New WA State Short Sale Seller Advisory and Licensee Guidance Bulletins

The Real Estate Division of the Washington State Department of Licensing and the Department of Financial Institutions have issued two bulletins about short sales. The DOL  Short Sale Advisory is for home sellers but really should be for both sellers AND their Realtors/real estate brokers.  DFI’s companion advisory is titled “Short Sale Guidance for Licensees” and contains many Q&As for both loan modification and short sale negotiation services. 

The DOL Seller Advisory contains basic education about short sales, the deficiency, “walking away” by letting the home go into foreclosure, options for homeowners in financial distress, warnings about predatory loan mod firms and other scams, and where to go for free help. The DOL Advisory also offers a signature page for the seller. There’s not a place for the real estate listing broker to sign the DOL Advisory.  I’d also like to see the Advisory offered in different languages. From the Advisory:

“FIRST, Understand that a Short Sale May not Discharge the Debt. You should know whether you will still owe your lender money (a deficiency) after the short sale. You should know this BEFORE you close the sale of your home. Even if a lender agrees to a short sale, the lender and any junior lien holders, may not agree to forgive the debt entirely and may require you to pay the difference as a personal obligation. This outstanding personal obligation could result in a subsequent collection action against you. For example, a lender may accept the short sale purchase price to “release the lien

Keeping the Keys to Your Home

I love reading the comments over on the CR blog. They’re great entertainment when I need a break from trying to dig my way out from deep inside the new WA State Distressed Property Law class I’m writing. Tonight, as I was reading the comments from this post on Fannie Mae lifting the “declining markets” rule, I found a link to this website (hat tip w.) is providing hope (for a fee) for homeowners who wish to use legal options to stay in their home as long as possible, or to prevent foreclosure altogether.

We’ve all read, and some RCG commenters have complained loudly, about loan servicing companies being slow to approve short sales, modify loans, or engage in any kind of foreclosure workout with homeowners. Well, perhaps the threat of predatory lending and violations of state and federal law at loan origination will bring loan servicers to their knees.

The legal team at seems to be focused mainly in California, where the current count of 1000 foreclosures per day seems to ensure a model for business growth for the next decade.

So what can homeowners do who are located in Washington State and want legal help? Sometimes homeowners in financial distress just want an attorney to take a look at their documents.  Taking this simple step is better than full blown homeowner denial, and legal help can often be more affordable than the homeowner might think.  I’ve been on the look out for Seattle area law firms offering affordable legal counsel for homeowners facing foreclosure.  Now I’ve found one and I bet you’ll never guess which firm decided to extend a hand to this market.  Thanks, Craig and Marc.

Now, what to do about all those homeowners who committed stated income fraud at application in 2007.  Hmmm.  Perhaps there’s a reason why foreclosure rates continue to climb.  Maybe it’s not just “denial” or “loan servicing” backlogs.