and have a certified document showing the preciseworthiness of your property. It may be the same average value that an experienced realtor or loanofficer gave you already for free, although a good certified appraiser will make a deep study ofthe area to find the most for your house.

Sometimes there are huge differences!

(Normal charges for a certified appraisal are around $350 dollars in Arizona)

Remember, is very crucial that you have some certified equity in your house by an appraiser inorder to refinance normally. This is in addition to a good credit previously established, and someother loan qualifying factors as well. Sometimes a lender will make its own appraisal review andmay discard your appraisal.


19/127



NEGOTIATE

If you see that you cant refinance and you think that you might miss a mortgage payment, callyour lender. Be frank with them and explain your situation.

DON'T TALK WITH THE FIRST PERSON THAT ANSWERS THE PHONE. ASK TO TALKWITH THE MANAGER.

(Most variable mortgages give you the right to change to a fixed rate at any time. If you thinkthe interest rise is not just a short-term fluctuation but will be a long-term trend you have theoption of converting your mortgage into a fixed term.

It doesnt matter if the company that is in charge of your loan is a servicing company -not theoriginal lender-. They may have the resources to make an arrangement in your loan.

Tell the Manager what you are expecting in the near future: the payment will increase, it will be

unaffordable for you and you will not be able to refinance due to the lack in equity, so you arecalling to make a new arrangement on your loan.

Tell him/her that if this is not possible, you will have to FORECLOSURE on the house.

Use the word FORECLOSURE very clear. Lenders are full of repossessed houses right now, andthey are trying to avoid more of this; why? Because The Federal Reserve penalize lenders whenthey have many foreclosure records in their files. Therefore, this is a higher inconvenience forthem than for you. Take this situation as a tool in your side, and use it!

FORECLOSURE: when the property is repossessed from the lender due to non-payments onthe mortgage

The secret they dont want you to know is that at this moment, they are scared to death forhearing that word once again and again in every call!

This is not the same situation as before, when they could take back your house as soon aspossible, and resell it for a very huge profit in just one day!

THEY DONT WANT TO KEEP YOUR HOUSE NOW.

BE SURE ABOUT IT.


20/127



So, when you talk to the manager, be very clear about your desire to keep the house as yourprimary residence (this strategy will work better in your primary, but try it anyway in investmentproperties). Also let them know that your house has dropped in value, the trends indicate it willlower for the next 8 years and you definitely will be unable to refinance or sell.

Say that you want to have a fixed rate for 30 years, keeping the same monthly payment

DON'T FORGET TO REQUEST WHAT YOU WANT. Request that your home loan needs tobe changed to a fixed rate with the same monthly payment (or less if possible). (If you have aninterest only loan, you may want to stick with this for at least the next 15 years) IT ISPOSSIBLE. DONT DOUBT ABOUT IT.

It is possible also to negotiate with lenders for a completely new loan for the price of the presenthome value in a fixed loan, which may be catalogued as a short refinance with the same lender.

Be prepared to hear one of the most stupid answers of this negotiation: the manager will tell you

that you need to be late 90 days in your loan in order to talk seriously about it and startnegotiating (and be prepared, because they will tell you this!!)

(Most lenders will play on a payments game; unfortunately, some of them will truly not allowdoing this, unless you are late). If he/she tells you this proposal, ask to talk with his/hersupervisor, manager or somebody in a higher-level position.

(Remember that a missed mortgage payment is far more serious issue than missing any otherloan or utility payment. It really affects your credit and leads you to foreclose your home)

This person may tell you there is no upper level and he/she is the top of the top smartermanagers in the company. If this is the case, ask for his name, direct phone and address; then, tellhim you will request this in writing by CERTIFIED MAIL so it will be a written record of yourcall request.

ASK FOR THE NAME AND ADDRESS OF THE PRESIDENT OF THE COMPANY ANDSEND HIM A COPY.

If you have 2 loans, you need to do the same with both lenders. You can also be foreclosed if youare current in the first but in default of the second loan.

Keep a record of all your calls, phone numbers, time expended, office department name at wherethe conversation was done, names of the people you contacted, copies of the letters you sent,copies of the certified mail, etc.

Note: You dont want to pay a delivery confirmation when send a certified mail. The certifiedmail is recorded on line when it is received at www.usps.com; a copy of this record is good inany court. Make a copy of this and file it.


21/127



A delivery confirmation can be denied by the person in charge receiving all the documentation,and your letter has to be returned without being sign or read. A certified mail without a deliveryconfirmation is received anyway, the same way as the other normal correspondence.

If you are already having problems making your payments, DO NOT IGNORE THE LETTERS

FROM YOUR LENDER, call or write to your lender immediately. Clearly explain yoursituation. Be prepared to provide them with financial information, such as your monthly incomeand expenses. Without such information, they may not be able to help.

If you bought your home with a Veterans Administration (VA) guaranteed loan, call the VAoffice nearest you.

Also, whatever it happens, stay in your home. You may not qualify for the following secrets ifyou abandon your property. You are not going to jail if you dont afford the payments anymore.That will not happen, my friend. Keep reading...

A KEY FOR SUCCESSFUL NEGOTIATIONS

In my trainings of Real Estate Investments and Business in the University of Donald Trump,Trump University, I learned something it has been very useful to me: they taught us to alwaysnegotiate, negotiate and negotiate to get what we want.

Obviously, it needs to be with fully knowledge in what you are saying and not just because.

Donald Trump says if we dont make a negotiation without feeling embarrassed, that is not agood negotiation. If you know that is possible, do it!

Negotiate in the Trump way, and learn all you can of this temporary experience. Because it willbe temporary; right?

ALL THE KNOWN WAYS TO NEGOTIATE

If you didnt had a solution to your claims negotiating with any high level position manager andyou already are behind in payments, -maybe following that ridiculous advice to be 90 days late,(well, thats what they wanted isnt?)-, now you are in the endless list of borrowers closer toforeclosure.

Your lender has to give you some attention now! (They dont feel good having many peopleliving in their properties for free!)

So, lets see the following options, they are ALL THE WAYS you have to negotiate and keepyour home (you may apply the best option for you):


22/127



MORTGAGE MODIFICATION

In simple terms, a Mortgage Modification is when your lender agrees to change the terms of theloan. The changes may be temporary, but if this is the case, NEGOTIATE to be permanent.

The changes most acceptable for lenders are reducing the interest rate, accepting just the interestpart of the payment (interest only), or extending the amortization (40 years) in an effort to reduceoverall payment obligations to a more affordable level.

Some lenders are allowing a balance reduction as well.

Tip: Go to http://www.bankrate.com and look for calculators. Then, look for INTEREST ONLYCALCULATOR.

Or, simply enter INTEREST ONLY CALCULATOR on your best web searcher. (I usehttp://www.google.com )

A Mortgage Loan Calculator is the normal one which is amortizing both Principal and Interest.

Make your own numbers and find out how much can be the payments in your new loan.

How to Qualify:

DONT NEGOTIATE WITH THE PERSON CALLING FROM THE COLLECTIONSDEPARTMENT. NOT EVEN WITH THE MANAGER.

Tell them you need to talk with THE LOSS MITIGATION DEPARTMENT; they are the onlydepartment having the real authority to make a successful negotiation with you.

Nobody else. (Only if you personally know the President of the company, talk with him).

YOU MUST HAVE 3 MONTHS LATE IN ORDER TO TALK TO THE LOSS MITIGATIONDEPARTMENT.

ANYWAY, TRY TO BREAK THIS RULE SINCE THE 1st MONTH. (Lenders are changingrules every month). Remember your credit will be damaged if you are late.

Note: Expect to wait a long time on the phone to talk with somebody at that department. Thereare hundreds of people in default trying to negotiate with these people every-single-day!

You may qualify for a Mortgage Modification if you have recovered from a financial problembut your net income is less than it was before the default (default = failure to pay).


23/127



In a modification, you must provide the last 2 years of W2, recent paystubs, bank statements, andeverything needed to prove that you have a steady income. You must provide also a hardshipletter, which must disclose that you want to keep the property.

Secret Tip: in order to qualify, you must show that you have a surplus of $200 dollars in income-expenses. If you have an income higher or less than that, you may not qualify. For example: ifyou have an income of $2,500 per month and your expenses (including the mortgage) are $2,300,you may qualify with most lenders. Lenders will accept any number you give for gas and foodexpenses, they not verify this.

If you qualify, this modification will have an actual change to the Mortgage Note itself by addingpast due interest and past due escrow amounts to the unpaid principal balance and then re-amortizing (recalculating) it over the new term.

In short words, all your pending payments and fees, will be added to your balance (Try to

negotiate this as well).

If a loan has a shorter amortization period, the payment is higher. When the amortization islonger, the payment is lower.

In other words, if you have a home loan amortized at 15 years, the interest rate is very low, butthe monthly payment is higher.

If you change your loan to a higher interest rate, but amortized to a 40 years, the monthlypayment will decrease considerably.

Most ARMs were amortized at 30 years. You can negotiate both to lower the interest rate andlonger the amortization.

Tip: Could your lender approve a 50-year amortization? That can be cheaper. You just need toask for it (Remember Trump?).

IMPORTANT NOTICE: There are on the internet several professional foreclosure negotiatorsadvertising that they can get these Mortgage Modification plans approved even when the debtorcannot. I warn you: They will do the same what you can do over the phone! And you will knowmore than those guys reading this book. Keep your money safe.


24/127



FORBEARANCE

The dictionary defines Forbearance as:

Act of delaying. Inactivity resulting in something being put off until a later time.

A Special Mortgage Forbearance is a temporary agreement you make with your lender to eitherreduce or suspend your monthly payments.

Usually a payment suspension is allowed for less than 6 months, but it can last for some moretime depending upon the lender.

Your lender just will allow you to not make your payments for a while. But it is not that easy.Here are the catches...

Forbearance is designed for borrowers who have temporary financial problems caused by

unforeseen problems such as temporary unemployment or health problems.

The workout agreement must be approved by your lender. Your lender is only going to bewilling to consider a suspension of your payments if they believe your problems are temporaryAND you can repay the back payments within a year.

If your lender does agree to a workout agreement, they will expect you to repay the amount theyallowed you to suspend (back payments) after the suspension period is over.

What this means is, once you start paying your loan again, your re-payment period starts, too. Inaddition to your normal monthly payment, you will be also paying off the balance of the amountof the missed payments.

When the forbearance is over, you will be entering in a REPAYMENT PLAN (more of this isexplained later in detail); that means you will pay your normal monthly payment PLUS smalladvances of the pending balance created by the months you were in forbearance.

Usually a lender will give you around a year or up to 18 months to pay off the back paymentsyou owe.

Every lender has different policies and procedures surrounding negotiations for Forbearances.Youll have to find out what your specific lender can do for you.

I recommend a mortgage forbearance if you have a really small loan monthly payment and wereonly temporarily set back by some financial circumstances.

If you had trouble covering your mortgage payment each month before this happened, this is notthe option for you.


25/127



If you have the money each month to afford to pay off the back payments and can get yourlender to agree to suspend your payments for a short period (this is sort of like a short-term loan).

I remind you that the lenders want to work with you, trust me. Foreclosures cost them a lot oftime and money. You must furnish documentation to your lender to show that you would be able

to meet the requirements of the new payment plan.

Investment properties, vacant homes or dwellings set for a foreclosure sale within 30 days wouldNOT qualify.

Remember that as soon as you have a financial hardship, call your lender(s).

If you have 2 mortgages, you have to make the same negotiation with both lenders.

Forbearances will not be approved by any one else than the LOAN MITIGATIONDEPARTMENT. Call them directly. Do not talk with the collections department or the guys

answering the phone. They are not decision makers! Just ask them for directions to contact theLOAN MITIGATION DEPARTMENT.

Dont wait. Every missed day means more fees to pay. This negotiation can allow you time toeither delay/avoid foreclosure or sell your home.

The technique of Forbearance is applied to mortgages and student loans as well.

You may also negotiate to have the missed payments transferred to the principal balance of yourcurrent loan. It will increase your future monthly payments, though.

Forbearance policies vary from lender to lender. Evidence of your financial situation may berequested by you lender. Also, if you have not yet made any payments to your account, or if youhave already received a forbearance, your lender may ask you to make one or more payments toyour account as an expression of your commitment to repay.

When you call your lender, find their telephone number on your monthly statement or onlinefrom their website. Be patient. If you dont think that a forbearance is the best option for you,review more options on this book.

Federal Housing Administration (FHA) Forbearance

If you have a FHA insured loan, is also possible to enter in a forbearance period which MAY beextended up to 24 months; but this ONLY apply if the homeowner had a very specialcircumstance to qualify, like a natural disaster, death of a contributor to the family income, or asevere disability.

If you qualify for this, you may require an upfront lump sum payment.


26/127



FHA PARTIAL CLAIM

If you have a subprime loan or ARM, you DO NOT qualify for this option.

This strategy applies only for defaulted FHA loans. Maybe you are a borrower in default of this

type of loans and you dont know (FHA loans do not adjust rates overtime).

This is how it works:

A borrower of a FHA loan in default can contact The Department of Housing and UrbanDevelopment (HUD) to work together with his lender.

Under the Partial Claim option, a lender may be able to work with a borrower to obtain a one-time interest free loan from HUD FHA insurance fund to bring a defaulted mortgage current.

This will bring the defaulted account up to date immediately.

The lender will execute a promissory note and will be payable to HUD. This will be placed onyour property until paid in full.

The borrower doesnt have to pay anything until it is refinanced, sold, the borrower leaves theproperty or when the mortgage matures.

No interests are accumulated in this note.

Partial Claim terms:

The note will be interest free. (0%)

There will be no repayment penalty The note is payable to HUD Borrower is not required to make monthly payments Borrower can make partial payments but they must be by cashiers check or certified

funds

The Note will be due when the Mortgage is paid off or when the home owner sells theproperty

The Home Owner can apply for a refund in the mortgage insurance premium when thenote is paid in full


27/127



A Borrower may qualify for a Partial Claim if:

The loan is at least 4 months delinquent and no more than 12 months delinquent; The property is Borrowers primary residence Borrower may or may not be in Foreclosure Borrower is able to begin making full mortgage payments Borrower has resolved the hardship that caused him to fall behind Borrower have the long-term financial stability to support the mortgage debt or make the

payment

Borrower dont have the ability to repay the past due amount through a specialforbearance or modification

If filed for Bankruptcy, Borrower may still qualify for a Partial Claim, but theBankruptcy Court must give approval

The Process of Partial Claim:

Things youll need:

Proof of income Tax returns Bank statements Letter of Explanation

1. Understand what a Partial Claim is. HUD provides you with an interest-free loanthat is secured by your home. You begin paying back this amount after you payoff the mortgage.

2. Call your lender to get information regarding Partial Claim. Ask for HUDcontacts to help you through the application process. Your lender also will sendyou a list of all necessary documentation needed to proceed with the Partial Claimprocess.

3. Prepare a letter of explanation for HUD stating the reasons you fell behind on themortgage and what you have done to overcome the financial hardship.

4. Provide proof of income. This is done so that HUD can be assured that you willbe able to meet your financial obligations.

5. Get your tax returns for the past two years. A copy of your taxes, in their entirety,must be included when submitting for a Partial Claim.

6. Gather your bank records for the past three to six months. The length of time willdepend on your lender.

7. Send the completed package to your lender.Double-check everything before you send it. This will ensure that there will be no delays in theprocessing of your partial claim application.

Send it by certified mail. This will help you keep track of the process and give you peace of mindthat it arrived at its destination. Check this on line at http://www.usps.com


28/127



Notes:

HUD will loan you the money to bring the loan current but you will have to pay all of theattorney fees upfront, though.

The only way that a partial claim can be approved is if you have been turned down for anotherplan by your mortgage company already.

Be sure the home for which you are applying for a partial claim is your primary residence.Secondary residences or investment properties do not qualify for this program

Know how many months you are behind on your mortgage payment. You will not qualify for apartial claim unless you are at least four months and no longer than 12 months behind on youmortgage payments.


29/127



FREEZE THE RATE

On December 6th, 2007, President Bush announced that representatives of HOPE NOW havedeveloped a plan under which up to 1.2 million homeowners could be eligible for assistance intheir mortgage loans. They assembled a private sector group called "HOPE NOW Alliance".

The HOPE NOW plan is to help homeowners who will not be able to afford a higher payment ontheir sub-prime loan once the interest rates goes up, but who can at least afford the current starterrate. Unfortunately, there are severe limitations of the plan.

This program is voluntary, meaning lenders may offer the relief programs but its not required.

The HOPE NOW (frustration later?) plan is designed to help subprime borrowers who can atleast afford the starter rate on a subprime loan, but will not be able to make higher paymentsonce the interest rate goes up.

HOPE NOW members have agreed on a set of new industry-wide standards to providesystematic relief to these borrowers in one of three ways:

Freezing current interest rates for five yearsRefinancing the existing loan into a FHASecure loanRefinancing the existing loan into a new private mortgage

HOW TO QUALIFY FOR A FIVE-YEAR FREEZE:

Only sub prime ARMs are eligible You MUST be up to date with your mortgage payments Your interest rate must reset between Jan. 1, 2008, and July 31, 2010 If your mortgage has already reset, you dont qualify The new payment must be at least 10 percent higher than your current payment Are eligible only ARMs made between Jan. 1, 2005, and July 31, 2007 Option ARMs or Negative Amortization are not eligible Only securitized loans are eligible for this plan, that means if your lender kept the loan on hisbooks rather than sell it into a securitization pool. Investment properties dont qualifyMeet all the above criteria and you may qualify before the initial reset.

HOPE NOW has supported a toll-free hotline, 1-888-995-HOPE, which is available 24-hours aday to provide mortgage counseling in multiple languages.

More information available at the following site: http://www.hopenow.com or

http://www.americansecuritization.com/uploadedFiles/FinalASFStatementonStreamlinedServicingProcedures.pdf

(Click on the links)


30/127



FHASecure

FHASecure, launched in the summer of 2007, is another option to help people mortgage-stressedto refinance.

This program is for homeowners whose interest rates reset between June 2005 and December2009.

HOW TO QUALIFY:

1. Have at least 3 percent equity in your home2. Dont have to be late in monthly payments3. Have a solid employment history4. Ability to afford the refinanced loan5.

More requirements in next page

You can call at 1-800-CALL-FHA (1-800-225-5342)

Or visit www.fha.gov/fhasecure


31/127



The Federal Housing Administration displays freely this FHASecure information in its website(http://portal.hud.gov). (They may keep posting new laws to help homeowners).

Eligibility

How far behind can you be on a mortgage to qualify? What about more than 90 days?

There isn't a limit on how far behind you can be on your mortgage or how many paymentsyou've missed. Whether you're current, one month behind or multiple payments behind, theamount you can refinance will depend on the value of your property and how much you owe andif the lender, or another eligible source, is willing to take back a second mortgage to help bridgethe gap between what is owed and your home's value.

Must I be delinquent, and for a certain period of time, in order to be eligible forFHASecure?

No, and FHA encourages homeowners facing reset to refinance before they fall behind on theirmortgage.

I have a fixed rate mortgage and have fallen on bad times. What about me?

Homeowners facing financial difficulties and unable to make their mortgage payments arestrongly encouraged to contact their lender. Many lenders offer assistance to their borrowers tohelp them bring their mortgage current. Homeowners may also want to contact a HUD-approvedhousing counseling agency to find out about programs that may be able to assist them, especiallyif communication with the lender has broken down. To find a HUD-approved housingcounseling agency, please call 1-800-569-4287 or search www.hud.gov

I have an interest-only mortgage. Am I eligible forFHASecure?

So long as you are current on your mortgage, you are eligible for an FHASecure refinance. If youare delinquent, the default must have been due to the payment shock of an interest rate reset or,in the case of an Option ARM, the "recasting" of the mortgage to fully amortizing.

Are there any programs for people already in foreclosure?

It is possible that FHASecure may help homeowners already in foreclosure but each situation isunique and depends upon the value of your home and how much you owe, and if the lender is

willing to offer a second mortgage. Homeowners facing foreclosure are strongly encouraged totalk with their lenders, possibly with the assistance of a HUD-approved housing counselingagency, to determine the best course of action. To find a HUD-approved housing counselingagency, please call 1-800-569-4287 or search online.


32/127



Paying Off Your Mortgage(S) and Your Home's Value

What if I have a prepayment penalty and other refinancing costs and there isn't enoughequity in my home for me to refinance?

If you do not have sufficient equity in your home to add your prepayment penalty and/or otherrefinancing costs into your new FHA mortgage, then you should ask your lender to consider asecond mortgage to pay the difference or a short payoff on your existing loan. Offering either ofthese options is at the discretion of the lender.

What if the average home price is above the FHA loan limit for my area? Are the FHA loanlimits changing for this program?

FHA's geographical loan limits and how much it can insure are established by law. Although theFHA insured mortgage cannot exceed those loan limits, when a lender is willing to combine afirst and second mortgage, the amount of the second could exceed the maximum loan limit for

your area.

Does it matter that the value of my home is now less than what I still owe?

Not to FHA but the mortgage lender considering the refinance would have to be willing to accepta short payoff on the existing loan OR to hold a second mortgage to make up the differenceneeded to pay off the existing mortgage and the home's value.

If I have first and second mortgages can both loans be included inFHASecure?

Yes, but only if the combined amount is within the FHA geographical loan limit. If the combined

amount exceeds the FHA loan limit and/or the loan-to value limit, your lender could offer you asecond mortgage to make up the difference.

General

How can FHA help homeowners stay in their homes?

FHASecure gives homeowners with non-FHA adjustable rate mortgages (ARMs), current ordelinquent and regardless of reset status, the ability to refinance into a FHA insured mortgage.With FHASecure, the lender will not automatically disqualify you because you are delinquent onyour loan, and the lender may offer you a second mortgage to make up the difference between

the value of your property and what you owe, including standard refinancing costs.

Why should I consider refinancing into a FHA insured mortgage?

FHA insured mortgages do not allow for prepayment penalties, teaser rates or balloon payments.They are offered at market rate with terms up to 30 years and are fully amortized, meaning thatyou pay towards principal and interest every month.


33/127



Is this program going to help people who shouldn't have gotten a home loan in the firstplace?

People will still have to qualify for a FHA insured mortgage, based on their capacity to make themonthly mortgage payments. Unfortunately, those who shouldn't have gotten a home loan in the

first place will not be able to qualify for FHASecure or other FHA refinancing options. Theyshould contact their lender or a HUD-approved housing counseling agency for assistance. Tofind a housing counseling agency, homeowners can call 1-800-569-4287 or visithttp://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm

If this program won't help everyone, why is FHA making it available?

FHA recognizes that foreclosures and vacant properties affect home values, contribute toneighborhood decline and cost local governments due to additional services and lost revenues.FHA is offering this program to help prevent that type of negative impact on a community.

What is this program going to cost taxpayers?

Because the borrower pays the FHA mortgage insurance premium, taxpayers do not pay forFHASecure or other FHA programs. FHA borrowers pay their own way, and potentially avoidforeclosures that contribute to neighborhood decline, property depreciation and decreasedrevenues to the locality.

Does this program help responsible people who pay their bills on time?

Any homeowner who is current on their mortgage can refinance to a FHA insured loan at anytime if it makes financial sense for them to do so. And for those homeowners with non-FHA

adjustable rate mortgages who are current but owe more than their home is worth, it is nowpossible for them to refinance into a more affordable FHA insured mortgage and the lender mayexecute a second mortgage at closing to pay the difference.

Why isn't FHA going after the lenders who approved these types of loans in the first place?

FHA was established to insure mortgages. It does not have the authority to regulate transactionsthat do not involve FHA financing.

To find a housing counseling agency, homeowners can call 1-800-569-4287 or visit

http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm


34/127



FULL REINSTATEMENT

Full reinstatement is the dollar amount (including payment, taxes, insurance, penalties etc.)required to bring the mortgage loan current.

A reinstatement occurs when you pay your mortgage company the total amount you are behind,including any legal costs and penalties and you are permitted to make regular payments thenyour mortgage has been reinstated.

Lenders dont ask if the money is coming from a friend, your bank account, a business, etcthey just want to see the money.

REPAYMENT PLAN

The repayment plan doesnt necessary applies to an adjusted ARM in default, but it can be goodthat you know about it, so you can maybe be creative with this.

You can negotiate a Repayment Plan when you are late, but is better when a monthly paymenthas not increased or adjusted the interest rate. This plan immediately brings accounts up to date.

It works by re-distributing delinquent payments over a period of time (normally less than 12months). The monthly amount is then added to the usual mortgage payment.

For example, if your monthly payment is $1,000 dollars, and you are 3 months late, you owe$3,000 dollars plus late fees.

You can negotiate to pay the normal $1,000 plus $300+ (or so) in advance, until you pay in fullthe pending balance. After that, you can return to the normal $1,000 dollars monthly payment.

This negotiation doesnt modify the interest rate or the amortization.

Dont do this negotiation if you have your ARM already adjusted.

VETERAN'S ADMINISTRATION (VA) LOANS

If you have a VA backed loan mortgage, your lender may be able to reduce the interest rate.

They also may be able to take the past due mortgage amount added to the current principalmortgage balance, and re-amortize the new loan.

This could result in a lower monthly payment.

Contact the US DEPARTMENT OF VETERAN AFFAIRS (VA) at 1-800-827-1000 orhttp://www.va.gov


35/127



ASSISTANCE FOR SERVICE MEMBERS ON ACTIVE DUTY

If the mortgage payments are behind due to military service, homeowners should call theirmortgage lender and ask about the Service Members Civil Relief Act (SCRA).

SCRA allows active military members to suspend or postpone some civil financial obligations.

The SCRA was designed to assist and protect important rights of active duty military membersand reservists who are in active federal service.

Under this statute, are recognized also National Guard Members who were called to active stateduty in response to a national emergency declared by the President of the United States.

REVERSE MORTGAGES

A Reverse Mortgage is a very convenient loan where you dont have to make a mortgagepayment anymore for life! You may also have cash back and stay free at your house until youdie!

Do not matter your credit; do not matter your health; do not matter your income; do not matter ifyou work or not.

For this loan, you only qualify if you are a homeowner with at least 62 years old and at least 50%equity in your house.

The lender keeps or resells your house when you die.

Thats it.

HARD MONEY LOANS

This money is provided by private investors. Typically, these loans are issued at much higherinterest rates than residential or commercial loans. Hard Money Lenders do not take credit, ageor income in consideration; the loan is purely against the collateral of the property. They willapprove you a loan up 65-70% of your home value; even they can give you cash out!

The rate and payments will be higher; though.


36/127



SHORT PAYOFF

If you:

cannot refinance in any way; cannot negotiate with your lender in any way Then, you must proceed to make a SHORT PAYOFF.

(Please dont leave the house yet!)

I define SHORT-PAYOFF as a negotiation of the loan terms for less than the existing loanbalance, due to factors such as the borrowers financial circumstances, the propertys physicalcondition and local real estate market conditions.

You can do this as a SHORT REFINANCE or as a SHORT SALE


37/127



SHORT SALE

If you want to sell FAST your property in a declining market, it must be following these marketrules: You must need to sell it for less than you owe (certain exceptions apply).

If you owe $250,000 in your loan and your house is worth $200,000, you may want to sell it at$250kthats what it is supposed to be, isnt?

But you know what is happening these days? NOBODY will buy your house at this price!(Thats why there are thousands of houses in sale right now for more than 8 months in a row)

The secret to sell it faster (and this is a real secret that Im giving to you, a secret not even thoseexperienced Realtors know about it!) is to take a look in the selling prices around yourproperty.

If similar or comparable ACTIVE houses in the market are being sold by $190k, YOU MUST

OFFER YOUR PROPERTY LOWER THAN THAT BY A 5%!

Every week keep looking at the competition prices to keep lowering the price in order to becheaper than them!

This way, a bunch of interested buyers in your area will come to see your property and willdefinitely buy from you when they compare the others.

They will buy from you, because THE PRICE.

This is a very clear and simple example of this:

You are shopping apples, and in front of you, there are 3 apples of the same size, same color andsame taste. However, the prices are being offered to you quite different: one apple is priced at $3dollars, the second one is priced at $2 dollars and the third apple is priced at $1 dollar; which onewould you buy?

Of course, the $1 dollar apple! Theres no sense on this Unfortunately, the same rule appliesfor your home.

I told to sell their properties to some of my friends and clients in the beginning of 2007;unfortunately, no one of them followed my advice, all of them were thinking to sell at the topmarket price to make huge profits (as today, this stills the same minding for many people!). Theresults were that ALL OF THEM lost their houses. All of them!

I remember some of them laugh of me and others get mad. At that time, the bubble crunch wasnot so hard as today.

At this time (2008), if you decide to sell, my friend, you must do it as soon as possible, becausehouse prices are dropping the value drastically every month!


38/127



When you short sale your house, you must do it through a very good Realtor experienced inShort Sales.

Depending on the negotiation developed by this person with your lender, it can be a successfuloutcome or not.

Your lender can easily turn down the offer of your buyer if that Realtor misses just one thing. So,be aware.

After entered your property in the Real Estate market by a really good and really experiencedRealtor and you finally have found a QUALIFIED buyer (to find a buyer can take from one dayto several months!), the Short Sale transaction will just began, and this can last from one monthto eight months!

By the end of the transaction, the buyer may not qualify anymore or the house has dropped downmore in value.

You want to know that a foreclosure is stopped when a short payoff transaction is approved andyour house will not start foreclose proceeds until the lender decided what to do.

It is said by experienced investors that an additional 30% to 50% will drop down on house valueshere in the Valley of Phoenix by next year. There is a similar average for the national scenario.

(But, you know how is thisnobody knows. We just need to be prepared)

I recommend seeing a video, which is going to graphically explain you what has been happeningall these years. This video will make you seriously think about where we are going now:

The Real Estate Roller Coaster

http://www.speculativebubble.com/videos/real-estate-roller-coaster.php

SHORT REFINANCE

For a SHORT REFINANCE, you must work closely with a seasoned loan officer or financialadvisor who originates home loans; they will negotiate a SHORT PAYOFF for you incoordination with both you and your lender in order to refinance for less than you owe.

In preference, it will be better if you are current with your monthly payments for a SHORTREFINANCE. For a SHORT SALE, it doesnt matter if you are late or not.

Short payoffs (short sales and short refinances) are not easy, and many of them are not acceptedby lenders. This transaction must be handled by an experienced short payoff negotiator in orderto be successful on this.


39/127



HOW TO QUALIFY FOR A SHORT PAYOFF

You may be wondering how you can sell or refinance for less than the balance in your loan. Itsnot that easy again.

In order to the lender accept your offer for SHORT REFINANCE or SHORT SALE your housethey will consider the following:

1. The property was purchased or refinanced at the top of a seller's market at an over-inflated price, and has had a substantial drop in value.

2. The property's value has decreased to an amount that's below the loan balance due tolocal and national economic conditions that are beyond your control.

3. The proposed selling or refinancing price is more than the lender would be able to sell theproperty for after foreclosing on the loan.

4. The lender would have to pay MORE MONEY to sell the property if forecloses on thepresent loan.

5.

You must proof you cant pay the same amount as before if this convert to a variable rate,and there's no realistic expectation that your financial condition will improve within theforeseeable future.

YOU MUST KNOW ABOUT THE DEFICIENCY LIABILITY

If you short payoff a property, (for example, if you owed 250k and sold by 150k) the remainingdebt (named DEFICIENCY LIABILITY or FORGIVEN DEBT) will be given back to you nextyear by the IRS in a form of 1099 INCOME. The same liability will apply if you foreclosed forless than the balance or given the property in deed in lieu (next).

This 1099 income is your TAX LIABILITY.

If that was your principal residence, you may avoid that Tax Liability, thanks to a new federallaw (up $500,000 if you file your taxes jointly or $250,000 if file individual); but if the SHORTPAYOFF was for an investment property YOU MAY HAVE TO PAY TAXES!

The Deficiency Liability does not apply for all states (Oregon for example). If your state allowsthis, you should request to your lender -before selling the property- a WAIVER of theDeficiency Liability. If the borrower doesnt get that waiver, well borrowers may be payinghuge taxes on that liability unless they file a report of insolvency with the IRS or file bankruptcy.A qualified CPA must be contacted for concerns in tax consequences.

Circular 230 Disclosure: Internal Revenue Service regulations provide that, for the purpose of avoiding certainpenalties under the Internal Revenue Code, taxpayers may rely only on opinions of counsel that meet specificrequirements set forth in the regulations, including a requirement that such opinions contain extensive factual andlegal discussion and analysis. Any tax advice that may be contained herein does not constitute an opinion that meetsthe requirements of the regulations. Any such tax advice therefore cannot be used, and was not intended or written tobe used, for the purpose of avoiding any federal tax penalties that the Internal Revenue Service may attempt toimpose.


40/127



DEED IN LIEU OF FORECLOSURE

If you couldnt refinance the property, you couldnt qualify for any negotiation with your lenderto stay in the property and you couldnt sell the property, then you may be able to voluntarily"give back" your property to the lender (deed in lieu) in order to avoid foreclosure.

Deed-in-lieu is a process in which the borrower in default of the loan obligation gives back hisproperty to the lender.

The lender then sells the property.

This won't save your house, but it will help your chances of getting another mortgage loan in thenear future.

You may qualify if:

You are in default and don't qualify for any other option

You couldnt sell the house before foreclosure You don't have another FHA mortgage in default. See the following page for ELIGIBILITY

You have to sign legal documents through an escrow company:

An Agreement in Lieu of Foreclosure, a Warranty deed and a Quit Claim DeedAgreement in Lieu of Foreclosure

Reveals the terms and conditions of the deed-in-lieu, and is signed by both the lender and

borrower

Warranty deed Conveys legal ownership of the property to the lender

Quitclaim Deed A document which a person transfers ownership to other

After signing these documents, your lender will mark your mortgage note as "paid".

The escrow then records the deed used for transferring legal ownership of the mortgagedproperty and sends a copy to you. You are now released from the liability of the mortgagepayments

Also, if you have an 80/20 loan in the house you dont qualify.


41/127



The US Department of HUD has the following information on its web site (the mortgagee is yourlender; you are the mortgagor):

DEED-IN-LIEU OF FORECLOSURE OPTION

The Deed-in-Lieu of Foreclosure allows a mortgagor in default, who does not qualify for anyother HUD Loss Mitigation option, to sign the house back over to the mortgage company.

FACTS

Mortgagee can pay, not to exceed $2,000 compensation, to the mortgagor. The $2,000 compensation is not paid to mortgagor until they have vacated the property. Mortgagor(s) compensation must be applied to any junior lien(s) placed on the mortgage

property.

Mortgagor must agree to written agreement of property conditions. Mortgagees may determine that a current mortgagor is eligible for the Deed-in-Lieu of

foreclosure option. Under no circumstance should the mortgagor be encouraged to default on their mortgage

for the purpose of qualifying for this option.

Deed-in-Lieu must be completed or foreclosure initiated within six (6) months of the dateof default, unless the mortgagee qualified for an extension of time by first trying adifferent loss mitigation option or an extension of time was approved by

HUD prior to the expiration of the time requirement. If the Deed-in-Lieu follows a failed special forbearance agreement or the preforeclosure

sale program, then the Deed-in-Lieu must be completed or foreclosure initiated within 90days of the failure.

ELIGIBILITY

1. The property must be owner-occupied, no walk-a ways or investment properties.2. Exceptions: when it is verifiable that the need to vacate was related to the cause of default

(job loss, transfer, divorce, death), and the subject property was not purchased as a rentalinvestment, or used as a rental for more than 12 months.

3. The mortgagor must be 31 days delinquent or more at the time of the Deed-in-Lieu4. Warranty Special Deed is executed.5. The mortgagor must provide documentation of a reduction in income or an increase in

living expense, and documentation, which verifies the borrowers need to vacate theproperty.

6. Mortgagee will develop a written Deed-in-Lieu of Foreclosure Agreement, which is to besigned by both the mortgagor and mortgagee, which contain all of the conditions underwhich the Deed will be accepted.


42/127



DEED-IN-LIEU AGREEMENT

Mortgagor(s) does not own any other FHA-insured mortgages and/or or mortgage held byHUD.

Agreed upon transfer date of property to mortgagee within the Agreement. Notification to the mortgagor that there may be income tax consequences as a result ofthe Deed-in-Lieu of Foreclosure. Acknowledgment that mortgagor(s) who complies with all of the requirements of the

Agreement shall not be pursued for deficiency judgments.

Mortgagor is to provide a statement describing the general physical condition in whichthe property will be conveyed.

Mortgagor will convey property vacant and free of personal property unless HUD hasapproved an occupied conveyance.

Itemization of the keys, built-in fixtures and equipment to be delivered to the mortgageeon or before the transfer date.

Mortgagor(s) agreement to provide evidence that certain utilities, assessments, andhomeowners association dues are paid in full to the transfer date unless otherwise agreedto by the parties.

The dollar amount of consideration payable to and/or on behalf of the mortgagor is not toexceed $2,000.

If you have any question, you may contact NSC at:

National Servicing CenterE-mail: [email protected]


43/127



Chapter 3


44/127



FORECLOSURE

If you followed all the options described in this book and there was no way to stop foreclosureon your specific case, you have to know all your foreclosure rights under your state law.

Maybe at this point you still dont understand what is happening. A clear example of this is whenyou go to a pawnshop and give a watch in exchange for $200. If you dont pay back the money,the pawnshop sells the watch. The same case is here, you gave your house as a security for themoney borrowed. If you didnt pay, the lender uses his right to sell this security interest.

THE FORECLOSURE PROCESS

I will disclose now The Foreclosure Process step by step. Dont get discouraged. There areseveral stages where the homeowner still has an opportunity to find a solution. (You have toknow that from a psychological point of view, if a borrower miss the first payment, it will beeasier to miss the following months, or keep being late very often. Dont make a habit for this).

The foreclosure process can vary by state, and the following is a standard of this process, fromthe beginning to the end:

#1 DEFAULT

Mortgage payments are established to be paid on the 1st

day of every month, and there is a graceperiod of (generally) 15 days. That means the borrower can wait to pay until the 15th day and nothave any late fees.

A borrower is officially late in the mortgage payment, after the grace period or after the 15th dayof the month.

A late fee is imposed to the payment, but it is not reported to the credit bureaus as late payment.Only if the payment is sent after the 30th day, then it is reported to the credit bureaus as late.

After the first 30 days late in the payment, the lender will send you by mail a notification aboutthe missing payment and will include some late fees in your bill.

At 60 days late, you will receive a second notification for this.

After 90 days of non-payment (three months), you may have started a pre-foreclosure action byyour lender (most common practice).

Few states may start Pre-foreclosure actions when the homeowner defaults his/her mortgage loanthe third, fourth, fifth or sixth month after. You must check your state law.

Here in Arizona is on the 90th day (the third month).


45/127



#2 NOTICE OF DEFAULT

After 90 days in default, your lender will then order a trustee to record a Notice of Default(NOD) at the County Recorders Office. You are in PRE-FORECLOSURE now.

Your lender will publish a legal notice in a local newspaper of the pending foreclosure (subjectto local laws).

In addition, your lender may make a demand for payment in full. This is stipulated in yourmortgage loan under the acceleration clause, which is included in most standard mortgagecontracts.

You will receive a copy of the Notice of Default as well.

The Notice of Default officially opens the pre-foreclosure stage.

TRUSTEE:A Trustee is a neutral person or entity authorized by a trust document to handlecertain property matters on behalf of another.

You can keep negotiating with the lender(s), though.

Note: This Notice of Default (NOD) is just to let you know that you are BEING OFFICIALYAND LEGALY WARNED of a Mortgage default and need to do something about it.

Many people getting this letter think it is an official foreclosure and leave the house that samenight. Dont do this!

Pre-foreclosure is like a grace period.

At this point, with just a Notice of Default filed, your lender is unable to claim back the propertyand sell it.

YOU CAN LEGALLY STAY AT THE PROPERTY without making any payments either tokeep negotiating with the lender, to sell it or preparing to leave.


46/127



Within this period, you have a Reinstatement Right (or full payment of the pending debt) whichcan be done anytime in this grace period.

Remember not only will you owe the balance of the mortgage, but also any missed payments,legal fees and late fee penalties.

Some states allow a reinstatement period until five days before the auction sale.

Once you reinstated the loan and missed another payment again, the lender will start theforeclosure process from the beginning.

The length of this grace period varies, as it is determined by state laws. Some states allow thePre-foreclosure or grace period to last for as long as 6 months, although most states have shorterperiods.

The Pre-foreclosure period in Arizona is within two to three months. From the NOD to the sale

of the property.

#3 NOTICE OF SALE

If you can not negotiate successfully with the Loan Mitigation Department any of the optionsdescribed in this book, or if you can not payoff the full amount including all pending fees withinyour States Pre-foreclosure period (2 to 3 months in AZ), then:

You will receive a NOTICE OF SALE indicating the time and location of the auction orforeclosure sale. This may be served by mail, a processor or by the local sheriff.

The trustee also will mail a copy of this notice to all affected parties.

Maybe one normal day you will stand out of your home and find this notice posted on the frontdoor of the property. A Notice of Sale must be posted at your property at least 20 days before theAuction sale (in Arizona).

This same notice will be recorded at the County Recorders Office in the county where theproperty is located.

Finally, it is also published once a week in county local newspapers over a three or four-weekperiod.


47/127



#4 FORECLOSURE SALE

The foreclosure sale typically occurs on the county courthouse in which the property is located,but it also can be conducted at the same property address or the trustees office.

The time and location of the Auction Sale are designated in the Notice of Sale you receivedbefore.

The lender sets the opening bid. It sometimes is equal to the outstanding loan balance, interestaccrued, attorney fees and any additional fees associated with the sale.

The property will be auctioned to the highest bidder.

The winner of the auction will receive the trustees deed to the property when paid (usually nextday).

If there are no bids higher than the opening bid settled by the lender, the property will bepurchased for the lender by the attorney or trustee conducting the sale.

At the foreclosure sale (this can be called an auction, sheriff's, trustee or foreclosure sale),anyone can participate in the auction; however, bidders must have a deposit check for thestipulated minimum and financing lined up to take over the property.

The winning bidder has until 5:00 p.m. the next day to pay the full bid price in cash, and withinseven days the property ownership is legally transferred by the trustee.

The proceeds of the sale are paid to the primary lender, then to any secondary lenders.

If everything is paid and there is some money left, it will be sent to the homeowner (now ex-homeowner).

The time frame from the first month late in the mortgage payment to the auction sale is normallyaround six months in Arizona.

After a foreclosure sale, the property will be deemed as a Real Estate Owned or REO.


48/127



#5 POST-FORECLOSURE

Redemption Period after an Auction Sale

If you still into the property after the closing have happened, the new owner can file an eviction.

Eviction:The legal act of removing someone from a property

Your state foreclosure laws will determine how soon the new owner can start an eviction.However, after the auction sale, you may stay rent-free at the property more days, weeks,months, and up a year if your State laws allow for a redemption period after auction sale. In thisway, under your State law, you may postpone an eviction legally.

Redemption period:The period during which a borrower may reclaim the title and possessionof property by paying the debt

Your right here is simply that you can buy the home back from the person who bought it atforeclosure; so now you may look for new ways to find a loan (or cash) to pay the redemptionamount.

If this is not possible in your State, expect an eviction of the property usually within 2 to 4 weeksfrom the auction.

*Arizona does not allow the Redemption Right.


49/127



EVICTION

The day considered for the eviction, the county sheriff will be present at the property to conductthis humiliating process.

The personal belongings are usually just put in the front lawn or everything may be seized intothe property depending in the new owner decision.

If they seized your belongings, there is no way they can give you back. Even suing the county orthe new owner will not work.

You can avoid this bad situation, just requesting more time to stay in the property or simplymoving out before the eviction.

Before the eviction date, call to the new owner or the sheriffs office and ask for more days tomove out. They will usually agree to hold the eviction if you are in the process of moving, as

long as you are not asking for a month or more to live rent-free.

Tip: you can request to be a caretaker of the house while the buyers plans to remodel can befinalized. Sometimes the buyer will prefer to have the hou

foreclosure secrets e-book_2008

Documents