2 liens - short approx $10-15K - would you approach the first or the second lien holder to request a short sale?
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2 liens - short approx $10-15K - would you approach the first or the second lien holder to request a short sale?
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I had a sale where we had similar numbers. We ran into trouble on the 2nd as there was MI on it. The 2nd was to get paid 56% of the lien and MI denied it. We then resold at a lower price so that the 1st was then short. We went thru a HAFA program and the 2nd ultimately got 20% pay off, the 1st was shorted a couple of thousand, and both lost more $ to missed payments. So what I thought would be a slam dunk was not. The MI person should have been fired!
I have had others that went easily. So I guess what I am saying is - Is there an MI company involved?
Get a payoff demand from the 1st and have your settlement company prepare the estimated HUD based on that payoff and the payoff for the 2nd. Then if the 1st is truly paid 100% you only have to deal with the 2nd. Make sure the 2nd has not gone to a Collector and you are still dealing with the investor / servicer. This transaction should be fairly easy and quick. I've done several of these. In CA, once the short sale approval letter is issued, there is no deficiency.
I have had a couple of these. The sellers brought cash to the table and didn't bother getting involved with all the problems and negative fallout from a short sale. One seller got an equity line on his new home. I don't know what the other did. Somoetimes the seller can borrow from his/her 401(k), credit union, or whatever.
Better make sure your calcs are accurate.
Default balances are very tedious to estimate.
Order a written payoff on the first mortgage for as far out as they will issue it, then add in the estimated interest and late charge per diems up until usually 90 days from closing expectation.Padding it a little is also wise.
Then you can determine if both lenders or just the sub lender will receive the short sale package.
The good thing is you only have to work the second trust. You should still notify the first, by sending them a hud and the second trust approval, but they won't need all the normal short sale paperwork, since they are not approving a short payoff. Should be a fairly easy deal to work.
You did not mention if the seller has stopped making payments to the first trust. If they are not making payments, you should notify them of the short sale early in the transaction so they don't start attempting to foreclose. Keep checking the first regularly to make sure they are not starting the foreclosure process.
I have the same situation where the first will not be shorted, only the second. Would you recommend that they continue making their payments on the first, but stop paying the second? How would you proceed in terms of keeping the first happy while we negotiate with the second? I appreciate advice on this!
I would recommend approaching the second mortgage holder as well. Depending on the value of the property and the amount owed on the second, a short of only $10 - 15k shouldn't be too difficult to approve. Be prepared to wait, however, because it is still a slow process.
Approach the 2nd, the first gets paid in full, the 2nd gets the difference.
Thanks Jimena. Is this common?
Yeah we do it all the time, they are easy deals because usually the 2nd is getting a large chunk of money and much more than they would get on a regular short sale.