Short Sales Rising Sharply

Whether it is just battle fatigue or simply good business sense, homeowners are looking at short sales, getting cash for keys and trying to get relocation fees to move. The banks are loosening up their standards for short-sales because failure to do so clearly reveals their malevolent intent to steal homes that they could not otherwise get if the judicial system starts operating properly.

That more and more judges are starting to scrutinize the documents and the actual transfer of money from one party to another, it is becoming increasingly apparent that the documents are for a transaction that is non-existent and that the loan is not supported by any documents — because the loan came from a third party with no connection to the loan originator.

Then comes the horrific problem with title which at some point will need to be addressed much as Florida did with the Murphy Act. Title must be reset because at this point there is practically no such thing as clear title as result of the work done by Wall Street.

The title problem can easily be minimized with a signature from the homeowner which is what is required in a short-sale, as opposed to a robo-signature from an unauthroized person signing a deed for the bank in an REO sale.

The last problem is that at the end of this year forgiveness of debt becomes taxable, which is bad for short sales after December 31, 2012. So the rush is on to get them done — but that is probably premature because the law will probably be extended by the lame duck congress after the elections. Everybody seems to want the extension.

See congress working on extension of tax exemption at Rain City Guide Blog by Craig

22 Responses

  1. Exactly, Poppy. If the judges won’t look at it or even care to—what can we do? Seriously?

  2. l guess what, the IRS has raised its ceiling on the amount you can “owe” them (actually they owe us) from 25k to 50K but the interest rate is less and if you dont like it they can garnish i think its time the people got some balls.

  3. The issue here is: the notes are paid in full and they were NEVER securitized, nor have the liens been perfected.

    I have found thousands of satisfactions of deeds in various states, filed one minute after the other. Daunting work, but they are out there. The issues I am finding are the lines of credit extended to the brokers/originators cannot be traced to your home…the paperwork is very sloppy. The players have sold the DEBT only, where the forgeries come into play. If they play hide and seek with the satisfactions, there is no authority or debt to be paid. Got it? The larger players, lenders, have been paid and the ruse is the servicer (no authority or collections due), or the legal mills lining their pockets, illegally. There is no debt.

    I have my proof, but the judge won’t even hear this and it is right in his face. Zero balance, lawyer forgeries, conflicts of interest, fraud on the court, conversion, etc…you name it. At every turn homeowners are being lied too. Not one of these foreclosures is legal and the lenders cannot place the line of credit to the individual houses!

    In my humble opinion, this is where your case is! The libor rate is something else.

  4. Speaking of AG’s with no balls:

    Matt Taibbi: Goldman Case Shows Eric Holder ‘Has No Balls’

    “Holder’s non-decision on Goldman is more than unsurprising,” Taibbi writes. “It amounts to an official announcement that the government is no longer in the business of prosecuting smart criminals. It’s pathetic. The one thing you pay any lawyer to have is balls, and our nation’s top attorney has none…”


    “ALBANY, N.Y. — The attorneys general of New York and Connecticut have issued subpoenas to seven banks over the possible manipulation of a global interest rate, a person with knowledge of the matter told The Associated Press on Wednesday…”

    OOOO…big scary ball-less AG’s—getting mad about something again…well, it’s nothing that a little “fine” and some BS “settlement” which again does absolutely nothing for the scapegoat/mark homeowners can’t fix…

  6. @BSE
    You said:
    “After suffering through a foreclosure or short sale, there’s a final kick in the teeth. It comes in the form of a 1099 from your ornery mule of a lender.”

    Except that it’s not from your “lender”. The SERVICER name is under where it says “lender”…on my 1099. How do they get away with that?

  7. What kind of law firms have bulletproof glass in their lobbies with little windows like currency exchanges? Foreclosure mills. How telling.

  8. what breaks my heart is the little gal i know a single mom worked all her life and is excited about buying a home she said its not a foreclosure its a flipper- the price is way too high (shadow inventory) she has been convinced by someone its good time to buy property and the guy selling is a distressed asset company, has multiple companies sound familiar, and now she says he wants more money
    i want to puke. i told her i just dont want her to wake up in a couple of years and be underwater, but then again i guess you can only do with what you got in front of you today, because tomorrow is not a promise.

  9. Yep. All equal before the law but… not before the bank!

    Selective Prosecution in the Midst of the Largest Unpunished Heist in History

    Causing a Financial and Foreclosure Crisis! = NO JAIL
    Cutting off Amish Woman’s hair = Possible LIFE IN PRISON!

    Prosecutors are in a frenzy to prosecute before its key evidence grows back. Prosecutors don’t have time to investigate financial crimes because they are too busy examining bad haircuts.

  10. August 14th 2012


    You know the cause of this foreclosure debacle and know why these people are losing their homes. You and every bar member has to know the problematic issues associated with administrative forfeiture
    My clients each have a copy of the ABA memeorandums as yours should.

    The complexity and ambiguity involved in these matters are the household’s only defense and you also know that does not sell.
    Claims made to subject matter are not one in the same with what these people bring into court. The red herring arguments for Robo slop and botched assignments are moot and a nullity to their defenses.

    These sidewinders are a distraction from what the bar has asked attorneys to stay out of or else. I warned of this in 1998 and 2001 and shared this with you early on in 2008. The pooling and servicing agreement is a joke and that was its intent all along. But you have taken your position and I’m sure will not change over to the truth of the matter.

    The crap I have endured in trying to advocate the truth was certainly nothing Livinglies needed while I never intended to circumvent this enterprise of yours.

    Property was seized from the get go. Title was taken to create a replacement note for the note the borrower signed. The new note is from a synthetic yield produced by a discounted bond called a negative pledge. The bond term and bond holder’s rights cause the matter of foreclosure to evolve into a mis-joinder claim in foreclosure.

    The program accesses short term commercial paper granting the banks a 500 BPS margin and nearly weaned the major banks off the Federal Reserve. The Goldman Sacks scandal with the option trader is the same thing Fannie Mae is doing with these loans – short selling the title.

    It is ethically wrong to engage novices as experts and what you’re doing here is wrong pal. Take no position or the right position and risk what comes with telling the truth.

    After your done reading this wash this piece out by publishing more non relevant junk ahead of it, like always.


  11. Didn’t I read that the bankster can still get a deficiency judgment after a short sale? If I did and it’s true, one would want to make sure the bankster abandons any right to deficiency? Good luck!
    They may not ever seek it though, if they can, for all I know.

    @NG – I recently came accross something which might be up your alley, so hope you see this. I think I read that a note and dot may not be used to settle an antecedent debt, which in my hugely limited understanding, says to me that if the obligtion by the banksters, any of them, already existed to the investors at the time Joe Brown’s loan was made, they can’t make use of the loan in regard to the antecedent obligation. Thought I made some kind of notes, was onto something else, but can’t find them. I readily acknowledge I don’t know why that would be true, at least this minute. It’s also possible these days that I imagined this! But I came accross antecedent debt one other time 4 years ago in regard to a title company trying to use a note and dot, I think, for antecendent debt and it didn’t work out for them, as I can barely recall.

  12. Congress weighs mortgage relief extension

    Law spares owners of distressed properties additional financial stress

    August 10, 2012 12:30PM
    By Kenneth R. Harney

    Here’s some encouraging news for financially stressed homeowners across the country: The Senate Finance Committee approved a bipartisan bill before heading home for summer recess that would extend the Mortgage Forgiveness Debt Relief Act through 2013.

    Why is this important? Several reasons: The debt relief law spares homeowners who receive principal reductions on their mortgages from being hit with hefty federal income taxes on the amounts forgiven. Without it, millions of owners who go through foreclosure or leave their homes following short sales would experience even more financial stress.

    The law, which has also provided relief to thousands of people who have debt balances written off as part of loan-modification agreements and is crucial to the $25 billion federal-state robo-signing settlement with large banks, is set to expire at the end of December. Some Capitol Hill analysts predicted that, along with a host of other special-interest tax benefits, an extension might have trouble making it through the partisan gantlet in an election year.

    But the Senate committee managed to pull together enough votes Aug. 2 to pass the debt-relief extension, after heavy lobbying by the National Association of Realtors and the National Association of Home Builders. The bill, which now moves to the full Senate for possible action next month, also would extend tax write-offs for mortgage insurance premiums for 2012 and through 2013, and continue some energy-efficiency tax credits for remodelings and new home construction.

    The mortgage debt relief extension could ultimately affect millions of families who are underwater on their loans, delinquent on their payments and heading for foreclosure, short sales or deeds-in-lieu of foreclosure settlements. Under the federal tax code, all types of forgiven debt are treated as ordinary income, subject to regular tax rates. When an underwater homeowner who owes $300,000 has $100,000 of that forgiven as part of a modification or other arrangement with the bank, the unpaid $100,000 balance would normally be taxable.

    But in 2007, Congress saw the fast-mounting distress in the housing market on the horizon and agreed to temporarily exempt certain mortgage balances that are forgiven by lenders. The limit is $2 million in debt cancellation for married individuals filing jointly, $1 million for single filers. This special exemption, however, came with a time restriction. The current deadline is Dec. 31. Without a formal extension by Congress, starting on Jan. 1 all mortgage balances written off by banks would be fully taxable — a nightmare scenario that has had financially stressed homeowners worried for months.

    These apprehensions were raised even higher when some policy analysts predicted that a Congress as fractious and dysfunctional as the current one would never get its act together to pass any tax bills until the closing moments of the lame-duck session expected after the November election. Even then, with issues like the mounting federal debt and draconian spending cuts scheduled for Jan. 1 taking precedence, smaller tax extensions such as mortgage debt relief might well be lost in the dust storms, experts predicted.

    A few Republican policy strategists, including Douglas Holtz-Eakin, former Congressional Budget Office director and economics adviser to Sen. John McCain’s presidential campaign, speculated that tea party freshmen in the House might oppose the debt-relief extension because they see it as another costly bailout funded by taxpayers. The estimated revenue cost to the Treasury for a two-year extension is $2.7 billion.

    The mortgage insurance deduction is another key housing benefit that made it into the Senate committee’s 11th-hour extender bill. Mortgage insurance generally is required whenever home purchasers make small down payments, whether on conventional, private market loans or government programs. Under a provision in the tax code that expired last December, certain borrowers could write off their mortgage insurance premiums on their federal income taxes, just as they do with mortgage interest. To qualify for a full deduction, borrowers could not have adjusted gross incomes greater than $100,000 ($50,000 for married taxpayers filing separate returns).

    The Senate’s bill would extend the write-off retroactively to this past Jan. 1, and would continue it through December 2013. No buyer or owner who planned to write off premiums during 2012 would be penalized, in other words, despite the expiration last December.

    The outlook for the extenders: Given the popularity of the housing deductions and credits, look for supporters to press the full Senate for early action in September in order to get these issues settled before Election Day. If there are serious objections in the Republican-controlled House, however, then all bets are off until the lame-duck session, when election losers as well as winners get to write federal tax policy

  13. What to do if the Mortgage Debt Forgiveness Act expires?

    Written on November 12, 2011 by tsammons in foreclosures-shortsales, Strategic Default

    After suffering through a foreclosure or short sale, there’s a final kick in the teeth. It comes in the form of a 1099 from your ornery mule of a lender.

    For the last few years, with foreclosures in high gear, many homeowners were able to avoid paying tax on the 1099 issued after short sales and foreclosures because of the Mortgage Debt Forgiveness Act. The Mortgage Debt Forgiveness Act says that if a homeowner short sells his primary residence or is foreclosed on his primary residence then no tax is owed. This expires at the end of 2012.

    What if they don’t extend this? There a few other ways to go as shown below.

    First a little background: A foreclosure or short sale creates what it is called cancellation of debt income.
    Income tax has to be paid on cancellation of debt income. For a short sale, the amount that’s taxable is the difference between the amount owned under the mortgage and the amount actually paid back to the lender. For foreclosures, it’s the difference between the market value of the property and the amount due on the mortgage.

    If you owned your home for any 2 of the last 5 years before the foreclosure or short sale, then no tax is due on the 1099 because of the Mortgage Debt Forgiveness Act. If you rented the home out temporarily, you will still qualify as long as you meet the any 2 of the last 5 years test. If the property was never your primary residence, then you can’t use the Mortgage Debt Forgiveness Act and tax will be owed on the 1099.
    If the Mortgage Debt Forgiveness Act expires, (or if you had an investment property foreclosed or that was sold short) , there are only two ways to avoid paying tax on the lender’s 1099:

    1. Claim Insolvency on form 982.
    2. File Bankruptcy before the 1099 is issued.

    Insolvency. Insolvency means that your debts exceeded your assets on the day that debt was forgiven. This worksheet explains how to calculate insolvency. Notice that IRA and 401k accounts ARE included as assets. Overall, this seems like a simple calculation but it’s kind of tricky and anyone hanging their hat on insolvency should discuss it with their accountant well in advance of April 15. The insolvency worksheet should be filled out, form 982 is filed and then because you are insolvent no tax is owed on the 1099.

    Bankruptcy. If a bankruptcy is filed before the 1099 is issued, then no tax is owed on the 1099. On your tax return, you file form 982 to show that you filed a chapter 7 or chapter 13 and that wipes out the income tax from the 1099

    Foreclosures don’t seem to be slowing down and my bet is that the Mortgage Debt Forgiveness Act will be extended again.

  14. To Be or Not to Be: The Mortgage Forgiveness Debt Relief Act Extension Beyond December 12, 2012

    The Mortgage Forgiveness Debt Relief Act is set to expire December 31, 2012, and there are early indications on Capitol Hill that it might not make the cut. The law, first enacted in 2007, allows homeowners who have received principal reductions on their mortgages as the result of loan modifications, short sales or foreclosures to avoid income taxation on the amounts forgiven.

    Prior to 2007, all cancellations of debt by creditors — whether on auto loans, personal loans or mortgages — were treated as taxable events under the federal tax code. If a person owed, say, $200,000, but paid off only $150,000 through an agreement with the lender, the $50,000 difference would be ordinary income, taxable at regular rates. Thanks to the Mortgage Forgiveness Debt Relief Act, however, that $50,000 difference would not be taxable.

    Under the debt relief law for qualified home owners, taxation can be avoided on forgiven mortgage amounts up to $2 million (married filing jointly) and $1 million for single filers. To be eligible, the debt must be canceled by a lender in connection with a mortgage restructuring, short sale, deed-in-lieu of foreclosure or foreclosure. The transaction must be completed no later than December 31, 2012.

    Having a foreclosure on one’s credit report will impact a credit score much more than will a short sale. If one is successful in completing a short sale, in many cases, he or she may qualify for a mortgage much sooner than with a foreclosure. Not surprisingly, short sales have thrived under the Mortgage Forgiveness Debt Relief Act. There have been 1.6 million short sales reported by the National Association of Realtors since late 2008, accounting for between 10 percent and 14 percent of home sales activity each month during that time. If the Mortgage Forgiveness Debt Relief Act is not going to be extended beyond 2012, we can expect short sales to plummet in 2013, with real estate sales in general, taking a dive. So if you’re a home owner contemplating a short sale, should you act now or hold off?

    Given the huge public and private resources now being devoted to helping financially distressed home owners — including the recently announced $25 billion national mortgage settlement with five major banks — you might assume that a key federal tax law benefit underpinning these efforts would be a shoo-in for renewal.

    Election-year politics and a contentious lame-duck, year-end congressional session loaded down with tax and budget issues could doom renewal of the debt relief tax legislation and put large numbers of loan modification participants deeply in the hole. Republican strategists say the cost of continuing the program — $2.7 billion for two years — is substantial enough to catch the eyes of budget-deficit hawks. Beyond that, they add, some members of Congress may be opposed to what they see as still another targeted federal benefit for people who didn’t pay their mortgages — subsidized by taxpayers and stayed current on their loans, even while underwater or facing severe financial distress. Douglas Holtz-Eakin, president of the center-right American Action Forum, former director of the Congressional Budget Office and economic adviser to Sen. John McCain’s 2008 presidential campaign, said in an interview that there is “a powerful sentiment,” especially among conservative freshman House members supported by the Tea Party, that tax code “bailouts” to delinquent and underwater home owners are fundamentally unfair.

    On the one hand, only 27 Republicans voted against the original 2007 bill, which was written by Rep. Charles Rangel, D-N.Y., and handily passed the House before sweeping through the Senate with unanimous consent. On the other hand, that all happened before the Tea Party picked up steam. A look at the 2007 roll call for the original 2007 bill shows that two of the “no” votes came from GOP members who are now heavyweights on the Ways and Means Committee-through which the original bill traversed — Rep. David Camp of Michigan, the Ways and Means Committee chairman, and Rep. Kevin Brady of Texas, the GOP deputy whip. Both Camp and Brady are on record having signed an opposition statement attached to the original legislation highlighting concerns that the temporary measure could morph into a permanent entitlement, creating “an environment where the American tax system is complicit in promoting ‘risk-free’ mortgages.” Camp has since been unsympathetic to many home owner relief measures proposed from across the partisan divide. He voted to kill the Home Affordable Modification Program (HAMP) and to deny federal bankruptcy judges “cramdown” powers, in which they could mark down the amount owed on a mortgage to the current market value of the property.

    The extension of the Mortgage Debt Forgiveness Act beyond December 31, 2012, therefore, is hardly a slam dunk. That being said, home owners contemplating whether to do a short sale now or wait until next year might be best served to take the “I’d rather be safe than sorry” stance and do their short sale before year end..

  15. interesting tidbit on the UK. All those countries want very much to shut him up once and for all.

    I wonder why… And i wonder how much that guy could unearth worth going through a major diplomatic fiasco. The more the US and UK are intent on getting him and the more I want to know what else they’ve done.

    Ecuador Says U.K. Threatened To Storm Embassy, If Assange Isn’t Turned Over

    05:32 pm

    August 15, 2012
    by Eyder Peralta

    The diplomatic battle in the case of WikiLeaks founder Julian Assange has taken a dramatic turn today: In an angry press conference streamed live on the Internet, Ecuadorean Foreign Minister Ricardo Patiño said Britain threatened to storm their embassy in London if Assange was not handed over to police.

    “Ecuador is not a British colony,” Patiño said. “The days of colonialism are over.”

    Patiño said Britain made the threat in writing and while diplomatic talks were ongoing. He added that if an assault does happen Ecuador would take appropriate action and look to the Organization of American States for help.

    If you remember, back in June Assange sought refuge at Ecuador’s embassy in London. Switzerland wants him extradited, in order to question him about allegations of rape.

    Assange came to prominence after WikiLeaks leaked the biggest cache of classified government information in U.S. history.

    Patiño said a decision on whether to grant Assange asylum has been made and will be announced at 7 a.m. Quito time.

  16. This is the reason why people short sale: either they give up with a (slight) chance of rebuilding elsewhere and some hard cash to start again. Or… they fight with a constant nagging feeling that, in the end, they will lose not only the house but whatever they spent in attorney fees, down payment, upgrades, etc., and all the years they wasted doing so. When the entire system is against you, I guess there comes a point where you just decide that it isn’t worth it.

    Wednesday, August 15, 2012

    Marcy Wheeler: Standard Chartered Bank Admits Promontory’s Estimates of Its Iran Business Were Wrong

    Yves here. A few quick comments on the New York state settlement. Some readers are unhappy that there wasn’t a prosecution. First, as we’ve written before, criminal prosecutions of big financial firms put them out of business (tons of customers are forbidden to do business with them) so they settle pronto (prosecuting individuals is another matter completely). Second, Lawsky is only a banking regulator and does not have prosecutorial powers. To do that, he would have needed Eric Schneiderman’s cooperation. But Lawksy’s boss, Andrew Cuomo and Schneiderman are rivals. And Schneiderman has thrown his lot in with the Obama Administration, which has been ferociously trying to undermine Lawsky. As Neil Barofksy noted in a Bloomberg story:

    “I can’t think of another case where there has been such uniformity among federal regulators undercutting an enforcement case”

    Marcy’s observation below is very important, and is being glossed over or even denied in the mainstream media. The Wall Street Journal has one of its all too common alternative reality editorial page pieces. Key snippet:

    Of the $250 billion of transactions at issue, it now appears that $249 billion and change were legal at the time they occurred.

    In a word, no.

    By Marcy Wheeler. Cross posted from emptywheel

    Standard Chartered just settled with NY’s Superintendent of Financial Services. The settlement–for $340 million and a monitor of SFS’ choosing–is less than some reports said the settlement might have been.

    But here’s the detail I’m most interested in:

    The New York State Department of Financial Services (“DFS”) and Standard Chartered Bank (“Bank”) have reached an agreement to settle the matters raised in the DFS Order dated August 6, 2012. The parties have agreed that the conduct at issue involved transactions of at least $250 billion. [my emphasis]

    Just .1% fine, so not that big. But an admission that the scope of the fraud and the Iran business really did amount to $250 billion.

    I find that interesting for two reasons. First, because it’s going to cause all kinds of headaches for the folks at Treasury who would like to let SCB off easy but ordinarily base settlements on the amount of the underlying activity.

    More importantly, for me, because it demonstrates what a sham the Get Out of Jail Free industry is. A former OCC head and his minions at Promontory Financial Group claimed to have added it all up and determined that SCB only hid $14 million of transactions from Iran. SCB now says that Promontory was wrong.

    By orders of magnitude.

    Granted, SCB–and most of the people who pay Promontory to soft-pedal their crimes and risk–tried not to admit it had gotten that estimate from Promontory. Going forward, I expect we’ll see Promontory’s clients hide their involvement even more.

    Still, this is a useful demonstration of how corrupt the Get Out of Jail Free industry is.

  17. Plus- It is much less public to short sell. Then the sale date does not get advertised. Less shameful. But at what cost? are you giving up your rights to sue?

  18. Many people believe they will face having to pay taxes on forgiven debt, so they must hurry to get rid of the home before the end of the year. Another ploy?

  19. Kick the battered can down the road some more..

    Short sales are desired by the uninformed because they are perceived as resulting in less damage to one’s credit score in addition to reducing homeowner losses because the bank agrees to the transactions and won’t have to foreclose.

  20. First, let’s describe what short selling means when you purchase shares of stock. In purchasing stocks, you buy a piece of ownership in the company. The buying and selling of stocks can occur with a stock broker or directly from the company. Brokers are most commonly used. They serve as an intermediary between the investor and the seller and often charge a fee for their services.
    When using a broker, you will need to set up an account. The account that’s set up is either a cash account or a margin account. A cash account requires that you pay for your stock when you make the purchase, but with a margin account the broker lends you a portion of the funds at the time of purchase and the security acts as collateral.

    When an investor goes long on an investment, it means that he or she has bought a stock believing its price will rise in the future. Conversely, when an investor goes short, he or she is anticipating a decrease in share price.

    Short selling is the selling of a stock that the seller doesn’t own. More specifically, a short sale is the sale of a security that isn’t owned by the seller, but that is promised to be delivered. That may sound confusing, but it’s actually a simple concept.

    Could they actually be SHORT SELLING the stock that is called equity that comprised the title seized and sold into bonds?

  21. The banks dont need your signature for quiet title if they could prove they own the loan. This only harming the cause for justice and to put a stop to the banks criminal acts. By signing the paperwork. People are overwhelmed and know they can not afford the health problems and the cost of legal help. So their alternative, when the government does not protect them is to give up to the most common sense avaiable to them. So sad No help unless you can afford an attorney and find one that gets it and is honest and smart and above the box in intelligence. The judges should be required to know realestate law and mortgage law. This is above to many heads. Only the extremely educated or extremely intelligent in this matter can figure this out. It is overwhelming to the sophisticated. Our government officials have let us down. Rob McKenna just did a consent order with RECONTRUST, and I guessed this would happen. Rob gets his fees back for the attorney fees and the rest of Washington can only get help if they can afford an attorney. RECONTRUST gets a slap on the hand and pays only attorneys fees to McKenna. Thousands of unlawful foreclosures are excused and life go on. He is running for Governor. I sure hope no one votes him in.

  22. why does anyone want to short sale ??????

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