Replies to This Discussion

Permalink Reply by Carole Higgins on August 21, 2011 at 2:29am

Wow you got some great advice here!  Unlike Maria I haven't researched MI and how it works but I have done a number of transactions where the MI company and or the 2nd lien holder demanded more than what was on the table for them.  We have always managed to find a workable deal and get the short sale closed- I have a 100% track record on close to 10 million dollars worth of short sales in the last 18 or so months.  

The hallmark of a good negotiation is that you find the deal everybody can live with- not the one they love- not the first one that gets rolled out- but the one where everybody gives something and they can live with the result.  Some of the things I saw in responses I know are true- if your sellers took a cash out refi and they are not currently in BK the MI company will want something and will likley not let the sale go through without it.  The MI company will have pulled your clients full credit report and they will scrutinize it- they will try to match it up to the bank statements and other financial data that your clients supplied adn they will find the discrepancies.

 If your clients were my clients I would suggest to them that they bring some cash to the table- make an offer to the MI company- even if it's only $1000.  That goes a long way and then I would further counsel them to sign a 0% note spread over 10 years (or the maximum the MI Company will allow)- typically you can get these payments to 50-75/month.  Yes it's a long time but if they foreclose both first and second have the option of going after them for the deficiency as does the MI company.  At least if they sign the note they are controlling the possible damage and collections as if they are pursued they won't bo offered 0% interest and a long time to pay they will more likley face garnishments and what not.  IF you can get your clients to agree then push back hard with the MI company- point out any hardships that your client may have that are not  easily apparent on the documentation they submitted and try to get the note amount down.  Don't know if it helps but I hope so

Good Luck

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Permalink Reply by 3n9fnvka38y7n on August 21, 2011 at 2:50am

All of these cash-out or promissory note solutions are on the HUD, so the first lien holder sees the amount going to the second. I've had the first come back and say, if the seller has money to give away THEY want it, and they wouldn't agree to the short sale if more money was going to the second.  What then?  Or should I start a new question thread?

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Permalink Reply by PJ Caruso on August 21, 2011 at 3:07am

All this sounds great.  The reality is that if the seller gives a cash contribution to the 2nd, the 1st will take it and it will never get to the MI co anyway.  How are you getting around that fact?  If you have a way I would love to know what it is.

Harry Clay said:

I think Maria's statement is wrong.

The MI company has final say as to whether a short sale will be approved.

In a recent 2 hour meeting with an upper level Radian executive (reportedly the 2nd largest MI company), I was told, point blank, that if they request a cash contribution, it is often because they suspect a strategic default, or because there was a cash out refi.

She told me they realize they cannot un-ring the bell, & that they are prepared to accept the fact that the property is most definitely heading to foreclosure.

But I was also told that IF they request a cash contribution, there MUST be some movement on the part of the seller, or the short sale will be denied, & the transaction in most cases will go down in flames.

You can stand on your principals, & sink with the ship, or, as the listing agent, prevail upon your seller to at least make some kind of reduced counter offer.

I just closed a transaction where the MI wanted a note for $12,500.

We offered $1K. No go. We countered again. No.

We finally settled on $2500 cash from the seller @ COE, & the deal was approved.

The seller hadn't paid his mortgage in 16 months.

He agreed that $2500 was a reasonable price to pay to assure the approval of his successful short sale.

It was either that, or accept foreclosure.

And once you're down to negotiating with the MI...they are the ones who have the power to approve, or deny.

Don't kid yourself.

 

Maria Evans said:

There is no reason for a MI Company to charge the seller....

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Permalink Reply by Sean Underwood on August 21, 2011 at 3:27am

I believe that the Cash Contribution agreed to must be stated on the HUD to a specific MI Company.

This is the way my client's Cash Contributions to MI Companies have ALWAYS been addressed.
This way there is no discrepancy as to who gets the funds.

Good Luck.

 

PJ Caruso said:

All this sounds great.  The reality is that if the seller gives a cash contribution to the 2nd, the 1st will take it and it will never get to the MI co anyway.  How are you getting around that fact?  If you have a way I would love to know what it is.

Harry Clay said:

I think Maria's statement is wrong.

The MI company has final say as to whether a short sale will be approved.

In a recent 2 hour meeting with an upper level Radian executive (reportedly the 2nd largest MI company), I was told, point blank, that if they request a cash contribution, it is often because they suspect a strategic default, or because there was a cash out refi.

She told me they realize they cannot un-ring the bell, & that they are prepared to accept the fact that the property is most definitely heading to foreclosure.

But I was also told that IF they request a cash contribution, there MUST be some movement on the part of the seller, or the short sale will be denied, & the transaction in most cases will go down in flames.

You can stand on your principals, & sink with the ship, or, as the listing agent, prevail upon your seller to at least make some kind of reduced counter offer.

I just closed a transaction where the MI wanted a note for $12,500.

We offered $1K. No go. We countered again. No.

We finally settled on $2500 cash from the seller @ COE, & the deal was approved.

The seller hadn't paid his mortgage in 16 months.

He agreed that $2500 was a reasonable price to pay to assure the approval of his successful short sale.

It was either that, or accept foreclosure.

And once you're down to negotiating with the MI...they are the ones who have the power to approve, or deny.

Don't kid yourself.

 

Maria Evans said:

There is no reason for a MI Company to charge the seller....

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Permalink Reply by PJ Caruso on August 21, 2011 at 4:13am

 

 This is our situation concerning MI

 

On HUD, BOA offered to give MI $6000.

 

MI wanted a total of $28,145.  They wanted the difference in cash from seller.  MI would not accept a prom note from seller because seller is unemployed. Seller then offered a small amount of cash. BOA would not approve unless those funds went directly to BOA.   Buyer agent then suggested and the buyer agreed to come in with a higher offer to cover the difference of $22,145, which would allow bank to give MI the full $28,145 they wanted.  BOA would not agree, they say they will NOT give MI more than $6000; any additional funds would go to BOA.

 

The transaction was rejected by BOA. 

 

So...we started all over with same buyer and changed the contract to read that " buyer agrees to a prom note to MI for $22,145" which is the difference between what MI wanted and the bank was willing to give.

 

We are waiting to see if BOA and MI will accept. 

 

 Your thoughts adn suggestions please

Sean Underwood said:

I believe that the Cash Contribution agreed to must be stated on the HUD to a specific MI Company.

This is the way my client's Cash Contributions to MI Companies have ALWAYS been addressed.
This way there is no discrepancy as to who gets the funds.

Good Luck.

 

PJ Caruso said:

All this sounds great.  The reality is that if the seller gives a cash contribution to the 2nd, the 1st will take it and it will never get to the MI co anyway.  How are you getting around that fact?  If you have a way I would love to know what it is.

Harry Clay said:

I think Maria's statement is wrong.

The MI company has final say as to whether a short sale will be approved.

In a recent 2 hour meeting with an upper level Radian executive (reportedly the 2nd largest MI company), I was told, point blank, that if they request a cash contribution, it is often because they suspect a strategic default, or because there was a cash out refi.

She told me they realize they cannot un-ring the bell, & that they are prepared to accept the fact that the property is most definitely heading to foreclosure.

But I was also told that IF they request a cash contribution, there MUST be some movement on the part of the seller, or the short sale will be denied, & the transaction in most cases will go down in flames.

You can stand on your principals, & sink with the ship, or, as the listing agent, prevail upon your seller to at least make some kind of reduced counter offer.

I just closed a transaction where the MI wanted a note for $12,500.

We offered $1K. No go. We countered again. No.

We finally settled on $2500 cash from the seller @ COE, & the deal was approved.

The seller hadn't paid his mortgage in 16 months.

He agreed that $2500 was a reasonable price to pay to assure the approval of his successful short sale.

It was either that, or accept foreclosure.

And once you're down to negotiating with the MI...they are the ones who have the power to approve, or deny.

Don't kid yourself.

 

Maria Evans said:

There is no reason for a MI Company to charge the seller....

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Permalink Reply by Donna McClelland on August 21, 2011 at 4:23am

Great discussion!  I do a lot of short sale negotiations for other agents and I always find out up front from the sellers (especially when it looks like a strategic default) their willingness and ability to make a cash contribution/sign a promissory note should that come up later in the transaction.   If you approach them at the beginning with the idea and explain what a bargain it is for them (pennies on the dollar), they are usually prepared when the time comes and you can complete the short sale.

 

As for reporting the cash contribution on the HUD, I agree with everyone else that the first will want the $.  We have gotten around this by having the seller settle the account directly with the 2nd outside the short sale.  Then we get a satisfaction of debt letter from the 2nd showing a zero balance and submit that to the first to show that there is no longer a 2nd on the property.  This only works if you have enough time before the approval letter expiration.  If you have the seller settle with the 2nd directly, it's no different than if they had done this before they listed their property for sale.  The first gets the same amount of $ they would have anyway and we prevent a foreclosure.   Everyone wins.

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Permalink Reply by Celeste ODea on August 21, 2011 at 4:50am

Actually, it is a Triangle affect.  The ultimate decision is with the MI Company, but you also have the Servicer and Investor holding out for a minimum amount that they would accept to reduce their loss. BOA was saying that the Investor wasn't budging.  BOA was saying the MI Company and Investor weren't budging. The Mi Company said they were waiting for BOA to accept their insurance claim offer.  So I had to get directly involved with the Investor and MI Company to find out why.   I escalated thru BOA, contacted Freddie Mac, and contacted Radian and documented what each one told me was the issue.  Lots of little white lies and holding back info. It came down to my negotiating the deal with the investor, who was not getting all the info from BOA. (For instance, the investor didn't even know that the Seller had agreed to bring $1500 to closing, because BOA didn't tell them.)  This information made a difference to the investor.  The investor told me that if I could get the buyer to increase the sales price by $5,000, and the Seller bring $1,500 to closing, they would agree to accept a lesser insurance claim from the MI Company.  The buyer agreed to pay $2,500 more for the property and Freddie Mac accepted and told BOA and Radian that they will accept a lesser insurance amount.  You'd be amazed at what you find out when you talk to all three!   So, you must know who the investor and MI company are so you can work the triangle.  Needless to say, it was hard work, but everyone was happy at the settlement table!

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Permalink Reply by PJ Caruso on August 21, 2011 at 5:06am

Thank you for the input and suggestions. 

Celeste ODea said:

Actually, it is a Triangle affect.  The ultimate decision is with the MI Company, but you also have the Servicer and Investor holding out for a minimum amount that they would accept to reduce their loss. BOA was saying that the Investor wasn't budging.  BOA was saying the MI Company and Investor weren't budging. The Mi Company said they were waiting for BOA to accept their insurance claim offer.  So I had to get directly involved with the Investor and MI Company to find out why.   I escalated thru BOA, contacted Freddie Mac, and contacted Radian and documented what each one told me was the issue.  Lots of little white lies and holding back info. It came down to my negotiating the deal with the investor, who was not getting all the info from BOA. (For instance, the investor didn't even know that the Seller had agreed to bring $1500 to closing, because BOA didn't tell them.)  This information made a difference to the investor.  The investor told me that if I could get the buyer to increase the sales price by $5,000, and the Seller bring $1,500 to closing, they would agree to accept a lesser insurance claim from the MI Company.  The buyer agreed to pay $2,500 more for the property and Freddie Mac accepted and told BOA and Radian that they will accept a lesser insurance amount.  You'd be amazed at what you find out when you talk to all three!   So, you must know who the investor and MI company are so you can work the triangle.  Needless to say, it was hard work, but everyone was happy at the settlement table!

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Permalink Reply by Kieran Jackson on August 21, 2011 at 5:11am

Wow!

 

Richard... no way should the listing agents be exposing his clients financial woes to a potential short buyer. Why would you expect that? It's the listing agents duty to  keep that confidential.

 

Just make sure you're getting a deal that you like!

 

All the best,

~Kieran~ 

Richard said:

It seems like the listing agents I've dealt with never shared this info even after requesting it and, maybe that's for fear of scaring potential buyers away.

 

This partially explains why some short sales are at the mercy of the buyer to unexplainably come up with a few more dollars at the end or, the transaction falls through.  But, how can the buyer know if the seller isn't just holding back?  It seems that the lenders/investors get to analyze tax and bank records but the buyer and their agents never have this information to my knowledge, (or) just maybe my agent is just lazy.  Perhaps, if I come into this situation as a buyer, maybe I should take the MI approach and say “prove it”.

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Permalink Reply by Michael Schneider on August 21, 2011 at 5:21am

I think that MI is the most complex part of a residential short sale.  MI controls, in my experience.  Here is an insight that I have found helpful in understanding MI for some of our deals.

MI covers the top part of the "total amount owed", generally between 20% - 30%, I believe.  So, if the deficiency exceeds this amount, then BOTH the MI and the Investor are taking a loss.  BUT, the MI's loss is fixed. 

Eg, MI coverage = 20%,  Owed = $600K, MI Coverage = $120K, SS Deficiency = $200K.

The Investor/Insured makes the claim upon realizing the loss.  So, in this scenario, the MI is better off under a foreclosure, because their fixed $120K loss is delayed.  Makes no difference to the MI whether the deficiency is $200K or $250K.  In this scenario, I think you need the Investor to voluntarily accept less that the full $120K payment from the MI.  (As a couple of people are reporting above they have achieved.)

But, it is hard to know exactly what is happening on a specific deal, because you cannot be sure what negotiations may or may not be occuring between Investor, Primary Servicer, and the Insurer.

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Permalink Reply by Nate Gerard on August 21, 2011 at 5:42am

This is all great info. I've had MI Co's involved in my short sales, but they've always been able to see that asking for a note from someone who would let the property go to foreclosure was a losing proposition. In addition each of my clients still had chapter 7 as an option so the prospect of ever collecting was very small. Each time they've grudgingly agreed with no seller contribution.

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Permalink Reply by Heather Robins on August 21, 2011 at 5:48am

You should come back with a counter (usually not a no deal) but something stating my sellers can bring this much into closing and THIS is why.  PLUS show the market of the home and why the bank will continue to lose money.  We had a 17K CASH request and after doing the above they changed it to a note request.  (have your seller read up online on HOW to reduce the note after the closing) We came back with the BUYER who agreed to raise the purchase price up 15K to make the deal work, the MI company said NO, they wont do that but will only accept  cash or note.  That is how crazy these people are you are negotiating with.  When all was said and done and with a new buyer we did a 12K note 3k cash at closing and it came down to the fact the MI pretty much said because he had 15K in his 401K, yep not suppose to be using that in their figures, but they do...

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