Collection Companies - Life after a "Charge Off"... Getting a Second Released - Forum

I'm curious, has anyone in Short Sale Superstars had an experience with:

A.) Client making a "token payment" to a collection company to release a "Charged Off" second lien?
B.) Contacting the 'Charged Off" lender and getting the loan pulled back from collections?
C.) Actually closing with a "Charged Off" second lien?

I'm currently working a short sale with BofA first lien and Citibank second lien. Citi charged off and sent the debt to collections with Solace Financial. I'm in receipt of a BofA approval letter after about 4 weeks through Equator. :-) Concurrently I've been speaking Solace Financial's negotiator. After Solace agrees to a 10% negotiated settlement amount, I let them know I received the BofA approval letter. Suddenly Solace wants a minimum "token payment" of $100 bucks from my client before agreeing to process the release of the second.

Reiterated Question A.) Should I be concerned that if my client makes that token payment - the DEBT OBLIGATION restarts? If it restarts will it be any easier to get the second lien released 0r is this another can of worms? (Representative at Solace tells me they'll have the release in 7 days if he makes the token payment...)

My first reaction was to call Citibank. I did and within HOURS Citibank let their debt collection representative at Solace Financial know I had called... How's that for communications between Lender and Debt Collector???

Anyone have ANY insight? My gut tells me to continue to dog Citibank for the release of the second, ignoring the collections company. Anyone else have any experiences here? Below I describe a similar experience with Chase and it worked!!!

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Earlier this year I had with a Chase "stack" (first and second loans with same lender.) I got approval on the first only to find the collection company's empty promise that they could NOT release the loan - IN FACT; They couldn't. (Unique situation was that the second lien had been given to two different collection companies. For about two weeks NOBODY knew who had 'AUTHORITY TO RELEASE' - NOT EVEN CHASE!) After I PUSHED further up the food chain, Chase management was able to retrieve their second lien back from the collection company(s) (OMS and PRS), furnishing me with a SHORT SALE APPROVAL for both first and second liens. All without THAT 'token payment' that the collections company(s) had begun to ask for.

Michael Ackerman

Zephyr Real Estate

ABZ@ZephyrSF.com

A) Never had a client that was asked for a 'token payment'. I do know I don't like the idea, but if it means they will accept the $3,000 Bank of America is offering in return for an extra hundred bucks I'd be tempted to go for it (for debt forgiveness, obviously).

B) Our experience has been (and we've done a few of these) that the original servicer of the loan will not pull the loan back from the debt collector. They already wrote it off and want nothing to do with it. We've even asked them if there is any way they could "influence" the debt collector to be a little more rationale. Bottom line: They've washed their hands of it and are done.

C) Yes we have succeeded, but they can be real creeps to deal with. They probably bought the note for a song and are going to try to get a big payday out of the seller. One side of the argument is; "This is all you're going to get from the seller - he'll let it foreclose and you'll get nothing." and the other side is "If you don't give me what I want, I'll screw up the whole transaction and we'll chase your buyer anyway."

We really don't like dealing with them which is why, if a seller receives a notice they need to make a payment to pay the original servicer or the note will be discharged, I always advise the client to pay it if there is any way they possibly can.

Replies

Michael Ackerman, CRS, SFR, January 6, 2011 at 8:24pm

Update: Went back to Citibank and ignored the collection agency. I've received a gentler email from the collection agency requesting documentation including the HUD-1 and no further mention of additional money.
Steve Early January 3, 2011 at 9:23am

A) Never had a client that was asked for a 'token payment'. I do know I don't like the idea, but if it means they will accept the $3,000 Bank of America is offering in return for an extra hundred bucks I'd be tempted to go for it (for debt forgiveness, obviously).

B) Our experience has been (and we've done a few of these) that the original servicer of the loan will not pull the loan back from the debt collector. They already wrote it off and want nothing to do with it. We've even asked them if there is any way they could "influence" the debt collector to be a little more rationale. Bottom line: They've washed their hands of it and are done.

C) Yes we have succeeded, but they can be real creeps to deal with. They probably bought the note for a song and are going to try to get a big payday out of the seller. One side of the argument is; "This is all you're going to get from the seller - he'll let it foreclose and you'll get nothing." and the other side is "If you don't give me what I want, I'll screw up the whole transaction and we'll chase your buyer anyway."

We really don't like dealing with them which is why, if a seller receives a notice they need to make a payment to pay the original servicer or the note will be discharged, I always advise the client to pay it if there is any way they possibly can.
Kimberley Kelly January 3, 2011 at 4:09am

When I had a 2nd lien that had been sold to a collection Co., (B of A sold it), I called the collection Co., and the nice man told me they would have to have over $4,000 from my Seller or Buyer to release the lien. I called B of A. Was told, that "no, we handle the collection payoff..it has nothing to do with you or your Short Sale." I called the collection Co. back. "What??? We own that loan now.." I called B of A. "No, they don't and that man is confused." I kept calling B of A only, and sure enough, the Demand Letter allowed the standard $3,000 for the 2nd, and no mention of MI, and it was done. Scam??? Maybe..

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