Short Sales and Foreclosures in Orange County, CA 

Perhaps you’ve heard the latest buzz words: “loan modification,” “short sale,” “Obama’s plan,” and you want to know if they apply to you.

We know what your options are when you owe more on your home than it’s worth and don’t know what to do

• Over 12% of people are not making their mortgage payments.

• 6 in 10 Orange County homes purchased in 2006 are upside down, meaning they owe more on their home loan than their house is worth*. 

•  In 2007, the numbers drop slightly to almost 4 in 10*.

• Orange County median home values have dropped approximately 40% from their high just a few years ago.

•  REINSTATEMENT and FORBEARANCE

Reinstatement means that you pay the loan current including all past due amounts, charges and fees to bring your mortgage completely current.

Forbearance occurs when the borrower obtains a payment plan with the bank to bring the loan current over a certain period of time, while the borrower gets back on their feet. 

• LOAN MODIFICATION and OBAMA’S MAKING HOME AFFORDABLE

 A loan modification on an Orange County, CA home occurs when an agreement between the borrower and the lender is made to change the terms of the original loan agreement. This may result in a change in the interest rate, the monthly payment amount, the length of time to make repayment (30 years vs. 40 years) or even, in very rare cases, a reduction in the principal balance owed.

Making Home Affordable

1. Available on existing Fannie Mae & Freddie Mac loans.
2. Eligibility

•  
  • Obtained loan prior to 1/1/09.
  • Owner occupied.
  • Must be delinquent or expected to default soon.
  • Fully document income.
  • Financial hardship.
  • Modification must occur before 12/31/12.
  • Only one modification may occur.

   3. Monthly payment must be 31% or less of gross monthly income.

   4.  Lender incentives for loan modifications.

 Making Home Affordable – Refinance

Under the Making Home Affordable program requires the following to be eligible:

•  
  • Existing mortgage must be Fannie Mae or Freddie Mac.
  • Maximum loan to value can be no more than 125% of the current value of the home. (ie. if you owe $125,000, the house must be worth at least $100,000).
  • Mortgage must be current.
  • No minimum FICO/credit score required. 
  • Refinance is rate and term only.
  • Mortgage insurance may be required.  
  • Income and employment verification are required. 

• SHORT SALES

A short sale occurs when the bank who currently holds the mortgage on a property agrees to accept less than it’s owed when the house is sold.

This is known as “shorting” the bank; thus, the term “short sale“.

Many homes currently selling in Orange County, CA homes are short sales because of a 40% drop in median values in the last couple of years.

HOW DO YOU QUALIFY FOR A SHORT SALE?

1. Hardship
2. Monthly shortfall
3. Insolvency

WHY WOULD A BANK AGREE TO SHORT SALE AN ORANGE COUNTY, CA HOME?

1. The bank may net more money from a short sale than a foreclosure.
2. If the short sale is completed, the bank may not have a non-performing asset on its books for as long.
3. The property is likely to be in better condition than if it were a foreclosure because the seller is more likely to take care of the property while attempting to sell it as a short sale.

• FORECLOSURE on Orange County, CA homes

California is a non-judicial foreclosure state, meaning a lender does not have to file a lawsuit in order to foreclosure on an Orange County, CA home.

Steps to non-judicial foreclosure on an Orange County, CA home:

1. Lender files Notice of Default

• Usually when borrower is at least 3 months behind on the mortgage.

   2.  Lender files Notice of Trustee Sale

• A Notice of Trustee Sale filed 90 days after the Notice of Default.
• Once a Notice of Trustee Sale has been posted, the bank can sell the house in 21 days.

In California, a lender can foreclose on a home in 111 days, including the 90 day time period for the Notice of Default and the 21 days for Notice of Trustee Sale.

If you have received a Notice of Default on your Orange County, CA home, do not delay!  It is time to look at your options and attempt to avoid foreclosure on your home. 

DEED IN LIEU OF FORECLOSURE on ORANGE COUNTY, CA HOMES

• Also known as a “friendly foreclosure.”
• Sometimes results in “cash for keys.”
• Borrower give the home back to the lender without forcing the lender to go through an official foreclosure.
• May not be available where there is more than one lender unless the junior lenders will agree to the deed in lieu.

 SHORT PAY REFI

• Lender forgives some portion of the debt owed when it is paid off.  
• Instead of selling the house to a new buyer, the owner actually keeps the house.

 EFFECT OF SHORT SALES and FORECLOSURES on CREDIT and YOUR FUTURE

• Fannie Mae will allow you to obtain a new home loan in as little as 2 years with a short sale, instead of 5 to 7 years with a foreclosure.
• Effect on credit for short sales is at least partially dependent on how the bank reports the payoff and is greatly effected by the number of late mortgage payments.
• There may be tax consequences to the forgiveness of debt.  It is strongly recommended that this be discussed with a tax specialist before a decision is made.

If you would like to receive my e-book with more information on short sales and foreclosures, please e-mail Me!

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About the author: Christine Donovan is a California Residential Real Estate Broker with experience in assisting clients buy and sell residential real estate.

Are you upside down in your home? Do you owe more on your Orange County home than it’s worth, and you don’t know what to do? Are you concerned about making your mortgage payment? Contact me at christine@donovanblatt.com or 714-319-9751 to discuss your options.

Want to buy a home or to list your property for sale in Newport Beach, Costa Mesa, Huntington Beach or Orange County? Contact me at christine@donovanblatt.com or 714-319-9751 to learn about our system which will make your buying and selling experience easier.

Disclaimer: All information in this blog is deemed reliable but is subject to change at any time and is not guaranteed to be accurate nor are there any warantees either express or implied. This blog is not intended to offer any legal, tax or other advice.

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Copyright © 2009 by Christine Donovan, All Rights Reserved.  Shorts Sales and Foreclosuresin Orange County, CA. 

* According to Zillow.com