SHORT SALE / FORCLOSURE INFORMATION KIT

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Your guide to understanding the Process

The enclosed materials will provide you

some general information you need to know about the short sale and foreclosure process. In it you will find specific details of the process and what you can expect.

PARRIS KRYGSMAN
REALTOR DRE LIC#01122830 1900 GRASS VALLEY HWY, #100 AUBURN, CA 95603 PARRIS | c.530.798.3400 | f. 530.745.8976 | Parris@GoLyon.com | www.GoHomes.net

Disclaimer: All information deemed reliable but not guaranteed and should be independently verified. Disclaimer: Seller(s) understand that a real estate broker/agent is a person qualified to give advice about real estate and seller is advised to consult with a tax and/or legal professional regarding his/her legal and tax obligations arising out of the sale of the property.

PARRIS KRYGSMAN

TABLE OF CONTENTS

What is the Foreclosure Process Six Options When Facing Foreclosure Short Sale Overview How Do I Qualify for a Short Sale Short Sale vs. Foreclosure Effects on Credit Hardship Letter Format Tips Sample Hardship Letter Frequently Asked Questions 14 About Me CONTACT PARRIS: Cell: 530.798.3400 Fax: 530.745.8976 Website: www.gohomes.net Email: parris@golyon.com 1900 Grass Valley Hwy, Auburn Ca 95603 Always seek professional legal and tax advice.

Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10-

Page 15

PARRIS KRYGSMSAN

WHAT IS THE FORECLOSURE PROCESS?

Almost all distressed properties are in the process of, or headed to foreclosure. So
it is important that you, the homeowner, understand the foreclosure process. There is a common misconception that once a payment is missed, the homeowner is immediately in danger of foreclosure. The reality is that foreclosure is a legal process that the lender must go through in order to take possession of the property for which it holds a mortgage. The following explanation is intended to provide a basic outline of the timing involved in a non-judicial foreclosure. The specific laws regarding foreclosure in California can be found in the California Civil Code.

PROBLEM - Generally, lenders will file a NOD 90-120 days after a borrower stops making payments. N.O.D (Notice of Default) is filed - NOD's are usually filed after 3-4 months of delinquent mortgage payments (timing depends on the bank) N.O.T.S (Notice of Trustee Sale) - filed and posted 90 days after NOD. TRUSTEE SALE - is usually 21 days after N.O.T.S. After Trustee Sale the bank owns the home or sold to 3rd party.

Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net

Always seek professional legal and tax advice. Page 3

PARRIS KRYGSMAN

SIX OPTIONS WHEN FACING FORECLOSURE

Refinance This is a great option if you have equity in your property because interest rates are at all-time lows. If you can refinance and be able to afford the payments, this might be a good option. Unfortunately, most homeowners are upside down on their mortgages and cannot refinance. Forbearance In this case, your lender delays the foreclosure process to negotiate with you. It may forgive some of the debt or add the amount you are behind in payments and fees to the principal to allow you to get caught up. This is a good option if you can afford to still make your payments and just fell behind temporarily for whatever reason. Loan Modification If you and your property qualify for a loan modification, the bank may lower and/or fix your interest rate to lower your monthly payment. Unfortunately most loan modifications do not go through. Deed in Lieu A deed in lieu of foreclosure is where the bank agrees to take back the property via deed with no foreclosure process. You may still be on the hook for the difference between what you owe on the loan and what the bank sells the home for. Additionally, the bank would prefer a short sale because it does not want the property. These days, its rare to see a deed in lieu. Foreclosure (Walk Away) This option has the most negative effect on the homeowner. You will be foreclosed on and kicked out of your home. This will not happen on your schedule. Furthermore, your credit will be dramatically affected and you may not be able to buy another home for 5 to 7 years. You also may be liable for the difference between what the bank sells your home for and what you owe to all lenders. Short Sale Once all other options have failed, this is the next best thing. A short sale is where you make an agreement with the lender who agrees to accept less than you own as payment in full. You will be able to vacate the home on your own terms, may have your debt forgiven, and experience much less credit damage than if you allowed the foreclosure to happen. In this case you will have an agent negotiating with the bank and processing the entire transaction on your behalf. You can expect to be able to buy another home, provided you qualify, in about 2 to 3 years, there is no cost to you to do a short sale; the agent will be paid out of the proceeds of the sale by the bank.
Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net Always seek professional legal and tax advice. Page 4

PARRIS KRYGSMAN

WHAT IS A SHORT SALE?

A Short Sale may occur anytime the value of the property is less than the amount
owed to the lender and the lender agrees to write off the difference. In other words, the homeowner is "upside down" on his/her loan. Short sales may be forced by a variety of situations: job loss, loss of income, divorce, medical bills, or changing payments on adjustable rate mortgages (ARMs). Here are the basic steps in the process: 1. List the property for sale with a Realtor. 2. Notify the bank and postpone any foreclosure auction date. 3. Find a buyer. 4. Submit short sale package to the bank including offer to purchase. 5. Negotiate with the bank and reach an agreement. 6. Go through the escrow process between buyer and seller. 7. Close and move out of the home. In most cases its in the best interest of all parties involved to agree to a short sale. The lender and the investor stand to lose less by agreeing to a short sale than they would lose if they had to foreclose. If you think about it, losing less is the same as turning more profit. The bank cares about its bottom line. The borrower gets to leave his/her home on their own terms without being evicted, has substantially less credit damage, and depending on the situation may be released of all liability of any excess debt owed. For the most part, during the short sale process the borrower needs to focus on is gathering any and all paperwork requested for his/her agent in a timely manner and making plans to move. Your agent and his/her team will be working hard to handle all the processing of paperwork, all negotiating with the bank, and all facilitation of the sale once approved.

Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net

Always seek professional legal and tax advice. Page 5

PARRIS KRYGSMAN

HOW DO I QUALIFY FOR A SHORT SALE?

Qualifying for short sale is quite similar to what you went through while qualifying
for your mortgage; the essential difference is that its in reverse. Rather than proving to your lender that you have the ability to pay a mortgage, you need to prove to them that you do not have the ability to pay the mortgage. Whatever has caused you to not be able to pay the mortgage any longer may qualify as a hardship. Following is a basic list of all documents you will need to send in for the initial short sale package: 3rd Party Authorization Form authorizing your agent to negotiate on your behalf Hardship Letter explaining your situation and why you can no longer afford the mortgage Most recent copy of mortgage statements and HOA statements with contact information Financial worksheet completely filled out showing all income, expenses, assets, and liabilities Copy of last 2 months bank statements Copy of last 2 years taxes Copy of last 2 pay stubs OR year to date profit & loss IF self employed Copy of Most recent W-2s or 1099s Copy of letter from state agency if receiving unemployment or disability Copy of any stock or 401K accounts HOA contact info to determine any HOA fee delinquencies Copy of any Notice of Default or Notice of Trustee Sale documents In addition to these documents, your agent will send the following: MLS (Multiple Listing Service) paperwork Property listing agreement between you and the real estate brokerage A list of comparable sales supporting the list price Estimated list of repairs and their cost, if any A fully executed purchase contract between you and the prospective buyer Throughout the process the lender may request additional documents or updated documents. Be prepared to provide those documents as soon as possible. Any delays in providing paperwork could ultimately result in the lender becoming impatient and deciding to just foreclose.
Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net
Always seek professional legal and tax advice.

PARRIS KRYGSMAN

SHORT SALE vs. FORECLOSURE

Lyon Real Estate strongly advises you to seek the appropriate professional legal or tax advice and investigate the consequences of either a Foreclosure or Short Sale.

Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net

Always seek professional legal and tax advice. Page 7

PARRIS KRYGSMAN

HARDSHIP LETTER FORMAT TIPS

Most lenders require the hardship letter for short sale approval. You should take
this valuable opportunity to appeal to the lender(s) that the your situation is genuinely distressing and the lender(s) would be better off accepting the lesser amount in a short sale than to pursue a foreclosure. In the hardship letter, present the facts clearly and honestly. A well-written hardship letter will be able to explain the situation that caused you to fall behind and provide proof of hardship. Situations such as divorce/separation, job loss or reduction of income, adjustment in mortgage payment, prolonged illness, or a death in the family are all acceptable hardships. Here are some points to help when writing a hardship letter: Get personal; you should not feel embarrassed about the situation. This is your opportunity to state your case. A handwritten letter is recommended. Include details regarding the hardship. Detail your current and past hardships (for example, job loss, car accident, medical problems either personally or in your immediate family, etc.) and include specifics for each hardship. Be sure your letter conveys the following important messages to your lender(s): - Why you will not be able to bring your past due amount up-to-date. - Your income is not enough to make the payments and you have no assets with which to continue paying the mortgage. - You are leaving the property. Include any signed exemptions of documents. If you do not have current bank statements, pay stubs or tax returns, you will need to explain in greater detail as to why those documents cannot be provided. For example: I do not have pay stubs because Ive been unemployed for 6 months and unable to find work. If you do not have tax returns, the lender(s) will want Extension Filings. If you do not have these to provide, explain why (i.e., I havent worked in over 2 years so I havent filed taxes or extensions.). Your can address bankruptcy in the letter: I dont want to have to file for bankruptcy.
Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net
Always seek professional legal and tax advice. Page 8

PARRIS KRYGSMAN

SAMPLE HARDSHIP LETTER

Lender Name Lender Address RE: Loan Number Todays Date To Whom It May Concern:

I purchased my home at 6789 Turtle Rock Rd in 2007. At that time I was employed by ACME LLC. Unfortunately, as of 2008 a downturn in the market caused my company to reduce its workforce and I was laid off.
We love our home and do not want to lose it, but we have come to terms with the fact that we cannot afford to keep it. This left us with the financial burden of paying the mortgage. I make $35,000 annually and have exhausted all my savings, IRAs and my childrens college fund, which I used to keep the mortgage payments current until July 2009. In July of 2009 I was no longer able to make the monthly mortgage payment. In August of 2009, I put my house up for sale with (Agents Name and Brokerage) who specializes in pre-foreclosure properties and short sales. My financial situation cannot sustain a home mortgage of nearly $2800 per month. I want to sell the home, avoid foreclosure and salvage my credit. I know that foreclosure on my record will affect me for years to come; I would ask that you please assist me in avoiding this. Please accept this offer as payment in full as I just want to move on and start over. I deeply appreciate your help and understanding in this matter. If you have any questions, or need anything further from me, please contact my agent or me personally. Sincerely,

Name of Homeowner

Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net

Always seek professional legal and tax advice. Page 9

PARRIS KRYGSMAN

FREQUENTLY ASKED QUESTIONS

What is a Short Sale? When a property sells and the bank agrees to accept less than what is owed. Who qualifies for a Short Sale? Anyone who has experienced a hardship that he/she can prove and who owes more on his/her home than it is worth. Do I have to prove hardship? Yes! You must send a hardship letter with your package explaining how your circumstances have changed that will require them to work with you in approving your short sale. It must be convincing and make sense, but it can be almost anything. Some examples of hardship include: - Adjustment in mortgage payments - Loss of job - Reduction in pay - Spouse is no longer working - Job transfer - Medical hardship - Other financial losses that affect your ability to make payments - Injury or Illness - Hospitalization - Divorce or separation - Death - Failed business - Decrease in home value combined with another hardship This list is, obviously, not all inclusive because there are many different things that could cause a financial hardship. The point is there is a reason you have stopped making your mortgage payment and want to sell your house. What is it? That needs to be explained in a way that will show the bank that it is in its best interest to work with you.
Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net
Always seek professional legal and tax advice. Page 10

PARRIS KRYGSMAN

FREQUENTLY ASKED QUESTIONS cont

How long does a short sale take? This can be a complicated question. Usually between 90 to 120 days, but in some cases it has taken up to 12 months or longer. Will I have to pay the bank back the difference? That depends, yes, no, and maybe. It depends a lot on who is negotiating the short sale with the bank. In most cases, you should not have to pay back the difference to the bank if you have negotiated correctly. In addition, California has special anti-deficiency laws that are set up to protect the consumer. In the end, it is in lenders best interest to reach some sort of agreement. That remains true whether the home is owner occupied as a primary residence or nonowner occupied (investment). If the bank does not believe you have experienced a hardship or it thinks it can recover losses from you directly, then you need to rethink the negotiations that you have presented to them. It is important to also know that in the case your loan has private mortgage insurance (PMI), the lender will be reimbursed for their loss by the insurance company. In this case you will need additional approvals from the PMI Company. Right now PMI companies are often asking for a promissory note. No one can guarantee to get people off the hook every time, and in every situation. However, in most cases, you can have each loan satisfied if you're working with a competent real estate agent. Promissory note disclaimer? Occasionally, the bank or investor will ask the homeowner to sign a promissory note. A promissory note is a document that the homeowner would sign agreeing to repay all or a portion of the banks loss. This depends mostly on which bank you are dealing with and how big the loss is. Many banks will negotiate the amount owing to as little as 10% of the balance owed with reasonable terms. A very small number of banks will require that the full amount is repaid. Their point of view is that if the hardship is not a permanent hardship, at some point you will be able to repay the money. The problem with this idea is if they place too high a burden on you, then you may end up having to file bankruptcy and the bank will recover nothing.
Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net
Always seek professional legal and tax advice. Page 11

PARRIS KRYGSMAN

FREQUENTLY ASKED QUESTIONS cont

So, essentially, the only thing

accomplishes is causing further hardship on you. That is why in the event that the bank officials do ask for a promissory note, it can usually be negotiated to a minimal amount. If the real estate agent you are working with specializes in this area he/she should have an idea of what your bank will do. Will I have to pay taxes on the difference? This is a common question and since tax laws are always changing, you should confirm the following information and consult with a tax and or legal professional. When the bank takes a takes a loss on a property, it deducts its loss for a tax benefit. To do this, it will document its loss and issue a form 1099-C in the full amount of the loss to the homeowner, who pays income tax on that amount. At this point, most people are panicking and swearing at their real estate agent for not telling them this or asking them to consult with a tax and or legal professional. HERE'S THE GOOD NEWS! The Federal government passed the Mortgage Forgiveness Debt Relief Act of 2007 that states that for short sales, foreclosures, or loan restructurings on a primary residence there will be no tax due on debt forgiven in calendar years 2007 to 2012. You still have to file a form 982 with your taxes showing the loss, but you will have to pay $0 in taxes. You can also read more up-to-date info about the Mortgage Forgiveness Debt Relief Act of 2007 on the IRSs Web site, www.irs.gov Remember, this act only covers your primary residence. You should consult with a tax and/or legal professional with your specific situation regarding other solutions, such as insolvency or bankruptcy, and for all other types of property such as nonowner etc. There are other solutions as well for non-owner occupied property. Contact your tax and/or legal professional for additional information on this.

Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net

Always seek professional legal and tax advice. Page 12

PARRIS KRYGSMAN

FREQUENTLY ASKED QUESTIONS cont

Are my assets protected? There are some assetsfor example, 401(k) accountsthat can be protected in your negotiations. The lender cannot force you to pay it anything. Its a negotiation so if it requests any money from, you can say no. How much does a short sale cost?

Our short sale services are paid for by the lender out of the proceeds of the sale and cost you nothing! The best part about that is that lenders prefer to work with someone who specializes in this process. It's a win-win situation for all parties involved. The only way my fee gets paid is if the short sale gets approved and sells, so you can rest assured that I am working hard to ensure that every deal closes!
But what if I really want to stay in my home? Staying in the home is important for many people. This can be accomplished if you have documented income and can be approved for a loan modification. Another way this can happen is if the home sells as a short sale to an investor who in turn leases the property back to you. There are only some situations where that can be accomplished. In most cases, I would advise the you to try to let some of the emotion go and look the transaction from more of a business point of view. In my experience, homeowners who do this are able to make better financial decisions regarding their homes. What if I have a FHA or VA loan, of if I have private mortgage insurance? FHA, VA and loans with PMI (Private Mortgage Insurance) will require one additional approval and some extra paperwork. (You probably have PMI if you financed more than 80% of the value of your home). You would think that having PMI would be a good thing but the private mortgage insurance companies are harder to get clean approvals with than any bank. A lot of it will depend on who issued the PMI policy. Any time there is PMI on a loan, you should most likely expect them to ask for a promissory note for the deficiency.
Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net
Always seek professional legal and tax advice. Page 13

PARRIS KRYGSMAN

FREQUENTLY ASKED QUESTIONS cont

Do I have to be delinquent to do a short sale? NO! It is sometimes easier to negotiate when you are delinquent, but you do not have to be. There only a few loan services that require it. Even then, the case needs to be presented to the bank in a way that makes it realize that its in their best interest to accept the short sale now or face a greater future loss. Some banks do prioritize their files by delinquency and auction dates, but other files still can be approved. How do I personally handle our short sale files? Every homeowner whom I work with gets my full attention on every detail through the entire process. With one meeting, we can cover options for your specific situation and help you make the decision that is best for you! On the first day we meet with you, we'll set realistic expectations up front about the process and timeframes so you can begin to move on with your life. We'll make sure all the paperwork submitted to your lender is complete and prepared exactly the way the bank needs to see it. We'll communicate regularly with all parties, keeping everyone informed of the status of the sale and negotiation. We'll negotiate with the bank regularly to meet your objectives. With any issues that may arise, you can rest easy knowing that you have hired the very best to handle and resolve problems for you.

Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net

Always seek professional legal and tax advice. Page 14

PARRIS KRYGSMAN

ABOUT ME
Get to know your Certified Distressed Property Expert, Parris? This is a time when you need someone who you can trust. You need someone who will be open and honest with you, and give you all the options. You need someone who will help you make the decision that is best for you. As a Lyon and CDPE (Certified Distressed Property Expert) Certified Short Sale agent with over 20 several years experience in real estate and mortgage loans, I can provide the specialized information and service you need. When a problem arises you can rest easy knowing that it is being handled efficiently. My goal is to help make the process easy on you and to exceed all your expectations. I understand there is a lot of information here, and it probably seems overwhelming. That is why I am here; please feel free to contact me so I may explain YOUR options, answer some of the questions that you might have, and help you decide on a course of action. The idea of losing a home can be overwhelming, and I feel it is vital for you to have all the facts necessary to make the best informed decision for you and your family. Please dont hesitate to call me directly anytime 24 hours 7 days a week at 530-798-3400 or feel free to email your questions to parris@golyon.com.

Disclaimer: All information deemed reliable but not guaranteed and should be independently verified.
Disclaimer: Seller(s) understand that a real estate broker/agent is a person qualified to give advice about real estate and seller is advised to consult with a tax and/or legal professional regarding his/her legal and tax obligations arising out of the sale of the property. Do Not Solicit Disclaimer: If your property is now listed with a REALTOR please disregard this offer as it is not our intent to solicit the offerings of other REALTORS.

Do Not Call/Mail Disclaimer: If you desire to remove yourself from this mailing list, notify Lyon Real Estate at 916-978-4289.

Parris KrygsmanCell.530.798.3400parris@golyon.com www.gohomes.net

Always seek professional legal and tax advice. Page 15