Replies to This Discussion

Permalink Reply by Raymond Kennedy on April 3, 2011 at 5:14pm

I think there is a misunderstanding on what a submission of the HUD actually is. We as agents are not offering anyone anything, it's not our money to offer and we don't have any idea on how much we can offer since the lien holders won't provide this answer until the tail end of the transaction. We are providing numbers to a lien holder so they can respond on what their bottom line is. It's a starting point, a negotiation. Providing different numbers to both lien holders without actually knowing what their response is can not be fraud or unethical because they have not provided and will not provide us with anything to base this off of. By the very nature of that we are simply making an educated guess. If they want to argue this than they can provide us with what their bottom line net before we submit, their choice. We are playing their game and their rules. It's negotiations just as if you were to submit a counter for a buyer at much lower than you know they would take, it's called negotiation. Don't over think this, understand that fraud is purposely deceiving someone in order to further your own interests. We can't purposely deceive someone if they won't provide us with information that would allow us to do so. Until that happens we have to play their game which is negotiations. They have their tactics, we have ours and ours is somewhat limited. Either side can argue the other is not playing fair but their is no morality in contract law and there is no morality in negotiations. Because of this, negotiations and legal real estate contracts will always ride a very thin line when it comes to ethics and various opinions about what is right and wrong.

 

Do what you feel is comfortabe but despite what you may think and with any knowledge of how banks negotiate, you should know the two separate HUDS do make a world of difference on some files. Not doing so in some cases could be the difference between a Short Sale closing or your clients going to foreclosure. 

 

 

 

 

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Permalink Reply by The Negotiator on April 3, 2011 at 5:20pm

That is exactly what I said in my last 1 sentence post ... Seriously, though, well said and you are right! My attorney in Florida says 2 HUDS is just fine as long as the final HUD is accurate and dispersed properly.

Raymond Kennedy said:

I think there is a misunderstanding on what a submission of the HUD actually is. We as agents are not offering anyone anything, it's not our money to offer and we don't have any idea on how much we can offer since the lien holders won't provide this answer until the tail end of the transaction. We are providing numbers to a lien holder so they can respond on what their bottom line is. It's a starting point, a negotiation. Providing different numbers to both lien holders without actually knowing what their response is can not be fraud or unethical because they have not provided and will not provide us with anything to base this off of. By the very nature of that we are simply making an educated guess. If they want to argue this than they can provide us with what their bottom line net before we submit, their choice. We are playing their game and their rules. It's negotiations just as if you were to submit a counter for a buyer at much lower than you know they would take, it's called negotiation. Don't over think this, understand that fraud is purposely deceiving someone in order to further your own interests. We can't purposely deceive someone if they won't provide us with information that would allow us to do so. Until that happens we have to play their game which is negotiations. They have their tactics, we have ours and ours is somewhat limited. Either side can argue the other is not playing fair but their is no morality in contract law and there is no morality in negotiations. Because of this, negotiations and legal real estate contracts will always ride a very thin line when it comes to ethics and various opinions about what is right and wrong.

 

Do what you feel is comfortabe but despite what you may think and with any knowledge of how banks negotiate, you should know the two separate HUDS do make a world of difference on some files. Not doing so in some cases could be the difference between a Short Sale closing or your clients going to foreclosure. 

 

 

 

 

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Permalink Reply by Raymond Kennedy on April 3, 2011 at 5:28pm

An answer to your question. The 2nd lender can and in rare occasions have asked for a payoff on the first and vice versa. The answer is simple, if they want it, you have to provide it or they could simply decline the Short Sale / close the file do to non-compliance. In relation to the multiple HUD's, we don't know what the first or second will approve until the end so you would only have to provide the total net minus what the 2nd is willing to take (which they already have a number in mind). I know some 2nd's will base what they will take off what the first is getting.

 

I had one file where the 2nd lien holder negotiator would not budge. After escalating the file and a true decision maker looked at the numbers I provided they realized the first was taken a much larger loss than expected so they approved it. This is an example of where it worked out in my favor, it could have easily gone the other way which is why knowing the numbers is an extremely important part of negotiations.

 

Smitty said:

Thom,

 

You wrote "RESPA" in your response.  What RESPA violation is occuring here?

"By providing two different HUDs to two different lenders for the same transaction, you are deceiving both lenders.  Further you are creating a worse situation for both the borrower and you.  What happens when ASC (Wells) comes back to you and says - nope, only $3,000 to the 2nd and HFC comes back and says we want $11,000 at a minumum?"

 

I don't see how I'm creating a WORSE situation.  If Wells is only going to allow $3000, then that's it.  How is that any worse than if both initial HUDS were the same?  I still only alloted $8000 to HFC so I STILL have to negotiate for $5000 somewhere.  Or in your scenario $11,000 to HFC and Wells only allowed $8,000.  I'm in the SAME exact boat!!  I still have to negotiate somewhere for the difference.  The final HUDS in all closings match.  It's the preliminary numbers I'm negotiating like in every transaction.

I'm not deceiving.  I'm negotiating...until the final HUDS.  Even the LENDERS know the numbers are preliminary which is why 24-48 hrs or so before closing the lender gives their stamp of approval on the final HUDS.  They expect the numbers to be estimates up until closing

Thom Colby said:

Smitty,

 

I never said there is a "Violation".

 

Thom Colby

Smitty said:

Richard and Thom,

Where is the violation?  Are you saying every first HUD you submit is an ACTUAL FINAL HUD?  No one here can give exact numbers intially. We ALL give preliminary HUD's based on ESTIMATES. Water payoff ESTIMATES, Sewar payoff ESTIMATES, closing ESTIMATES, tax ESTIMATES.  I'm ESTIMATING the a payoff to the second lender of $8000 not knowing if they will accept.  I'm ESTIMATING to the first lender that they will allow $13,000 to the second.  My lawyer prepares these HUDS, so if I was doing something illegal, I'm sure I'd know.  Only until we know who will accept what amount for a payoff can we try to prepare a FINAL HUD.  If the first lender OK's $13,000 to the second, and the second lender accepts $8,000 then I call and tell them I can get them more money. 

 

Both HUDS match at closing.  I think everyone is missing my initial question.  Does the second lender have a right to know what the first lender is getting BEFORE the FINAL HUD? 

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Permalink Reply by Ben Benita on April 4, 2011 at 12:39am

I have to agree with Jesse...we generally use 2 HUD's INITIALLY.

 

Where I think Smitty missed the mark is NOT having full disclosure. 

We have negotiated TONS of short sales and never had any issues INITIALLY telling teh first lien that the second will LIKELY agree with 10% of what they are owed, and, telling the second lien holder the first will LIKELY agree to $3000.

 

3 Points to keep in mind:

1)  It is RARE that first liens will NOT approve $3000 to a second, and, it is RARE that a second will not agree to 10% of what they are owed

and

2)  Everyone here seems to miss that this is ALL about negotiations, getting the first and second lien to "meet in the middle".....sometime seconds will not even start teh process until they see, in wriitng, what the first lien will offer them. 

and

3)  And here is the BIGGIE - 99 times out of 100 the first and second liens will want to see final prelim. HUD showing what each other has agreed to as per the approval letters....remember - FULL DISCLOSURE ALWAYS.

 

I do not see anything wrong with the above, again, as long as everything is fully disclosed prior to closing.....

Hope that makes sense?

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Permalink Reply by Smitty on April 4, 2011 at 1:23am

Ben, I'm not going to withhold from the second if they ask for a final prelim.  So I'm disclosing when I need to.  You and I do the same thing, so I'm certainly not missing the mark. 

 

Everything matches at closing.  It seems like many that have replied to this thread do the exact same thing that I'm doing.  I think everyone is missing what I asked initially which was does the second lender need to see what the first gets on a preliminary.  Can that be left blank INITIALLY to see if they will approve.  I realize that they will eventually see the amount.

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Permalink Reply by Ben Benita on April 4, 2011 at 1:36am

Smitty - my apologies.....lots to read here and I just did a "quick glance" on your post.

 

To all - I think with the homeowners best interests in mind, getting this to closing and avoiding foreclosure, as long as everything is ultimately disclosed (know that ALL FINAL HUD'S ARE REVIEWED BY THE INVESTORS ON THE NOTES AS WELL), I think everyting is ok....

 

One thing I PREACH AND PREACH AND PREACH AND PREACH about short sales:

The guys and girls we deal with in loss mitigation ARE called "negotiators" for a reason!!!

;-)

 

All my best to everyone.....

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Permalink Reply by Linda Zemler on April 4, 2011 at 4:39am

I've found that many 2nd's want to know what kind of loss the 1st is taking before they approve a short sale. (Especially if the 2nd is for a large amount in comparison to the first lien). When our escrow agent was making HUDs that showed closing costs and then just left the remaining amount on line 603 in a lump sum for both 1st and 2nd lien holders, neither of them liked it. They both wanted to see it split out to show what each was getting.

I love the 2 HUDS approach for preliminary (negotiating) tools.

P.S. if you create a HUD that shows the 2nd lender what they'll recieve but shows nothing for what the 1st lender will receive. . . (then all they have to do is look on line #603 and they'll see what the 1st is getting??????? No secrets here. 

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Permalink Reply by Jeff Payne on April 4, 2011 at 9:27am

I agree with Ben for sure, negotiate, negotiate, negotiate and look out for your seller.  Discloure is the key!

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Permalink Reply by Aaron Ayotte, Short Sale Monkey on April 4, 2011 at 9:51am

I totally agree with the "submit only 1 HUD responses".

 

Bottom line.....1 HUD showing Net to the 1st, and Net to the 2nd.

 

You'll have to send the approval letter from each to the other anyway, so how does having 2 HUD's help.  Short sales are complicated enough...SIMPLIFY!!

 

 

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Permalink Reply by Ben Benita on April 4, 2011 at 3:49pm

Aaron - if you track your files properly, it is actually MUCH easier to use 2 PRELIMINARY HUD's for negotiating....

 

When it it gets complicated - send a HUD with a $10k payoff to the second, which they approve, then, the first says they will only pay $3000 MAX.

Depending on your second lien (and more importantly your ability to negotiate), you MAY have to start the entire process over b/c an approval has been issued....ask me how I learned this!!!!

 

;-)

 

Again, FULL disclosure....ALWAYS....both lien holder will ultimatley see the final signed and noatrized HUD, no way around it (and I would not suggest you try)!!!!

 

Keep negotiating for yuor homeowners!!!

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Permalink Reply by Raymond Kennedy on April 4, 2011 at 4:41pm

One HUD doesn't simplify the Short Sale it complicates it. Two Huds will simplify the Short Sale and it and will cut your negotiation time down substantially if handled appropriately. It's a simple negotiation tactic and should not be overlooked on certain files. This is all done before any bank issues an approval letter or any indication of what they will take and/or pay out hence the term "negotiation" termed by the lien holders themselves. Once you know that than you can use one HUD.

If done correctly two lien files don't take any longer than single liens. In some cases I have seen a lender push on a file when you advise them the other lien has already approved (don't lie about this because they will ask for the approval letter depending on what position they are in). That will never happen with a single HUD unless your numbers line up perfectly on the first submission, does happens but not often. Take control of your own file, don't let the lien holders control it anymore than they already do. 

Aaron Ayotte said:

I totally agree with the "submit only 1 HUD responses".

 

Bottom line.....1 HUD showing Net to the 1st, and Net to the 2nd.

 

You'll have to send the approval letter from each to the other anyway, so how does having 2 HUD's help.  Short sales are complicated enough...SIMPLIFY!!

 

 

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Permalink Reply by Wendy Rulnick on April 5, 2011 at 12:27pm

I understand what Smitty is saying.  Substitute "net sheet" for HUD.  Net sheets used to be fine for short sale packages. My goodness, It's just a draft  HUD.  What other format do you want?  It's a proposal in a format that is recognized.... For example - Junior Lien - you get "X", do you agree?  Senior Lien - you get "Y" and give Junior Lien "X" (maybe ask for more with your proposal), do YOU agree? He is just using the HUD format as a proposal to start negotiations.  It's not THE HUD for closing.

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