Wilshire will not give a full release of a second mortgage on one of my short sales. They will only give a lien only release. They are getting $5000.00 from the first AHMSI. Now the seller of the property just wants to cancel the short sale and file bankruptcy. Any suggestions? There is approx $65000 owed on this second, they say no way will they give a full release and the approval letter clearly states they will file for a deficiency and the negotiator made it clear they are going to come after him for the balance.

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Nope, this is the only home he owns. I am waiting on a call back from the negotiator. I will let everyone know how this one turns out. Thanks for all the help, I love this site!

Theresa Prim said:
Sorry Kynse, read it too fast. YES, I have this happen on 2 occassions, BUT both occassions were of different situations. Do the homeowners own another home?
Reason why I ask is this? 1 of my shorts, similiar situation, 2 mtgs, and the 2nd made the homeowners take out a "note" they called it, for 20 or 30 years. Low low payments, like $85/month or something, interest free. The sellers agreed. They did. They did not a foreclosure, as he was a prominent public figure in town, BUT he had moved from the home and purchased another home in the meantime, then tried doing short sale on his previous residence, Therefore, the bank held him under a barrel.
the 2nd situation was this, OH! and this is yet another blog...i am finding that these 2nd homes, the investment properties that people own, i.e. bought a house for my son and his wife and they didnt pay, or we didnt have a mtg so we took out a line of equity to put a down payment on another home.. well, LOE, LOC, 2nd homes etc...lenders are making the sellers carry notes for the deficiency. You dont find out until
1) the BPO is accepted
2) the short is approved
3) the buyer is ready to close

OH! Now subject to the seller signing this note. I've had lenders call my homeowners and tell them to get a hold of their realtor to do a short sale, "we'd rather do short sale than foreclose" YES, THAT IS BECAUSE THEY FOUND OUT THAT THE SELLER/HOMEOWNER HAS ASSESTS THEY CAN ATTACH THIS NOTE TO! OR if they default on the very small note they make them take out, they can attach it to their other property then.

I have been tricked on occassion, the sellers have been lied to.

Therefore, one short fell through and the home is going to foreclosure, if it dont make it to tax sale first, and the seller is filing BK on the house. Here was her BK attorneys advice to her.

GOT IT!!! HE SAYS TO TELL THE LENDER TO 'PRODUCE THE ORIGINAL NOTE' . HERE IS THE VERBIAGE.

"I suggest that you advise 5/3 that you will not sign the note for the deficiency. Having not seen the note and mortgage, I am not sure if it was originally signed as a non recourse or recourse obligation. Anyway, they should make the deal without your commitment to pay the difference. You will only be doing THEM a favor if you sign the note without getting anything in return. Let's see what they say because you will be discharging any deficiency of a foreclosure sale in the bankruptcy"


KEEP US POSTED.....THESE ARE SO CHALLENGING, AND FUN, DONT GIVE UP!
I got a full release from the lender! It took a lot of time and energy but I was successful!
Great job Kynse. Did they actually state in writing that they would not go after the deficiency or did they just remove the deficiency language from the payoff letter?

Can you share the letter with us so we can use as ammo?

Kynse L. Agles said:
I got a full release from the lender! It took a lot of time and energy but I was successful!
I will post both letters the lien only and the full release on the Wilshire page. I also got an email from the supervisor stating that no deficiency would ever be pursued!
Great job. I wanted to suggest a line of thinking when it comes to BK, FC and short sales. If the seller is considering BK or is definitely going to file BK with a property that has no equity, the property will not be liquidated in the BK. So after the BK is over, then the lender will continue with the FC. They may even continue with the FC during the BK after they get a release from the stay which first mortgages usually do pretty quickly, often seconds do not bother. So at this point the seller has a BK on their credit, doesn't owe the money to the lender(s) but they are still foreclosing on the property to get it back and recover whatever they can. So now the seller has to short sale the property anyway to avoid also having a completed foreclosure on their credit.

Now if they short sale the property before the BK and then a lender tried to collect on the deficiency, they could always file BK if they could not negotiate the settlement of the deficiency. So the end scenario is the same, only they did not have to file the BK until the lender tried to pursue them, and if they never do, they never file BK.

Now if the seller wants or needs more time in the home, filing BK before selling will do that.

The one down side to the above process is that the lender could wait to try and collect until the seller has rebounded financially at which time they would be less likely to want to file BK. But at the same time, they may be in a better cash position to work something out with the lender and avoid the BK altogether.

Now if they do none of the above and let the property go to foreclosure and there is recourse by the lender, they will be in the same position of having to file BK and once again have the FC and BK on their credit.

That is how I usual think about it when thinking of what would be the best course of action. Of course I talk about it with their attorney and he gives them his recommendation.
Congratulations! I'm in a short sale now and just received the approved demand letter for the sale. Still working on a complete release of the note. Can you provide details of where you will be posting your letters that you referenced you wrote or received from the bank? thanks!

Kynse L. Agles said:
I will post both letters the lien only and the full release on the Wilshire page. I also got an email from the supervisor stating that no deficiency would ever be pursued!

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