I did a search for this but couldn't find anything.  Seller completed ss in May.  Property in AZ which is not an anti-deficiency state for short sales.  We had to negotiate a deficiency release and got it in writing.  Since then, she keeps checking her mortage account online expecting it to be closed and it still has a dollar in it.  She's made many calls to BofA with no results.  The last person she spoke to told her the investor does this to keep the file active so they can sue for the deficiency balance.  But we got a deficiency release.  And since when is it good business to sue for $1?  That's not a good way to win future business.  Has anyone had this experience yet? 

 

I suggested the seller first check her credit report to see if they are reporting the account closed and paid off for less than the balance.  If they are still showing the account open with $1 balance, that's actually a great thing for her credit and this may not be a problem after all.

 

Any advice?  Thanks!

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One of the things I would  check is the exact wording of the deficiency release.  Althought terms vary area to area, a lien release can be done without taking care of the deficiency.  Just want to be sure that your client received written confirmation that the deficiency was being waived and not just a lien release.  Could you share with us what the letter stated?

Hi Steele V. Propp, "The owner of your mortgage note, the mortgage insurer, if your loan is covered by mortgage insurance, and Bank of America, N.A.

waive their right to pursue collection of any deficiency following the completion of your short sale and your debt is considered

settled.

So the only question is, was the loan covered by mortgage insurance?  If so, it appears the former borrower is covered.  I personally would check on that and have the MI information handy (policy number, coverage dates, etc.) just in case.

When I was working with a lender doing foreclosures I was surprised to find only about 15% of the first mortgage loans we dealt with had MI.  So I am a bit paranoid when I see this as a condition.

 

If the property had MI, the MI company covered a certain amount of the loss.  Depends on the policy but 10%-20% is fairly average. 

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