Tags:
Risa:
You didn't say how much your seller is being asked to contribute to the second on top of the amount Bank of America is willing to part with. That aside, this can most certainly happen.
A $3,000 contribution to the 2nd lien is very common with Bank of America. In my experience it has nothing to do with whether it is a government backed loan or not - but it is all based on investor guidelines. They can sometimes contribute more than that depending on the investor and the circumstances, but I rarely see anything above $3,000.
The issue you have with the second is this:
Bank of America won't let your seller give extra money to the 2nd lien holder because they are working from the viewpoint that if the seller has extra cash hanging around, they want it!! It is as simple as that. If there's more to be had, they want to give it to the investor to lessen their losses.
Unless it is a small amount and someone else (like you) can make a contribution to make it go away, the only option to remove the second lien might be to accept a promissory note. It is up to the second lien holder whether they will accept a promissory note or not. Sometimes they won't.
So now the question is: What if the second won't accept a promissory note and insists on cash, and it isn't a small amount?
This is a pain and it assumes your seller has, or can beg borrow or steal the cash needed but ...
1) Get wiring instructions to pay off the second lien for everything but the $3,000 from Bank of America
2) Once you are certain that the closing is set in stone - wire the funds to the second lien holder early in the day on the DAY BEFORE the closing
3) Be absolutely certain that the 2nd VERIFIES RECEIPT of those funds the same day.
4) Now the HUD for the closing only needs to reflect the $3,000 contribution from Bank of America to the 2nd lien holder.
It can make you a wreck until it all closes but it's the only way I know around it.
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