Short Sale Deficiencies Fact Sheet Legal Dept Calif Assoc of Realtors

General Rule A mortgage lender is generally prohibited from pursuing a deficiency or deficiency judgment for a short sale involving a one-to-four residential unit property.

Prohibited Acts Where applicable, a mortgage lender involved in a short sale is prohibited from engaging in any of the following acts:
• Collecting a deficiency;
• Having a borrower owe a deficiency;
• Requesting a deficiency judgment;
• Having a court render a deficiency judgment; or
• Requiring the borrower to pay any additional compensation, aside from the proceeds of the sale, in exchange for written consent to a short sale.

Applicability
A borrower is protected under this law if all of the following requirements are met, and no exception applies:
• Mortgage loan is solely secured by a deed of trust;
• Mortgage loan is for a one-to-four residential unit property;
• Borrower sells for less than the outstanding loan balance owed;
• Lender provides a written short sale approval;
• Title voluntarily transfers to a buyer by grant deed or other conveyance document recorded in the county where the property is located; and
• Proceeds of the sale have been tendered to the lender or lender’s agent in accordance with the parties’ agreement.

Exceptions include any of the following :
• Lender seeking damages for fraud or waste;
• Borrower is a corporation, LLC, or limited partnership;
• Cross-collateralized loan (special rules apply);
• Borrower is a political subdivision of the state;
• Bond lien; or
• Public utility lien.

Effective Date July 15, 2011.
The new law protects a borrower who closes escrow after the law came into effect on July 15, 2011. For short sales that closed escrow before July 15, 2011, the borrower may be protected for a first trust deed under the previous law or by asserting other legal arguments.
Practice Tip Regardless of the law, it would be prudent for a borrower to obtain the lender’s written and signed agreement to release the borrower from any and all liability for the mortgage loan, and to report “no deficiency balance” to the credit bureaus.

Legal Authority The full text of Senate Bill 458 (codified as section 580e of the California Code of Civil Procedure) is available at www.leginfo.ca.gov.

Are they telling you to invest in real estate? 6 Investor Mistakes to avoid

Traditional investments are delivering low returns, and home prices are at bargain levels. Is it time to consider buying some rental housing?
Investing in real estate right now can be profitable, if everything goes well. ( Short Sales and Foreclosures are just now hitting the market in greater numbers on the Westside of Los Angleles.) Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae's and Freddie Mac's bulging inventories of foreclosed homes into affordable rentals.Before you start scouring for deals, keep in mind that owning rental properties is time-consuming, expensive and fraught with challenges, and many investors lose money. You will want to avoid falling into one of these common traps.

• Mistake 1: Confusing a cheap deal for a good deal. It is true that you can buy some homes for ridiculously low prices—but that doesn't mean you can rent them out. Homes in deserted subdivisions aren't any more appealing to renters than they are to buyers. The same is true for less-attractive properties or those in less-desirable school districts. FinestExpert.com, to estimate rents. Other experts suggest canvassing apartments nearby to see not just their rates, but whether they are offering special deals, like a couple of months of free rent.•

Mistake 2: Overlooking key costs. Knowing the potential rent isn't enough. Before you buy a property, you should also factor in closing costs of 3% to 6%, the costs to fix up the place and maintain it, and your holding costs. Then add the profit you expect to make (and more closing costs, if you intend to turn around and sell it). Only then can you figure out what you can afford to pay.

• Mistake 3: Forgetting that time is money. In real estate, time is your biggest enemy (added-time spent doing paperwork, chasing tenants rent checks, evicting tenants etc.)

• Mistake 4: Assuming you will sit back and watch the rent roll in. Just like homeowners who can't pay the mortgage, tenants lose their jobs and stop paying the rent. Evicting them can take several weeks, and some steal appliances or other property.

• Mistake 5: Underestimating repair costs. As with all homes, you will be making lots of repairs. You may find wood rot or mold when you remove that cracked bathtub. Carpet in rental homes typically must be replaced every five years, and you may have to repaint after every tenant. Tony A. Drost, president of the National Association of Residential Property Managers, or Narpm, suggests setting aside six months of expenses so that you will have funds if a major repair is needed.

• Mistake 6: Assuming that owning a rental is the same as owning a home. You might put up with flaws in a home that a renter wouldn't tolerate. In addition, many states and communities have strict (and complex) laws for landlords, even if you own only one property. A property manager can handle most of the headaches, but you should expect to pay one up to a month of rent for finding and screening tenants—and up to 10% of the monthly rent for management fees.
Taken from WSJ 9 10 11 business section with comments by Maralee

Yes foreclosures have finally hit the Westside

per M Grantham CNN Money. CNN presents the case for and against foreclosures below with a gathering of good statistics.

for the "Westside", the percentages are up significantly. Be careful of general statements, but Realty Trac, a good source, shows that for areas such as Santa Monica and Culver City, Playa Del Rey and Beverly Hills, the total number of homes approaching short sales and that are in foreclosure are way up. There are various stages also to this process in California. The general time frame in a Trust Deed state such as California is 3 months and 21 days as opposed to a mortgage state such as New York, where the action can take up to 10 years.

T. Lushby writing in CNN Money 8/31 makes a good case for pushing through foreclosures and giving someone else a chance to own the home.

A first step could be to sell off the foreclosed properties owned by Fannie Mae, Freddie Mac and the Federal Housing Administration. Collectively, they own 248,000 homes, about 31% of the foreclosure inventory.

The administration and the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, are already looking for ways to unload these foreclosed homes. Earlier this month, they put out a request for ideas, including possible bulk sales of inventory. Also, they are interested in turning many of these properties into affordable rentals, which are sorely lacking in many communities. Experts interviewed agree this would be a good move for the market.

To entice investors to purchase these homes, as well as other foreclosed properties owned by banks, the administration could advocate for changes to the tax code, Gaines said. For instance, more favorable capital gains or depreciation rules could attract buyers.

The case against foreclosure
David Min, associate director for financial markets policy at the Center for American Progress, argues that there are many homeowners who can be saved if their payments can be adjusted to affordable levels or if some of their principal is forgiven. This particularly applies to those who are only a few months behind.
Foreclosure is very costly for servicers, homeowners and neighborhoods, he said.

While some of the 2.2 million loans in foreclosure can still be saved, many are too far gone, they say. Some 37% have not made a payment in more than two years, while another 34% have not made a payment in 12 to 23 months, according to Lender Processing Services.
"Loans enter into foreclosure, but never come out," said Thomas Lawler, founder of Lawler Economic & Housing Consulting. "If this keeps going on, you have a continual overhang that never goes away."
Delaying foreclosure increases the percentage of homeowners who'll likely never catch up, Lawler said. In 2009, only 6% of delinquent borrowers were more than two years behind. And it means vacant properties still in limbo could fall even further into disrepair, hurting the value of the surrounding housing market.
Accelerating foreclosures is tricky, however, especially since it is largely the purview of the states. But the administration could work with state officials to speed the process, especially on vacant homes, he said.
The push would come at a time when many mortgage servicers have slowed foreclosure efforts as they resolve shoddy paperwork practices. Foreclosure filings in July dropped to their lowest level since November 2007, due to processing delays and foreclosure prevention measures, according to RealtyTrac.

Mediation, for instance, could help some homeowners avoid foreclosure, he said. Some 23 states and the District of Columbia currently have programs that require mortgage servicers to sit down with borrowers and discuss the homeowners' options, though many began only in the last year. More than 70% of mediations end in a settlement, often restructuring the mortgage to a sustainable level, according to the center.
Helping those still current with their payments can also give the housing market -- and the economy -- a lift, albeit a somewhat marginal one, experts said.
"It would be helpful to some borrowers with high rates," Lawler said.