I am a very experienced short sale realtor/negotiator.

I have 20 listings in pipeline, close 4-5/month.

 

Florida listing

Chase 1st lien $445,000

USAA 2nd lien $50,000 (to date client made over $26,000 in payments)

seller unemployed, insolvent, and used personal retirement savings to make payments.

Chase was good to deal with, understood and was reasonable to offer a short sale approval at market value, with a HAFA $6k contribution to 2nd.

USAA took 60 days (after Chase approval)  to have "committee" review offer of $6000,  they countered with demand for 75% payoff of loan balance.

Responded that this was rediculous and a waste of realtor time, and countered at maximum of 20% ($8800)  with contributions from buyer as well as realtors.

USAA took almost 60 days again submitting our counter offer to USAA "committee", they responded to demand a payoff of 50% ($41,000) of UPB.

Seller has now abandoned property, he tried very hard to "do the right thing".

 

REALTORS UNITE! BEFORE YOU ENGAGE ANY SHORT SALE WHETHER FOR BUYER OR SELLER, ASK WHETHER THE 2ND LIEN IS A USAA LIEN. USAA DOES NOT RESPECT REALTORS EFFORTS, LET ALL GO TO FORECLOSURE OR BANKRUPTCY.

DO NOT LIST OR BROKER PURCHASE OF ANY USAA 2ND LIEN SHORT SALE!

WHEN THIS GOES TO FORECLOSURE, I WILL COPY , ENLARGE AND SEND THIS TO THEIR "COMMITTEE"!

 

 

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Unless I am mistaken, the 1099-C is an IRS designation (Cancellation of Debt) that triggers an IRS event (somebody may have to pay taxes)....I do not think it in any way will impede the investor from selling the paper in the future....my understanding of accounting tells me that the investor writes off bad debt (which can offset that amount of revenue), but if the bad debt, or any portion of it, is collected in the future, it will be counted as revenue at that time....this suggests to me that good strategy and timing on behalf of the investor would motivate them to make any moves with regard to their "bad" paper during a time when they have reduced revenues or even losses....as I said before, I fully expect that the investors approval of a short sale without the appropriate language in the approval letter "lives."

Thanks to all for the responses regarding my question on deficiency judgements and sorry for the lack of detail.  I closed on the SS in March 2011 and did recieve a 1099-C from Aurora and trhe langauge in the contract said as follows:

1.  the will provide a 1099-C (they did)

2. they will release my mortgage on public records

3. report to the credit bureaus as "paid in full for less than the full balance" 

With the above contrcat language, does this make me any more confident they wont pr cannot pursue judgement?

Steve 

 

It is all governed by the language in the acceptance letter at the time the short sale was accepted.  Did you get the "full and final settlement" language (or something similar) or did you get the "we reserve the right" language (or no mention of their position at all)?  If it lives, it lives....in my opinion, we will see these deficiencies reappear from 3rd parties who will buy these "rights" from the banks at some point in the future.  The language in the acceptance letter is critical....I have had many conversations with the negotiators that go something like this:  "what will it take get the investor to give written affirmation that the deficiency is forgiven in full?"  It may take additional money or a promissory note from the seller at closing, but better to know WITH CERTAINTY the status of the debt.  I also believe this is where Realtors will find themselves in a lot of trouble in the future....when someone shows up to collect, the seller may "remember" you saying it was over.  Beware!

I agree with you Sherri - and is why most agents hire our attorney’s to read the approval letters and fully understanding the legal babble in these generic SS approval letters. Our attorney will usually see nothing in writing in specific to deficiency rights, and demands the lenders to add the correct verbiage, based on the state the property is located. These SS approval letters are very important, and the final agreement based on that debt. I just don’t think we can answer a question like Steve’s and the "what if” when we are still living in the mess. Most lenders and their investors probably don’t have the answers to these questions right now, since every year something new comes to play on short sale laws. We are seeing the government step in to help, and State officials making short sale laws, so we are protected down the line. All in time.... 

Remember, if the lenders can’t net the REO value in a short sale transaction based on the NPV test - most lenders would rather go to foreclosure.

There is no mention of their position at all in the contract.  My lawyer requested language allowing a release of deficiency as you mention below from the negotiator but he said they do not allow such language.  We even offered additional payment to get that language to no avail.  The negotiator obviously had all the leverage, in this transaction so we took what we could get.  So how do I protect myself now?  If they try to collect deficiency then can I play the game of asking them to produce the original mortgage documents (given this loan was packaged and resold by the original lender) to prove validity?

 

Steve  

Great advice Wendy,

 

Another angle you may want to consider is to see if USAA will "Abandon" their interest in the Note because they wish for the property to goto foreclosure rather than settle. If they do abandon their interest, you may be able to have a release issued without any payment. Check with legal and with your title co.  I have delt with this in the past and it worked. Does not hurt to try! Best of Luck to you!

Carmine R Biello Jr.

 

Thank you Wendy and Carmine for your comments. I will not abandon this transaction and probably will get it closed, but I have proven the seller is insolvent, and find it rediculous that USAA disrespects realtor time and efforts. We are 180 days into this already, on an offer that is in their best interests to settle. I am very close to consider negotiating a cash for keys deal with Chase and let them foreclose.

Richard. The lenders concern is their investment and the borrower. Not Realtors. Always remember it's the sellers deal not yours. Negotiate the best deal you can for the sellers then let them seek legal and financial advice as to whether or not to accept it.

By the way, new HAFA guidelines allow $8,500 to the junior liens.

I know it can be frustrating dealing with these lenders but your must get your emotions out of the deal and focus on a solution.

Maybe the seller can get an attorney to do a lien strip and get rid of the 2nd altogether? There are solutions to this problem. It's just not all of them can be handled by an agent.

I had a horrible 1st and 2nd with USAA, also.  They are nearly impossible to deal with and insist on TOTALLY illegal things (just do a payment over the phone in this amount--off the HUD-1, mind you--and we'll release) from their members, who are trying to do the right thing.  I felt caught in the middle of a nightmare.  I also, am highly experienced (closed five last month), and there are some lenders you just CANNOT deal with.  Flagstar, USAA, Naval FCU--forget it and move on. 

This is where you need the correct contacts that supersede any committee and/or upper management demand for unreasonable pay off figures. I get see these same results and I always go over their heads, resulting in quick results and approvals faxed to me. The first lien doesn’t care, obviously, and this is where your “Real” expertise come into play. You need to work around them and manipulate the situation, since they can’t think outside the box. Ask the servicer, if the loan delegated or non-delegated? This will give you an indication on who owns the loan, and then you start researching who the investor is, and how to contact the liaison who is coordinating with the committee, or upper management. What they want, and what they get is nothing, VS something, and you need to find the person who makes a rational decision, based on the situation and the borrowers. Good Luck! My advise, never give-up! 

It's funny you don't really know your bank until you need a short sale.  I know plenty of happy USAA customers, but after reading this I wonder if they know the consequence of having a USAA 2nd and running into financial hardship.  I wonder if they know that their lender will have no mercy and drag the process out unreasonably while they are left to hang out to dry?

 

USAA may date and marry well, but they sure do seem to divorce ugly.

 

Good luck closing that (unnecessarily) long short sale.  I hope the buyers have the patience of Job.

I agree to never give-up & you are a smart to keep moving forward since the best policy in short sales, is to never give-up. HARRY on the other hand, has given-up and can believe one VP who basically convinced him so much - Harry decided to post his comments on a short sale site where agents comment to one another, and help each other overcome the obstacles in short sales.

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