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ALM Presentation to CB Gundaker


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									 Partnering With Access Loss Mitigation

 April 22, 2009

                                          Presented By: Richard Petz
                                          Director of Realtor Services Division

Strictly Private and Confidential
Table of Contents
 1. Introduction to Loss Mitigation

 2. Homeowner’s Obligations & Responsibilities

 3. Marketing to the Demographic

 4. File Flow

 5. Fees
1. Introduction to Loss Mitigation
Introduction to ALM
ALM works with distressed homeowners nationwide to avoid foreclosure and mitigate its associated
negative credit impact. ALM provides an array of loss mitigation solutions and services including loan
modification and short sale negotiation.

About Access Loss Mitigation                             Advantages to Partnering with ALM

 National leader in short sale negotiation and           Short sales are complex and time-consuming
  loss mitigation
                                                          Leverage ALM’s relationships with lenders and
 Operate in all 50 states                                 expertise in the negotiation process

  – Comprehensive understanding of rules and              Expand the scope of your services
    regulations applicable to each foreclosure
    situation                                             Increase your volume of property listings and
                                                           enhance your earning potential
 Based in Los Angeles, CA
                                                          Focus on what you do best: selling properties
  – Satellite office in New York, NY
                                                          We boast a 75-80% success rate
 Assisted thousands of homeowners facing
  foreclosure                                                   When we have offer, and buyer stays in

                                                                Realtor avg. 15-20%

                                                          Reduce legal risks

                                                          Education, Selling and Listing Agents
Introduction to Loss Mitigation: Definitions
A brief overview of loss mitigation definitions and terms.

 Short Sale
  – Pay less than owed
  – Forgive the difference
     Occasional promissory note (usually on seconds)
  – Commission paid by lender

 Loan Modification
  – Modify the terms
  – Interest rate, extend term, type of loan
  – Short term solution (5-7 Years)
     Have seen long term solution, not common

 Deed-in-Lieu of Foreclosure
  – Handing keys to lender
  – Foreclosure credit hit
Foreclosure Basics
The following overview provides a basic summary of the key elements and concepts involved in

Stages of Foreclosure                                     Judicial vs. Non-Judicial Foreclosure
 Pre-Foreclosure                                          Mortgage deed vs. deed of trust
      Borrower misses payments
      Missed payment notices sent by lender               Judicial:
                                                            – Foreclosure passes through the state or district court
 Notice of Default (NOD)
                                                            – When homeowners default on mortgage, lender files
      A document made public and states that the
                                                               claim to recover unpaid balance of loan
         borrower is in default and legal action may be
         taken (foreclosure)                                – Courts decide case, which typically takes 4-6
          In Missouri a NOD is typically used as              months, but sometimes up to a year
             Missouri is primarily a Non-Judicial state
                                                           Non-judicial:
 Notice of Sale                                            – Foreclosure by trustee sale
      Mailed the borrower twenty (20) days prior to        – If homeowner defaults lender can notify the trustee
         scheduled day of sale                                 to start foreclosure
      Must also be published in a newspaper within the
                                                            – The trustee can then sell the property and transfer
                                                               proceeds to the lender
 Foreclosure Sale (Auction)                                – Trustee sale is typically much faster than foreclosure
      The sale is conducted by the trustee at public          by judicial sale
        auction for cash to the highest bidder                  Not tied up in courts
      Redemption Period
         If the lender is the winning bidder, the
            borrower has one year (12 months) to
            redeem the property
      REO
Typical Foreclosure Timeline
The following is the typical foreclosure process for Missouri.

Pre-Foreclosure                                        Foreclosure                                         Post-Foreclosure
                                                       (Process Period)

                                                                                                          Redemption Period: Mandatory redemption
 0-14 days:
                     45-60 day notice:                 Notice of Default: A notice to homeowners          period after the sale (12 months in MO). The
                     lender sends out                  notifying them that they have failed to fulfill    borrowers have the right to pay off the loan
                     certified letter asking for       their payment obligations. Notice is filed with    along with any interest and penalties thus
                     payment in full                   the county and put in the newspaper                regaining the property. Regardless of who
                                                                                                          takes possession of the property at the auction
                                                                                                          (lender or new buyer), they must wait until the
                                                                            Sale/Auction: the             redemption period expires before taking
                                                                            property is auctioned-        possession of the property
    2-week                                                                  off to the public. If
                     90-day limit: Lender               Notice of Sale: An lender does not
    grace period
                     initiates formal                   official            receive its minimum           Real Estate Owned (REO): If property is
                     foreclosure                        announcement that bid, the lender takes           not successfully auctioned the lender has no
                     proceedings. Lender                specifies the time, possession of the             option but to repossess the property, wait for
                     transfers the matter to            place, and terms of property, and it              the redemption period to expire, evict the
    30-day           outside legal counsel              a foreclosure sale. becomes a part of its         previous homeowners (if necessary) and
    notice: late-    and attorney in charge                                 real estate owned             place it back on the market to try to recoup
    payment fees     has a foreclosure notice                               portfolio (REO)               its losses
                     posted (NOD)

           30-days          60-days          90-days        120-days       150-days        180-days      210-days      240-days       270-days
Borrower’s Options When Facing Foreclosure
A borrower essentially has only two basic routes to choose from when facing foreclosure: Stay or Go.
These options run from stopping foreclosure and keeping the mortgage, to being evicted.

 Reinstating the Mortgage
  – Borrower brings mortgage current, pays late fees and penalties
 Forbearance
  – Lender may agree to allow homeowner to delay payments for a short period or negotiate a payment plan
      Lender may offer a combination of reinstatement and forbearance, no payments for a short time then pay off later
 Repayment Plan
  – Enables homeowners to submit payment of a portion of the past-due amount and penalties with future payments until
     the past-due amount and penalties are paid-off
 Loan Modification
  – A change in the term, interest rate, type of loan or principal reduction (very rare) of the note
      Goal is to lower monthly payments making it affordable
 Short Sale
  – Agreement by lender to accept less than the principal owed as payment on loan. Also known as a short pay-off or a
     pre-foreclosure workout
 Deed-in-Lieu of Foreclosure (Voluntary Conveyance)
  – Borrower voluntarily transfers title back to lender to avoid foreclosure. Lender releases borrower from mortgage and
     repossesses the property
 Bankruptcy
  – Typically only pauses the foreclosure process (provides a “stay”). Eventually the property is repossessed
 Other potential options
  – Sell Home (if there’s enough equity to pay back loans)
  – Refinance (through another lender that specializes in financing for homeowners facing foreclosure)
A Comparison of the Options
Foreclosure vs. Deed in Lieu vs. Short Sale.

                Lender Expense                 Credit Implication                  Tax Implication
                 Average $50,000 + 30%         200-300 point reduction + No       Some States Deficiency
                  reduction in home value as     new home purchase for 7-10          Judgment, Issue 1099 for sales
 Foreclosure      REO                            years                               vs. loan difference

                 30% reduction in home         200-300 point reduction No         Some States Deficiency
 Deed in Lieu     value as REO                   new home purchase for 7-10          Judgment, Issue 1099 for sales
                                                 years                               vs. loan difference

                 Sells for market value        40-80 point reduction from late    Issue 1099 for sales vs. loan
 Short Sale                                      pays; can purchase home in a        difference
                                                 year with credit repair
Short Sale Credit and Tax Implications
“I can’t give legal or tax advice. Please consult an attorney and accountant.”

 Credit Implications
  – Take credit hit from late pays not from the sale itself (40-80 points)
  – Can purchase a new home in a year with credit repair
     Paid as agreed vs. settled debt

 Tax Implications
  – Issue 1099-c for difference between sale price and loan value
  – “Mortgage Forgiveness Debt Relief Act of 2007” (Expires 2012)
  – Primary Residence vs. Investment Property
     Debt was qualified principal residence indebtedness, you were insolvent immediately before the
       discharge, or if the debt was canceled in a title 11 bankruptcy case. (IRS.GOV)
The Short Sale Process
Although every short sale is a unique transaction, the following outlines the typical steps in a short sale.

                        From offer submission to close an average of two to four months

          Homeowner                List                Submit                  BPO /               Negotiate
          Defaults on            Property             Short Sale              Assign               Short Sale /
           Payments              For Sale              Package               Negotiator           Sell Property

    Homeowner            Homeowner works  ALM creates short         The lender orders  Lender agrees to
     misses payments       with expert and     sale package;            a BPO to             accept offer, final
    Lender initiates      determines value    assists                  determine value of   details are
     collection efforts    of property         homeowner in             property and the     negotiated
                           through CMA and     gathering and            minimum sale        Lender receives
    Homeowner             BPO                 completing all           price required
     consults with                                                                           approval from their
                          If total owed is    necessary               Lender assigns a     investors, if loan
     expert and                                paperwork;
     determines short      less than the                                negotiator           has been sold to
                           property value,     compiles all                                  investor
     sale is only option                       transaction
                           short sale is the                                                All other liens on
    The earlier the       best option         documents from
     homeowners start                          realtor                                       property (e.g.,
     the short sale, the  Homeowner puts                                                    second
                           property up for    Lender reviews                                mortgages) must
     higher the success                        package to
     rate                  sale                                                              be negotiated and
                                               determine                                     settled prior to
                                               eligibility of short                          sale
                                                                                            Lender reviews
                                                                                             and must agree to
                                                                                             final HUD-1
Managing Expectations
The biggest reason we see buyer and seller fallout is from not “Managing the Expectations” of our clients.

Typical Short Sale Timeline                               Managing Selling/Buyers Agents Expectations
● Week One                                               ● Let the buyers agent know it will take…

   ― Borrower contacted by                                  ― Takes 2-3 months for completion

             •   Negotiator                                            •   Determine buyer mindset

             •   Processing                                            •   Will buyer stay or go?

● Week Two                                                             •   Explain the S.S. process

   ― Need listing agreement from you, executed           ● Find multiple offers / (if MLS allows)

   ― CMA, HUD-1, Listing Agreement, COMPS                   ─ “Contingent with Short Sale Approval”
● Week Three-Four                                           ― Even if we have an offer that looks fantastic….
   ― Procure offers, submit them to ALM                     ― We submit the lowest offer, swap out offers at the
   ― Processing will complete S.S. package with
     borrower assistance                                 ● HUD submission

                                                            ― Always have your title rep pad the HUD
● Once we have fully executed offer and complete short
  sale package                                              ― Increase Title fees, overcharge for inspections
   – Two-Three Months for Approval                       ● Once we have fully executed offer and complete short
                                                           sale package

                                                            – Two-Three Months for Approval
2. Homeowner’s Obligations & Responsibilities
Homeowner’s Responsibilities
These items are required for ALM to work on the homeowner’s file.

 Homeowner fills out ALM paperwork
  – Client agreement
  – Property profile
  – Letter of authorization

 Gather Required Docs – Bottleneck for Submission of Offer to Lender
  – Pay stubs
  – Tax returns
  – Bank statements
  – Hardship letter
ALM Client Agreement
This document describes the services we provide and the terms of the agreement between our company
and our clients.

Title                                                ALM Client Agreement
 Client Agreement has industry disclosures
    – Protects CBG and ALM
 Legal document
  – Must be signed by all borrowers
Property Profile
This form provides us the necessary information regarding the homeowner’s property, their loans, and any
outstanding liens.

Title                                                   Property Profile
 Provides borrower / property snapshot
    – Contact information
    – Property information
    – Mortgage information
    – Additional liens
Letter of Authorization
This form authorizes the homeowner’s lenders to discuss their loans with representatives of our company
and allows our company to interact with their lenders on their behalf.

Title                                                  Letter of Authorization
 Required for ALM to discuss borrower’s loan
    with servicing company

 Must be signed by all borrowers
  – Complete one for each loan
     First and second lenders

 LOA is submitted to the lender upon receipt
Hardship Letter
An effective hardship letter sticks to the facts and is concise, straight-forward, and relatively simple. It is not
a good idea for the homeowner to blame the lender for their problems. It is a good idea to highlight how
they have exhausted all options available to them to repay their lender.

Anatomy of a Hardship Letter                                 Sample Hardship Letter
 Good Hardship                                               January 1, 2009

                                                              To Whom It May Concern,
   – One page
                                                              This is a hardship letter. Our loan number is 987-456-321. We bought our home
   – What was catalyst                                        tw o years ago and received a mortgage from your institution to finance 80% of the
                                                              purchase. At the time, w e both had good jobs and a stable income. We have
                                                              alw ays been financially responsible. Unfortunately, in October of 2006 I got laid off
   – Show how borrower got into this situation                from my job and since then I have been unable to find steady employment. Since
                                                              my unemployment benefits ran out we have simply been unable to afford to continue
   – Short sale as a last resort                              making our mortgage payments. Our credit cards are maxed out. We have cut back
                                                              on all but the most necessary expenses but continue to struggle to keep up w ith the
                                                              bills and make ends meet.
 Bad Hardship
                                                              We are now four months behind on our mortgage payments. We considered selling
   – Blaming the lender                                       our home, but property values in our area have come down greatly. As it turns out,
                                                              w e have no equity left in our home and there is no way we could sell our home for an
                                                              amount that w ould pay off our mortgage in full. Even if we could sell at current
   – Emotional                                                market prices, w e would first need to replace the roof (it is beyond repair), which we
                                                              cannot afford to do. We are late on our credit card and car payments, and have not
                                                              paid our utility bills for some time now.
   – Not factual
                                                              Of course, w e would love to keep our home, but given our current financial situation
 If it makes sense the lender will accept it                 it is just not possible. Even if things turn around for us, we see no way that w e can
                                                              make up for the mortgage payments w e missed. We really want to avoid foreclosure
                                                              w hich will further damage our already ruined credit. We have exhausted all of our
                                                              savings and we have nobody left to turn to for help. Please do whatever you can to
                                                              help us out of this situation. Thank you for your time and consideration in this



                                                              Michael & Samantha Jones
                                                              St. Louis, Missouri
3. Marketing to the Demographic
Marketing to the Demographic
There are many ways to approach the target market. Here are a few ways to find your ideal loss mitigation

Who Qualifies                                                    How to Target the Demographic
 Must be late or will be late                                    Notice of Default
   – Don’t tell client to be late                                   – County recorder
   – “If your financial situation does not allow you to pay         – Newspaper
     your mortgage than we can start working on your
     Short Sale”                                                    – Mailers

         Legal risk                                                – Door knocking

 Borrower has Asset’s                                            Database marketing

   – Case by Case situation                                         – Contact past clients

   – Lender will review                                             – Talk to your Church, Synagogue

         401k’s, savings, all assets taken into consideration      – Talk to your local community

 Legitimate hardship                                               – The homeowners get a free service

   – If it makes sense….                                                  Paid by lenders
4. File Flow
File Flow
A brief summary of the file flow from CBG to ALM.

 Consultation for Borrower
  – Contact ALM representative
  – Dedicated phone line for CBG
     Phone- 877-552-7353
     Fax – 888-900-8510
  – Determine how to accomplish borrower’s goals
  – Stay or go?
     Loan modification or short sale
     Stave off dreams of loan modification

 Fax ALM required paperwork + Agent Identification Worksheet
  – Client agreement
  – Property profile
  – Letter of authorization
     (Homeowner Welcome Packet)

 Agent will receive a confirmation of receipt
  – Ask for additional documents
  – Ask agent for quick summary of borrower situation
Selling Agent
As a selling agent you can still take advantage of our negotiation services and here is how…

 Seller’s agent
  – Find property for purchase
  – Tell listing agent that you will make an offer contingent on it being negotiated by ALM
     Call dedicated phone line- 877-552-7353
     Invite listing agent to next webinar
  – Fees
     Same fee structure as CBG (discounted rate)
     Split fees with listing agent
         Ex. Property sells for 350k
            – Split would be 15% from each side totaling 30%
     Create realtor welcome packet for listing agent

 Fax ALM required paperwork + Realtor Welcome Packet
  – Client agreement
  – Property profile
  – Letter of authorization
     (Homeowner Welcome Packet)

 Agent will receive a confirmation of receipt
  – All agents notified
5. Fees

Listing Side Commission

Short Sale Price               ALM Compensation          CBG Compensation

$100,000.00 or less            $1,000                    Remainder of commissions in excess of $1,000

$100,000.01 to $200,000.00     38.9% of commissions      61.1% of commissions

$200,000.01 to $300,000.00     34.5% of commissions      65.5% of commission

$300,000.01 or more            30% of commissions        70% of commissions

 • All commission are paid by the lender
 • The lender will not honor your listing agreement’s commission/ However Fannie and Freddie Paper
 will honor listing up to 6%
 • Commission is negotiated
       • Some lenders have blanket commission policies
       • Countrywide 5%
Summary of Topics
1. Introduction to Loss Mitigation

2. Homeowner’s Obligations & Responsibilities

3. Marketing to the Demographic

4. File Flow

5. Fees
               Send them to:

 Partnering With Access Loss Mitigation

 April 22, 2009

                                               Presented By: Richard Petz
                                               Director of Realtor Services Division

Strictly Private and Confidential

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