Mortgage Insurance Company wants a $17k Note from sellers

Jerri Schick September 6, 2011 at 3:37am

After formally denying the the short sale request due to seller's rejecting $17k promissory note (we offered them $1,000), and closing the file and the negotiator actually telling me nicely to 'go away' . . . I get an email from the negotiator 1 week later saying the MI company has done a 180 and dropped the cash request and promissory note requirement and has approved the short sale request as-is. :-) Doing a happy dance!

MaryAnn Dempsey August 24, 2011 at 8:10am

I have been asked 2 times before for a note to be signed and I have told the bank repeatedly, the seller have no room in their pocket for a note. If they did, they would not be giving up their home. If they do not remove it, ask for it to be escalated until you get the results you are looking for. It will take time, but you will more than likely come out with a favorable response.

MaryAnn Dempsey

Jeff Payne August 22, 2011 at 6:49am

I have never seen a prom note on any HUD, not even sure where it would go on the HUD?

Joetta Fort said:

All of these cash-out or promissory note solutions are on the HUD, so the first lien holder sees the amount going to the second. I've had the first come back and say, if the seller has money to give away THEY want it, and they wouldn't agree to the short sale if more money was going to the second. What then? Or should I start a new question thread?

Enrique Vasquez-Plaza August 22, 2011 at 5:51am

Wow, so many different things we can learn out of this... Here are my findings:

1- MIs are like PNC : pain n crotch... Once you get a listing, find out if there is an MI company involved, and research/ inquire about guidelines.

2.- Make your seller financial and emotionally involved and well aware from day 1 with all the possible "consequences" short sales can bring (deficiency judgement, prom note & cash contribution)

3.- Document your sellers hardship to the extreme and always make them look completely broke ( i do this and i have onky had 1 prom note and 1 cash contr. On my record)

4.- Everything in this Short Sale/MI world is negotiable ( at least most of it). So negotiate and fight. Lets play the game with the biggest players out there: Lenders. If you have to decline and re-start, do it! If you have to counter: do it! But always do your best got nail it at the first strike.

5.- Always show the lender how much can they loose and make them beleive you are saving them, specially if you have postponed sale dates.

6.- Keep posting on this site!!

Diane Wheatley August 22, 2011 at 5:25am

Dear Jerri, As of 7/15/2011 in California it illegal to ask for seller contributions for short sales. But in my experience with promissory notes, I have had to reject the lender's request per my client's instruction and resubmit the short sale package including a hardship letter that strongly represents my client's insolvency backed up by current financials, bank statements, etc. to prove that there is NO MONEY. I did this with Aurora and we were approved on the second time around.

Good luck!

Diane Wheatley

Barbara A. Reagan August 22, 2011 at 5:17am

I had a Bank of America short sale in which the MI company wanted a $25,000 interest free note from my sellers. The sellers decided to agree to pay a note but negotiated the $amount and were able to get it down from $25,000 to $10,000 interest free, payable over 25 years, which was a monthly payment they could live with. I was told by Bank of America negotiator that the MI company would not negotiate with the sellers on the amount, but the sellers took the chance and won! So it is worth trying to negotiate it off or down to a very minimal amount. Good luck

Jerri Schick August 22, 2011 at 3:50am

Hey Josh, I did have a conversation with the sellers about this potential scenario. They told me that if it came down to coming up with money at the end they would have to walk because they don't have any. Not sure how true 'don't have any' is but I believe them when they tell me they don't have $17k to bring.

Thanks everyone for your insightful and informative replys!

Josh M. Boggs August 22, 2011 at 2:41am

It was certainly been our experience that if you can truly prove your borrower's hardship in all financials and press hard against these requests; that eventually you can get the MI company to back off. It's a matter of escalating and threatening to go viral and use social media to get the point across that this MI company that ONLY has a tooth in this deal because our sellers are actually trying to help everyone avoid loss by preventing foreclosure, but yet by asking for something that truly can't be materialized they are forcing sellers back into foreclosure!

Also, I agree with Sean's comments as well. At best, get them into the PN and make it happen. I've been a licensed credit counselor and also worked very close with many credit restoration companies that were able to settle them for pennies on the dollar and clean them up quickly. It's just that "worth only the price of the paper it's printed on".

Of course, this is always easier for your sellers to swallow by having all these hard and difficult conversations up front with your sellers before even the listing agreement gets signed. I'm sure this deal will ensure you have these conversations up front from now on. ;)

Best of luck,

Josh

Jim McCormack August 21, 2011 at 2:23pm

How much available cash does your seller have? If they have some, offer a small cash contribution instead of the $17K note. If they have little or no cash, but can afford a promissory note post closing then counter with a lower figure note. If they cannot afford any payment then tell the MI company that they can't get blood from a stone. The seller's financials will prove whether they can afford any contribution. Short sales are nothing more than sale price, sale net and seller contributions. The bank and MI company are just looking to collect as much as they can. If the seller has nothing then they can't get anything. Your job is to present the evidence in a convincing and forceful manner.

Pam LoRusso-Floyd August 21, 2011 at 11:47am

Hi Jerri =)

First off, MI companies have to pay the claims to the short sale bank regardless. Meaning that they either allow the short sale and pay it now or they allow it to go to FCL and pay the claim to the bank months down the road. But they have to pay it period. The only way for them to mitigate their loss to a lessor amount is if the homeowner offers them a note or cash contribution which is the only way for them to lessen the amount of their loss.

In a short sale the MI carrier (Radian, Old Republic etc) will run a credit check on the seller and review their financials as well as hardship. I have had some files go thru with no contribution asked for and others have required something. If the seller truly has a hardship (sometimes they really dont) they can write another hardship letter asking for reconsideration of the note, due to extreme hardship and spell out their plight in extreme detail.

You can try to mitigate the amount with this letter or have it removed completely but we are at the mercy of the MI company. If the seller has any cash reserves (most dont) you can ask to make a cash contribution @ closing in an amount they are willing to pay. You can ask for a note reduction, try 1/2 of what they are requesting. But the bottom line is this...The MI company is the controlling party in a short sale they can make or break the deal.

If you are at a standstill with the MI company then you go back to your client and explain that if they sign the note it is an unsecured note. The short sale will go thru and they wont have a FCL on their record. If down the road they can't or don't want to pay on the note anymore then it becomes a collection account on their credit report that has no security. "I am not telling you to do this" you remind your client....But it is far easier to recover from a short sale with lates then it is a FCL.

I've been doing this for 5 1/2 years and have never has a MI company not sign off on the short sale...Of course in a negotiation it's successful when both parties leave wanting more but okay with what they received.

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Mortgage Insurance Company wants a $17k Note from sellers

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