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The Joe Niece Team....The Results of Experience

Minnesota Loan Modification Information and Advice. Let us help you now, Call us at 612-305-8487.

E-mail Joe Niece about your situation

Looking to do a Minnesota Loan Modification? Have you been trying to do a Minnesota loan modification for months or even years with no answers from your lender? We can help you determine if you qualify for a loan modification.

One of the first questions people ask me is why it is taking so long for the bank to tell them if they qualify for a their Minnesota Loan Modification?
Some of the most common things we hear are the following:

1. Not enough staff to get to your application. This could be correct but it becomes hard to believe after more then four months.

2. Incorrect paperwork. Most people are not use to filling out forms with no one to ask if they are correct. Many lenders will not notify you if your forms are incorrect. If this is the case, you may never get a Minnesota loan modification done.

3. You make to much money. This is one of the most common reasons that Minnesota loan modifications are denied. If this is he case, we may be able to help point out things that were submitted incorrectly to help you qualify.

4. You do not make enough money. This is normally the second most common reason for a Minnesota loan modification to be denied. We can look at your situation and point out things that might help increase your income or reduce your liabilities.

5. You do not meet investor guidelines. Different investors have different guidelines within a bank or lender

A bigger issue that has come to light is should you do a Minnesota loan modification?

Many owners are finding that after a Minnesota loan modification they are not really better off then they were to start. I have yet to see a loan modification that has a reduction of loan principle. When borrowers finish a loan modification and start making payments again, they begin to realize that they are going to be upside down for the next 10 years or more. With most banks offering owners the option of short sales and deed in lieu of foreclosure, loan modifications may be the worst option for you.

Consider the following: If you are in danger of foreclosure now and do a short sale, deed in lieu of foreclosure or let the bank foreclose on your home, the loss and resulting 1099 from your lender in most cases will not result in a taxable event for you.

If you wait until next year when the current law expires, and then continue to have financial difficulties, you could end up owing the IRS tens of thousands of dollars.

No matter what you do, I would recommend the following:

1. Do not pay anyone a fee up front. Almost every lender will pay the negotiator that helps you with a Minnesota loan modification or a Minnesota short sale. If the person that you are talking with is not confident enough with their ability to succeed for you and get paid by the lender, you should not be putting your life into their hands.

The person you choose to help you with your Minnesota Loan Modification or Minnesota Short Sale will determine your success rate. Most agents do not specialize in Minnesota Loan Modification or Minnesota Short Sales. The average agent has less then a 30% chance of completing a successful Minnesota Loan Modification or Minnesota short sale with you. You have almost a 300% better chance if you use our specialized team.

A Minnesota short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor located in Minnesota. This Short Sale negotiation is all done through communication with a bank's Loss mitigation department. The home owner/debtor sells the Minnesota mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.

Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower's financial situation.

A Minnesota short sale in Minnesota typically is executed to prevent a home foreclosure. Often Minnesota will choose to allow Minnesota property to short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on their credit history and the partial control of the monetary deficiency. Additionally, a short sale is typically faster and less expensive in Minnesota than a foreclosure in Minnesota due to the redemption laws. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.

Minnesota Short Sale Information

Learn More about Short Sales

Minnesota Short Sale versus Minnesota Foreclosure, which is the best option? In almost all cases, a Minnesota Foreclosure is a bad option if you have the choice of doing a Minnesota Short Sale. Why is this? If you think about it, it starts to make more sense.

Let's look at the differences between a Minnesota Short Sale and a Minnesota Foreclosure. A Minnesota Short Sale is when you need to sell but owe more then your home will sell for. The process similar to a normal sale in some ways.

1. You need to sell. (same)

2. Your home is worth less then you can sell it for. (different)

3. You contact a Realtor. If you are looking in Minnesota, you can contact us. Do not use a Realtor that does not have free information and/or Short Sale video on their website about Minnesota Short Sales. The choice you make when picking a Realtor will in most cases determine if you will be successful or not with your short sale. Find someone like us that has helped hundreds of homeowners with their foreclosure or short sale needs versus 99% of the agents that have done less then five short sales. This will increase your chances of being successful from about 30% to about 90%. (similar)

4. You negotiate with the bank if you chose a bad Realtor or we negotiate if you picked us. Most people agree that negotiating for yourself has some very big negatives but you need to do what you are comfortable with. (different)

5. We negotiate for the bank to pay your closing costs and fee's. (different)

6. Your lender pays your Realtor fee's (different)

7. You sign at closing to sell your home. (same)

If you are missing your payments and you do nothing, you will most likely end up as a Minnesota Foreclosure in Minnesota. The process can take five weeks, it can take nine months, it can take a year depending on your situation. Once your redemption period ends, you must leave your home. Let's talk about the main problems with letting your home become a Minnesota foreclosure versus a Minnesota Short Sale.

1. The bank does not want to force you into foreclosure. It is much better for them to allow you to do a Minnesota short sale versus ending up as a Minnesota Foreclosure. They will work with you if you just follow the instructions that they give you.

2. A Minnesota Foreclosure will double or triple the time it will take for you to fix your credit and get another loan on a home. This might be far down on your list now but why ruin your credit for longer then you have to.

3. If you have private mortgage insurance, the private mortgage insurance company may pay part or all of the money that the bank loses. The problem is that they will come after you once you have become a Minnesota Foreclosure. Having a collection agency going after you for ten or more years may not seem like a great option to most people.

4. If you have more then one loan, the junior lien holders are still owned the money they have lost after you Minnesota Home Forecloses. They can and will come after you and file a deficiency judgment which you will have to pay. If you do a Minnesota short sale instead, we can get the second mortgages to settle.

Minnesota Short Sale Hardship LettersMinnesota Shortsale Hardship Letter Samples

Let a Minnesota short sale Expert help you now, Call Joe Niece at 612-305-8487.

E-mail Joe Niece about your situation

Search every listing of every home for sale in Minnesota. Search Minnesota MLS Listings and Home for Sale

All of the information provided is gathered from numerous sources. If you are in need of help, contact us for a private meeting about your particular situation. Some provisions may not be applicable in all states and may change daily based on new laws and interpretations. This infomation is provided as a public service to help troubled borrowers and lenders minimize the economic and emotional damage that foreclosures have had on society. Legal advice should be obtained from an attorney.

I. Lender's Options Upon Borrower's Loan Default

Q 1. What options does a lender have on a debt secured by real Minnesota property if the borrower does not make the payments on the loan?


Depending on the situation, a lender may consider one of the following:

A lender may foreclose on the defaulting borrower's real property which secures the loan. There are two types of "foreclosures" available to a lender: a trustee's (sherriff's) sale and a judicial foreclosure. Technically, a sherriff's (trustee's) sale is not a "foreclosure" but the term has been used for both a trustee's sale as well as a judicial foreclosure.

For certain loans, a lender has no choice and must conduct a sherriff's(trustee's) sale. With a sherriff's(trustee's sale), a lender cannot go after a deficiency judgment. A deficiency occurs when the current market value of the property is less than the loan on the property. See Questions 3 and 4 for more details.

Q 2. What other options may the lender consider instead of foreclosure when the borrower is delinquent?


Loan Workout or Short Payoff/Short Sale

Basically, a loan workout is any resolution of a problem loan between the lender and borrower that modifies the original loan agreement. Some of these options include forbearance (e.g. forgiving a portion of the debt or late charges); deferment; renegotiating interest rate, monthly payment amount, principal amount, maturity date; or the enforcement of an acceleration clause in the loan.

The lender may also be able to pursue "guarantors" of the debt who have signed written guarantee agreements (not including the borrowers).

*: With a Minnesota short payoff, the lender accepts less than the remaining mortgage amount as full payment of the loan. The property need not be sold.

*Note: Some lenders do not differentiate between a Minnesota short sale and a Minnesota short payoff.

Q 3. What is a deficiency judgment?


A deficiency judgment is a judgment obtained by the lender in court against the borrower for the difference between the unpaid balance of the secured debt and the amount produced by sale or the fair market value of the security, whichever is greater, in a judicial foreclosure. A lender may obtain a deficiency judgment only with a judicial foreclosure. With a sherriff's(trustee's) sale foreclosure, the lender cannot go after a deficiency judgment. See Question 4 for more details.

Q 4. Can a real estate lender obtain a deficiency judgment against a defaulting borrower following foreclosure?


It depends. Some states have "anti-deficiency statutes" that protect certain borrowers from deficiency judgments. Under those circumstances, a lender would opt for a sherriff's (trustee's) sale foreclosure which is quicker and less expensive than a judicial foreclosure. A sherriff's (trustee's) sale foreclosure does not involve the courts. Generally, there are five situations in which a deficiency judgment is prohibited.:

1) Purchase Money

2) Seller Carryback.

3) Trustee’s Sale.

4) 3 Month Time Limit.

5) Fair Value Limitations.

When a deficiency judgment is permitted, the lender may obtain one only following a judicial foreclosure, or when the security has become valueless (such as when security for a second trust deed loan is wiped out when the first trust deed lender completes its foreclosure). Holders of a junior deed of trust (second, third, etc.) should note that if the "wiped-out" junior lien is not purchase money or seller carryback, then the junior lien holder may sue on the note and the borrower on the junior loan may be personally liable.

Q 5. Can a lender avoid the foreclosure process and just sue the borrower on the note (i.e., treat it as an unsecured note)?


No. A lender cannot sue on a debt secured by a mortgage or trust deed except for a judicial foreclosure. This is called the "one action rule" or "one form of action rule." One exception to this rule is if the security for the loan has become "valueless" after the lender's security interest was recorded (e.g., a "wiped out" junior lien holder). In this case, the lender can sue directly on the debt (note) unless the borrower's loan falls into category 1) or 2) in Question 4. A deficiency judgment is limited by the difference between the amount of the indebtedness and the fair market value of the property, unless the actual sale price exceeds that value. An action for a deficiency judgment must be brought within 3 months from the time of judicially-ordered sale. A lender may not pursue a deficiency judgment against the borrower should the lender opt to foreclose by a trustee's sale foreclosure (a non-judicial action). If the purchase money loan for any type of real property is financed by the seller and secured by that same property, the lender/seller may not obtain a deficiency judgment against the defaulting borrower/buyer. . If the loan is obtained to purchase a residential 1-4 unit dwelling all or part of which is owner occupied and the loan is secured by that property, the lender may not obtain a deficiency judgment against the defaulting borrower. This loan is entitled to "purchase money" protection. Note, however, that should the buyer refinance the home, the new loan is no longer "purchase money." Thus, the buyer would lose the protection against a deficiency judgment in the event of a default

Q 6. Why would a lender agree to accept a Minnesota short sale?


A lender will typically evaluate the financial situation of the borrower as well as current market conditions to determine whether or not to agree to a short sale. It is really a business decision for the lender to determine whether it would receive more money by accepting the Minnesota Short Sale, or completing a foreclosure, reselling the property, and pursuing personal liability (i.e., deficiency judgment against the borrower and/or claims against guarantors, for loans on which those remedies are available.) Lenders may have ample incentive to negotiate a Minnesota short sale with a distressed borrower. For example, should the lender take back a property pursuant to a foreclosure sale, the lender would become responsible for a variety of costs, including property maintenance, utilities, HOA fees, and might risk destruction of the property by vandalism. Furthermore, lender-owned properties (REO) may take a long time to sell, in part because so many REO properties are now for sale.

II. Effect On Borrowers of Minnesota Short Sales

Q 7. Does a Minnesota Short Sale adversely affect a defaulting borrower's credit rating?

Answer: Yes, but the amount and length of damage is significantly less then a foreclosure. Lenders will report the Minnesota short sale as being settled for less than the full balance. This would show up on the borrower's credit report as a negative mark for up to seven years. It is not reported and recorded the same as a Minnesota Foreclosure which allows the Minnesota seller other options to remove the short sale from their credit report.

Q 8. Suppose the borrower is late with his/her mortgage payments, causing the lender to begin the foreclosure process by filing a notice of default. Before the Minnesota foreclosure sale occurs, the borrower pays the lender what is owed on the note. Could these activities appear on the borrower's credit report?


Yes, it is possible for the lender to report any late payments. The lender could also report foreclosure proceedings started, etc. Yes. The lender can report to a credit bureau receipt of any payments made 30, 60, 90 or more days after their due date. This may appear on a borrower's credit report as a "foreclosure in process," "foreclosure proceedings," "current was 30," or in some other way. Any such terms, or other similar reporting comments, harm that individual's overall credit rating.

Q 9. Is the method by which lenders report a Minnesota Short Sale a negotiable item?


Yes, but it varies by negotiator used and lender. The Minnesota short sale is usually reported to credit reporting agencies as settled for less than the full balance. However, a borrower may try to negotiate this at the time the Minnesota short sale is being arranged.

Q 10. Must a real estate property disclosure statement be given to a buyer in a Minnesota short sale transaction?

Answer: Yes, all Minnesota residential short sales require the owner to disclose any issues that are know. A seller can still sell the home "as-is" but needs to disclose all know isssues.

Q 11. Must other disclosures be given to a buyer (or seller) pursuant to a Minnesota short sale?

Answer: Yes, your real estate agent should give you a list of disclosures that are required for your property

Q 12. Suppose a distressed seller enters into a contract to sell his/her home to a buyer pursuant to a Minnesota Short Sale. Should the listing agent inform the lender if and when other offers are made on the property?

Answer: Only one purchase agreement can be signed by a seller of real estate. The seller can sign other offers as backup offers but most negotiators believe that it is not in the sellers best interest to submit more then one offer to the lender.

Q 13. Should a Minnesota listing agent working with a distressed seller attempt to negotiate a future listing agreement with the lender?

Answer: No, this would be a conflict of interest with the current seller. Listing agents working with distressed sellers owe them a fiduciary duty. Since in a Minnesota short sale situation a lender could choose to foreclose on the seller, the lender's interests are potentially adverse to the seller's interests. Attempting to negotiate a future listing agreement with the lender raises the issues of "to whom is the agent's loyalty devoted" and "has the agent violated the fiduciary duty he/she owes the seller." The safer practice is to avoid putting oneself in such a position.

IV. Other Issues

Q 14. Are there any tax effects of a Minnesota short sale?

Answer: Tax effects vary depending on your situation. It can range from nothing owned to the entire shorted amount counting as taxable income. Talk to your Minnesota Agent and your Tax Accountant for your specific situation. Generally speaking, any relief of indebtedness is included in gross income. There are, however, some exceptions to this rule that may benefit a taxpayer involved in a Minnesota short sale.

Q 15. What is the process for applying for a Minnesota short sale?


You should try and find the most experienced Minnesota Short Sale agent or Minnesota Short Sale Negotiator you can find. Ask for a list of short sales that the agent or negotiator has negotiated successfully.

First, the borrower must find a buyer for the property.

Second, the borrower must prepare all the necessary documents. See question 16.

Third, the borrower must submit all documents to the lender.

Fourth, the lender will send out their own appraiser to make sure that the buyer's offer is at fair market value.

Fifth, the lender will make a determination on whether or not to agree to the short sale.

Q 16. What documentation will a lender typically require?


Written explanation (and proof) of the hardship the borrower is experiencing;

Copy of the purchase contract signed by both the buyer and seller (borrower);

Proof of the buyer's ability to purchase the property, i.e., a completed loan application, pre-approval by another lender, or evidence of cash on hand (bank statement);

Preliminary title report;

Estimated net/closing statement certified by an escrow officer acceptable to the lender;

Completed and signed IRS Form 4506, "Request for Copy of Tax Form;"

Completed and signed personal financial worksheet;

Previous two years tax returns;

Employment paycheck stubs for the past two months;

Profit and loss statement (if the borrower is self-employed);

Past three months' bank statements.

Q 17. Where can I obtain additional information?


You may consult the seller's lender directly about their policies and what is required to apply for a Minnesota short sale of a property. The internal departments that handle Minnesota short sales differ by lender. You may try asking for the problem loan department, loan workout department, loss mitigation department, or foreclosure department.

Lenders will typically require a distressed borrower to furnish a variety of documents, which could include the following:

It is always in the best interest of the borrower to keep the lender informed. If the borrower is in default of the loan and is contemplating a Minnesota short sale, it would be best for the borrower to let the lender know before the foreclosure proceedings are well under way. The lender may or may not grant more time to the borrower to find a buyer. In general, the process goes as follows:

Probably. Although the lender is technically not a party to the real estate contract, lender approval is nearly always a contingency of the agreement. Therefore, REALTORS® should obtain the client's permission to keep the lender apprised of any relevant developments, including the presentation of other offers.

Yes. Minnesota Short sales are treated just like any other sales transaction.

III. Disclosure Requirements in Minnesota Short Sales

Yes, if the property being sold is a residential 1-4 unit dwelling and the transaction doesn't fall into one of the regular TDS exemption categories. No exemption exists for a Minnesota short sale transaction in which the borrower sells the property to an outside buyer, using the sale proceeds to pay off the lender.

Deed in Lieu of Foreclosure: After the borrower is in default, the borrower voluntarily delivers title to the lender for consideration and the lender accepts the conveyance of the property in full satisfaction of the mortgage debt. Using this method, the lender saves the costs of foreclosure and the borrower avoids having a notice of default on his/her records.

Minnesota Short Sale*: A Minnesota short sale is a transaction in which a lender allows the real property securing the loan to be sold for less than the remaining mortgage amount due and accepts the proceeds as full payment of the loan. A lender may accept a Minnesota short sale when the borrower is in severe financial straits and market conditions make a Minnesota short sale the best choice to mitigate the lender's damages. Like a deed in lieu of foreclosure, this saves the lender the costs of foreclosure and the borrower avoids having a foreclosure on his or her credit report. Rules differ for multiple mortgages.

HAFA or Home Affordable Foreclosure Alternatives Program

Do You Qualify?

The Home Affordable Foreclosure Alternatives (HAFA) Program is the governments program to help homeowners avoid foreclosure.

HAFA gives incentives to lenders and $3000 to homeowners to allow and complete a short sale or deed-in-lieu of foreclosure.

Use the tool below to determine your eligibility:

Section 1 HAFA Questionaire

Is your loan owned or guaranteed by Fannie Mae or Freddie Mac?

Is the property your principle residence?

Is the Mortgage a first mortgage that closed before Jan 1 2009?

Have you missed payments or will you soon miss a payment?

Is your current unpaid balance less then $729,751?

Do your total monthy mortgage payments exceed 31% of your gross income?

Section 3 Borrower Information

Main Mortgage Borrower Name:

Home Phone Number:

Email Address:

Mortgage Property Address:

City                                          State, Zip Code


Please press only once.

HAFA Homes Affordable Foreclosure Alternative