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Permalink Reply by Bryant Tutas on October 2, 2011 at 12:51am

WOW!! I haven't has the pleasure of doing 1 3 lien short sale yet. Firs, I doubt seriously that the borrower can sue the 3rd of the property gets foreclosed on. The lender does not have to approve a short sale. In most States foreclosure wipes out the lien only, not the note. So even if a property is foreclosed on the borrower could still be liable for the debt.

It sound like your seller has good income and/or good assets. The lender knows this and that is why they are playing hardball. If the seller had already offered to make the 3rd whole by paying them off over time them maybe they can still do so by borrowing against their retirement fund?

Other options are:

1. Keep negotiating
2. Get some of the money from the buyer

The seller certainly needs to seek legal advice. Maybe there are some actions an attorney can suggest.

 

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Permalink Reply by Kathleen Sheridan on October 2, 2011 at 1:37am

I find that it is not useful to think that a lien holder has 'no sense.' Figure out how they benefit from their position. Then you can figure out how to respond to their counter offer. 

The 3rd lien holder should expect to get $0 from the foreclosure. So how will they benefit?  Are they just playing hardball, knowing that your seller can come up with more than the $6,500 that you offered? Or, are they insured for the loss? Is this the same USAA that is an insurance company? 

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Permalink Reply by Joe McDermott on October 2, 2011 at 3:37am

Depending upon your state, the seller will likely be on the hook for the full balance in the event of foreclosure as I don't know that USAA did any purchase money loans. I think their portfolio is made up primarily of HELOC's. They know that the odd's of the seller making good on the remaining balance is likely zero as it would now be an unsecured personal obligation...easily settled for far less or discharged in BK.

How close to BofA's appraised value is the purchase price? You might be able to push BofA hard to lower the price (get a new appraisal?) and, if they have enough cash reserves, get the buyer to bring that corresponding money in as a contribution towards the removal of the junior lien. If you can get the price down $20K then have the buyer bring that in to give to USAA, then the buyer can get you to a figure that will work for the 3rd. 

 

I've done several 3 lien short sales and never had one go HAFA...too many hands in the cookie jar. This plan will only work if you kick out of HAFA and go regular short sale. This approach also free's up BofA to kick in more to make the junior lien holders go away. USAA will settle for less - 10%, they do it all the time.

 

As a last resort threaten them with a letter to the OCC. The Office of the Currency Comptroller takes homeowner allegations of lender intransigence in short sales, particularly HAFA short sales, seriously. I've had a few deals in which just the threat and/or sending a copy of the letter to the lender was enough to get management at the lender involved and save a deal. Better yet, have an attorney write the letter. USAA positions itself as a friend of Vet's  and is one of the nations largest VA lenders...raise hell, have your client raise hell, but don't just lay down and take it.

 

Good luck

-Joe

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Permalink Reply by Patrick on October 3, 2011 at 10:35am

I recently closed a file with USAA. It was a lengthy process and we went through two buyers while waiting on USAA to respond. It seems to follow the same pattern as your file. We had do some outside the box thinking on this one. The first initially offered $5,000 to settle the 2nd on the initial go round. The 2nd attempt and they lowered the offer to $3,500 and then the PMI company lowered the payout to $1,000 in addition to cutting commission rate from 6% to 5%. Suffices to say it was going from bad to worse. I eventually became so frustrated and after demanding to speak with a supervisor to point out the obvious - that they wouldn't act without an offer from the 1st (who provided a 45 day closing window) and demanding 60 days to review the offer- that this file would never close. I asked for a settlement figure and was told that they liked to get 75-80% of the loss to which I referenced people in hell and their fondness for ice water. After a series of "If I could, would ya?" we got the figure to about 40%. That number is way above the industry norm but it was progress. The fly in the ointment was the fact that the 1st and the PMI company would only allow $1,000. They had no issue with a note taken out by the seller. Remember that notes don’t appear on the settlement statement. USAA was not going to source the funds for the note and we made the note due and payable on the date of closing and had the buyer pay the note. 1^st was happy with their net and waived deficiency , PMI was happy they limited the loss, USAA got paid and also gave deficiency waivers.

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Permalink Reply by Becky Martin on October 3, 2011 at 2:37pm

Nice work~

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