Forum

LCS and Buying Its Debt

Posted by ElizabethWeintraub00697006LyonRE on February 2, 2012 at 2:42pm in Short Sale Discussions

I have a client who wants me to take over a short sale that failed. She was offered $25,000 from Chase Bank. LCS is the second. LCS blocked her contribution from Chase, stating it wanted the money. Chase refuses to give the money to LCS. She tried to negotiate a discounted contribution to LCS, but Chase refused that as well.

I'm wondering if it would make sense to ask Chase Bank to buy the loan from LCS as part of the approval process? Has anybody triggered this kind of negotiation?

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Replies

Tni LeBlanc (805) 878-9879 February 5, 2012 at 9:32pm

Wow this is an interesting scenario, Elizabeth. Don't forget to drop a note about the resolution, if any. I'm anxious to hear. There are a lot of great ideas in this post. Sounds like the most expedient solution is finding a cash buyer. Have you decided to take this on?

Good luck!
- ElizabethWeintraub00697006LyonRE > Tni LeBlanc (805) 878-9879 February 6, 2012 at 4:28am
  
  Yes, I have, Tni. It's an interesting challenge. A more rational person would run like the wind, LOL.
ElizabethWeintraub00697006LyonRE February 5, 2012 at 11:51am

It depends on how you do it, Thom. I just had Chase approve a short sale with a seller contribution. I wrote them a letter explaining the situation. I also included the contribution on the HUD. Don't just put it on the HUD because it will get rejected. You have to explain why. And do it upfront, on the front end -- not after negotiations.
Wendy Smith February 5, 2012 at 7:12am

Once Chase put the $25,000 incentive in writing, they are bound by federal regulation to pay the incentive and not allow it to be "spent" on junior liens or other expenses. How about offering LCS a prom note, then the seller can pay off the prom note after closing using some or all of the incentive cash. That is perfectly legit.
- ElizabethWeintraub00697006LyonRE > Wendy Smith February 5, 2012 at 11:57am
  
  Hey Wendy: I like the idea. We can see if Chase will allow it because the prom note would have to go on the HUD. Thank you for thinking outside of the box. That's what it takes in short sales!
  - Joseph Alfe > ElizabethWeintraub00697006LyonRE February 5, 2012 at 7:03pm
    
    Prom notes do not go on the HUD, cash contributions do.
    - ElizabethWeintraub00697006LyonRE > Joseph Alfe February 6, 2012 at 4:27am
      
      Yes, the prom note would have to go on the HUD as a POC item.
      - Joseph Alfe > ElizabethWeintraub00697006LyonRE February 6, 2012 at 5:58am
        
        No, it wouldn't. Why would it? RESPA is for disclosing actual cash transactions. A note is not a transaction and should not be on RESPA unless there is some form of immediate payment. If your title company is doing this then they are overstepping their bounds.
        
        ElizabethWeintraub00697006LyonRE > Joseph Alfe February 7, 2012 at 8:23am
        
        Because we disclose all aspects of the transaction, cash or otherwise, on the HUD to avoid being accused of short sale mortgage fraud -- disclosure disclosure disclosure.
        
        Kelly Walters > ElizabethWeintraub00697006LyonRE March 9, 2012 at 4:39pm
        
        I've never seen a prom note appear on a HUD. I'm in NC where we are required to use an attorney at settlement. I don't know if that makes a difference. The attorney executes the prom note and returns it to the lien holder, but I've never seen it on a HUD.