2nd Lien Release prior to ATP for FHA/PFS
I have a FHA Wells first, with a Citi second.
I've applied to the FHA Preforeclosure Sale program. The mortgagors and the property have qualified. So, after 40 days of deliberation, Wells has completed everything needed to admit them to PFS. All of this was before the offer was received.
Now, Wells is saying that they need a statement from Citi stating that Citi will release their 2nd lien for the $2,500 FHA consideration, BEFORE Wells can admit them into PFS.
But, Citi wants the proposal, only after the offer, which we just accepted last week.
This effectively nullifies the PFS program, which is suppose to allow the borrowers to get admitted to PFS, together with the minimum net, so they can market their property.
Wells is saying, if we can't get the written release from Citi in a few days, then they must cancel the file.
I'm thinking, this just can't be Wells policy. Does anyone have Wells-specific experience on this? On with another Lender? And, does anyone have a contact reasonably senior in FHA short sale at Wells I could call?
This just seems wacky to me.
Thanks, Michael.
Replies to This Discussion
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Permalink Reply by John Edelman on
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I do have quite a bit of Wells specific experience - but I am a little confused as to why there is a 2nd with Citi.
Was this a lien after the initial purchase - for some type of improvement?
Typically on properties with FHA loans, there is only one lien. -
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Permalink Reply by Michael Schneider on
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John,
Yes, I think is was primarily for home improvement. But, it was not a "sales finance" loan, it is a CitiMortgage fixed, second.
And, yes it was originated after the FHA 1st.
I don't know FHA origination guidelines all that well...
FHA PFS guidelines, eg 2008-43, discuss the handling of secondary liens, so clearly they are anticipated/allowed by FHA.
What is you viewr of the PFS policy that Wells is following here? -
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Permalink Reply by Elise Fay on
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Yes I just went through that process with Wells. It took forever for them to even talk to us about the PFS and the approval process. My client had a 2nd with Chase. Wells instructed me to get a lien release from Chase before they would even approve the PFS. I also thought that was a bit wacky and there was some delay because I thought I would have to get that approval AFTER the PFS. Wrong...so I worked hard at convincing Chase that they had to get me the lien release for $1500. It took about 3-4 weeks for Chase to get to it..I then submitted it to Wells as a contingency for approval into PFS. Once I got it to Wells, they dragged their feet. Now I had Chase hounding me for a closing date. They kept calling me and threatening me because if we did not close soon enough they would close the file and we would go to foreclosure.
The long and short of it is...it can be brutal to play both ends of this. The process took about 6 months if not more before everyone agreed and a PFS was issued. In the end my clients did not want to play and opted for a foreclosure. I now have another one with Wells, only 1 lien holder. I just got the approval for PFS this weekend. The process was started on March 17th. Not anxious to do many more of these. Good Luck -
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Thanks, Elise.
Odd policy.
Effectively, Wells is saying, at least in many cases, I think: No PFS if you have a second lien. Citi will not look at the file until the offer is in. Then, the Wells PFS approval is contingeny on the impossible.
More than odd, actually. I would think that FHA would not want the disparate treatment between Lenders. And, if I were Wells compliance, I would question this. If there were a 'protected class' overlay based on the presence of the second lien, then this could be a fair lending issue.
Just seems misguided.
michael -
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I just read the PFS ATP and they do say on that they there is a certain amount they will contribute to the 2nd lien release. From what I am reading they will allow it. Also if there is a certain amt that the 2nd wants over and above what the 1st will allow those monies will come out of any monies that the 1st lien holder will provide to the seller at successful closing...those numbers are based upon the actual price and time frame before an offer is received. ( I think I read this right???)
Chase gave me a hard time about giving a lien release and I just flat out told them that if they don't it will go into foreclosure and they will nothing. I told them it was an FHA and those were the rules. I was firm and they backed down a bit.
Have you seen a HUD approval yet? They are pretty standard. I will be happy to send you a copy. -
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Elise,
ML 2008-43, the definitive reference for PFS, does not clearly prohibit the Wells policy. There is language in there along the lines of "if the 1st believes that the secondary lien issues can be resolved, then they can admit the mortgagors into PFS during the sales process to allow the mortgagors to secure release" (from memory....)
So, Wells is taking the most restrictive interpretation of this, which just feels un-Wells-like. Meaning, they believe it can be resolved, only if it is resolved already.
I've had Servicers admit a client to PFS with much less promising outcomes than in the Wells case I'm dealing with.
FHA will contribute up to $2,500 for 2nd lien release. But, at $2,500 there is no borrower incentive.
Regarding "additional money to the 2nd" policies on this seem to be vary quit a bit. Some Servicers flatly state "how you get that money is between you and the second".
The timeframe determines the required minimum net proceeds as a percent of appraised value 88%, 86% or 84%, I believe.
I was hoping to seeing another ATP form from Wells.....we shall see. -
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Thanks..I will read up on it. Where can I find ML 2008-43? Just google it?
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Michael
Great info...I just found it and read thru it. It says exactly what you said, from memory :) The Wells that I had did take it literally and wanted to get the lien release because they NEEDED to see a Clear Title. In fact because of my homeowner's common last name, they found other liens that were found to be unrelated to my sellers even after our Title Co. cleared them upon getting the sellers ID statement. So I guess Wells is playing by the hard rules on this. -
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Permalink Reply by Bryant Tutas on
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I have a PFS with Wells Fargo right now and PNC on a 2nd. I had no issue at all getting the HUD 900-45 without having a lien release from PNC. My only issue is PNC wants $6,500 and of course Wells Fargo can only give $2,500. Still trying to sort that out.
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Bryant,
Thanks, Bryant. This is why I posted this, as I find it hard to believe that Wells would have a policy of "2nd lien release prior to admitting into PFS", as this is pretty clearly not aligned with the intent of ML 2008-43.
I shall be working this this week... -
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Permalink Reply by Rachel Diedrich on
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I am having the same problem. Litton is the Jr. Lien Holder and won't provide a lien release of $2500 to Wells and Wells is saying that they are going to cancel the file if they don't get it. This makes no sense! Has anyone had any luck getting Wells to back down?
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Did you figure anything out with Wells?
Michael Schneider said:Bryant,
Thanks, Bryant. This is why I posted this, as I find it hard to believe that Wells would have a policy of "2nd lien release prior to admitting into PFS", as this is pretty clearly not aligned with the intent of ML 2008-43.
I shall be working this this week... -
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