US Bank Heloc 2nd won't even consider SS without seller first agreeing to pay ENTIRE deficiency

I have a short sale with two US Bank loans. The first is with US Bank Home Mortgage, which apparently is wholly separate from their Heloc division (which governs the 2nd). The 1st goes the traditional route (bank statements, paystubs, tax returns, etc.). The 2nd, however, insists that in order to review the short sale, they only want a HUD. But they also require the owner to agree to repay the entire deficiency in an unsecured note..or they won't even consider the short sale.  They also will require 10% or $5k, whichever is greater, from the 1st.

Our client owes about $125k on her 2nd, which means she'd have to get US Bank Home Mortgage to kick in $12,500, with the seller agreeing to cover the remaining $112,500 in a promissory note. If the seller doesn't agree to that up-front, they won't even look at the short sale (they bluntly said, don't bother sending us the HUD, because we won't look at it unless the seller agrees to pay the full deficiency).

Based on this bizarre policy, it would seem that we're dead in the water before we start. I'm sure others have encountered this, but not sure what the best next step is. I believe all the escalation contacts on the US Bank page are probably from US Bank Home Mortgage and not their separate Heloc division.

Suggestions? Advice? US Bank (Heloc) Contacts? Thanks in advance.

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Replies to This Discussion

Helo Rod, I am in the same boat, my first is with US as well the 2nd. I believe this policy went into action about 1 month ago. Not all the reps are on  the same page. I spoke to a few reps on the 2nd, one nice gal explained to me that the seller does need to call in and do a verbal agreement regarding the deficiency. She also mentioned that if when we get the written terms the seller does not have to agree. So it sounds to me that  the seller needs to call up and agree to the deficiency in order to get the short sale started. I also think that once the process is running in the right direction everything is negotiable.  Let me know how this goes for you and your seller!

Thanks!

Thanks for the feedback JulieAnn. I'm going to try calling several different times and see if I can get someone to volunteer the same information. I'm sure our client would be fine with giving them a verbal okay to get the ball rolling, as long as that doesn't compromise her ability to later decline to contribute to the deficiency. I appreciate your help. Happy New Year to you!  - Rod

JulieAnn DeCeunynck said:

Helo Rod, I am in the same boat, my first is with US as well the 2nd. I believe this policy went into action about 1 month ago. Not all the reps are on  the same page. I spoke to a few reps on the 2nd, one nice gal explained to me that the seller does need to call in and do a verbal agreement regarding the deficiency. She also mentioned that if when we get the written terms the seller does not have to agree. So it sounds to me that  the seller needs to call up and agree to the deficiency in order to get the short sale started. I also think that once the process is running in the right direction everything is negotiable.  Let me know how this goes for you and your seller!

Thanks!

Rod,  see my new discussion titled "Time to Boycott US Bank...."  Your answers to the new promissory note question is answered there.

Rod, not sure how your short sale is going with US 1st and 2nd.

I just got terrible news today, the 2nd is not approving the short sale without the seller coming in with 38K, lost the buyer last night, the seller lost his job today and there is a sale date in place for next week.

is there any hope??????

Sorry to hear that, JulieAnn. Our seller is about at the end of her rope. We have not been able to find any way to get US Bank to budge. They 2nd (Heloc) simply WILL NOT even look at her SS pkg unless she agrees to pay back the entire $120k+ with an unsecured note. She actually is willing to pay $30k-$40k on a note, but they say "pay it all back or no short sale." I argued that if she pays it all back then it's really not a short sale. "Yes it is, they said." "How," I countered...if she pays it all back what's "short" about the payoff? They didn't have an answer...just said, either she agrees to pay back every dime she borrowed or there will be no short sale.

 

I was told by one person at US Bank that she could agree verbally to get the SS package reviewed, but if she later declined to sign a note paying back the full amount, they'd immediately stop the short sale process.

 

It seems like you've gotten further than we have if you got them to at least give you a counter. Or was the $38k they wanted the entire loan amount? What's the balance owed on your client's loan? Is the $38k a portion of what they owe or the entire thing. If it's less than what she owes, how were you able to get them to look at the short sale and negotiate to a number lower than what's owed?

 

Thanks!



JulieAnn DeCeunynck said:

Rod, not sure how your short sale is going with US 1st and 2nd.

I just got terrible news today, the 2nd is not approving the short sale without the seller coming in with 38K, lost the buyer last night, the seller lost his job today and there is a sale date in place for next week.

is there any hope??????

Rod,

My situation is exactly like yours with US Bank Home Mortgage for the 1st and US Bank Financial for the 2nd. The two entities do not share information, which is really frustrating. USB Financial will not even talk to us regarding a short sale until the sellers verbally agree to repay the loan. This is a poor business practice and very frustrating.

 

Have you progresed further with your negotiatons? Any feedback is greatly appreciated.

 

Thanks,

Hilary Willis

Managing Broker

Coldwell Banker Danforth

Federal Way, WA

 

The buyer pulled out shortly after I posted this, so I didn't have an opportunity to pursue this to the bitter end. Though I believe we had reached a dead-end due to this inflexible all-or-nothing demand by USB. I'd love to hear if you come up with a viable work-around. Another agent had suggested having the client agree to the deficiency, close escrow and then try to negotiate the amount down on her own after escrow closes, based on the notion that it's far easier to negotiate with the lender on an unsecured note, since they don't have the "I'll stop your short sale" leverage any more.

Rod, we may have had a possible breakthrough regarding US Bank HELOC's. 

We were in the same boat...$150K 2nd and USB telling us that they needed agreement to pay the whole balance in order to process the SS. This started in October.

This week we got approval on the 1st and called USB to see if this changed our predicament with them. To our surprise they sent us from the short sale department to the "recovery team" where a new negotiator told us "show 10% to USB on the HUD and e-mail it to us for management review."

When asked why the sudden change he said "This loan has been charged off. When that happens they send it our department."

We don't have a number we can close with yet, but this is a heck of a lot better than where we were up until now.

If this doesn't work then the seller will just close the escrow then BK on USB.

I've had similar experiences with Greentree and PNC. In both cases the massive deficiency was settled after COE for a fraction of what they were demanding prior to close.

Good luck

That's great news, Joe. How long since the seller stopped making payments on the 2nd? Also, how recently did yours go from the SS dept to the Recovery Dept?  Thanks for sharing this possible breakthrough. Good luck!

We started the short sale in October and at that time she was already behind 1 month. I believe her last payment was in August. Looks like 7 months at least.

 

I had this happen on a Chase HELOC last month. They went from not wanting to accept $6K on a HAFA deal (they wanted $24K) to accepting it. Negotiator in that instance said the difference was the charge off.

Looks like these lenders get tired of waiting and take the tax benefit of charging it off as a loss then sending to recovery.

 

Thanks for the update, Joe. I think our client stopped making payments about the same time, give or take a month.

OK...final update (I hope).

 

Recap: seller built the home in 2006-2007. We had a 1st with SunTrust for $870,000 and the 2nd with US Bank for $150,000. Our offer to purchase for our asking price of $599,000.

 

Both banks were difficult initially. SunTrust eventually lightened up once we got to our second negotiator. SunTrust accepted the offer. US Bank took a while and fought the whole way.

 

US Bank finally came back to the table and agreed to accept $40,000 for a lien release and satisfaction of mortgage debt. We were getting $9200.00 from the 1st so we had a $30,800 gap to cover. The buyer agreed bring in that difference and we're set to close this week. 1st is fine with buyer paying the 2nd that much to release.

 

What a pain in the neck...

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