Foreclosure statistics released last week revealed some pretty hefty trends, with 1.65 million properties having experienced some sort of foreclosure filing in the first six months of 2010. But one fact was buried in the avalanche of numbers from online real estate tracker RealtyTrac:foreclosure short sale

We're on track for 3 million foreclosure filings this year.

So many homeowners upside-down on their mortgages, so many people one bad break away from missing a house payment. And so many unwitting victims one misinformed decision away from a deficiency judgment. If you faced the loss of your home, would you be prepared? Would you know the consequences of every alternative? Would you know where in the grass the snakes are hidden?

Loan mod or refi. Short sale or deed-in-lieu. Strategical foreclosure or head buried in the sand. All have risks. Laws vary by state, but one thing is universal: Deciding which solution fits best is only the first step in the long journey. Making sure you don't get body-slammed by a six-figure legal judgment is the ultimate destination.

I know, I know, it's important to have an expert in your corner. That's the common theme we preach. But not just any expert. There are many self-proclaimed "experts" who have little or no experience. Do you want them cutting their teeth on your situation, learning what not to do while working on your future?

According to RealtyTrac, California led the nation again in the first half of the year, with more than 20 percent of all foreclosure filings. Clearly, The Golden State is struggling. Let's talk about California, the good news and the bad news ... (We speak in generalities only here, because we are not attornies or CPAs. Seek the guidance of a licensed lawyer for specifics on your situation).

Good news: California is a "non-recourse" state. In general, foreclosing banks cannot go after a California homeowner for the difference between what was owed and what the bank netted after selling the home at auction, as long as the home was a principal residence and the mortgage was "purchase money." (If you have a home-equity line of credit, the rules are different, and it's a separate discussion altogether. Talk to your attorney about your situation.)

Bad news: Yes, that's correct: If you refinanced your California home, you may have surrendered your non-recourse status, even if you didn't take out a hundred grand and buy every toy in sight. Potential danger: Strategically walk away from your cash-out refi, and the bank may be able to chase you for years for the money they lost.

Good news: California is working on legislation right now (SB 1178) that would extended non-recourse status to non-cash-out refinances. But it is not yet law.

Bad news: Recourse and non-recourse apply to foreclosure. Bring the short-sale option into the equation, and the rules shift. In a short sale, legitimate non-recourse protections don't mean squat if your agent doesn't negotiate it into the agreement. You agree to whatever you agree to. And the banks routinely insert language to "reserve their rights to pursue the homeowner for a deficiency judgment," with four years to go after you. If you sign it, you're at risk.

Good news: Even in California, on a recourse loan, the banks usually can't sue you for a deficiency unless they foreclose using the longer and more expensive "judicial foreclosure" process. Few banks take that route, though they are starting to analyze it as a valid option as strategic foreclosures become more prevalent. But with that in mind, even distressed homeowners with recourse loans can successfully obtain short-sale approvals with no threat of deficiency judgments, as long as their agent has a clue and some cojones.

More Good News: In a short sale, homeowner protections against deficiency judgments have more to do with the agent negotiating the deal and less to do with the type of mortgage in place. That means the homeowner has the power, to choose the right solution, to seek out the most experienced representative, and to participate in their own rescue.

Yes, the homeowner has the power, and they must wield it wisely. More importantly, they must actually wield it. That means taking the time to educate themselves, ask good questions and take responsibility for achieving their goal.

To the distressed homeowner, don't rely on answers from just one source. Talk to three agents who specialize in this expertise. Not your boss, not your neighbor, and certainly not your broke Uncle Bob. Your financial future depends on it.
(Brian Bean is a real estate broker and ambassador for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. He can be reached directly at Brian@BigDreamInc.com.)

Brian Bean
Real Estate Professional
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com














I've been specially trained to negotiate short sales with an emphasis on deficiency waivers.

"If one advances confidently in the direction of his dreams, and endeavors to live the life which he has imagined, he will meet with a success unexpected in common hours."

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula