Hello all!

I am working a Freddie Mac Wells Fargo short sale.  Our offer is for $100,000.00 and the bank just countered wanting $51,500.00  cash at closing on top of the contract amount. The crazy part is is the seller only owes $143,000.00  on the property.  Any ideas?  Thank you everyone in advance!

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You have a combination of things - WF & BofA have gone to having the lowest level possible of employee working on bits of short sales rather than an intelligent negotiator. They have very limited authority and are told to follow the rules no matter how stupid. The 2nd part is that Freddie and Fannie are in ripoff mode - Fannie admits it, but Freddie is doing it, too - demanding typically 20% over market value. And, yes, no matter how stupid it is, they will demand more than what is owed and ask for a tip (seller contribution) on top of it. This is a clear case where you could get some attention by going to your state's attorney general. You might get somewhere by asking for a value dispute form. You may not. I have a stubborn freddie mac where it is not going anywhere good after 3 value disputes and a service release to one bank and then service release back. They simply need to be taken to the shed by someone with some power. You have a good start with the AG by them extorting more than what is owed - how is that right? These fed bailouts get away with murder - no one seems to care, unfortunately.

So, keep fighting, but you may think about going the public route - TV news pressure, as some have done with Fannie, but probably more headway with the AG, possibly a state senator, unfortunately.

I must apologize in advance if my response is rudimentary - but I have to ask a few questions because these are some of the things that have happened to me. First - I can assume that you have ordered a payoff from Wells and are not relying on the seller or the last statement from Wells to give you the balance owed? There could be a huge disparity in those two amounts. Secondly - a whole lot of Freddie firsts are backed by seconds especially with Wells that used to be Wachovia loans. Be certain you have a good title report and are aware of all liens.  Perhaps the demand for more includes a payoff or pay-down on a second lien.

Other than that I agree with Joe Freddie has gone completely insane and they are demanding prices that are far above market value. Joe is also correct in saying that the servicers have a very low level of personnel working these files and they don'e have a CLUE what they are supposed to do.  It states quite clearly that they are supposed to order a value FROM FREDDIE MAC in the new guidelines.  They are supposed to be delegated to approve the short sale if it meets certain requirements. yet - for some reason all of the employees at Wells still insist that they have to submit the file to Freddie Mac for approval. It's really important to ask whoever your "negotiator" is if they have ordered the value from Freddie Mac's system. They are still learning their jobs and it's up to us to make sure they follow the rules. 

I have a threatening letter I use when I feel they are just being idiots or are not following the rules.  It calls them out on the incompetence and is a general threat to file a lawsuit against the servicer for refusal to follow federal guidelines. I am on a personal mission to get this Freddie thing under control. 

The payoff is 142,159.87 as of today .  The bank wants the $100,000.00 plus $51,500.00 cash at closing. Sounds like a regular sale to me.

Title has been run and its clean. No second loans or liens.

I am disputing it through Freddie and the complaint department of Wells Fargo.  I work with another person that facilitates short sales as well and she was sent one that was very similar to this from a Wells Fargo negotiator (Freddie Mac).  The bank will make a profit on that sale. Why they think it is still a short sale is beyond me!

Banks make mistakes too....any chance they have mixed your file up with another?

I have received many short sale approval letters that had errors, one was even on a property in another state than mine.

That's what they said.  I work with another person that does this as well. She got a counter from the bank today as well with the same issue.

This is what I've heard. The folks at Freddie and at most servicers are told how to calculate a counter offer PERIOD.  (i.e. - take the estimated market value that WE think it's worth, multiply it by X and counter at Y)

I don't think there's much forethought into the counters they don't even see the payoffs half of the time. 

Is the offer in line with the market value?   Obviously your not going to even deal with the bank if the seller is able/willing to come up with the difference.  Also if the seller has $51k, then they are not even going to consider a short sale.   Who ever is dealing with the bank is not doing something right.

 "Also if the seller has $51k, then they are not even going to consider a short sale."

Why not? I've closed short sales when the seller has more than a $1,000,000 in the bank. Having more than 50k in the bank is quite common for my short sellers.

Fannie and Freddie both have very specific guide lines on when a cash contribution is required.

BORROWER CASH CONTRIBUTION TEST AND FORMULA
The servicer must evaluate a borrower who is either delinquent or in imminent default for a cash contribution if the borrower’s cash reserves, including assets such as cash, savings, money market funds, marketable stocks or bonds (excluding retirement accounts), as stated on Form 710 are:

in excess of the greater of $10,000; or

six times the contractual monthly mortgage loan payment including principal, interest, and tax and insurance escrows (PITI). (If the servicer does not escrow for taxes and insurance, it must estimate the borrower’s monthly tax and insurance premium amounts).
If a borrower has cash reserves of more than $50,000, the servicer must request written approval from Fannie Mae for the contribution amount.
If the servicer determines that the borrower has the capacity to make a cash contribution, the servicer must initially request a contribution of 20% of the borrower’s cash reserves, not to exceed the deficiency.
If a borrower who is greater than 30 days delinquent is either unwilling or unable to contribute 20% of their cash reserves, the servicer may negotiate a lower cash contribution, but must provide an explanation in the mortgage loan servicing file of the specific circumstance that limited the borrower’s ability to make a full contribution.
If a borrower is offered a short sale under the imminent default standard and is either unwilling or unable to contribute 20% of their cash reserves, the servicer must request approval from Fannie Mae to accept less than the 20% borrower contribution. However, if the borrower’s hardship is death of the primary wage earner, the servicer may negotiate a borrower’s cash contribution for less than 20% of the cash reserve, but must provide an explanation in the mortgage loan servicing file of the specific circumstance that limited the borrower’s ability

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