Replies to This Discussion

Permalink Reply by Bryant Tutas on February 8, 2011 at 11:41am

Hi Bobbi. Very common foe the 2nd to want the seller to agree to the deficiency. My guess is the 2nd is agreeing to remove the lien for the 5k but will not remove the prom not thet the borrower had signed when they took out the loan. Of course this would be no different if they foreclosed.

So the seller has to make a decision on whether to move forward and at least eliminate the 1st. The 2nd will probably contact then after closing to make arrangements to pay back the 5ok.  At that time they could negotiate a reduced payment or a low monthly payment.

If they cant pay iot then they can't pay it. At least they are now dealing with an unsecured debt instead of a mortgage. They will avoiud a foreclosure but wil l have to deal with the deficiency.

The borrower needs to seek legal advice to discuss their options.

 

I am NOT an attorney. This comment is just my opinion and is in no way legal advice. It is highly advised that ALL short sale sellers seek competent legal and tax advice.

• ▶ Reply

Permalink Reply by Steve Early on February 9, 2011 at 9:55am

Bobbi:

How are they suggesting that the seller pay the deficiency? Are they asking for a cash contribution and/or promissory note at closing? Or are they putting the seller on notice that after the short sale is concluded they will have to work with the USB Recovery Department to work something out?

If they are asking for cash or a note at closing the first thing I would do is review the seller's finances (bank statements and pay stubs). This might tell you whether the request is reasonable or not. Some examples:

Case #1:

Servicer informs us they want a $4,000 promissory note to be paid off over 4 years at 0% interest (that's $83.33/month). Seller goes into a tizzy - "I can't afford it". Yet when I review the bank statements I see consistent monthly Debit Card withdrawals such as:

 - Comcast Cable $178.48

 - Netflix $14.98

 - Joes Cafe and Grille $84.40

 - The Elegant Gourmet - Coffee and Pastries $3.95 every other day

 - Verizon Wireless $138.89

Sorry - the servicer is right - she could afford it. She might have to change her lifestyle a bit, but why should she have premium cable service and not pay them back?  She maintained she could not afford it, refused to sign the note, the short sale didn't happen and now they're pursuing her for the second AND the first.

Case #2:

Servicer wants $10,000 in cash and a$4,000 prom note. Seller has moved out, and went from taking a downgrade in pay at the time we initiated the short sale to being unemployed 2 months prior to closing. She and her daughter were living with various friends because she had depleted her bank accounts and could not afford to rent anything. We put new finances and a new hardship in front of the servicer and both the note and cash disappeared. (Unfortunately, the seller panicked, got some bad advice from an attorney who didn't realize the property was under contract, filed bankruptcy and screwed the short sale up big time.)

If they are asking for the seller to deal with Recovery after the short sale, this may not be a bad option. They may or may not be contacted by Recovery, and if they are contacted it could be difficult for Recovery to structure a payback plan for someone with zero income. If they have a true and serious hardship, the Recovery department needs to be able to work out something that will work for both them and the seller or what's the point?

 

• ▶ Reply

Permalink Reply by Bobbi Bryant on February 9, 2011 at 10:07am

Thanks Steve, that is the problem...they are not giving my client any specifics.  They said they would not know the terms or the payment until closer to the end of the shortsale.   This is absurd...when i talked to them today, i got out of the lady maybe a 10 year note..
Steve Early said:

Bobbi:

How are they suggesting that the seller pay the deficiency? Are they asking for a cash contribution and/or promissory note at closing? Or are they putting the seller on notice that after the short sale is concluded they will have to work with the USB Recovery Department to work something out?

If they are asking for cash or a note at closing the first thing I would do is review the seller's finances (bank statements and pay stubs). This might tell you whether the request is reasonable or not. Some examples:

Case #1:

Servicer informs us they want a $4,000 promissory note to be paid off over 4 years at 0% interest (that's $83.33/month). Seller goes into a tizzy - "I can't afford it". Yet when I review the bank statements I see consistent monthly Debit Card withdrawals such as:

 - Comcast Cable $178.48

 - Netflix $14.98

 - Joes Cafe and Grille $84.40

 - The Elegant Gourmet - Coffee and Pastries $3.95 every other day

 - Verizon Wireless $138.89

Sorry - the servicer is right - she could afford it. She might have to change her lifestyle a bit, but why should she have premium cable service and not pay them back?  She maintained she could not afford it, refused to sign the note, the short sale didn't happen and now they're pursuing her for the second AND the first.

Case #2:

Servicer wants $10,000 in cash and a$4,000 prom note. Seller has moved out, and went from taking a downgrade in pay at the time we initiated the short sale to being unemployed 2 months prior to closing. She and her daughter were living with various friends because she had depleted her bank accounts and could not afford to rent anything. We put new finances and a new hardship in front of the servicer and both the note and cash disappeared. (Unfortunately, the seller panicked, got some bad advice from an attorney who didn't realize the property was under contract, filed bankruptcy and screwed the short sale up big time.)

If they are asking for the seller to deal with Recovery after the short sale, this may not be a bad option. They may or may not be contacted by Recovery, and if they are contacted it could be difficult for Recovery to structure a payback plan for someone with zero income. If they have a true and serious hardship, the Recovery department needs to be able to work out something that will work for both them and the seller or what's the point?

 

• ▶ Reply

Permalink Reply by Steve Early on February 9, 2011 at 10:28am

This is a step they often require prior to getting to the Approval Letter. They are not going to go bother the investor with the deal and write an approval letter unless they know the seller is willing to take on the deficiency.  Why have the investor analyze this transaction if the seller isn't going to follow through? Their time is better spent analyzing another transaction that will close.

If it is a promissory note, we have been successful in:

  - lowering the amount they want

 - getting a longer payback period (making the monthly payment more affordable)

 - getting a delayed start date (seller needs time to move, get back on their feet and would like payments to start in 3-4 months instead of now)

These are all things that they will often consider if you have a valid reason for them doing so.

 

• ▶ Reply