Suntrust requiring undisclosed fee BEFORE closing (scheduled Friday 1/14)-PLEASE HELP
Hello everyone - I discovered this site over the past couple weeks and have read a lot of good information. I am hoping someone can help me out with my current short sale situation
Here's the somewhat short version of the process to this point:
I received an offer on my home and submitted Short Sale package to Suntrust 8/9/10
Assigned a negotiator around mid to late October, 2010
Recieved 'approval letter' from Suntrust on 12/2/10 - letter stated I would bring an amount to closing, no notes, and they would release all debt. I agree to terms, sign letter and send back. After I send back the buyer moved forward with appraisal and inspection, and each of those went fine.
Around mid December, I received an email from my agent indicating there had been a new development with Suntrust and that fees required at closing would double and/or triple and notes would be required. According to my agent (who claims this happens quite frequently) once the entities (i.e. mortgage #1, mortgage #2, and MI company) saw how much I was bringing to close, each wanted to get more from me.
A bit of history... I originally got an 80-20 loan in order to avoid paying PMI - so for me to hear MI was involved was something I did not understand.
For the next few weeks, my negotiator verbally indicated a number of different scenarios that 'might' work out, each of which required a fee + a note at closing. I told the negotiator (via my agent) that I wanted to pay a sum at closing and wanted to avoid dragging the process on with a note. He continued to offer these 'off the wall' totals with notes. Finally I told him (through my agent) how much I could afford to bring to closing, which was slightly more than what they required in thier letter from 12/2/2010. I sent an email indicating my position and the amount I could afford to bring. About a week and a half went by and they agreed to the amount I counter offered with, verbally. I finally spoke to the negotiator myself and he flat out indicated he sent me the approval letter (12/2/2010) prematurely and that he should not have done so w/out going to Mortgage #1, #2 and MI company before hand. He indicated they are going to accept my counter offer and we scheduled a closing for this Friday (1/14). The only stipulation is before they send me the approval letters (one for each mortgage) they are requiring I pay 70% of the total I agreed to pay at closing, BEFORE we close. They said they will not provide the approval letter until I submit that fee. I am in a bind here. I want this to close, but I have not received anything in writing from Suntrust explaining the procedure. I have no reason to believe they will even aknowledge the fee if it is submitted without disclosure before the closing. Basically, I dont close unless I have the approval, and I dont have the approval unless I pay them before the closing.
I spoke with the negotiator yesterday and indicated I would need something from Suntrust detailing the procedure and I am waiting to hear back from him or his supervisor.
I spoke w/my agent last night and explained to them that I'd need to see something in writing and they said the banks are doing this more frequently and said I most likely wont receive anything from Suntrust. However, I'm not sure if my agent is protecting my interests or not. They may be too concerned with getting this to close versus what is in the bests interests for thier client (me).
In my opinion this seems unorthodox. When I spoke with the negotiator yesterday he actually asked if I'd be able to wire the money to him that day! Once I questioned if that was standard procedure (paying before the close) he indicated Suntrust is an upstanding company etc. That didnt make me feel any better.
So that is why I am posting here. Has anyone had any experience with this? Has it worked out? Is it standard for a fee to be paid before closing? Please let me know your experiences in this type of situation. Any advice and/or information would be greatly appreciated!
Thanks in advance!
Replies to This Discussion
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Permalink Reply by Kim Himmel on
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You need someone to take over your file that knows how to deal with SunTrust, it is very hard for the home owner to negotiate for themselves on a short sale. You are at the mercy of the bank and it is sometimes hard to understand all the in's and out's of what they are asking you for. You need someone that is neutral...
Are you in Ohio ?
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Permalink Reply by Andrew J Harris on
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Thanks for the reply Kim.
I am located in Michigan. I am currently working with an agent who claims they have closed many short sales (admittedly this is thier first with SunTrust). However it seems they have lost focus and are more concerned with closing than being concerned with what's in my best interest - that's my opinion. I agree, and would like the neutral party to negotiate on my behalf, I question whether they are currently doing that though. For example, up until I notified my agent of my financial limits, they suggested I accept every offer SunTrust came to me with (2x to 3x more than the original letter) - there was no negotiating.
Up until last week all of my correspondence has been through the agent. Then the SunTrust negotiator contacted me and I've dealt with them on and off since.
When SunTrust indicated they needed the payment before the closing, my agent did say that is happening more frequently, but I feel I need some assurance that SunTrust will supply the approval letters once the payment is made, that is why I'm looking for similar experiences/feedback on this site.Thanks again for the reply!
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Permalink Reply by Laura Marshall on
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So sorry that you are going through this. I completely understand your concern regarding sending money with nothing in writing. If it were me, as a seller, I would want the agreement in writing first. Maybe you could agree to deposit certified funds in the amount stated, to escrow. I have closed MANY short sales, and my position has been that if it is not in writing....it means nothing. Regarding MI - I recently closed one with Suntrust (not much fun). It was Fannie Mae (investor) and Genworth(insurer). I went to the MI company myself and negotiated down to 0 and no note. Some MI companies are a bear to work with, but this particular one was not. My client did not have PMI when he took out the loan, but apparently the bank put PMI on after the fact...and they paid the premium. I still needed their approval to move forward with the short sale.
** I did have one company that demanded payment before postponing a trustees sale. It was not Suntrust. The buyer paid the fee, and the sale was postponed **
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Thanks for the reply Laura.
Another day came and went and it 'sounds' like there has been no headway in my negotiation. I use the word 'sounds' because ever since I questioned SunTrusts requests on Monday, I have not spoken to the negotiator, he has only contacted my agent.
Yesterday when I spoke to my agent, I suggested speaking with the MI company directly, just like you did. I had read about doing that too and last week the SunTrust negotiator was more than willing to give me the MI contact information. However when I suggested that to my agent, it sounded like a new concept to them.
My position stays the same, I need to see something in writing before I pay the fee. I told my agent that my counter offer included me bringing the money to the close... if that can't happen, we may not close.
One of my fears is exactly what you wrote that happened to you... postponing the sale. Since the fee is non-refundable, I assume it would just get lost in the paperwork and I'd be out that money.
I'm keeping my fingers crossed!
Thank you again for the reply!
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Permalink Reply by Steve Early on
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Hi Andrew:
I'm sorry to hear what is going on with your situation. You didn't say who the 2nd lien is with but I am assuming it is also SunTrust, and you did not indicate whether or not you ever got an approval letter for that lien. I'm about to do a lot of "reading between the lines" on your scenario so this may or may not match what is happening to you but it is something we see happening with greater frequency and it is troubling.
If it is the second lien that is asking for a significant payment, then what you could be running into is the following:
First lien holders will often not allow the seller of a property to make a cash payment to a second lien.
Let me paint you a scenario as an example:
First Lien - approves a short sale and agrees to pay $3,000 (fairly typical amount) to the Second Lien as an enticement to remove their lien on the property so it can be sold. This payment does nothing to absolve you from what you owe the Second Lien - it is just a payment for them to lift the lien - you still owe them what you owe them.
Second Lien - is owed way more than $3,000 and refuses to release their lien for that amount. They are owed $100,000 and demand the seller bring $30,000 in cash to closing, basically settling for about 1/3 of what they are owed. They may or may not offer debt forgiveness in exchange for whatever payment they demand.
First Lien - discovers that the second lien is demanding $30,000 in cash and their position is: "If this guy has $30,000, then WE should get that money to offset our losses. All the second lien can have is $3,000."
So now you are in the chicken-and-egg dilemma that is so troubling. You can find away to come up with $30,000 for the Second Lien, but the First Lien becomes aware of this and now wants that money to go to them. If you give it to them, the Second Lien will still want their $30,000. If you find a way to come up with another $30,000 the First Lien would want that too.There should be a law against this, but there isn't.
The answer you are getting to solve this problem seems to be: Send the Second Lien the $30,000 in advance of the short sale closing. That way the $30,000 doesn't appear on the HUD document at closing. All that has to be recorded on the HUD now is the $3,000 payment the First Lien holder agreed to pay to the Second Lien and the transaction can close.
My observation:
You're getting jerked around and you MUST have an approval letter from both lien holders before you do anything. I wouldn't pay anybody a penny until I got that. If you are being asked to make a payment to the Second Lien prior to closing, PLEASE consult an attorney!
The first lien holder's approval letter of 12/2/2010 is something you should be able to hold them to, but my guess is it will be expiring very soon. When it expires, all bets are off. You can request an extension to the approval letter, but they don't have to grant it. If they extend it, they can extend it as is, or they can extend it with new terms, or they can deny an extension and put you in a position where you have to renegotiate this all over again.
Bottom line: Speak to an attorney with experience in real estate and short sales (not a bankruptcy attorney!) and get some advice from a neutral third party that will be looking out for you.
Good luck with it!
Steve
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Thank you Steve for your insight!
I believe you hit the nail right on the head with your analysis!
To what I understand, SunTrust does hold the second lien and the first is with either Fannie or Freddie. SunTrust has verbally indicated to me that if the first sees extra that money, they will not allow the second to get it.
The one thing that is different is SunTrust is pinning the 'blame' on the MI company, claiming THEY (MI) are requiring the additional fees - at least that is how I understand it. In your experince, could that be the case? Could the MI company be throwing a wrench into all of this? Keep in mind, like Laura said in her post, I originally got an 80-20 loan to avoid paying PMI, though SunTrust must have gotten it somewhere along the way. So basically, SunTrust wants me to make the MI company happy, even though they chose to get the insurance and I had tried to stay away from it by getting the 80-20.
Regarding the letters dated 12/2 ( I did have one from each lein), I am not sure if they have expired or not. But to be honest, those were not even a discussion point until I just brought it up a week and a half ago to my negotiator. According to him (who admittedly supplied the letters prematurely), he spoke w/his supervisor (whom we've never spoken with) and they are going to 'honor' the letter and accept my counter offer - under one stipulation - that I pay them before the closing!
It makes sense to me... if they want me to agree to do something outside the legal limits... why would they provide anything in writing to me explaining so - that would only hold them liable if it came to litigation. In 'loose' terms, I basically need to 'bribe' them in order to get my Short Sale approved.
I believe my next move will to get a short sale attorney involved. I chewed on that for a bit last night and I think your post helped solidify my thoughts.
Thank you again!
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Andrew:
That absolutely could be the case. The MI company guaranteed a certain portion of your mortgage. The amount they are guaranteeing is typically between 17 and 35% of your total loan. So on a $200,000 note, the MI company would typically be insuring somewhere between $14,000 and $70,000. The investor is on the hook for the rest if the loan goes bad.
Assuming 100% financing on a $200,000 loan, the MI company has been collecting a payment on the bet that the value of your home would never sink a certain percentage below the $200,000 mark. In the "good ol' days" this was a pretty safe bet and they didn't have to pay off very often. All that has changed in the last few years and these days a lot of MI companies find themselves in the position of being at "full payout" -- the property value is so far below the amount owed that they have to cough up the entire amount they insured the loan for.
When a seller is asked for cash at closing, the #1 culprit is the MI company, followed by the investor if the loss exceeds the MI company's max payout. So if the $200,000 note discussed above was insured for 35%, and the short sale will only net $100,000, the MI company is out $70,000 and the investor is out $30,000. So it could be only the MI company, or it could be the MI company and the investor together asking for a cash payment.
The reason they ask for cash at closing however, isn't so much that they are losing money (well, OK that is a real motivator) but a payment is being demanded because they believe that you can afford to pay them something. They have reviewed your finances, bank statements, 401Ks, tax returns, etc. and think they have a picture of someone who can afford to either make a cash payment, sign a promissory note, or both.
I hope this helps and good luck with getting this all worked out!
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Andrew, I am dealing with the exact same scenario as yours, with the same players. How did your deal turn out? What did you end up doing?
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