Ridiculous request from Wells Fargo HELOC - what would you do? - Forum

So here's the situation. Home has toxic chinese drywall. Sellers didn't qualify for HAFA. Have a buyer at $40K who is going to rehab the house. Seller has tried to sue the drywall company but they are MIA/bankrupt and its not likely she'll see any money there for some time.

Wells Fargo 1st mortgage has approved the sale price

Wells Fargo HELOC on the HUD is getting $6K, but now also wants $40,500 from the Seller to release deficiency OR $4800 without releasing deficiency

I don't know who owns the HELOC. I was told by a past Wells Fargo negotiator that WF never pursues for deficiency but I'm not sure I can believe that. This house isn't even worth $40K in my opinion. Seller has consulted with an attorney who basically told them tell the HELOC to go flip off because why should they pay a dime if they can't get a deficiency release! I'm thinking what if we counter the HELOC $4800 but they have to give a deficiency release in full. Anyone had any experience with the HELOC being completely unreasonable, and successfully negotiations with them? The HELOC investor seems to believe the Seller is getting some large settlement from the drywall company which is not the case and we've had their attorney also write a letter stating this but they don't seem to care.

Your thoughts and suggestions are welcomed.

If you are in a state where Wells can persue in Forclosure then they have a leg to stand on. Wells Fargo HELOCS in my experience have always been very tough to negotiate full settlement. I had one close earlier in the year where Wells had a $180k HELOC, they wanted $100k plus to settle. Wells accepted the $18k that we were able to get them from the first lien holder to release the lien only. The sellers were not in a position to settle at closing with the demands in place and took their chances that they would be able to negotiate a better settlement post closing. They just finished their negotiations last week (7 months later) and settled the balance for just over $15,000. In this situation, the sellers were much better off settling the deficiency post closing then they would have been at closing.

Always prep your sellers that they may have to contribute to closing if there is a HELOC and they want to settle, or that they may need to negotiate a post closing settlement. There are tricks and occaisions where the transactions can generate enough money to settle a second, but this is more the exception then the rule.

Replies

Sam September 28, 2011 at 5:35am

If you are in a state where Wells can persue in Forclosure then they have a leg to stand on. Wells Fargo HELOCS in my experience have always been very tough to negotiate full settlement. I had one close earlier in the year where Wells had a $180k HELOC, they wanted $100k plus to settle. Wells accepted the $18k that we were able to get them from the first lien holder to release the lien only. The sellers were not in a position to settle at closing with the demands in place and took their chances that they would be able to negotiate a better settlement post closing. They just finished their negotiations last week (7 months later) and settled the balance for just over $15,000. In this situation, the sellers were much better off settling the deficiency post closing then they would have been at closing.

Always prep your sellers that they may have to contribute to closing if there is a HELOC and they want to settle, or that they may need to negotiate a post closing settlement. There are tricks and occaisions where the transactions can generate enough money to settle a second, but this is more the exception then the rule.
Brent Innocenzi September 27, 2011 at 2:56am

Wells Fargo HELOC, in my experience isn't like any other lender. They ALWAYS want a substantial contribution or a note. I've always been able to negotiate around with any other lender, but them. Every file I've had with them seller had to participate. I'd love to hear how other agents/negotiators got around this w/ Wells Fargo HELOC.
Justin September 26, 2011 at 12:49pm

here we go again on deficiency! These attorneys and their self professed knowledge of how to negotiate and what to do. Oy vey. What is the unpaid balance?
- Liane Jamason > Justin September 26, 2011 at 3:36pm
  
  $46K. So basically they want ALL their money back. It's laughable!
Smitty September 26, 2011 at 12:09pm

Negotiate it. I just had a high end property with BOA tell me to release deficiency they wanted $40,000. We said no way and went up to $10,000. BOA came back with $25,000 and we got the approval a week later.

To be honest I HATE HELOC's. I always tell the homeowner they MAY be required to bring $$$ to closing and to be prepared.

Thankfully my situation worked out, but I had Greentree reserve their rights and no matter what we offered they were standing their ground. Good luck.

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