Category: Orlando Short Sales

What You Should Know About Mortgage Forbearance

Posted on by Jenny Zamora

Like many Americans right now, you might be worried about making your next mortgage payment. Don’t panic just yet… Forbearance may be a good option for you! It means working together with your mortgage company to help you avoid any late penalties and eliminate any risk of being foreclosed on. You may also consider seeking the advice of an experienced real estate agent before contacting your lender.  

If you’re experiencing financial hardship due to COVID-19, here are some things you need to know about mortgage forbearance agreements.

What’s mortgage forbearance?

Mortgage forbearance is a program designed to provide temporary relief from your mortgage payment by either lowering your monthly payment or pausing your payments completely for a pre-determined amount of time. This is generally requested by homeowners who are going through some type of financial hardship affecting their ability to make their mortgage payments, like loss of employment, divorce, or illness.

Mortgage forbearance is not free money; you still owe the full amount of those reduced or missed payments.   

Does mortgage forbearance affect my credit?

Under normal circumstances [not during a global pandemic], it would be up to your lender whether or not to report your forbearance to any credit bureaus. However, right now mortgage lenders are providing struggling homeowners with an automatic, no documents required 3-month forbearance plan because of the coronavirus. They will not be reporting this forbearance plan to any of the credit bureaus either.  

Under normal circumstances, however, a forbearance would still be much less damaging to your credit than a few missed payments or foreclosure.

How does a mortgage forbearance work?

First of all, you have to make contact with 6your lender to see if they will approve you for a forbearance agreement. Don’t ever just stop making payments without speaking to your lender first. Normally, lender qualifications will vary slightly between different mortgage companies. The type of loan you have will also be a determining factor in what options you will be offered, or you will qualify for.

If you qualify for mortgage forbearance, your lender will work together with you to set up the terms of your agreement. Terms of forbearance may include:

  • Length of time for the forbearance period
  • Reduced payment amount required during the forbearance period.
  • Whether or not your lender will report the forbearance to credit agencies.
  • After the forbearance period ends how will you pay your mortgage moving forward, including skipped or reduced payments.

Once the forbearance period ends, you will have to pay your mortgage company back according to the terms you agreed on. Here are some typical options for paying back the missed amount:

  • Lump sum bringing the loan current in 1 single payment.
  • Adding an additional amount to your normal monthly payment until your current.
  • Normal payments will resume and missed payments will be added to your mortgage lengthening the terms of your mortgage.
  • Loan modification; when the terms of your mortgage are permanently adjusted by either a reduced payment, reduced principal or both.

How long will a mortgage forbearance last?

Mortgage forbearance is designed to provide temporary relief from your mortgage payment while you are going through a financial problem. Typically forbearance agreements do not last more than 3 months to 1 year.

Most mortgage companies will require you to provide them with regular updates during the forbearance period. If you need an extension, your lender will explain your options at that point.

Can a forbearance plan hurt my financial future?

A forbearance will usually be reported to the credit bureaus unless your lender has agreed to not report it. Right now, because of the coronavirus outbreak, almost all lenders have agreed to not report a forbearance to any of the credit bureaus. Having a forbearance on your credit history still looks much better than a foreclosure, short sale, and even a few missed payments.

Before you buy a new home in the future, you would need to re-establish yourself as a credible borrower. As long as you’ve already gone through the forbearance without missing any payments, the impact on your credit should be minimal and you may even consider applying for a new home loan from the same lender that granted you the forbearance.

How can I qualify for a mortgage forbearance?

The qualifications for mortgage forbearance are similar to that of a short sale. You start by applying. Most lenders will let you start the process online but I suggest you begin by calling your lender and take notes on every phone call… who did you speak to?… what happened on the call? etc. You can get started by gathering the following items.

  • Most recent mortgage statement.
  • List of your monthly income.
  • List of your monthly expenses.
  • Hardship letter, an explanation of why you cannot continue to make the mortgage payment (include any supporting documentation if possible).

Just like when I do a short sale in Orlando, it’s best to start communicating with your lender way before you miss any payments. If you already missed a payment before reaching out, it will show up on your credit report and stay until the loan has been made current again.

Keep in mind, if you’re filing because of a natural disaster or even a global pandemic like we’re facing currently, there’s usually a time limit in which you can file your claim.

If your request is denied, you then have an option to appeal the decision with your mortgage company. Then your application will be reviewed by a newly assigned loan officer, and they will reach out to you with an updated decision.

How do I get mortgage forbearance?

You should contact your mortgage servicer to apply for a mortgage forbearance agreement. Call the number on your monthly statement and ask for the mortgage forbearance dept to get started.

If you want unbiased advice about your financial situation, consider speaking to a housing counselor from the Department of Housing and Urban Development. You can make an appointment with a HUD counselor near you by going to their website. They will advise you on whether forbearance is a good choice for you in your current situation. They will also explain how different repayment plans would work.

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Orlando Homeowners Get A Lifeline

Posted on by Jenny Zamora

I’ve been a real estate broker in Orlando for the past 16 years and in that time I’ve never seen the economy come to a screeching halt like this before. Not even when the market crashed back in 2008 and the market was suddenly flooded with Orlando short sale properties that weren’t selling.

This pandemic is a different kind of disaster that has nothing to do with unethical mortgage companies or homeowners living well above their means. This is a situation that took us all by surprise and is out of our control as homeowners. Luckily, there is help out there for homeowners who are currently in financial trouble.

Orlando homeowners who’ve lost their job because of COVID-19 are getting some help with their mortgage. Depending on the situation they’re in, they should be eligible to have their mortgage payments suspended or reduced for anywhere between 3 and 12 months.

Our Federal directors, with the help of Freddie Mac and Fannie Mae, are instructing lenders to help homeowners out by offering flexibility. This would cover about 50% of all the home loans in the U.S. [loans that are guaranteed by Freddie and Fannie]. Regulators believe, however, that the mortgage industry adopts a similar policy with their customers.

Under this new plan, homeowners who lost their income could qualify for reduced payments or a pause to the payments altogether. This forbearance can be for up to 12 months depending on the homeowner’s situation.

Homeowners should not just stop paying their mortgage without contacting their mortgage company. Doing this will surely damage their credit. Their lender will work with them to at least suspend 3 months of payments right off the bat without any penalties and without reporting it to any credit bureau. They will do this with verbal testimony without any supporting documentation because of the coronavirus outbreak.

Within the 3 months, they should work with you to come up with a payment plan and may ask you for some proof of hardship to determine what your best options would be to get back on track.

COVID-19 mortgage help is not FREE MONEY!

You must know that help with your mortgage due to COVID-19 doesn’t mean free money. All homeowners will have to work out a repayment plan once they are back on track financially. This could also be simply extending the term of the loan.

Some may even have to repay the entire amount when the 90 days are up, depending on the banks’ criteria as well as the homeowner’s financial situation.

I believe this was a great 1st step by lenders. Could you imagine the mass panic throughout the US if, all of a sudden, homeowners couldn’t continue to make payments and all the lenders began foreclosure proceedings?!

There’s already enough stress about trying to not get the virus and keeping our loved ones safe and healthy that people should not have to worry about losing their homes.

Contact your mortgage lender

Homeowners needing help should reach out to their servicer immediately and find out what their options are. Explain to them that you are having financial problems because of the virus outbreak and request to be put into a forbearance program.

Some of the largest mortgage lenders in the country, like Wells Fargo and Chase, are also working to help homeowners who have been financially hurt by the coronavirus. These lenders have the responsibility to follow through on what our government directed them to do.

Mortgage companies have also been told to pause all foreclosure proceedings as well, although anyone in foreclosure right now would have had to be in trouble before the coronavirus even started spreading in the U.S. I believe this was more of a public health move than anything else.

Can a mortgage forbearance end up as a short sale?

Once a mortgage forbearance agreement has come to an end, there is still a chance that you don’t like the terms, or you still can’t afford what they’re offering. In this case, traditional loss mitigation procedures may resume. At this point, the usual options will be available to you like a short sale, loan modification, or a deed in lieu. Homeowners may feel that one of these options will benefit them more than agreeing to the terms they have laid out for you in the forbearance program.

Help for renters

These plans by mortgage companies don’t do anything to help renters. Renters, however, can apply for rental assistance through state and federally funded rental assistance programs. I would also suggest reaching out to your landlord and maintaining open lines of communication.

Landlords feeling the pain

Keep in mind, landlords are suffering as much and even more right now. Mortgage forbearance programs are designed for people’s homestead properties and not investment homes. Imagine you have 10 rental properties, 10 mortgages to pay… then, all of a sudden, you stop receiving 10 rental checks all at once!  

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A wave of Short Sales could be headed for Orlando due to COVID-19

Posted on by Jenny Zamora

While stay-at-home orders are keeping people at home, many Floridians could be falling behind on mortgage and rent payments due to loss of employment and an economy on a downward spiral.

The real estate data-service provider, Attom Data Solutions, reported that 10 of Florida’s 67 counties are in the top 50 most vulnerable counties in the U.S. to the economic impact of the COVID-19 pandemic. Most of these counties are in either North or Central Florida, including Osceola, Hernando, Flagler, Clay, Lake. Surprisingly, Broward county was the most vulnerable of the South Florida counties.

The only state that ranked higher than Florida in this study was New Jersey with 14 counties in the top 50 most at risk in the nation. Also ranked near the top were New York, Connecticut, and California. Real estate markets in the Midwest and West are considered to be less likely to see big numbers of people losing their homes because of the virus outbreak.

483 counties throughout the US were studied to determine what percentage of homes we can expect that will be receiving foreclosure notices by the end of 2020 and what percentage of the local wages are needed to pay for homeownership. The study used data from the last quarter of 2019 to calculate the averages.

Central Florida has one of the lowest median incomes in the U.S. The local economy is largely dependent on tourism and convention revenue which could mean big trouble for homeowners. Many landlords are suffering right now… especially if they depend on rental incomes to pay the mortgages.


Central Floridian homeowners could be facing rough waters ahead

Realtors in Orlando are also starting to feel the pain. Activity has slowed for both buyers and sellers with only people who have no choice but to buy or sell eager to close. Home sales in Orlando are reaching the levels that we saw back in 2008 after the market crash. Orlando Realtors are losing almost $700,000 in daily commissions from the pandemic.

Right now it’s too early to say how this will all play out because we don’t know how effective the Federal stimulus will be in helping people through this financial rough patch. Banks are granting temporary mortgage forbearance to many homeowners and businesses will hopefully get enough help to pay employees through the crisis.

I believe lenders will have to step up and provide some major help to prevent foreclosures in Orlando and other Florida cities. In my opinion, it’s the only way to avoid large numbers of foreclosures and short sales in Orlando.

Potential for Mass Short Sales in Orlando

Like I said before, it’s too early to tell what will happen to Orlando real estate market as a result of coronavirus. However, I do think that if people don’t get back to work in the next couple of months, short sale Realtors in Orlando will be extremely busy by the end of 2020 and well into 2021.

Even lenders aren’t sure how everything will end up playing out because they don’t know how much time it will take for Floridians to get back to work. Short sales and loan modifications are used as an alternative to avoid foreclosure. The problem with loan modifications is that the homeowner will still be on the hook for the entire amount of the loan but with lower payments.

I’ve been a short sale Realtor in Orlando since 2004 and 9 out of 10 times when I present my clients with the terms of both a short sale and a loan modification, they choose short sale.

Doing a short sale, however, will allow the homeowner to sell the home for less than what’s owed on the mortgage. By doing this, the lender gets at least most of their money back and avoids a lengthy and expensive foreclosure process. The homeowner also benefits from a short because they can avoid having a foreclosure on their record and won’t be responsible for the difference between what they owed and what the home sold for.

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How To Submit A Short Sale Package

Posted on by Jenny Zamora


Submitting The Short Sale Package

Back in the early 2000s when short sales were scarce and uncommon, short sale agents were forced to deliver completed short sale packages via FedEx, UPS, or sometimes even in person, depending on where the short sale lender was located concerning the home. As a short sale agent in Orlando, I did this to ensure the lenders would receive the package because banks would routinely lose or would claim they “never received it”, probably because they were outsourcing their short sales to 3rd party short sale processors. It was very frustrating, to say the least…

Although Bank of America was the first one to have the ability to receive shorts ales via upload, many of their competitors still required us to fax them over, and over… and over. As the years went on, through the implementation of online software and loss mitigation departments becoming more familiar with short sales, the short sale process became more streamlined and where being processed a lot faster.

These days some lenders will only accept documents if you upload them to their online processing platform. You must speak to someone before submitting the package so you know exactly what they need and how they need it. If there’s only one document missing, it will hold up the entire process.

Documents Needed for A Short Sale Package

Nowadays most lenders will have their short sale package with their company logo. It’s best to just follow along and submit the docs exactly how they ask for them.

This is a list of documents required by all lenders to be considered for a short sale:

Listing Agreement: The short sale lender will need proof the property is listed by a licensed real estate agent at the current market value. The listing agreement must be signed and list the terms of the listing, the name of the brokerage and the amount of commission to be paid. It’s never a good idea to lowball the bank so make sure the offer price is close to the listing price, they aren’t stupid and it could cause them to reject the file altogether.

Purchase Contract: Note: Not every lender will accept a contract that’s been signed electronically. They may require you to have “wet signatures” on the contract so find out the requirements beforehand. Make sure the property address is written correctly and every line has initials and signatures where needed so there aren’t any delays.

Hardship Letter: Writing an effective hardship letter is probably the most important part of the short sale package. It should tell a detailed story about how the homeowners got into their current situation and why they can no longer afford to pay the mortgage. Whether it’s because of loss of employment health problems or divorce, leave nothing out. The hardship letter must have the loan number on it, signed and dated by the homeowner.

Letter of Authorization: This is the letter in which the seller authorizes the agent to speak with the lender on the seller’s behalf.  As a short sale realtor in Orlando since 2004, I prefer to send in the authorization letter as soon as I get the listing agreement so I can establish communicate easily with the short sale lender before sending in the package. However, for some unknown reason, many short-sale agents will wait to send it together with the complete package.

Bank Statements: Every short sale lender will want to see your last 2 bank statements for every account you have and don’t leave out any pages as this will delay your file. If there is any unusual activity on the account like large deposits or withdrawals, I suggest you make a note to the short sale processor explaining why. Put out the fire before it starts…

Last 2 Years Tax returns: The short sale lender will also want to see your past 2 years of federal tax returns, dated and signed, on every single page. If for some reason you haven’t failed, you should write a letter explaining why.

Last 2 W-2s or Profit and Loss Statement: The lender will require you to send in the past two years of w-2s disclosing your salary. However, if you’re self-employed, you’ll need to send in a profit and loss statement. If you’re not self-employed, you should also send in your payroll stubs supporting the w-2s. Explain any bonuses or other pay increases if applicable.

Preliminary HUD Statement: The preliminary HUD statement should be prepared by the title company that will do the closing. It contains all the details of the property such as a legal address, seller’s names, buyer’s names, and the estimated closing costs. It will break down all the costs of the transaction including the sale price, mortgage payoffs, real estate commissions, taxes, insurance, etc.

The CMA [comparative market analysis]: Your short sale agent should also prepare a comparative market analysis to be included with the short sale package. It’s a report of comparable homes sold in the same area. A CMA report should justify the offer price and should be included if the offer price is less than the listing price.

Contractors Estimate: If the home requires some repairs to make it livable or even minor repairs, it’s always a good idea to include a contractor’s estimate of how much it will cost to make the repairs. If you want to be thorough, you should get 3 estimates from different contractors.

Short Sales Aren’t Guaranteed

Keep in mind that there is never a guarantee when it comes to short sales. Just because you followed all the steps and did everything the lender asked of you, there’s still a chance that your short sale will be denied by the lender. If this happens, don’t give up!

If you have an experienced short sale agent in your corner, they won’t give up either. Sometimes it takes some negotiating and jumping through a few more hoops to get it done.

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The Complete Short Sale Process From A to Z

Posted on by Jenny Zamora

Even after all these years, the short sale process remains a mystery to many people. Distressed sellers are puzzled and desperate for some guidance from a short-sale agent. Even more confusing… most real estate agents in Orlando don’t know how to do a short sale.

What’s a Short Sale?

A short sale is a situation that occurs when a mortgage lender agrees to accept a lesser amount than what’s owed on the outstanding mortgage balance. This situation benefits both the lender as well as the seller [homeowner] when foreclosure seems unavoidable.

By agreeing to a short sale, the lender can avoid a long drawn out and costly foreclosure process. Because even if the bank forecloses, there’s no guarantee that it will sell at the auction in which case the lender would end up back with the property as an REO [real estate owned] property. If the lender keeps the property, they will ultimately have to put it up for sale again, and there’s no telling how much they will get or how long it will take.

The dollar amount offered on a short sale is often more than a lender would receive at the auction or as an REO listing. However, you should know that banks are never thrilled about releasing mortgage obligations at huge discounts either.

The Seller

There are 2 main reasons why lenders grant short sales. First, the homeowner is going through a financial hardship and cannot continue paying the mortgage. Secondly, there isn’t enough equity in the property to pay off the mortgage and closing costs, taxes, etc. Both of these conditions must exist for a bank to approve a short sale.

A few examples of financial hardship may include loss of employment, reduction in income, divorce, medical condition, job transfer, bankruptcy, or even death.

Sellers must prepare a financial package so they can submit it to their lender. Every bank has a different short sale package but the basics are the same among all lenders.

The Short Sale Package

Following are the main components of a typical short sale package:

  • Authorization Letter: This is a document which allows your short sale agent to speak with your lender on your behalf.
  • Hardship Letter: A detailed letter describing the hardship the seller is going through explaining why they can no longer afford the mortgage.
  • Preliminary Closing Statement: Discloses the contract amount, realtor commissions, closing costs, taxes and any other fees involved with the transaction.
  • Financial Statement: A statement which discloses your income versus your expenses.
  • Two years of your tax returns
  • Two years W-2s
  • Last two bank statements
  • Two months of pay stubs
  • CMA: This is a report prepared by your short sale agent which lists recent sales of comparable homes in your area.

Submitting an offer to the Bank

Before submitting a short sale offer to the lender, buyers should ask their real estate agent for a list of comparable properties. The lender will look to get an offer that’s close to market value.

It’s important to keep in mind that the listing price on a short sale may not reflect the market value. The property will most likely be lower than market value to entice more buyers to make an offer. Most short sales begin when there’s a signed and accepted purchase offer by the seller and buyer.

Keep in mind that the short sale listing price might not reflect market value. The property might be priced below comparable sales to encourage multiple offers. Some short sales can begin before an offer but banks will most often start the procedure upon receipt of an accepted purchase offer.

Once the seller accepts the offer, the listing agent will then send the listing agreement, signed purchase offer, and proof of funds to the bank together with the completed short sale package.

If the package is incomplete, the lender won’t even process it. This is why it’s so important to have an experienced short-sale agent representing the seller.

The Short Sale Lender

Short sales are anything but short… buyers can end up waiting several months to get a response from a lender. The short sale listing agent must follow up with the bank regularly and keep detailed notes of each contact. Being a short sale agent in Orlando since 2004, I can tell you that following up regularly with the lender is crucial to the success of a short sale transaction.

I can’t tell you the number of times a buyer has decided to cancel their offer because of the bank taking too long to respond. This is especially true when the buyer needs to buy a house ASAP. For buyers wanting to close quickly, a short sale may not be the best option for them.

The Usual Process

Once the lender receives the completed Short Sale package, this is usually what takes place on the bank’s end:

  • The loss mitigation dept acknowledges receiving the completed package. This alone can take between 1 – 3 weeks.
  • A short sale processor is assigned to the file, this can also take up to a week or two.
  • A BPO aka [Broker’s Price Opinion] is ordered. The lender will contract a local realtor to give their opinion on what the property is worth. They do this by looking at the comparable properties in the area and are supposed consider any repairs the home may need.
  • Another short sale processor maybe assigned to the file. This can add another week or 2.
  • A second short sale processor might be assigned. This can take another 30 days.
  • The offer is either denied or accepted. If the offer is denied, the bank will counter with the amount they are willing to accept. At this point the buyer may wish to counter the bank’s offer together with a contractor’s estimate and a CMA.
  • Once the bank has accepted the offer, the lender will require all parties in the transaction to sign an arm’s length affidavit. This document states that parties are unrelated and acting their own best interest.
  • The lender will send out a short sale approval letter approving the contract amount.

While all this is going on, sometimes buyers will give up hope and cancel. They become tired of waiting because the short sale process is taking much longer than they expected. I’ve had situations with clients where buyers just walk on the deal without even telling their real estate agent.

I’ve had some Orlando short sales get approved in two weeks and others take more up to 6 months on average. A top short-sale realtor can help speed up this process, but at the end of the day, it’s all up to the lender. Some lenders are easier to work with than others.

It’s crucial that the short sale agent check-in with the short sale bank at least once or twice a week. Unfortunately, there are many incompetent short sale processors and the short sale agent may have to go over the processor’s head or request an “escalation”.

Final Thoughts

A good short sale listing agent will often have a good idea about when approval will come after the file has been sent for the bank’s final review. If so, the buyer would be wise to start the loan process if they haven’t already. Occasionally, banks will only give buyers 2 weeks to close so it’s important to be ready.

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