Replies to This Discussion

Permalink Reply by Melissa Colvard-McKinsey on September 3, 2010 at 3:52am

I'm having the same problem on my short sale with PNC in the first and Chase in the second. Do you know who the investor is for Wells?

Permalink Reply by Kent Dills on September 3, 2010 at 3:55am

Blaine,
By all means consult an attorney on this; however, I have heard of seller's paying cash to seconds to get full debt release via direct payment prior to and outside of closing. IMHO: It's none of Wells Fargos business what your client needs to do to avoid Deficiency Judgments from Chase. ;-)
Kent

Permalink Reply by Nate Gerard on September 3, 2010 at 4:13am

I have the same situation but different banks but in our case we made an agreement with the second that after closing we will give them the needed funds for them to supply a satisfaction letter.

They only need to give a lien release to make the short sale happen and then they will give a satisfaction letter when my client pays them the money they want to release them from responsibility.

BTW, great job getting them to accept $2K. Most seconds I deal with want as much as $7K more than what they get from the first.

Permalink Reply by Ben Benita on September 3, 2010 at 4:21am

to get around this, we have SOMEONE (Seller, Buyer, agent, whomever) send in the $2000 PRIOR to closing, making it refundable if the short sale does not close (MAKE CERTAIN YOU GET THIS IN WRITING).

This way, the stars are in alignment.....nothing happens AT closing, it is done prior thereto.

We have also put items on the HUD as P.O.C (paid outside closing) and they have been approved.....

Permalink Reply by Alan Remigio on September 3, 2010 at 4:28am

Blaine,

It's not unusual to get the 2nd paid off prior to closing or, if your client preferred, escrow 2k subject to the written release from the 2nd. Our attorneys scrutinize language and, without saying more, the statement you shared should give you a couple of exit strategies which may not violate the approval conditions of the 1st.

As Kent is correct in stating, no lender can really dictate what the junior positions may get through their collection efforts, only that they (the 1st) can authorize and deliver part of their (the 1sts' ) proceeds to junior positions, or not, with common provisions safeguarding the maximum payoff they feel entitled to, which may be over and above the negotiated $$. I've seen full payoffs before closing, delayed 2nds closing, junior notes purchased, etc.

Unless there are more requirements on the approval letter, the language you shared still allow you to succeed. The key word in the statement...closing.

Permalink Reply by Blaine Washburn on September 3, 2010 at 4:36am

Thank you very much for all of your input. This helps a ton. Great information. Thank you!!!

Permalink Reply by Melissa Colvard-McKinsey on September 3, 2010 at 4:49am

In my case, we started by having the buyers pay the deficiency and putting it on the HUD1. The first is refusing to allow more than $3000 to the second and now they want the additional funds going back to the first. The investor is Freddie Mac. Any suggestions?
Thanks!

Permalink Reply by Rashell Travis on September 3, 2010 at 5:33am

Offer the $2,000 from Real Estate commissions and sign a contract with your client to pay outside of closing. Make sure you get it in writing.

Permalink Reply by Jennie Blackburn on September 3, 2010 at 5:40am

If it's Fannie Mae, contact them directly. That's what we did when we encountered this situation, and it worked.

Permalink Reply by Melissa Colvard-McKinsey on September 3, 2010 at 5:44am

Thanks, Jennie. It's Freddie Mac, though. Do you have any contact names or numbers?

Permalink Reply by edwin zetino on September 3, 2010 at 7:20am

well you cant get around it because the 1st lean controls. Well let the second
lean holder that there is nothing you can do and if they would be willing to
take a promissory note on the lean. You obviously want their commitment to
release liability upon closing if your buyer is willing to pay. But if its only
going to cost him $2000 to get off the hook I would do it. Other then that he
doesn't have a choice but if he lets the home foreclose the second lean still
doesn't go away so hes better off negotiating now. I hope that helps

Permalink Reply by Darren J. De Wilde on September 7, 2010 at 1:49pm

I like the idea of POC on the HUD and have been considering this as an idea to get around an issue posed where GMAC is the servicer for FreddieMac. Fred has issued a payoff to the junior of no more than $3000 and has stated that the jnr is not allowed to receive anymore than the allocated 3,000. The jnr, being CitiFinancial have rejected the 3,000 on a 61,000 and change debt. They told me to tell Freddie to go scratch as they would rather see the first lien file Foreclosure than accept the paltry 3,000 on offer from the senior. Anyway since the minimum acceptable by the junior is no less than $6100 or 10%, I rolled up my sleeves and started to call around, eventually getting the buyer to contribute the additional 3100 to appease Citi and close the deal. The problem that concerns me is that GMAC told me it is near impossible to get FreddieMac to allow the jnr anymore than the allocated funds regardless of who raises the funds for the junior lien holder. I was almost given a clue by GMAC when the negotiator told me that the only way in the past that Freddie has approved the junior lien holder getting more is if the buyer contributes and even then, the HUD must read correctly for the approval of the extra funds to be sent to the junior lien holder. I contemplated arranging to secretly send the junior lien holder the additional 3100, but then feared violating RESPA regs and more importantly committing fraud since those funds sent to the junior would technically be done without the consent of the senior. Plus,I was almost certain that one step from total approval, the senior would deliver a document with language requiring all parties to certify that the junior was not receiving funds outside the HUD, hence had I made such arrangement for the junior to accept the 3100 from the buyer prior to the approval, I would indeed have implicated myself into a fraud situation. Plus, in NJ attorneys prepare the HUD and understandably, there is not one who would risk their license to practice. I definitley prefer the Paid Out of Closing statement on the HUD since it is clearly more legal and above board. My question to you is how have you ensured that the additional funds to the junior lien holder go to the right place. ie, would it be something like, Buyer contibution to second lien POC?...thanks for the great idea, its the best possible solution I have seen.

Many thanks for your input and to all on this discussion who have clarified a few grey areas!!!!

Ben Benita said:

to get around this, we have SOMEONE (Seller, Buyer, agent, whomever) send in the $2000 PRIOR to closing, making it refundable if the short sale does not close (MAKE CERTAIN YOU GET THIS IN WRITING).

This way, the stars are in alignment.....nothing happens AT closing, it is done prior thereto.

We have also put items on the HUD as P.O.C (paid outside closing) and they have been approved.....

Ben Benita said:

to get around this, we have SOMEONE (Seller, Buyer, agent, whomever) send in the $2000 PRIOR to closing, making it refundable if the short sale does not close (MAKE CERTAIN YOU GET THIS IN WRITING).

This way, the stars are in alignment.....nothing happens AT closing, it is done prior thereto.

We have also put items on the HUD as P.O.C (paid outside closing) and they have been approved.....

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