Divorcing couple & BofA Short Sale
Talking to a couple who are geting a divorce. Neither can afford the home individually. Husband doesn't care if his credit is adversely affected. Wife does becuase they currently work for the same company & she feels she has to change jobs & wants to apply to a Gov't Defense contractor. Is there a way to just put the deficiency in his name? Will Bank of America do a personal loan to cover the amount of the deficiency? Both would be willing to do that. Neither wants to purchase a house again so the goal is only to preserve the wife's credit. Any suggestions are welcomed. Have not called BofA yet - seeing the house for the 1st time today. They're probably $75,000+- upside down on the house (plus they added $15,000 in upgrades).
Replies to This Discussion
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Permalink Reply by Jeff Payne on
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Why would you want to attach a deficiency to either of them? Go for the short sale without a deficiency. If you go into it offer a promissory note, BofA will for sure ask for one. $75,000 is small compared to what we deal with every day here in Florida.
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Permalink Reply by Marty Hackworth on
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The divorce is a real hardship. Do they have other assets? I would pursue the short sale deficiency free and without a promissory note. Leave the note section blank on Equator, do not enter a "0" in that category on Equator. Also, you could always try a HAFA short sale which is automatically deficiency free.
Marty
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Permalink Reply by Stephanie Hart CA 310-930-2342 on
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Agree never offer with BOFA... If they counter it to you always say NO. I went back and forth on one deal probably 15 times and got it waived.. from $45,000 prom note to nothing. It was a $650K loan amount with a 350K cash offer. I represented both sides and closed it last month. Hope you get a good negotiator in equator! having trouble on a nother that only wants 10,500 cash contribution but 1st wont allow. Gotta love BOFA!
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Permalink Reply by Mary Carson on
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They each have a 401K - don't know yet how much they have in there.
From what I'm told by other agents and the "professional" negotiators in our area - BofA almost always reserves the right to pursue the deficiency judgment -they record the def judgment and it shows up on the seller's credit report. Our market has declined in value - some areas more than others - but short sales and REOs still only make up maybe 18-20% of the market.
Do you have to be evaluated or turned down for a HAMP loan mod in order to go the HAFA short sale route? It is their primary residence, it's owner occupied & they bought it before Jan 1, 1999.
They're not behind in their payments and don't want to be due to credit repercussions - the current payment is more than 31% of each's income (but not over 31% of their combined income - which I think shouldn't be considered since they're divorcing).
Does BofA typically go after their 401Ks?
Marty Hackworth said:The divorce is a real hardship. Do they have other assets? I would pursue the short sale deficiency free and without a promissory note. Leave the note section blank on Equator, do not enter a "0" in that category on Equator. Also, you could always try a HAFA short sale which is automatically deficiency free.
Marty
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Hi Mary, Here's a link to a copy of the approval letter (Accounts and names of course blacked out) I received on a B of A short sale that just closed. http://hackworthrealtors.com/wp-content/uploads/2010/11/Scan1860.pdf The negotiator had first sent a letter with the deficiency language not removed, but I called her and asked for one without the deficiency language and she sent it right away. I won't close a short sale unless that right is removed, unless the seller is adamant about avoiding foreclosure at all costs and understands the situation. In California a purchase money first is a non-deficiency loan.
MakingHomeAffordable.org says you are supposed to at least start the HAMP mod before being offered a HAFA short sale. You can either not make the trial payments, or make them and then not agree with the mod and be eligible for HAFA, which according to the HAFA page should be approved in 12 days. Unfortunately, on our end I do not see much evidence of lenders following the rules, but what else is new. Sounds like they do meet the qualification for HAFA , though I am not sure how they're going to handle the income situation. Guess you'd have to submit and see. If they're concerned about the deficiency judgement I'd either call the lender and request a HAMP/HAFA package or download it right from Making Home Affordable. I would go this route first. Also, you can have them call to speak with a counselor at the (888) 995 HOPE number to discuss their options.
As far as going after the 401k, I'm not exactly sure what you mean. If your clients have other assets , including money in a 401k, any lender could potentially ask them to contribute some money to achieve approval the short sale, or sign a promissory note. As for getting to it through a deficiency judgement, that'd be a question best answered by a real estate attorney in your area.
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Thank you for your input - greatly appreciated.
I thought I had read that a buyer had to apply or be evaluated for a HAMP in order to be eligible for a HAFA - just went back and read the following in : Making Home Affordable - Supplemental Directive 09-09 Revised March 26, 2010 - Effective April 5, 2010:
"When a borrower, who was not previously evaluated for a HAMP modification, requests a short
sale or DIL, the servicer must determine the basic eligibility of the borrower as described in the
HAFA Consideration section of this Supplemental Directive. In addition, the servicer must
obtain a completed Request for Modification and Affidavit (RMA)2 and evidence of the
borrower’s income sufficient to determine that the borrower meets the 31 percent income
eligibility requirement and has experienced a hardship. The servicer is not required to obtain an
IRS Form 4506-T nor 4506-EZ, unless it is necessary to verify the borrower’s income; to
evaluate the mortgage loan using the NPV test; or, to apply the standard modification waterfall
set out in Supplemental Directive 09-01. The servicer must notify the borrower verbally or in
writing of the availability of a HAMP modification and allow the borrower 14 calendar days
from the date of the notification to contact the servicer by verbal or written communication and
request consideration for a HAMP modification. If the borrower does not wish to be considered
for a modification, this does not trigger a non-approval notice under Supplemental Directive 09-08, Borrower Notices."
To me, this sounds like a borrower can still apply for a HAFA even if he/she hasn't applied for a HAMP and even if he/she is offered a HAMP mod and rejects it that the rejection does NOT trigger a HAFA rejection.
Am I reading this correctly?
What about the 2nd mortgage - junior lien - HAFA keeps referencing the first mortgage but I was told by a couple different BofA short sale people that under HAFA it can be considered with the 1st? Does that make sense? Any experience with a junior lien with same lender that was take out at time of 1st mortgage to purchase the property?
401K - I've been told by some agents in my office that some lenders don't require the homeowners to withdraw money from their 401K to contribute while other lenders consider it a liquid asset and want the sellers to contribute money from the 401K.
Thank you.
Marty Hackworth said:Hi Mary, Here's a link to a copy of the approval letter (Accounts and names of course blacked out) I received on a B of A short sale that just closed. http://hackworthrealtors.com/wp-content/uploads/2010/11/Scan1860.pdf The negotiator had first sent a letter with the deficiency language not removed, but I called her and asked for one without the deficiency language and she sent it right away. I won't close a short sale unless that right is removed, unless the seller is adamant about avoiding foreclosure at all costs and understands the situation. In California a purchase money first is a non-deficiency loan.
MakingHomeAffordable.org says you are supposed to at least start the HAMP mod before being offered a HAFA short sale. You can either not make the trial payments, or make them and then not agree with the mod and be eligible for HAFA, which according to the HAFA page should be approved in 12 days. Unfortunately, on our end I do not see much evidence of lenders following the rules, but what else is new. Sounds like they do meet the qualification for HAFA , though I am not sure how they're going to handle the income situation. Guess you'd have to submit and see. If they're concerned about the deficiency judgement I'd either call the lender and request a HAMP/HAFA package or download it right from Making Home Affordable. I would go this route first. Also, you can have them call to speak with a counselor at the (888) 995 HOPE number to discuss their options.
As far as going after the 401k, I'm not exactly sure what you mean. If your clients have other assets , including money in a 401k, any lender could potentially ask them to contribute some money to achieve approval the short sale, or sign a promissory note. As for getting to it through a deficiency judgement, that'd be a question best answered by a real estate attorney in your area.
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At the HAFA certification class I took it was taught that you had to be considered for a HAMP mod first. If you fail to make the HAMP trial payments or do not like the terms of the mod if you make the payments, you can then be considered for HAFA. I read the same thing in the article you pasted. It's basically saying if a borrower requests a short sale without ever being evaluated for HAMP, the lender/servicer must first evaluate for eligibility of that borrower for HAMP, have them fill out a HAMP request (RMA), notify the borrower of the availability of HAMP and give them 14 days to make a decision on the HAMP mod. Then they can proceed with the HAFA short sale request.
I have yet to negotiate a HAFA short sale with a second lien. I was taught in the HAFA class that you must negotiate this yourself as second liens are not included in HAFA. I'm uncertain if HAFA will allow a payoff on the HUD for a second lien. I would ask the short sale department that question before submitting a package so you can get to work on the second. The last couple times there have been junior liens at the same lender on short sales I negotiated (Chase and HSBC/Beneficial most recently) I did not have to negotiate the second, my negotiator told me how much to put on the HUD and ordered the approval from the second.
Hope that helps, Marty
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Permalink Reply by warren smith on
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I've had sellers assign the propertyover to the other person, but it's still not a finalized divorce with assets divided. If only one person is to be the owner, it will likely require a re-fi to put the property solely in one person's name.
If both are on the title and loan, BOTH will have to sign everything and provide financials. Not easy, and can kill the deal. If I don't have both on board and co-operative, it's best to walk from the deal and find another short sale to work on ( I know that sounds cold, but don't waste time on emotional attachments...)(
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Permalink Reply by Malcolm McLean on
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Why would you want a deficiency on any one of them? Makes no sense!
Depends on the value of the home, and if HE can, and wants to refi under the FHA 125 program.
Only way out to preserve credit is a short sale - and they say they do not want to purchase another house now, but if they ever want to get married again, then their decisions today could effect their ability in the future.
I have multimillion$ shorts here in S. California with divorced, bankruptcies, IRS liens - $75,000 short - yours is easy! LOL!
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