HELOC DEFICIENCY CLAUSE REMOVAL
Does anyone successfully obtain approval of a HELOC loan without deficiency clause ? The seller offered some cash contribution in exchange for deficiency clause removal but BOA refused. The supervisor said no exception for HELOC loan.
Replies to This Discussion
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Permalink Reply by Shelly Long on
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In my experience, none of the banks will remove the language (esp BofA) for HELOCs. We have others in our office who also work short sales, none of them have had any luck either. We also had a local real estate attorney do a presentation to the office and he indicated that it's HIGHLY UNLIKELY that the banks will be willing to remove. Doesn't seem to matter if you play 'hardball' with them or not. Maybe someone else on this board has a few suggestions? Good luck~
Shelly
Ps...we're in California, but I doubt that makes a difference. -
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Permalink Reply by Van Bui on
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Shelly, we are also in CA. I am able to remove deficiency clause on 1st lien refinance loan but I am unsuccessful on HELOC loan. The seller has BOA 2 loans: 1st is a refinance and 2nd is HELOC. The property is an investment. Seller refuses to continue the short sale if approvals have deficiency clauses. I know BOA will sell deficiency balance to a debt collector after the sale. Seller will NOT get away with HELOC debts.
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Permalink Reply by kathleen shaffer on
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i am in the same spot right now. i have heard that when the short sale closes, two to three months later the borrower can approach the second and try to negotiate a settlement. at that time they will usually take 5-10% of the note and issue a settlement letter to the borrower.
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Permalink Reply by David Wiggins on
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Have you been able to get B of A to remove deficiency on the 1st and 2nd if the 2nd is not a HELOC? I'm having trouble with them right now and my advice to the seller is not to close.
Dave -
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David, What state are you in ? Is 2nd a standalone purchase loan or refinance loan? I know in CA BOA is willing to remove deficiency if they are original purchase loans and owner occupied. Try to offer seller contribution by cash or promissory notes, BOA may grant your wish.
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Permalink Reply by Katerina Gasset on
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HELOCs are different than mortgages. We always explain to sellers before we even list their properties that HELOCs are different. The only time you have a chance with a HELOC is if it is taken out to avoid MI on the onset of the purchase of the property. If sellers get HELOCs, ieL ATM machines- the first thing the creditor looks at is the credit report to try to find out what they spent that money on. We have lots of people here who used those to purchase other properties. So why would the bank remove a deficiency? What incentive is there? On HELOCs they can be charged off and then sold on the the open market to scum bag collection companies for 20 cents on the dollar.
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Very true. My client has a small second with BofA. We will be closing on the short sale end of May, then they will approach the owner of the second to negotiate it down. Even giving them 10% would be good or my client since this money was used for toys.
Katerina Gasset said:HELOCs are different than mortgages. We always explain to sellers before we even list their properties that HELOCs are different. The only time you have a chance with a HELOC is if it is taken out to avoid MI on the onset of the purchase of the property. If sellers get HELOCs, ieL ATM machines- the first thing the creditor looks at is the credit report to try to find out what they spent that money on. We have lots of people here who used those to purchase other properties. So why would the bank remove a deficiency? What incentive is there? On HELOCs they can be charged off and then sold on the the open market to scum bag collection companies for 20 cents on the dollar. -
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Permalink Reply by Bryant Tutas on
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While it is certainly possible to negotiate a debt down at a later date I would advise about telling your sellers this can be done. We are not attorneys. We get paid to sell real estate. Please be careful with this. Remembers even if you are just telling them that "you heard this" that is not what they will remember when they are not able to negotiate it down. You are opening yourselves up for future law suits. Send the seller to an attorney. If they don't want to spend the money on legal advice then be sure to have then sign a disclosure and place it in your file.
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Katerina, you said " The only time you have a chance with a HELOC is if it is taken out to avoid MI on the onset of the purchase of the property". My seller refinanced purchase loan and got HELOC to avoid high interest rate. He did not cash out money from the HELOC. Do you think I have good chance to fight with BOA to get them remove deficiency clause on the HELOC? The seller offers to contribute 10K cash to remove both loans 1st and HELOC. BOA agreed to remove deficiency clause on 1st loan only, not HELOC. I am about to lose this file and I don't know what else I can do. Thank you for your input.
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Permalink Reply by Katherine Fornale on
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I'm doing my first HELOC with BofA. I just got the counter and I was hoping someone could help me to understand it. On the Worksheet BofA "cash contribution from seller $5000". A few lines below it says "promisary note amount $5000." Does this mean they just want a promisary note for $5000 or do they want $10000?
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Katherine. It could be either an "either or" or it could be they want both. You'll need to contact them to get clarity. or you could just have the seller counter if with the one that works best for them.
Katherine Fornale said:I'm doing my first HELOC with BofA. I just got the counter and I was hoping someone could help me to understand it. On the Worksheet BofA "cash contribution from seller $5000". A few lines below it says "promisary note amount $5000." Does this mean they just want a promisary note for $5000 or do they want $10000? -
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Permalink Reply by Nancy Bercini on
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I'm actually negotiating a charged off second with one of those scum bag companies right now. they are pushing for 10% (4500.00) . First is with BofA, and they always seem to offer 3000.00. I haven't received the response from BofA yet, but any day now. Do you think the collection company will easily settle for 3000?
Katerina Gasset said:HELOCs are different than mortgages. We always explain to sellers before we even list their properties that HELOCs are different. The only time you have a chance with a HELOC is if it is taken out to avoid MI on the onset of the purchase of the property. If sellers get HELOCs, ieL ATM machines- the first thing the creditor looks at is the credit report to try to find out what they spent that money on. We have lots of people here who used those to purchase other properties. So why would the bank remove a deficiency? What incentive is there? On HELOCs they can be charged off and then sold on the the open market to scum bag collection companies for 20 cents on the dollar. -
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