Has anyone completed a short sale with LBPS / Seterus?

 

We received our approval with the following phrase:

 

upon completion of all requirements by borrower(s), Seterus, Inc. will execute a release and a discharge of the deed of trust/mortgage and if necessary, will dismiss any pending legal action to collect this obligation. As required by law. Seterus, Inc may issue a 1099C, forgiveness of debt, as a result of this settlement agreement. Borrower(s) acknowledges that here may be tax implications resulting from debt forgiveness. Borrower(s) should consult with a tax advisor.

 

The clients attorney wanted the approval to be retyped stating no deficiency action would be taken. When this was requested from the negotiator he responded in the following manner:

 

The seller will receive a 1099C which is the only action we take to pursue the deficiency.  The 1099C is a cancellation of debt and the seller will file this with their next years taxes.  I'm unable to change the letter or request anything be changed.  Hopefully this will work as we don't have many options.  Thanks

 

Does anyone have any input? Should we let the property go back by deed in lieu or foreclosure. Has anyone had success in having the banks change the legal verbage in their letters?

 

Thank you,

Kim

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Replies to This Discussion

Permalink Reply by Jeff Payne on September 20, 2011 at 5:09am
i agree harry he needs to dump the attorney
Permalink Reply by Keji Ogunleye on September 20, 2011 at 5:41am

Your seller needs to take this approval and move one.. This letter is their template and I don't think they will be changing it just because the attorney is requesting it.

Permalink Reply by Becky Martin on September 21, 2011 at 11:12am
Agreed, attorneys sometimes complicate the process, I had one in CA want the language changed even knowing that with CA law they could not pursue a deficiency !!!  I just told the seller to take it or leave it, the letters cannot be changed, she took it:)
Permalink Reply by Catherine Myers on September 21, 2011 at 7:21am

They are cancelling debt, they have to issue the 1099 but that has nothing to do with the recourse.  It looks like they are saying they "will dismiss any pending legal action to collect this obligation." 

 

Taxes and recourse are two entirely separate things.  You can't escape a possible tax implications, but they are right that the borrower should work with a CPA, if they fall under the mortgage debt forgiveness guidelines they can file the appropriate paperwork with their taxes and be forgiven any taxes owed.

 

What kind of attorney are you working with?

 

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