After a Foreclosure or Short Sale

Have you gone through a foreclosure or short sale in recent years?  Ever wonder how long it will be until you qualify to purchase again?  This handy chart takes the guess work out of this sometimes complicated process.  Please feel free to contact Kelly Zitlow if you feel that you are ready to purchase and would like to know how much you qualify for.


Mortgage Debt Relief Act Expiring

WASHINGTON — Beginning on Jan. 1, people who lose their home to foreclosure will be required to pay federal taxes on any unpaid mortgage the bank can’t recoup through an auction. The same will be true for homeowners whose loan principal is reduced by a mortgage modification, with the wiped-out loan being treated as taxable income.

The new tax obligation will hit because the Mortgage Forgiveness Debt Relief Act expires at the end of the year. The 2007 law was passed to save struggling homeowners from getting whacked twice, first by the sagging housing market and second by the Internal Revenue Service. Its expiration could push more people to remain in homes worth less than their mortgages, slowing the housing market’s recovery.

“The housing market is in its first stages of recovery, making now the worst time to take this exemption away from homeowners,” Rep. Jim McDermott (D-Wash.) told HuffPost. McDermott has introduced one of the bills geared toward extending the exemption.

“This exemption allows homeowners to write down their mortgages and refinance without incurring a hefty tax bill,” he added. “This ultimately lowers monthly mortgage payments, leaving more money in the hands of homeowners at a time when they need it most. If Congress does not act, the gains the housing market has made will be wiped away.”

The Washington Post reported on Friday that a number of former White House economic advisers and other economists consider the sagging housing market to be one of the greatest obstacles to recovery. Yet Treasury Secretary Timothy Geithner and others in the administration think there is little more they can do to help struggling homeowners, according to the Post.

Extending the tax exemption would help. The exemption, which can be as much as $2 million per household, covers individuals who negotiate a principal reduction on their existing mortgage, sell their house short (i.e., for less than the outstanding loans), or participate in a foreclosure process.

Under normal circumstances, homeowners who sold their house for less than the balance of the mortgage — and were forgiven the difference by the bank — would have to pay income tax on that windfall. Negotiating a reduction in the mortgage principal would also generate tax liability.

For example, an individual who owed a $400,000 mortgage might decide to sell the house, now worth $300,000 on the local market. If he sold the property short and the bank forgave the extra $100,000 — an arrangement that benefits the lender because it recoups more of the original loan than would a foreclosure — the IRS would consider that amount as income, on which the borrower could owe thousands of dollars in taxes.

“This has the effect of pulling people up with one hand, and hitting them in the face and knocking them over the cliff with the other,” Sen. Jeff Merkley (D-Ore.) told reporter David Dayen back in August.

An extension of the tax exemption would appear to be a common-sense means to help stabilize the housing market, but the political turmoil around the fiscal-cliff negotiations means common sense may not win out.

“The challenge is that a single-issue tax provision of this type — of any type, frankly — just simply doesn’t move on its own,” said Linda Goold, tax counsel for the National Association of Realtors. “It will be part of a package or it will not move. … It is really tied to the future of what happens with the big deal and then whatever they come up with after that relating to the provisions that either have or will be expiring.”

For more information, please see the IRS website with detailed information about the act.

Buying after a Short Sale or Foreclosure

In this informative video, Aladin tells us the various waiting periods for purchasing a home after going through a foreclosure or short sale. Some of these facts may surprise you!

If you have gone through a foreclosure or short sale in recent years and would like more information about your options, please contact us!

National Mortgage Settlement

Roughly $25 billion in relief for distressed borrowers, states and federal government…

In February 2012, 49 state attorneys general and the federal government announced a historic joint state-federal settlement with the country’s five largest mortgage servicers:




  • Ally/GMAC
  • Bank of America
  • Citi
  • JPMorgan Chase
  • Wells Fargo

The settlement provides as much as $25 billion in relief to distressed borrowers and direct payments to states and the federal government. It’s the largest multi-state settlement since the Tobacco Settlement in 1998.

The agreement settles state and federal investigations finding that the country’s five largest mortgage servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct.  Both of these practices violate the law.  The settlement provides benefits to borrowers whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service.

What does this mean for you?

For homeowners and those whose homes were foreclosed between January 1, 2008 and December 31, 2011, the deal means that you could receive a cash payment, a principal write down or refinancing with the money from the settlement, depending on your specific situation. If you received a letter in the mail, follow the instructions to register.  The deadline to  make your claim is January 18, 2013!

For more information and updates, please visit their official website.

Short Sales & Foreclosure Dominate AZ Sales

Here is a snapshot of sales from 2009 in Maricopa County, separating short sales, foreclosures and “regular” sales.  Sales have increased by approximately 30% from 2008 to 2009.  In 2010, short sales and foreclosures will continue to dominate the number of sales.  In looking at the graph below, short sales picked up dramatically and were almost 1/4 of our sales in December.  I expect the number of short sales to rise even more this year and make up perhaps half of all sales!  Pricing has been flat the last several months but if the foreclosures and short sales continue to dominate the market, some areas have not seen the worst of it (whereas areas like Old Town Scottsale may continue to remain flat).  I like to be positive and think 2008 was the worst of it!! :)

  Total Sales  $1-$399,999 $400,000+ REO Sales Short Sales
Jan 4,285 3,989 296 2,881 (67%) 396 (9.2%)
Feb 4,869 4,525 344 3,278 (67%) 444 (9.1%)
March 6,881 6,504 377 4,709 (68%) 690 (10%)
April  7,655 7,222 433 5,108 (66.7%) 774 (10.1%)
May 8,338 7,852 486 5,349 (64%) 947 (11.45%)
June  8,254 7,706 548 4,804 (58.2%) 1,118 (13.5%)
July 7,989 7,440 548 4,246 (53.1%) 1,344 (16.8%)
Aug 7,076 6,609 467 3,641 (51%) 1,353 (19%)
Sept 6,948 6,464 484 3,331 (48%) 1,363 (19.6%)
Oct 7,024 6,559 465 3,116 (44%) 1,379 (19.6%)
Nov  6,506 6,078 428 2,637 (41%) 1,325 (20%)
Dec 6,551 6,071 480 2,803 (43%) 1,517 (23%)

Arizona Homeowners being pursued after short sale and foreclosure

Many homeowners think if they go to foreclosure they “wipe their hands” from their lien and will never hear realestateresidentialfrom their old lender again.  Often, homeowners will avoid a short sale because they think they will have to re-pay part of their mortgage yet think if they go to foreclosure, they are “free and clear.”  Contrary to this belief, in many states the lien holder has 5-6 years to contact the homeowner for deficiency judgment.  With a short sale, a good listing Realtor will ask the bank upfront if the seller will be held liable for a future deficiency payment.  Banks are sending these unpaid liens to credit agencies, so it is not rare, both with short sale and foreclosure, that a creditor will be calling a seller that went to foreclosure.

For more info, visit this article from

Purchse a Home after Short Sale via FHA financing

sedonaLast month, FHA released yet another mortgagee letter clarifying FHA’s position regarding borrowers who recently had a short sale on a primary residence and want to purchase a new primary residence using an FHA loan.

 Summarized below are a few of the key points:

1) These changes are effective immediately

2) Borrowers are not eligible for new FHA financing if they pursued a short sale agreement on his or her principal residence simply to:

  •  Take advantage of declining market conditions, and
  • Purchase ,at a reduced price, a similar or superior property near the residence they completed a short sale on (this is a key point)

3) Borrowers are eligible for new FHA financing if:

  •  All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
  • All installment debt payments for the same time period were also made within the month due, and
  • The proceeds from the short sale serve as payment in full (another key point)

4) Borrowers whose mortgage was in pre-foreclosure status at the time of short sale are not eligible for FHA financing for 3 years unless they qualify for an exception

So yes, this means if you just sold your home via short sale you COULD qualify to purchase another home through an FHA loan (if eligible based on the requirements above) without waiting 2-3 years.

If you have questions or want to see if you are eligible, contact Kelly Zitlow at Suburban Mortgage, or 480-355-8105.

Kelly Zitlow, Suburban Mortgage, BK #10123

Short Sales expected to Increase in 2010

In 2010, expect short sales to be even more mainstreamed than 2009.  What a change in 2009!  According to the AZ Republic and real-estate analyst Mike Orr, “pending short sales, including all of the deals under contract, reached 9,343 in October, compared with 1,448 in January. Almost 40 percent of the homes currently for sale in the Phoenix area are properties homeowners are trying to sell to avoid foreclosure.”

Short Sales are expected to rise in 2010 while foreclosures are on the decline.  The chart below shows a slight increase in short sales toward the end of 2009 while REO sales are slightly down.






Total Single Family Home Sales






Less than $399,999

7,440 (93.1%)

6,609 (93%)

6,464 (93%) 

6,559 (93%)

6,078 (93%)

$400,000 and above






REO sales and % of total sales

4,246 (53.1%)

3,641 (51%)

3,331 (48%)

3,116 (44%)

2,637 (41%)

Short Sales and % of total sales

1,344 (16.8%)

1,353 (19%)

1,363 (19.6%)

1,379 (19.6%)

1,325 (20%)

In terms of negotiations, most short sales are averaging less than 3 months to get a decision, whereas some banks will respond more quickly and others take even longer.  The federal government has been incenting banks for over six months to close short sales, similar to the monies the banks were receiving for homes that were foreclosed.

As we enter this new year and an expected increase of distressed homes, we need to put our faith in the banks to help close more short sales and loan modifications.  More short sales and less foreclosures will help our market rebound more quickly.

Making Home Affordable Short Sales

Could there be “light at the end of the tunnel” when it comes to selling your home via short sale?  If you do not qualify for a home loan modification, there is a chance the bank will provide a pre-approved short sale which will streamline the sale of your home.  No more waiting months and months for a short sale decision!  Could it be this easy?  Expect to see more on this topic… 

Read the full article “Treasury Releases Guidance for Making Home Affordable Short Sales.”

The New Flipping: Short Sales


The new flipping: short sales

Untold millions of dollars that banks could have recovered from the sale of distressed Florida homes have instead been pocketed as profits by a new breed of property flipper.  These flippers target houses on the verge of foreclosure and persuade banks and mortgage companies to accept lowball buyouts, sometimes by using questionable appraisals and not disclosing that a quick sale at a higher price has already been arranged, experts say.  No one knows how widespread the scheme has become. But a national glut of short sales — pre-foreclosure sales in which the lender agrees to let the house sell for less than the mortgage owed — has spawned a small industry of short-sale flippers, some of whom use these questionable tactics, experts say.

The Herald-Tribune examined nearly 18,000 property sales that occurred in Sarasota and Manatee counties in 2009. The review showed that:
• At least 250 properties have been sold multiple times at escalating prices so far this year. Nearly 50 of those properties were bought then resold within 24 hours, suggesting that banks were underpaid for properties that already had a buyer willing to pay more.
• Just the most suspicious sales, where properties flipped within a day, have cost banks $1.7 million in Sarasota and Manatee counties so far this year. On houses bought and resold within a month, the bank short sales were $3.2 million less than the houses fetched just a few days or weeks later.
• Real estate professionals are a key part of short sale flipping. Of about 120 short sale properties that sold twice within a month in the Sarasota area, more than half of the buyers or sellers were real estate agents, real estate attorneys or mortgage brokers.
• Questionable short sales accounted for 1.4 percent of all property sales in Sarasota and Manatee counties this year.  At the peak of the housing bubble, 2 percent of all sales statewide raised suspicions, based on criteria used by fraud investigators.
• Bankers and some organizations that regulate the real estate industry have taken steps to curb the latest form of flipping. But the measures, including restrictions on writing mortgages for flipped properties, have not halted questionable transactions. Experts warn the number of short sale flips is likely to continue growing nationwide.

View the rest of this article by clicking here.