I am the buyer of a short sale and the process so far has taken about a month and a half to get through the second lien holder.  Now it appears the documentation has been sent to a Mortgage insurer for final approval.  Unfortunately, our broker only has limited experience with short sales and does not really know how to alleviate any of our concerns.  Basically if you go online, you hear nothing but bad things about the mortgage insurer and how they many times reject a short sale since they would rather just pay the money one year later in a foreclosure then to ever approve any short sale.

 

Our sale situation is such that the first mortgage company has enough to cover the entire loan and the short is only with the second mortgage holder BOA.  After the costs and commissions, it looks like there might be $10,000 left for BOA and I am pretty sure seller owes $60,000 since it was a home equity loan (8 years of paying and assuming they only paid interest). 

 

My question is this, how often do these situations get approved? how often do they ask for more money from the seller?  how often do they change the price?  and how often do they flat out reject the sale?  Any insight will help,

 

Thank You

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Every situation is different but I have never had an issue obtaining approval from BofA as a 2nd lien holder with mortgage insurance. Since it is an equity account, the negotiator is likely working through BofA's equity department and they are WONDERFUL to deal with (personal opinion). 

This situation is unique in that the 1st lien holder is being paid in full so the 2nd typically feels entitled to more money than they normally would if the 1st was a short payoff as well. However, in my experience, they usually take what is on the table knowing that it is more than what they would get if the 1st was a short payoff.

Sometimes Bank of America's HELOC department will use third party resources to obtain a value of the property (i.e. Zillow, etc.) and if your offer is very far off from what they feel they could get, they will come back with a counter offer. Never have I seen a flat out rejection. Have you done any research on those websites to see what the estimated home value is? I hate that some lenders use this as a tool because it is not very accurate, in my opinion.

Hoping this information helps. Without knowing many specifics, it is hard to give precise feedback.

A BPO was done by the first mortgage company to confirm they would be covered then BOA did a formal appraisal 2 weeks ago.  Since the loan went on to the next stages, we are hoping they are happy with the numbers.  We are just afraid of last minute changes.  Zillow appraises the house to about 13k more then our offer but I have had no indication that they will use that number.  Comps could show the house to be anywhere from 20k below to 20k above our current offer.  We are getting a good deal but I certainly wouldn't call it an awesome deal.  Lucky for us, they house is upgraded with the features we would want which doesn't usually effect most appraisals.

 

Tom, you mentioned that the first was covered in full. Why would the first do a BPO?  All you need a current payoff amount for the first and the second would most likely do a BPO.  Zillow is irrelevant.

they may or may not ask for cash from the seller.  It depends on each situation. I closed a BoA second last week, the borrowers were current and BoA took $6000 on a $52,000 balance.

and this amount they usually request from the seller in a prom note right?  

 

It looks like there was 10K left for the second mortgage company after everyone else was paid so does that go toward your $9,000 - $18,000 figure?

so the most I could expect from a $60,000 loan is your $18,000 figure and then if there is $10,000 from the sale, the most they could ask for is 8k? 

 

This is good news at least knowing they wont come back and say "the house is worth 30k more, give us 30K to close the deal" or reject it all together.  Unfortunately we have been kept in the dark with all the information and given little tidbits of info here and there not knowing what they mean and sometimes using the internet as a reference can scare the hell out of people.

 

Thank You both for all your help,

Tom

every situation is different but I never face this situation hope everything will be all right with you,

http://www.myhardmoneyschool.com/truth-about-hard-money-lenders.php

Mortgage insurance protects the lender against loss in the event that the borrower defaults. The borrower pays the premium, but the lender receives the protection.

Mortgage insurance has no connection to any kind of life insurance, and pays no benefits to borrowers. The sole benefit received by the borrower is that, with mortgage insurance, lenders are willing to make loans with down payments smaller than 20% of purchase price or appraised value.

As to why borrowers pay for insurance that protects only the lender, see Mortgage Broker?


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