Question: I recently went through and completed a short sale on my home after several unsuccessful attempts to get my lender to work with me on a loan modification.
I decided to go with the short sale thinking that it would be a better option on my credit rating vs. a foreclosure. I had a first and a second mortgage with the same lender (Chase) I purchased the home with an 80/20 loan and during the time that I owned the home I never refinanced or did anything that would have changed the “purchase money” status. The 1st mortgage balance was $320,000 and the 2nd mortgage was $83,000.
Here is my big problem. The short sale was successful for a price of $226,000 though my realtor and was closed in July of 2010. My realtor and I were both under the impression that the 2nd mortgage was to be written off by the lender. However, subsequent to the closing within a few months I was contacted by a collection agency that was attempting to collect the $83,000 for the second. It appears that after the closing of the short sale the lender turned it over to the collection agency.
After reviewing all of my loan docs it looks like I mistakenly signed my rights away to the second in a very confusing document that both my realtor and I assumed was a security release for the second.
What are my options at this point? I have no way of paying the $83,000 dollars for the 2nd mortgage. Can this be negotiated down substantially with the help of an attorney?
Mike
Answer: – It sounds like they went ahead and “released the lien” so you could continue with the the short sale however, that means they retain the rights to go after you for the deficient amount. You do have some options.
Your best option, which is not available anymore, would have been to offer more for a complete satisfaction and not a release. You may have had to come up with a few thousand more, but then this wouldn’t happen and you’d be 1099’d.
So the next best option is to negotiate a settlement with them. This is where you would offer them a few thousand dollars to settle. You can try to do this yourself, but we’ve found it’s more effective with an attorney. Collection agencies are trained to use scare tactics against homeowners because they can. An good attorney won’t put up with it so they talk to them a little differently.
You need to be prepared to let them know your attorney has advised you to file bankruptcy… and that may be an option for you depending on the amount they agree to settle for. Banks would rather have something instead of nothing. They usually don’t get anything if you file bankruptcy. So in many cases they are motivated to accept something, they just need to be convinced you don’t have anything to give them. Start low and work from there. I wouldn’t pay more than 10% of the $83,000 – but that’s just me.
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