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Permalink Reply by Steve Early on October 21, 2010 at 9:40am

Risa:

You didn't say how much your seller is being asked to contribute to the second on top of the amount Bank of America is willing to part with. That aside, this can most certainly happen.

A $3,000 contribution to the 2nd lien is very common with Bank of America. In my experience it has nothing to do with whether it is a government backed loan or not - but it is all based on investor guidelines. They can sometimes contribute more than that depending on the investor and the circumstances, but I rarely see anything above $3,000.

The issue you have with the second is this:

Bank of America won't let your seller give extra money to the 2nd lien holder because they are working from the viewpoint that if the seller has extra cash hanging around, they want it!! It is as simple as that. If there's more to be had, they want to give it to the investor to lessen their losses.

Unless it is a small amount and someone else (like you) can make a contribution to make it go away, the only option to remove the second lien might be to accept a promissory note. It is up to the second lien holder whether they will accept a promissory note or not. Sometimes they won't.

So now the question is: What if the second won't accept a promissory note and insists on cash, and it isn't a small amount?

This is a pain and it assumes your seller has, or can beg borrow or steal the cash needed but ...

1) Get wiring instructions to pay off the second lien for everything but the $3,000 from Bank of America
2) Once you are certain that the closing is set in stone - wire the funds to the second lien holder early in the day on the DAY BEFORE the closing
3) Be absolutely certain that the 2nd VERIFIES RECEIPT of those funds the same day.
4) Now the HUD for the closing only needs to reflect the $3,000 contribution from Bank of America to the 2nd lien holder.

It can make you a wreck until it all closes but it's the only way I know around it.

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Permalink Reply by Risa Kneip on October 21, 2010 at 9:55am

Thanks Steve,

Great advise! I will contact HSBC to see if they will do that.

Thanks Risa

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Permalink Reply by Wendy Rulnick on October 23, 2010 at 4:44am

Risa - An option may be to have the seller also pay a contribution to BOFA. Some investors want equal to what the other is receving in cash.

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Permalink Reply by Risa Kneip on October 23, 2010 at 6:03am

Thanks Wendy another great option!
Risa

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Permalink Reply by Shari P on October 26, 2010 at 12:52pm

That's really funny because I was told via BofA that the government-backed investor in my deal will only allow $1750 to the second lienholder (2nd wants $3000) but BofA/Fannie Mae is allowing the buyer to give money to the second.

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Permalink Reply by Stephanie Hart CA 310-930-2342 on October 28, 2010 at 4:26am

I tried to do this wire out early bit and BOFA wont accept it... have you had any success with it with BOFA?
We were all set to fund today and can;t get OWB to approve of the hud because of this.


Steve Early said:

Risa:

You didn't say how much your seller is being asked to contribute to the second on top of the amount Bank of America is willing to part with. That aside, this can most certainly happen.

A $3,000 contribution to the 2nd lien is very common with Bank of America. In my experience it has nothing to do with whether it is a government backed loan or not - but it is all based on investor guidelines. They can sometimes contribute more than that depending on the investor and the circumstances, but I rarely see anything above $3,000.

The issue you have with the second is this:

Bank of America won't let your seller give extra money to the 2nd lien holder because they are working from the viewpoint that if the seller has extra cash hanging around, they want it!! It is as simple as that. If there's more to be had, they want to give it to the investor to lessen their losses.

Unless it is a small amount and someone else (like you) can make a contribution to make it go away, the only option to remove the second lien might be to accept a promissory note. It is up to the second lien holder whether they will accept a promissory note or not. Sometimes they won't.

So now the question is: What if the second won't accept a promissory note and insists on cash, and it isn't a small amount?

This is a pain and it assumes your seller has, or can beg borrow or steal the cash needed but ...

1) Get wiring instructions to pay off the second lien for everything but the $3,000 from Bank of America
2) Once you are certain that the closing is set in stone - wire the funds to the second lien holder early in the day on the DAY BEFORE the closing
3) Be absolutely certain that the 2nd VERIFIES RECEIPT of those funds the same day.
4) Now the HUD for the closing only needs to reflect the $3,000 contribution from Bank of America to the 2nd lien holder.

It can make you a wreck until it all closes but it's the only way I know around it.

• ▶ Reply