Replies to This Discussion

Permalink Reply by Coleen DeGroff on December 17, 2011 at 4:26pm

Thanks Brian. :)

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Permalink Reply by SE Davis on December 18, 2011 at 2:27am

I have closed several short sales with the seller having a recent BK7 discharge.

Both lien holders still have to approve the short sale like any other circumstances.

As far as the second lien holder goes the chargeoff of their default balance cannot be associated with that seller post BK discharge HOWEVER the BK7 discharge document does not obligate the subordinate lender to issue a "satisfaction and release" of their lien.

You will have to negotiate a "satisfaction and release" from the second lien holder. That may cost between $5,000 and $6,000 for the "satisfaction and release" of their lien and its legal for them to do so.

Have that larger $6,000 amount written into the Prelim HUD1 in your short sale proposal to the first lien holder along with a copy of the one page discharge letter.

I have had many first lien holders pay those second lien holders as as a condition of the first lien approval. Sometimes they only approve $3,000 to be paid to the subordinate lien holder depending on their Net and NPV calc.

When that 1st lien written approval comes back with a dollar amount designated to the 2nd forward a copy of it to the second lien holders short sale negotiator and typically they will approve it without a lot of drama or unreasonable counter offer demands.

In one specific case of a BK7 discharged seller case I had three lien holders all with very large default balances. Same thing I issued a Prelim HUD1 to the second lien (as if they were the 1st lien holder) holder in the short sale package to them. I ask them to pay $100,000 to the private third lien holder.

The second lien holder bucked and groaned but then counter offered with a $50,000 payment to the third lien holder and we closed with smiles all around.  

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Permalink Reply by Scott Korbin on December 18, 2011 at 3:43am

I would check with a BK attorney in my state. I suspect that the Trustee will want to see those dollars distributed to creditors. But I could be wrong. I often am.

Scott

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Permalink Reply by Roger on December 20, 2011 at 5:47pm

Yes- do check with a BK attorney.  There may be penalties associated if you don't depending on the creditors involved ithe  BK.

 

Roger Fountain

Pitbull Consumer Advocates

www.pitbullconsumeradvocates.com

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Permalink Reply by Ben Mills on December 18, 2011 at 4:39am

Hi Coleen,

My seller had told me about a letter which he dug out of the trash, wiped the mustard off, and I called to confirm they would honor it as it had expired....They said they would.

I closed a Chase (with the Outreach Program) where my client received $20,000 for the program and $3,000 for moving. He was in bankruptcy at the time so we were contingent on court approval as well. Once his bankruptcy attorney realized he was receiving monies, he double his fee for "legal entanglement". In the end, they were more concerned over receiving a 1099 so the decision was made to forego the bankruptcy. After 14 days for notifying the creditors of the dismiassal and 5 days for a judges signature, we were able to close.

In general, do a complete package with Chase with Outreach Program ($20,000) on the Hud1...try to see if there is the $3,000 credit as well.

Have the attorney check the title work to see if there is a second lien. It may not have been included in the bankruptcy.

The Heloc needs pretty much the same package along with the approval letter from the first. Typically Chase will offer Citibank $3,000 to release the lien (assuming there is one) but keep in mind on Heloc's, most are recourse loans depending on your State law. I am seeing promissary notes and deficiency judgments with these.

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Permalink Reply by Ludora Cooper on December 21, 2011 at 6:57am

Can you give me more information about the Chase Outreach Program? How does it work? Is it for Sellers wanting to discharge a BK Ch. 13 and pursue a Short Sale? And they do qualify for the 3000 in Relo funds?

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Permalink Reply by Ben Mills on December 21, 2011 at 7:27am

I was introduced to the Chase Outreach Program by my seller who was told by his mortgage company to seek out an agent to sell the home. He had received a letter from Chase encouraging a short sale by offering $20,000 with this program. The date had expired on the letter but I was able to get Chase to extend it in our case. Chase instructed me to add the $3,000 (HAFA) to the hud1 as well. The CMA was approx $240,000. Line 1304 showed Chase Outreach Incentive To *Client's name* $20,000 and line 1305 showed HAFA Incentive To *Client's name* $3,000

That was in the Spring but I just was asked last month to work with a potential client who was offered $30,000 through this program on a property that comps about $475,000. So it appears the program still exists but you may have to ask or better yet, I would have the seller ask Chase.

One issue for the BK attorney will be trying to justify why your client should be able to keep these funds as the court will need to approve the hud1. Also, in our case, the BK attorney doubled his fee once he found out the client was going to receive money. He claimed it was for all the "legal entanglement".

In our case, the client decided to withdraw his bankruptcy as it appeared it would be the quickest option when it appeared the buyer would walk as the bankruptcy was dragging out. I would definitely seek the attorneys advice before suggesting that though.

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Permalink Reply by Ludora Cooper on December 21, 2011 at 7:58am

Hi Ben, Thanks for the response...Let me be sure I am correctly following the sequence of events in your statement.   1. Your seller was in an active Ch 7? 2. Chase sent a letter offering them $30,000 cash to do a short sale during this time? 3.The BK Attorney had to get permission or OK from the courts for the Seller to accept this Outreach Program from Chase and funds? 4. AT what point did you get an offer from a buyer for the property? I'm not sure when you started marketing for a buyer? If this all occured "after" a Ch. 7 was discharged I'm not following why the courts would still need to be involved?

 

I have a relative that's is in a similar situation as THIS one and would like to give her the information. She is currently in a Ch. 13 has a mortg. with Chase. The ONLY reason she filed the ch. 13 is because Chase was trying to Foreclose AFTER they turned her down for a permanent Loan Mod that was supposed to be a Trial plan of 3-months but lasted 9 months with her making "all" the payments. Refused to work with her and set out to Foreclose....

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Permalink Reply by Ben Mills on December 21, 2011 at 8:27am

Mine was active.

Correct, but he was offered $20,000....(Another client was offered $30,000 on a larger sales price).

The letter explaining the program came to the seller which he threw in the trash prior to listing. We dug it out of the trash when I went over for the listing appointment. In fact, the program said it would expire after a certain date. I called Chase to inform them that I was listing the property ; and, to confirm the would honor the program which they agreed. I included the "Subject to Chase Outreach Program" in the listing and mls. I also included "subject to BK court approval".

The hud1 needed to be approved by the court and i had to get Chase to spell out that in a separate letter that they were actually giving the incentive as part of the closing....I tried attaching the original letter which only explained the program.

 

I would call Chase and ask them directly if they would do this program as my person had not made a payment in almost a year...and they practically begged him not to leave.

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Permalink Reply by Lisa Helweg on December 18, 2011 at 5:19am

Way to go Superstars!

Thanks to all for a great question and your very informative answers!

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Permalink Reply by Lola Traylor on December 18, 2011 at 10:29am

Very helpful information...thanks.

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Permalink Reply by Donna McClelland on December 19, 2011 at 11:37am

If you are working with an attorney, the attorney should be able to answer your question.

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