BOA says: "...waive all rights to pursue further judgement or deficiency" ahhh, that's music to my ears!!!

Until 7/21/2010, our office had never received a Bank of America short sale approval letter that relieved the borrower from future liability or from the pursuit of the deficiency after the short sale. In what hopefully marks a meaningful shift in Bank of America’s handling of post-short sale deficiency issues, Winged Foot Title received a Short Sale Approval Letter from Bank of America that waived its and the investor’s “rights to pursue further judgment or deficiency.”

If you have been involved in an approved Bank of America short sale, then you are likely aware of what has been the company line on borrowers’ future liability. To wit, the standard language has been: “BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above.”

The deficiency language in the letter is significantly different. It reads:

“Upon receipt of the agreed amount, BAC Home Loans Servicing, LP, and/or its investors will waive the remaining balance due on the above referenced loan and release the borrower from further obligation therein, and waive all rights to pursue further judgment or deficiency.”

We were admittedly shocked by the language in this letter. Winged Foot Title’s Short Sale Title Solutions Team has orchestrated a hundred or so Bank of America short sales over the last two years. Because of the previously standard deficiency language, we have made a point to make available to listing agents and their short sellers copies of prior approval letters from Bank of America so that the sellers’ expectations would be set correctly in advance of delving into the short sale process. This letter, unique as it may be (it is the first and only we have received), may signal a shift in Bank of America’s deficiency standards. At this point, we are hard pressed to shout that out loud. What we can say with confidence is that under certain circumstances, Bank of America and certain investors may at least be making ad hoc deficiency evaluations and determining on a case by case basis whether or not to retain the rights to pursue further judgment or deficiency.

Winged Foot Title is busy compiling the details leading up to this potentially groundbreaking approval letter and will share them as quickly as possible.

Stay tuned...

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Comment by Juan-Manuel Valera Jr on October 14, 2010 at 12:16am
The issue is not the how much was the total deficiency but the principle behind all this. How is it possible that a negotiator does not have the right to settle the debt and waive the deficiency? If so, why wait the day before the closing to say something contrary? I placed the manager on speaker phone so that everyone in the office could here this and my boss was fuming because this particular seller did not have one penny to put into the pot and the our firm was been ridiculed by this manager. To make a long story short, we did not close the next day. The buyer walked away stating that the cost of "gutting" had increased and surpassed his budget and he was not signing. This was two months ago and I am still waiting for a new appraisal, a new renegotiation of that $3k promissory note because since we did not close it has expired and sweet 'ol BofA doing whatever they feel like doing to us.
Comment by Juan-Manuel Valera Jr on October 6, 2010 at 9:10pm
After I had negotiated with the 2nd lender (also BofA) a settlement of 10%, I was informed 1 day prior to the closing by her manager, that the negotiator did not have the right to settle the debt and waive the deficiency. I was totally taken back with this and I asked why. His response was simply because she had a HELOC on her second loan, they were not going to take a deeper hit and he even speculated that the seller had actually taken the money and gone on vacation, bought clothes, cars, etc..I basically told him the truth: I do not know what she did with money. I do not questions any clients intentions when they get any money. He then continued to say that he was tired of clients hiding behind third party companies and attorneys. His final comment was that if the BofA was going to waive the deficiency, the client needed to sign a $3k promissory note payable in 36 months. Otherwise, he would reject the contract and we would have to start all over. Can u believe this? Someone, please tell me it ain't so. That I am not hearing this.
Comment by Sandra Lambert on August 31, 2010 at 7:49pm
I also received the new approval letter waiving any future action. I was quite surprised... We can only hope that they continue to get better. This Short Sale only took 7 weeks to get approved....That's a record!
Comment by Chris Black on August 4, 2010 at 7:36am
Thanks for the follow up. It is especially important here in Florida as well, where lenders have a five year period to pursue deficiency judgments.
Comment by Paul Francis - Vegas Short Sales on August 4, 2010 at 7:00am
Supposedly, We also have one on the way from B of A waiving their future right to a deficiency judgment. Freddie Mac owned at a cost of $9,000 to the sellers for them taking a $180,000 loss.

Big for Nevada since lenders have six years to pursue deficiency judgments after a short sale closes. Of course... I'll believe it when I actually see the letter.

For these sellers... it's important. They'll be back on their feet as soon as they get this Albatross off of their neck.
Comment by Chris Black on July 29, 2010 at 2:03pm
Absolutely, Wendy! Thanks for your work in creating and maintaining this invaluable resource.
Comment by Wendy Rulnick on July 29, 2010 at 12:53pm
Chris - Thank you for sharing this.
Comment by Chris Black on July 28, 2010 at 9:01am
It was FNMA. Check out the rest of the story and the Deficiency Evaluation Tool on the Next Post:
About to post a discussion regarding a call I have scheduled with BofA this evening to discuss how much of this we can expect in the future and under what terms. Send questions if you have them.
Comment by Ben Benita on July 27, 2010 at 10:48pm
Chris -- nice work, I would be VERY curious to know who the Investor is on this? Was it a gov. backed loan (Freddie, Fannie, etc.) a portfolio loan (actually held by B of A) or a private Ivnestor.

I would bet the farm this was NOT a Fannie or Freddie, they generally will not turn over that easy on deficiency language without some fight or a run through their legal department......

See if you can find out....

Try a quick run through the Fannie and Freddie sites:

Fannie Mae -
Freddie Mac -
Comment by Bryant Tutas on July 27, 2010 at 9:37am
Very cool., Thanks for sharing the letter too. I will be throwing this in their face :)


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