Replies to This Discussion

Permalink Reply by Evelyn Broxterman on June 14, 2010 at 2:18am

Hi Rich,
I am going through two very similar short sales right now. Both junior liens are with WellsFargo Equity. So far I have only managed to negotiate a lien release for 5% of the balance. In addition for them to agree a lien release, they want a repayment plan, lump sum of total amount at closing, or consent to judgement from my seller who lives of SS Disability, which they cannot touch if a judgement is filed.

Have you spoken with Wells Fargo Legal Remedies Department? They are the ones I am working with. They say their policy is the above policy and thats it! They play HARDBALL!

I will be following this discussion as I hope someone out there has the magic answer!

Permalink Reply by Michael Schneider on June 14, 2010 at 3:00am

Rich,

As you know, I'm sure, you need to talk to a bankruptcy attorney.

I would try to negotiate with Wells for full satisfaction of the debt.

Meaning accept a payment, adding an additional payment if necessary, as "release AND full satisfaction", thereby waiving any future right. Ask Wells if this is what they are proposing.

The foreclosure route does not seem to me to be in the Seller's best interest, unless their objective is to live in the house for as long as possible without paying, then vacate when forced to by the Court. You need to determine their real intent.

The noteholder needs no "signature" or any other affirmation from the Seller to pursue the deficiency, if they choose to do that. Their right is based on the original note. Also, the short sale does not create a "judgment", just a possible remaining amount owed.

If the Sellers choses to let the house go to foreclosure, which they can do, then they will probably have a larger deficiency, and then I think there would be a judgment, if the Court grants the request for judgment after the foreclosure, which I thought was more-or-less routine.

Better to sell short, first, then declare BK, if necessary, but too late for that in this case.

Permalink Reply by Rich Lemer on June 14, 2010 at 4:07am

I am actually the buyer involved with this transaction at a distance. We should get a response from Wells Equity any day now - this short sale actually started back in beginning of March but was held up until last week by the first bank (again, actually getting full payoff).

I truly want this deal to work out - just trying to get an idea if it's likely as a short sale. I already have my mortgage committment and the home has been appraised and inspected.

Believe me, I just want this short sale to happen. Wells Equity is being offered about $40-50K on a $175K line of credit (20-25% loan balance). But the seller has told me, he won't sign anything unless "debt is satisfied".

So do you think this deal will happen? Could Wells Equity drag this deal out for much longer?

Permalink Reply by Michael Schneider on June 14, 2010 at 4:31am

Well, as a buyer, my concern would be around "Seller Intent".

Does the Seller really want to sell? He must be seriously delinquent, I think, else the 1st would not be foreclosing.

Rich Lemer said:

I am actually the buyer involved with this transaction at a distance. We should get a response from Wells Equity any day now - this short sale actually started back in beginning of March but was held up until last week by the first bank (again, actually getting full payoff).

I truly want this deal to work out - just trying to get an idea if it's likely as a short sale. I already have my mortgage committment and the home has been appraised and inspected.

Believe me, I just want this short sale to happen. Wells Equity is being offered about $40-50K on a $175K line of credit (20-25% loan balance). But the seller has told me, he won't sign anything unless "debt is satisfied".

So do you think this deal will happen? Could Wells Equity drag this deal out for much longer?

Permalink Reply by Rich Lemer on June 14, 2010 at 4:39am

Just by chance, I found this owner about 6 months ago because of my interest in the property. He tried to sell the home last summer at a much higher inflated price, but he gave up and vacated home about 1 year ago when he knew he was upside down after his bankruptcy. He is waiting for foreclosure or short sale - "whatever happens first". But he has cooperated with banks through this whole process for BPO's and inspections, etc. He's motivated, but not that motivated since "his credit is already shot".

Permalink Reply by Rich Lemer on June 14, 2010 at 4:40am

Seller has not paid mortgages or taxes in over 1 year now.

Permalink Reply by Michael Schneider on June 14, 2010 at 5:00am

Well, I'm guessing that your numbers may be high. The 1st will be adding $40K or so to principal balance to cover all of the expense they are owed, and believe me, they know how to charge.

If you want to see what is going on, ask the Seller for the payoff statement from the first and for the preliminary HUD1 settlement sheet that was submitted to each Servicer, if you don't have these already.

They, my recommendation would be give an ultimatum: If written demand/approval is not received from each Servicer by xxxxxx, then the offer is withdrawn. Just my opinion. (Check with you attorney, first, of course.)

Michael Schneider said:

Well, as a buyer, my concern would be around "Seller Intent".

Does the Seller really want to sell? He must be seriously delinquent, I think, else the 1st would not be foreclosing.

Rich Lemer said:

I am actually the buyer involved with this transaction at a distance. We should get a response from Wells Equity any day now - this short sale actually started back in beginning of March but was held up until last week by the first bank (again, actually getting full payoff).

I truly want this deal to work out - just trying to get an idea if it's likely as a short sale. I already have my mortgage committment and the home has been appraised and inspected.

Believe me, I just want this short sale to happen. Wells Equity is being offered about $40-50K on a $175K line of credit (20-25% loan balance). But the seller has told me, he won't sign anything unless "debt is satisfied".

So do you think this deal will happen? Could Wells Equity drag this deal out for much longer?

Permalink Reply by Rich Lemer on June 14, 2010 at 5:11am

You are very accurate. The 1st bank did add about 40K to final payoff amount - and they took nearly 5 weeks to put this figure in writing. And this has already been figured into my above statements.

Bottom line, Wells Fargo Equity still will get 30-50K offer on their 175K loan (after all other expenses - including back taxes, seller's transfer fee). I believe seller has been honest and open with me about these numbers.

But deal won't happen unless Wells Fargo Equity releases their lien (and seller's loan is "satisfied") with the above figures. I can't imagine that Wells wouldn't be offered at least 10% of this loan, but again, more likely 20-25%.

I really am tired of waiting for this deal.

Permalink Reply by Ben Benita on June 15, 2010 at 1:49pm

1) You need to verify if this was or was not included in the BK
2) I think the Seller MUST re-affirm the debt in order to proceed with the short sale, this will expose him to consequences such as deficiency.....as noted by the others here, double check this with his BK attorney.

I would keep negotiating with the second, escalate escalate escalate.....
Find out who the investor is on the note, contact them
Find out if there is mortgage insurance and what the coverage ratios are

See if the Seller will bring at least SOME cash to get this done......if not, you could be facing an uphill battle.

BEST MOVE -- have the Seller put in writing that he/she will NOT agree to this consequence and that his/her attorney has advised them to jsut let the home go to foreclosure, sign the letter, then, hav eyou submit it to the second (remember, make it as EASY AS POSSIBLE for your negotiator to work with you and get you a "yes")

We suggest in your pre-listing appointment to ask all Sellers whether or not they will agree to a prom. note, tax consequence, bring cash to closing etc. so you can better prepare when things like this come up.....and of course decide whether or not to even take the listing.....

Permalink Reply by Pacita C Dimacali on June 15, 2010 at 5:47pm

One of my Wells Fargo short sales also had an offer that was enough to cover the first loan, but not the second (HELOC). So all my negotiations were with the second.

He tried so hard and for so long to get my seller to contribute, including asking my seller to cash in some IRAs. My seller refused. Although my seller had other assets (an apartment building that was paying for itself), he was deep in the hole because he was earning considerably less in his new job and after nearly one year of unemployment.

Finally, when the first buyer backed out, and when I tried to get an extension, out of frustration I ranted that if he is not willing to help us then is his goal to foreclose on the property and end up with nothing?

Shortly after that, we fortunately got an all cash offer and could close the same day that we would had if the first buyer had moved forward.

In the approval letter, this is what he said:

"Wells Fargo's actual payoff includes: unpaid pricipal balances, accrued interest, late charges, negative escrow reserve, delinquency expenses. The shortfall amount (outstanding loan balance, including additional charges, less net sales proceeds paid to Wells Fargo), estimated $___ is forgiven.

If you purchased optional credit insurance of any kind in connection with your Account, and your coverage has not previously been cancelled, your participation in this short sale agreement will result i nthe cancellation of your insurance coverage in accordance with the terms of your insurance contact and the coverage will not be reinstated."

Permalink Reply by Rich Lemer on June 18, 2010 at 5:23am

I've now done my homework regarding this seller's unique situation. I have confirmed that during bankruptcy about a year ago the Wells Fargo Heloc was in fact discharged and never reaffirmed. According to the seller's attorney and the buyer's attorney, the bank cannot legally ask for a deficiency judgement against such a discharged entity (Well's Fargo junior lien). So bottom line, Wells Equity will either get 0$ at the time of foreclosure by the 1st mortgage or will get about $45K (20% loan balance) if they accept this short sale deal and allow the seller's deficiency to be "fully satisfied" as above. We are awaiting final word from Wells HELOC any day now. I'll post the final outcome in this discussion. Wells negotiator this AM called seller's attorney to clarify final numbers on the HUD regarding this offer.

How soon should I hear back Wells HELOC final decision regarding this offer?
(1st mortgage is already onboard since they are getting fully paid off)