PNC clause locks in borrower for balance
Early in the process with PNC on a second deed of trust in Arizona. This clause they have in the packet is very scary. Myself and by attorney don't want the borrower to sign. It states if they sign they will still be held responsible for the balance even if we come up with a settlement figure. If the packet is not fully filled out they will not process the file. I emailed the negoiator that sent me a list of items needed that we have a problem with this clause:
If your creditor agrees to enter into a short sale, the mortgage or deed of trust securing my/our Account will be
released upon payment of the agreed upon proceeds from the sale of my/our property. Because it is a short sale,
the amount that will be paid to your creditor is less than the balance owed on my/our Account. Unless
prohibited by applicable law, I/we agree to remain responsible for the repayment of the remaining balance on
my/our Account pursuant to the terms of my/our note or line of credit agreement. By signing below, I/we
acknowledge and agree to the foregoing.
Notice: This Short Sale Deficiency Agreement is not applicable to any debts which have been discharged
in a bankruptcy proceeding under the U.S. Bankruptcy Code.
Any suggestions on how to handle. Borrower signs this and I will be in potential hot water.
Replies to This Discussion
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Permalink Reply by Jerry A Cook on
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Seeing a lot of that language, especially on 2nds and cash out refi's. No reason the bank should not expect repayment, especially on cash out refi's or helocs where the party bought jewels, cars etc.
But where the buyer was an 80/20 and all funds used were for purchase of home, never refied and payment history is great....I would just counter their demand, it's all negotiations, with the understanding that all the negotiations may end up with a declined short sale.
At which time, if you have a state with purchase money financing laws, (Like California) you tell the 2nd that the borrower is deeding the property back to the lender in Lieu of foreclosure! and send them a notarized deed with an estople affidavit for the lender to complete.
This only works when its a purchase money deed of trust or heloc used to buy house only (with no additional advances!)
Otherwise, sign, close, bk, discharge, and move on.
Jac.
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Permalink Reply by Justin Berry on
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I would suggest to move forward with the short sale and push for a settlement with PNC. Signing this doesn't put the seller on the hook for anything that the original promissory note doesn't already. They are not giving anything up by signing this.
It could create a lot of unnecessary work though, and ultimately the short sale wouldn't close. If it is not signed, the deal is dead. If it is, you may be able to structure a fully settlement and still close. How much faith & time do you have? ;-)
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Permalink Reply by Victoria Frieberg on
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can you say how this went for your sellers? i have the same situation, and seller is on hold not knowing quite how to handle it..
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Permalink Reply by Lauren Mayer on
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Just wondering how this worked out? I have the same situation - a HELOC with PNC Bank where we should be able to give them about 20% of what the loan balance is. Client has been making regular on-time payments. The first trust is not being shorted. Any advice? I too am afraid to have my seller sign that they remain responsible! I would appreciate any advice. Thank you!
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Helocs are a strange type of loan. The people typically use the money for things 'unrelated' to a home purchase. Thus they are not afforded the protection (at least in california) of the antideficiency laws. PNC is allowing the sale to close, which is fair. But the seller will still be responsible for the unpaid principal (not knowing what it was used for, it might be fair or not fair)..
But the seller does have a little trump card, depending on their other financing, they can go BK and have the debt discharged. Probably won't happen as they are current on payments.
So, with the little details provided... Sell the home. Seller pays on the balance of the Heloc. Buyers happy and more commission income flows into the local economy!
Happy 2nd day of spring!
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Thank you! So you think that PNC will likely come after the Seller for the balance? Is there any strategy that you know of - where we can avoid this or get PNC to accept less? Other than filing BK? Thank you for responding!
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With the market improving, its probably unlikely.
One tactic is to offer PNC an immediate payoff for a reduced amount.
Where is property located? (State)
What typically happens is PNC sells note to outside agency and they do the collecting... And they are brutal!
Did they use the money to buy the house.... or fix up the house (proof) or spend on personal stuff?
That is going to be key in what PNC will do.
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Permalink Reply by TOP END Properties on
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Cross it out and initial it. DONE. They will move forward ..
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Thank you! I already submitted the paperwork and they said it was going to Quality Review. Is it too late to cross it out - will they send other paperwork where it could be crossed out or should I try to re-send it? Any ideas? Thanks!
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Hi Top End! I did receive a notice from PNC that they will accept exactly 20% of the loan amount($28,000) to release the lien. They then go on to say:
The Short Sale - Settled offer for this loan has been Approved/Countered with a net recovery of $83,900.00.
With acceptance of this offer, PNC Bank agrees to release the lien AND the seller from the remaining deficiency balance & a 1099 C will be issued. The credit report will reflect ‘settled for less than full balance’. Counter offers can be submitted on a HUD statement via email. All funds are due at closing & need to be reflected on the HUD; we cannot accept payment prior to closing...etc.Since they are saying that counter offers can be submitted, I can show that we are willing and able to pay the 20% on the HUD but how do I counter the $83,900? Any thoughts? Anyone have any experience with this? By the way, I only sent the request to them about 2.5 weeks ago - so they have been pretty fast with their response.
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Permalink Reply by Sharona Byrnes on
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Lauren -
To be clear, you represent the seller, correct? My experience has been that I send a cover letter explaining the counter offer with a HUD1 completed that matches the offer. What they seem to be saying is that they are making two different offers. 20% would release the lien, $83,900 would be settlement in full. Is your seller intending to accept the 20% for the lien release but not settle the entire loan? I would not recommend that (from personal experience).
You could proposed that $X is offered for the lien release AND the deficiency waiver (probably higher than $28,000 but lower than $83,900), that would be done in a cover letter, and also with an extra line item on the HUD1 showing a seller contribution. This all depends on whether PNC is the 1st or the 2nd, and what the 1st lienholder will allow. Feel free to contact directly for more discussion.
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I'd figure out how much they will net with the offer and push for the waiver of deficiency.
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