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SEEKING WISDOM: BofA 1st, HELOC 2nd, PLEASE?

Posted by Ron Payne on March 2, 2011 at 10:56am in Short Sale Discussions

I joined Short Sale Superstars today to pose this question (after Pirating your wisdom for a few weeks).  I have an upcoming listing Bank of America (I know--the only short sale that I wasn't successful with, and I do have their new instructions https://realestateagent.bankofamerica.com/default.aspx ).

 

My question is the vague, but let's say approx. $500k owed on the BofA 1st, and the 2nd is a Compass Bank HELOC approx. $95k.  Probably can cover the 1st in a normal sale situation.

 

To provide the least exposure to my clients now and in the future (deficiency, collections, etc) what can you tell me...hypotheticals welcome.  SINCERE Thank you in advance.

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Replies

  • Trina Gonzales April 5, 2011 at 11:43pm

    It's best to check 2nd lien laws in respect to HELOCs.  They vary widely by state.  Is your client's HELOC a purchase money?  I've found that if these are purchase money most HELOC's, collection agencies etc are a lot more pliable.  In California, the going rate is about $6000 or 10% of the amount of the credit line.  If they're purchase money HELOCs, these lien holders can't seek deficiency judgement in California.  See if you have a similar law.  

    @ Caryn

    Never go by what the person in correspondence verbally tells you about what they will or will not accept.  Send in your package with a HUD1 showing the proposed settlement amount.  Unless you're being told that by an actual "negotiator" assigned to your file, it's probably a customer service person who just wants to collect debt and has absolutely no clue about a shortsale!  Hope that helps a bit.  Good luck to you.

  • Caryn Shannon April 5, 2011 at 12:32pm

    I have a similar situation where the 2nd is Compass.  Seller wants to discuss paying the balance ($16K) in full as an "unsecured" debt.

    they are current on payments.

    Sale of the property will cover the 1st lien---just barely.

    I called Compass yesterday to check on my Auth Letter and was told this would NEVER be agreed to.

    Do you have contact info for someone who can "think" and help us work this out?   Thanks.

  • Brian Del Terzo March 6, 2011 at 12:02pm
    I am not sure your question is very clear.  1st, are you suggesting only the HELOC is going to take a hit.  Have your sellers stopped making payments to the 2nd mortgage?  If they haven't, even before they do so, getting an LOA into Compass Bank to discuss options would probably be the smartest first step.  Do your seller's have a legitimate reason to sell or hardship? Do you know the deficiency laws in your state?  What happens to the 1st in foreclosure?  What happens to the 2nd?  For example, in MN, most 1st mortgages are forgiven in foreclosure by advertisement, however the 2nd will only lose the lien against the property while retaining the right to pursue the balance of the underlining note.
  • Rick Trono March 3, 2011 at 6:16am
    Ron...At this point Do you have a short sale situation?
  • Bob Bridge March 2, 2011 at 1:53pm
    The second is a heloc so they will almost always want a note or large cash like 9500. BofA will only allow 6K max to go to the second. You'll have to see if BofA will allow the difference to go on the HUD as a cash contribution from the buyer or seller. With any luck the second will just take 6K. If you can show the second what the sellers did with the heloc it will help. They want to see that they actually used it for the property. Good luck.
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