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Short Sales

In Florida. Purchased another home. Foreclosing on 1st home.

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Question:  In Florida. Lots of stuff going on and now the MI says today they need a take it or leave it answer with no negotiation by close of business Friday. Son no longer lives in house that has mortgage insurance on it that the lender has accepted a short sale contract on and forwarded to the MI. He has purchased another house and just stopped making payments on the other in September. The MI says that they want 42000 over ten years 0% interest starting 2/12 or they will foreclose. (Doesn’t the lender do that?) He has some cash but has a baby due at Christmas that requires 20000 out of pocket at least, assuming no emegencies, because of crappy insurance. He made less this year than last but more last year than in 2009. The short sale contract and the appraisal are 89000 and the mortgage is in the high 150s give or take a few thousand. Not sure what the least expensive thing is to do but 42k is a lot more than he will have in the bank after the baby comes and no one wants to pay an extra $350 a month for 10 years to compensate them for a mutually bad investment. I am thinking ask the lender to do a deed in lieu so there is no deficiency and then file a 982 I think it’s called to get around that. If they don’t take the deed in lieu, then file for bankruptcy to get out of the deficiency but since I have little experience with this I need some advice that may help resolve this better than my solutions.

Answer:  – The least expensive thing to do is file bankruptcy. It will cost him $1500 and he can start over from scratch. A lot of lenders, when you tell them you are going to file, will work with you to find a solution. A better option might be to get an attorney or good real estate agent / short sale negotiator to help you push the short sale through with a full satisfaction meaning they can’t ask for any money to be paid back. The loan would be paid in full. Your son would receive a 1099 which would be negated with form 982 as mentioned. Don’t let the bank push you around… unfortunately they deal with homeowners a lot differently than an attorney or 3rd party negotiator because they automatically assume the homeowner doesn’t know what they are doing.

Short Sale on Second Mortgage

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Question:  We are moving and our home will have to be a short sale. We have perfect credit and have never been late on a payment. The short sale will need to be on the second mortgage only. We owe $150,000 on the second and the short sale will probably be $75,000 of that. We are purchasing a lot where we are moving to and I want to make sure they will not be able to put a lien on it for the difference. In other words what assets will they come after for the difference.

Answer:  – Well, technically they can come after you for whatever is not satisfied. If the short sale is approved and successful, the individual doing the short sale will need to make sure it “satisfies” the loan in which you will receive a 1099-c. If they don’t satisfy the loan, then the bank retains the right to come after you for the deficient amount.

There is actually another option, similar to a short sale, but takes half the time, allows you to stay in the home or (be able to actually sell it in this case) for a profit. We basically get rid of the $150,000 second mortgage by offering a settlement with the lender. The loan is completely satisfied and it never shows up on your credit like a short sale does. Just another option out there for you to think about.

Wells Fargo HELOC Oregon – If short sale, can they collect?

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Question: We have a mortgage with 20% of the amount in a HELOC with both parts of mortgage through Wells Fargo (May 2007). The house value is continuing to decline below the value of the first mortgage. If we walk away, short sale or foreclose…can the bank try to collect on the HELOC? We live in Oregon.

Answer: -Absolutely… you should always try to work something out with the bank. They may not make you pay the full amount but will require you to pay something in most cases.

My mortgage company, PNC, has accepted a shortsale offer on my house.

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Question:  My mortgage company, PNC, has accepted a short sale offer on my house. I owe approximately $149,000 and the accepted offer is for $115,000. Coinciding with my application for short sale, PNC moved forward with foreclosure. The court, in Pennsylvania, granted judgement in foreclosure for the owed mortgage balance plus legal fees. Based on what I have read, because I do not have a second mortgage, HELOC and have not refinanced I am at low risk of being sued for the deficient balance after short sale. My concern is that PNC will, however, pursue me for legal fees involved with the foreclosure even though the short sale was accepted post hoc. Can you provide any insight or advice?

Answer:  – Most of the time banks won’t come after you for just legal fees, if they come after you, they will file a judgment for the amount they lost because it costs them a great deal more to pursue someone for a deficiency. So unless they are confident you can pay, they typically will 1099 the homeowner instead. And if you’re like most homeowners, the debt relief act will counteract the 1099 or you could claim insolvency. Best to talk to you accountant if you have specific questions.

Purchasing a short sale with three liens. The bank is being unrealistic. Is this all legal?

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Question: I’m trying to purchase a short sale with three liens. A first at 600,000, a second at 80,000 and a third HELOC at 117. The bank holding the first two loans accepted the offer, which is coincidentally exactly what the house appraised for. The first and second have been zero’d out and forgiven. The bank holding the third in line HELOC, which I’m not giving the name of (although I should because they’re very inconsiderate) are holding the short sale hostage even though they are getting ten percent of the HELOC balance. We have offered 10,000,in addition to what the first bank is passing through (5,000). I thought they would rather finish a short sale than go into foreclosure. Nothing makes sense. Recently we offered them 15,000 on top of what the first bank is passing thru, bringing it 5,000 beyond what the house is appraising for, which means it’s not in the loan it’s out of my pocket. The retailer informed me the bank negotiator said if we give the bank 22,000 they’ll sign off today on the loan, otherwise, we’ll just have to wait. This is almost extortion, because it brings the price well over the appraisal. Is this all legal?

Answer: – Unfortunately yes… and it makes no sense at all because if it goes to foreclosure the 3rd gets nothing because no one will bid more than what it appraises for. And if they don’t agree to satisfy or release the lien, then it will continue to go to foreclosure. So you have to be persistent and prove to them again and again that what they are asking for is unrealistic.

Sometimes lenders will have 3rd party collection agencies handle the negotiations once it passes a certain time frame. This is typically when you’ll find a great deal of resistance and difficulty in negotiating the price you want. These collection agencies tend to be very unrealistic in their requests. We had a situation where they were being so unrealistic that after 6 months of negotiation and getting no where, we complained to the lender and told them how unprofessional, rude and dishonest this collection agency was. So they pulled the file from them and we were able to get the short sale approved and completed in less than 30 days.

So don’t give up, be persistent, stick to your offer, make them see that they are being ridiculous in what they are asking.

Can a 3rd party prevent the closing of an approved Short Sale?

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Question: Can a 3rd party, acting on behalf of a 2nd mortgagee prevent the closing of an approved Short Sale by refusing to accept the amount offered them by the 1st mortgagee?

Answer: – Yes they can… Many times mortgage companies will have 3rd party collection agencies deal with negotiating payoffs. If they don’t like the offer they don’t have to accept it. Sometimes they can very difficult to work with. They only way is to either give them what they want by handling it outside of closing or negotiate with them more until they decide to accept.