Hello all,

 

I just ran into a unique situation for me. I have a short sale where Wells Fargo holds the first lien (conventional loan), and Chase holds the second lien (HELOC). Previously I had an offer into each bank and was not able to get Wells Fargo to approve, but Chase did give me an approval. Unfortunately, I lost that buyer and had to start over.

 

Now, I just submitted a new offer (which is higher than the last offer) to each bank. However, this time Wells Fargo approved the transaction, but CHASE told me today that they are declining it because they will make more if this goes to foreclosure. They told me that they expect to get as much as $43,000 going to foreclosure (outstanding debt is at about $55,000), and that the only way they would consider approving the transaction is if Wells Fargo Allows $25,000 to go to the second (CHASE). My negotiator was very firm that they needed $25K or they prefer it goes to foreclosure.

 

Why would CHASE do this? Does anybody know. I thought that if it went to foreclosure and the lien was released, their only remedy is to sue the seller for the money. Does anybody know what is happening here? Any suggestions?

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Replies to This Discussion

Has Chase sold the 2nd to a 3rd party collection agency?  Typically on HELOCs, they will sell them and begin / enforce collection activity directly against the borrower.  Typically it forces the borrower into BK.

Remember Wells and Chase are not lenders once the loans go into default, they are "Debt Settlement Companies" which is VERY different.

The other scenario is the 2nds are selling loans at Trustee Sales to unsuspecting buyers who THINK they are buying the property at a huge discount but in reality they are buying the 2nd subject to the 1st.

 

Keep trying - hopefully Chase will accept "something" to release.

 

Best of luck,

 

Thom Colby

Broker

Newport Beach CA

You didn't provide much information here.  Is purchase price at fair market? Will Chase get anything out of it, or is all of it going to Wells Fargo?  Chase must think that the sales price is well below market ....or....they will clear more with the MI if it goes to Foreclosure  - is there MI on the HELOC?   What is Wells Fargo saying to this.....shall we say, proposal?

Thank you Thom for your response. That is good information.

I don't believe they have sold it to a 3rd party collection agency at this time. 3 days ago the approval process felt normal, and they told me they would have a decision by today. They haven't mentioned anything about a collection agency. I probably should ask though to be sure. Also, it is the 1st lien that is foreclosing. Since they are the 2nd lien and not the foreclosing mortgage, isn't their lien released at auction and their only remedy is typically suing the seller?

Thom Colby said:

Has Chase sold the 2nd to a 3rd party collection agency?  Typically on HELOCs, they will sell them and begin / enforce collection activity directly against the borrower.  Typically it forces the borrower into BK.

Remember Wells and Chase are not lenders once the loans go into default, they are "Debt Settlement Companies" which is VERY different.

The other scenario is the 2nds are selling loans at Trustee Sales to unsuspecting buyers who THINK they are buying the property at a huge discount but in reality they are buying the 2nd subject to the 1st.

 

Keep trying - hopefully Chase will accept "something" to release.

 

Best of luck,

 

Thom Colby

Broker

Newport Beach CA

My understanding is when the 1st forecloses, the 2nd is no longer secured by the Real Property and therefore the 2nd will pursue the borrower / get a judgment, etc.

 



Blaine Washburn said:

Thank you Thom for your response. That is good information.

I don't believe they have sold it to a 3rd party collection agency at this time. 3 days ago the approval process felt normal, and they told me they would have a decision by today. They haven't mentioned anything about a collection agency. I probably should ask though to be sure. Also, it is the 1st lien that is foreclosing. Since they are the 2nd lien and not the foreclosing mortgage, isn't their lien released at auction and their only remedy is typically suing the seller?

Thom Colby said:

Has Chase sold the 2nd to a 3rd party collection agency?  Typically on HELOCs, they will sell them and begin / enforce collection activity directly against the borrower.  Typically it forces the borrower into BK.

Remember Wells and Chase are not lenders once the loans go into default, they are "Debt Settlement Companies" which is VERY different.

The other scenario is the 2nds are selling loans at Trustee Sales to unsuspecting buyers who THINK they are buying the property at a huge discount but in reality they are buying the 2nd subject to the 1st.

 

Keep trying - hopefully Chase will accept "something" to release.

 

Best of luck,

 

Thom Colby

Broker

Newport Beach CA

Debra, Thank you. Here is some more information.

After Repair value is $170 to $180K, however this property is a mess. It has mold in the basement, asbestos ceiling tiles, built in 1955 and very few if any updates, worn out carpet, water damage from two sources in the basement, over grown yard, is a corner lot on a busy intersection, and clutter everywhere.

 

In its current condition I believe its current market value is $115,000 on the high end. I have had more than 60 showings and most retail buyers run from this property. Because of the problems in the home, I have been advertising it hard as a fixer upper. Investors are offering $100K on the high end. I have had 5 offers to date on this property. Two offers have been right at $115K, I have had a couple at 100K (investors), and one offer at $93K (investor).  There is $110K owed on the first mortgage and $52K owed on the second (Chase) mortgage.

 

In honesty, I am not sure if there is MI on the second lien. I just unsuccessfully tried to reach my negotiator to ask. Will try to find out tomorrow. Regarding Wells Fargo, I have left a message and sent an email to the negotiator, but have not heard their response yet.

 

Thank you for your help.

 

Blaine

Debra Enos said:

You didn't provide much information here.  Is purchase price at fair market? Will Chase get anything out of it, or is all of it going to Wells Fargo?  Chase must think that the sales price is well below market ....or....they will clear more with the MI if it goes to Foreclosure  - is there MI on the HELOC?   What is Wells Fargo saying to this.....shall we say, proposal?

At a certain point, if no payments have been made for over a number of days, or if the first lender begins foreclosure proceedings, CHASE moves the file into CHASE Loss Recovery. 

That department operates really just as a debt collector and their demands (in my experience) tend to be along that line.  Did they switch the department?  Are you in Loss Recovery? 

Thom, that is my understanding as well. That is why this is so confusing to me why they are making this demand. I truly am thrown by this demand.

Thom Colby said:

My understanding is when the 1st forecloses, the 2nd is no longer secured by the Real Property and therefore the 2nd will pursue the borrower / get a judgment, etc.

HELOCs think they can get more through judgments.  Of course they get nothing through foreclosure per se.  MI payments should be the same, foreclosure vs short sale, or close.  If they have changed numbers on you, something is likely tipping them off to think there are more resources available - bank statements, hardship letter, credit report.  We just completed a BoA/Chase SS and heard the exact same arguments.  They settled for 10% of loan balance despite posturing for 12-15%.  I'd tell you to escalate, but the VP and the at least one of the managers are more hard asses than the negotiators themselves.   
Are you sure that the banks - both are fully aware of the condition of the house? Mold, asbestos, water damage!  Hopefully all 5 of your offers are cash.  That is the only way to go.  I would escilate this one ASAP. Bypass the negotiator at CHASE and fill in his/her supervisor on the condition of the house.  I will surely sell for much less at auction.  Good luck!
Tni, thank you. That is a good question. My negotiator has gone home for the day, but I will call tomorrow and see is something like that has happened.

Tni LeBlanc said:

At a certain point, if no payments have been made for over a number of days, or if the first lender begins foreclosure proceedings, CHASE moves the file into CHASE Loss Recovery. 

That department operates really just as a debt collector and their demands (in my experience) tend to be along that line.  Did they switch the department?  Are you in Loss Recovery? 

Thom - I am interested in your statement about the 'Typically it forces the borrower into BK' .  

I have heard sellers thought it's better to go into foreclosure on Chase 2nd HELOC lien instead of settlement other than what 1st offers because Chase would just go after them just like if they complete the short sale with outstanding deficiency.  They did not think there would any difference, or not much at all, if any.  Doesn't sound like that's what you are saying. 

 

You insight on this will be greatly appreciated.    Thanks!  Sylvia    


Thom Colby said:

Has Chase sold the 2nd to a 3rd party collection agency?  Typically on HELOCs, they will sell them and begin / enforce collection activity directly against the borrower.  Typically it forces the borrower into BK.

Remember Wells and Chase are not lenders once the loans go into default, they are "Debt Settlement Companies" which is VERY different.

The other scenario is the 2nds are selling loans at Trustee Sales to unsuspecting buyers who THINK they are buying the property at a huge discount but in reality they are buying the 2nd subject to the 1st.

 

Keep trying - hopefully Chase will accept "something" to release.

 

Best of luck,

 

Thom Colby

Broker

Newport Beach CA

Also, what's the differences in negotiation / collection treatments before or after it goes into Recovery?

 

Sylvia 

Thom Colby said:

Has Chase sold the 2nd to a 3rd party collection agency?  Typically on HELOCs, they will sell them and begin / enforce collection activity directly against the borrower.  Typically it forces the borrower into BK.

Remember Wells and Chase are not lenders once the loans go into default, they are "Debt Settlement Companies" which is VERY different.

The other scenario is the 2nds are selling loans at Trustee Sales to unsuspecting buyers who THINK they are buying the property at a huge discount but in reality they are buying the 2nd subject to the 1st.

 

Keep trying - hopefully Chase will accept "something" to release.

 

Best of luck,

 

Thom Colby

Broker

Newport Beach CA

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