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.