BOA claims it wants to end the suspense of the uncertainty of deficiency judgments
A recent article claims that BOA may have started to understand that the open ended threat of deficiency judgment may be backfiring on them. I have had many clients, especially in high end homes, who prefer to preemptively file bankruptcy on BOA rather than live with the threat that sometime in the following 25 years BOA will ambush them and start collecting on the shortage. In the high end houses the deficiencies are routinely $100,000 to $400,000+.
BOA's shortsightedness has caused them millions of dollars of additional losses by providing a disincentive to borrowers to go through the short sale process just to be kicked below the belt by BOA. Bankruptcy and subsequent foreclosure inflict many more losses on BOA that could have been avoided.
Most homeowners did not default on purpose. This economy was too much to bear. Many borrowers ran up other debts trying to keep their BOA loan current until they couldn't scrape bottom any longer.
Short sales help BOA mitigate its its losses. BOA should reward homeowners for doing a short sale, not push them over a cliff.
Here's the article: http://www.palmbeachpost.com/money/real-estate/bank-of-america-want...
I will be sending this article to BOA when I lobby for my clients to get a waiver of the deficiency. Please share any methods you have encountered to successfully procure deficiency waivers for clients.
Thanks, Dave Halpern, Louisville, KY
Replies to This Discussion
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Permalink Reply by Michael Schneider on
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Dave,
My "sense", and it really it just that, is that Investors are becoming less willing to "waive future rights", when not required by the program.
It seems that perhaps with FHA/PFS, MHA/HAFA and now GSE/HAFA, Investors may be less willing to "waive" on "traditional short sale". (Tradiitional short sale seems like an odd term....traditional?)
I was told that Fannie "retain future rights" was non-negotiable.
There are four basic strategies, I think: Settle Now, Extinguish Afterwards, Defend Later, or Foreclosure.
I also think that Extinguish Afterwards, meaning file BK after the short sale, is a reasonable approach for some sellers.
michael -
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Permalink Reply by Dave Halpern on
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Michael, I like your breakdown of the four strategies. It's the "extinguish afterwards" that's causing many borrowers to file BK now while they are still insolvent. They don't want to look over their shoulder for years. Most borrowers can live with the tax liability of the 1099-c cancelled debt but not with the threat of full deficiency.
BOA will net more money and get it faster if they ease up on the deficiency demands. -
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Permalink Reply by Jeff Payne on
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the last 2 approval letters that I have recieved did not have the deficiency language in them.......
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Jeff,
Is the letter silent on the deficiency and on future rights?
Or, does is explicitly state that the net-proceeds is accepted as full satisfaction of the debt, or similar language.
Unless explicitly waived, then right is retained, I think, state laws permitting. -
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Good question: copied and pasted:
IMPORTANT MESSAGE ABOUT THIS ACCOUNT
This letter will serve as BAC Home Loans Servicing, LP’s demand for payment and advises you
that BAC Home Loans Servicing, LP and/or its Investors and/or Insurers have agreed to accept
a short payoff involving the above referenced property and the referenced account(s). This
demand should be used by the closing agent as our formal demand statement. No additional
statement will be issued. This approval is exclusive to the offer from the buyer referenced in
this letter.
WHAT THIS MEANS TO THE SELLER
There may be tax consequences associated with entering into a short sale. The seller is
encouraged to seek guidance from an independent tax advisor, and/or an attorney, before
proceeding with the short sale.
If this short sale is contingent upon BAC Home Loans Servicing, LP and/or its investors
receiving a promissory note, we will reserve the right to collect the full amount on the new
promissory note which may lead to us pursuing a deficiency on that balance should the need
arise. If the short sale does not close, then we will pursue all remedies under our note and
mortgage. This offer is contingent upon BAC Home Loans Servicing, LP receiving a properly
executed and notarized Promissory Note, if applicable, to this short sale transaction.
Michael Schneider said:Jeff,
Is the letter silent on the deficiency and on future rights?
Or, does is explicitly state that the net-proceeds is accepted as full satisfaction of the debt, or similar language.
Unless explicitly waived, then right is retained, I think, state laws permitting. -
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I think it is definately open to interpretation but I believe that the verbage means it is a full release.
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By stating "This offer is contingent upon BAC Home Loans Servicing, LP receiving a properly
executed and notarized Promissory Note, if applicable, to this short sale transaction." BOA has introduced enough ambiguity to render it so it cannot be considered full release. Closing attorneys I work with opined that it is not strong enough language to consider it full release.
Jeff Payne said:I think it is definately open to interpretation but I believe that the verbage means it is a full release. -
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Yup, I think I would tend to agree with Dave and your closing attorney.
As a non-attorney just reading the text, the deficiency rights do not seem to be waived.
Unless this is a state with an anti-deficiency statute or the debt is non-recourse for some other reason.
What are Investors planning to do with all these millions of "future rights". Sheesh..... -
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