Replies to This Discussion

Permalink Reply by Alex Krumm on January 22, 2013 at 4:43am

Hi, Jack - can you supply more info?

• Are there just two liens?  Have you received payoff agreements for both loans in the past?  If so, are you still within the closing timeframe for both letters?
• Is this a primary residence or investment home?
• Is it Wells Fargo that's requesting seller participation or a MI company?
• Is the 2nd a purchase money mortgage or a HELOC?

Alex Krumm

Re/Max Alliance Group

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Permalink Reply by Teresa Keeler on January 22, 2013 at 4:52am

Could you clarify the type of participation?  Are they asking for a cash contribution or a promissory note? Also - are both loans with Wells? If so is the first or second asking for this?

Permalink Reply by joe beauchamp on January 22, 2013 at 10:44am

I think freddie always asks for $$, even when they have a price higher than what is owed - real jerks. These braindead demands are quickly deleted when you point out the finances of the seller show that they are ludicrous. If the demand is from the MI, that is different. They are frequently screwed virtually no matter what price you get for the property, so the contribution is the only way they get anything while paying out a bunch - w/o contrib, foreclosure and SS mean the same to them. Many times, you have to dig to find out that the MI is pulling these strings (for some reason??). If it is the MI, they are likely to be tough.

I would run through the seller's finances, ask questions like, "what is on your credit report? Are you paying everyone but the bank? Did you just buy something?" - because you don't normally see these things. Then I'd push the bank to see where the demand is coming from. Usually, the negotiator will tell you why they think the seller should contribute (if it came from the bank/investor) - that can give you some important info - maybe they are wrong.  I've gone to the MI - it can take a while, but knowing where they stand can be helpful, if it came from them.  At this point, you probably have all the info you can get, except the seller's willingness to pay whatever amount. Give them your counter and give them good reasons why your counter makes sense. Then you'll get back a brick wall or something better or they will accept your counter. Don't expect to get another round. You might, or you might get "click".  They don't like playing used car salesman.

Permalink Reply by Jim McCormack on January 22, 2013 at 11:25am

In a normal Fannie/Freddie short sale the initial valuation is handled by the servicer.  However, once the short sale contract is determined to meet preliminary requirements it is sent to Fannie/Freddie for review.  At this point it is not uncommon for Fannie or Freddie to review the net proceeds and the borrower's financials and determine that a cash contribution and/or promissory note is warranted.  Also, even if they may agree to accept a reduced cash contribution/promissory note after negotiating if there is mortgage insurance involved the borrower could be asked for another cash contribution.  That is why I tell short sale sellers that nothing is agreed to until the short sale letter says it is.

Permalink Reply by Kevin - Greenville, SC on January 22, 2013 at 12:18pm

Borrowers are not required to make a contribution in the following instances:
Borrowers who are service members with Permanent Change of Station orders, provided
the Borrower occupies the Mortgaged Premises as his or her Primary Residence and
purchased the property on or before June 30, 2012
Borrowers who are 90 or more days delinquent with a FICO score less than 620. (Refer to
B65.37(a) for the requirements for determining the Borrower's FICO score.)
Applicable law prohibits requesting or receiving a contribution

http://www.scribd.com/doc/121665756/B65-37-1-Borrower-Contributions...

Permalink Reply by Teresa Keeler on January 23, 2013 at 7:20am

Regarding this - do you know if they consider retirement funds in calculating the reserves? I have someone who is being asked to make a contribution of 10K. The person only has 2K in the bank but has a 50K IRA. It would make sense that they are asking for this since it is approximately 20% of their IRA. 

Permalink Reply by Jim McCormack on January 23, 2013 at 7:22am

The banks don't care where the money is located.  However, if they foreclosed and sued the borrower it would be difficult to go after the IRA money.  Therefore, counter the bank's demand based on that.

Permalink Reply by Teresa Keeler on January 23, 2013 at 7:29am

So the whole concept we were always told before "they can't touch your retirement accounts" isn't really the truth anymore?

Permalink Reply by Jim McCormack on January 23, 2013 at 7:36am

Yes and no.  The banks can ask for a cash contribution even if you have nothing.  It is at their discretion.  However, like I said previously suing a borrower to get at their retirement money is difficult.  Remember, though that as soon as the borrower takes that money out of their retirement money to live on when they retire it is no longer protected so the lender could then go after it along with any other money in their bank accounts.