Chase 2nd Lien Demanding $25,000

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

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on January 14, 2011 at 4:10pm

In a situation where the 2nd / HELOC is sold to a 3rd party debt collector, they will aggressively try to recover from the borrower which in many instances will force the seller into BK - just to get away from the collectors. 

In CA, once the lender of the 1st has issued an approval, there is no deficiency (on the 1st) per SB931 which took effect on January 1, 2011. 

 

There remains the deficiency on the 2nd or any subordinate liens unless it is waived / forgiven in writing by each of those lenders.

 

I hope this helps,

Thom



Sylvia Barry said:

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

Permalink Reply by Wendy Rulnick on January 15, 2011 at 4:46am
Blaine - Another suggestion is to see if the seller can borrow money to pay Chase.  They may say 25,000, but I bet that number can be reduced, perhaps halved.  I just worked a Chase junior like this.  My  seller borrowed from his brother.  Chase originally wanted 50,000, dropped to 25,000, then dropped to 12,000 based on OLD notes in their file.  My seller had a record of the previous Chase offer to settle for 12,000, and I suggested he call the negotiator directly.  The negotiator liked him, and voila, settled and deficiency waived.

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