Can someone explain why a junior lien holder would not approve a short sale?

I am in the process of acquiring a short sale in CT. The first lien holder, Chase, has approved the short sale. We have the letter. The second lien holder SLS has not as of yet. The amount owed is $10k and they are promised 6K from the short sale. Initially they requested more from the seller but the seller needs to spend 2K to get an underground oil tank out from the ground. The seller has sent this estimate to SLS last week explaining there are no additional funds. We are still waiting to hear back.

From what I understand, if the property goes into foreclosure then SLS, as the junior lien holder, will get nothing. Why would SLS not approve this sale?

 

Any insight would be greatly appreciated.

Thank you.

 

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A lot of these second lien holders are simply tired of getting the short end of the stick.  And frankly they are in a good position in that while they could lose the $10,000, the first lien holder could lose a lot more.  Just released figures show that a foreclosure is averaging $50,000 to over $70,000 in losses.  Not to mention the extended time involved.

 

Also, just because the 2nd doesn't get anything from the sale doesn't mean that they can't still go after the borrower for the loss.  The loan is still owed, just not secured by the property.  And depending on the state, they can file against the borrower years after the fact.  A common misconception is that this lien goes away with the foreclosure.  Not so.  That is why it is so important to not just get a lien release from a 2nd mortgage holder in a short sale but a written forgiveness of any loss as well.

 

Just so you know I worked with a lending institution in their real estate department for a year.  Dealt with a lot of 2nds.  Even though getting $6,000 on $10,000 is very good I know my boss would have looked at this and said "get more..."

 

Here's a thought.  Offer a promissory note with a low interest rate and 3-5 year timeframe.  Look at what they said that they needed.  Probably the monthly payment is quite low.

 

Negotiate.  And best of luck.

Think about the jerks you run into at the first. You have at least an equal percentage at most 2nd's. It's just a job to them, they are paid by the hour. So what if they are holding the seller's life hostage for less than $4K? If you have one of these on the other end of the phone, you can try getting to his manager - but you might find he encourages this.

You mean nothing to them financially.  You can keep pushing them to consider that they are part of humanity - you might just be hitting their tactic to suck as much money out of you as possible and will let it go. You might get traction by going to the OCC, the state attorney general, a state senator to complain about SLS doing this to your homeowner.

From what you said ... they didn't decline the short sale.  They take a long time to do anything, no matter how much money or time they lose.

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