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Permalink Reply by Melanie Ross on April 7, 2011 at 2:09pm

We had two short sales with MI issues.  One the first buyer walked and when the second buyer came along we pushed back and it got approved.  Another one we just closed we did negotiate a lower amount for a promissory note.  It took us several weeks.  We had a NOT that has passed and there was no way the MI was giving up.  Our client did do it after thinking through it very carefully and we recommended he see his attorney and CPA.  Bottom line this was the only way we got it through.  We also got the buyer to come up in price and applied that difference (about 5K) from the first offer pirce (which was approved at) to the note to lower it.  We had this all on the HUD with full disclosure to all companies.

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Permalink Reply by Amelia Keene on April 8, 2011 at 3:20am

Indy Mac is the worst. Try to reach out to the MI company -go right to them...

But, one scenario a lot of sellers are doing is signing the promissory note. I have one associate who did, and shortly after the rep who was handling the servicing of the promissory payment, made an offer to further reduce it.

Many sellers are opting for this approach and negotiating later to reduce the promissory note. treat it like a collection company. they are always willing to settle for less down the road to clear the account.

:)

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Permalink Reply by Melissa Polce on April 8, 2011 at 3:55am

go in with a counter offer, 20K promissory, 2K cash at close...MI companies are really starting to pose a problem...good luck 

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Permalink Reply by Aaron Ayotte, Short Sale Monkey on April 8, 2011 at 5:55am

ALL short sales come down to 3 things.....value, the HUD, and the offer.  Period.   It seems that you haven't reached a REAL decision maker yet.  Escalate the file explaining, in numerical detail, the outcome for that investor if the foreclosure occurs, vs. the outcome from a successful short sale. 

The AVERAGE net gained by investors in short sale closings vs. foreclosure is 15-20%!!!  AND THEY KNOW IT!  They're calling your bluff.  ESCALATE to the chairman's office, VP's, etc.

How?

Go to http://jigsaw.com -- search email addresses and phone numbers for officers of the company.  It's free.  You get credits for adding contacts into the system, so you can get contacts out of it.  Most everyone's contact info that we've found there has been accurate.

Find the Officer just below the TOP officer.  Send them your letter, cc'ing the top officer.  Then do the same thing to other managers of loss mitigation, etc. that you can find.   I suggest sending your letter to only 2 or 3 people....you'll usually hit upon the right contact, and if not, sometimes the "wrong" contact will forward your info to the right one. 

 

Keep your letter short and to the point - don't send them your short sale file.  These folks are decision makers, not usually the "detail" type....they want to know the bottom line.  Be nice, but serious.  Compliment the negotiator you've been working with, even if they've been a jerk.  Apologize for reaching out to them, but tell them you felt there was no other choice.  Use something like, "We just need your help, Mr. Smith", in the subject line....don't mention short sale, loan numbers, etc. -- that will be in your letter.

After you send it up, send a copy to your negotiator...thanking them for their help and notifying them that in an effort to be ABSOLUTELY sure there's nothing that can be done, you've contacted A, B, and C regarding the situation.  You may find that the first response you get back is from the negotiator ready to change his/her tune.

It's all a GAME.

Additionally, MI companies AND lenders know that a P-note is an unsecured debt instrument.  But, by asking for one, they get to report, in this case, $36k as an ASSET on their balance sheet as an accounts receivable!  They automatically look better to their stock holders, regardless of whether a single payment is made.  THEN, after the seller doesn't pay (about 90% of them go delinquent), they'll sell that note to a collections company for 10-15 cents on the dollar, making another $3k + than they would've had otherwise.

Yes, a delinquent P-note can turn into a judgment (at least here in TX), but so can the loss on the property the lender experiences AFTER foreclosure.  Which one would be bigger?  At the end of the day, P-notes, if you can't avoid them, aren't really a bad deal.  Just a less crappy choice of two crappy choices.

Good luck!!

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Permalink Reply by Anita Smith on April 13, 2011 at 7:23am

Harry, Thank you for you reply. It is very helpful.  Unfortunately, the sellers are in the middle of a divorce. The wife has 2 small children and does not work  however, the husband requested that the negotiator ask MI if they would lower the promissory note and they came back with a no. At this time we are seeking attorney advise. I will let you know what the outcome is.

Harry Clay said:

I recently attended a 2 hour short sale seminar with an upper echelon executive with Radian, the industry's 2nd largest Mortgage Insurer.

It was an eye opener for me, as someone who had recently lost several of what I thought were otherwise solid transactions to MI demands, that the seller's dug in their heels & refused, & subsequently went down in flames.

The Radian Exec said, point blank:

If the MI company says they want a note, it means that, upon reviewing the seller's financials, they have come to the conclusion that the seller is strategically defaulting, & that they probably could have hung on if they had really wanted to, but are bailing on the house primarily because of the loss of equity.

She further stated that Radian realizes they can't un-ring the default bell, & they know the property is going down...but if the seller truly wants to avoid foreclosure on their record, & attain short sale approval...

...they are going to have to come up with some kind of contribution, or Radian will absolutely burn that seller to the ground, & deny the short sale, & take the insurance loss rather than make it easy on defaulting borrowers, & risk opening the flood-gates of all the seller's neighbors who are also upside down, & want an easy way out.

She did however repeatedly hint that Radian knows they "can't get blood out of a turnip" & strongly suggested that the MI companies are almost always prepared to compromise & ultimately settle if the seller will make an honest attempt to make some kind of financial movement in their direction.

She all but admitted that it would not be out of the realm of possibilities that the MI company would ultimately settle for pennies on the dollar.

But she also insisted that if a seller is uncompromising, & absolutely refuses to negotiate & make even the smallest contribution once the MI company has requested that note...that we should expect the worst: Foreclosure.

The MI company has the final word, you can count on it.

My very next deal, this same scenario came up, with a different MI company.

I encouraged my sellers to offer $.06 cents on the dollar demanded...& the offer was approved, & the transaction successfully closed.

 

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Permalink Reply by Bryant Tutas on April 14, 2011 at 2:14am

Anita. The sellers should negotiate. I agree with thew comments above that MI is going to want a contribution of some sort. I also agree that the sellers need to make the MI an offer not just ask them to reduce the note. Give them a figure to work with.

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