Again, we were shocked but excited by the Short Sale Approval letter language waiving Bank of America’s and its investor’s right to pursue further judgment or deficiency after the short sale. In the interest of educating and of determining what type of Bank of America short sale may result in a deficiency waiver, let’s take a look at the details that lead to the approval.

The original loan amount was $220,562.00 and was taken by two sisters in order to purchase a Fort Myers home. Early in 2010, one sister lost substantial income and was not able to contribute her share of the payment. The other sister could not afford the entire payment on her own. Because of the hardship, the sisters listed the property for sale in early June. The received an offer on June 7, 2010 and the file was initiated through the Equator system on June 11. Incredibly, the file was approved in just 29 business days from the date of the Equator initiation!

A copy of the approval letter has been made available. In it you will find that the approved offer price was $60,000.00. Total closing costs were not to exceed $7,003.17, including realtor commissions capped at 6% or $3,600. Bank of America’s investor’s approved net was $52,996.83, or roughly 24% of its original loan. The approval letter contained sections dedicated to Promissory Notes and Cash Contributions; but neither were applicable in this situation and the sellers were not required to sign a Promissory Note or make a cash contribution at closing.

We have also made available the only Deficiency Evaluation Tool (DET) we have ever seen. In fact, we just Googled “Deficiency Evaluation Tool” and got only one unrelated hit. We are working with Bank of America to find out more about the DET, but on its face its title seems to do a fine job of describing the DET’s use. It seems that Fannie Mae (FNMA) and/or Bank of America will use this tool and its questions to determine whether it should waive the approval’s deficiency language or not. Here are the questions along with the answers related to our transaction:

1. Select state in which property is located (ok…not really a question, but it’s there!) [Florida]
2. Owner Occupancy: Was the home owner occupied at the time of the origination? [Yes]
3. Purchase money: Did the first lien finance the home purchase? [Yes]
4. Is the first-lien investor non-delegated? [No] (we do not understand what this means and are working on an answer)
5. Is there a BAC second lien? [No Second Lien]
6. Is there a mortgage insurer (MI)? [No MI]
7. Is FNMA (Fannie Mae) the investor? [Yes]
8. Have we received an appropriate contribution, or has FNMA agreed to close without a contribution? [Yes]

Based on the DET we received and the answers provided, it may be safe to create a checklist for determining the likelihood of deficiency waivers for Bank of America-servicedFNMA loans.

If you have any questions, please feel free to call me at (230) 985-4142.

- Chris