Hi Everyone. I am negotiating a short sale where the first is a Freddie Mac serviced by Nationstar and the second lien holder is Cenlar. Cenlar wanted a $43K payoff and I negotiated down to a bottom line of $12K. The Freddie Mac guideline is to pay no more than $6,000 to the second lien holder. The buyer had agreed to reduce the closing cost credit by $3,000 and both agents will be pitching in $1500.00 to come up with the other $6,000. I had a new HUD done and sent it to Nationstar. They are refusing to allow this to take place. Nationstar said that these are Freddie Mac's guidelines and that we will not be allowed to pay Cenlar any more than $6000 --period. No contributions will be allowed.
Has anyone been able to get around this situation? If so, how did you do it? Anyone have any creative ideas?
I have escalated this with Freddie Mac and should be talking with a case manager within the next few days, but the supervisor I talked with today for over an hour said that Freddie Mac will not bend these rules.
Thank you for any ideas!
Suzanne Martin
**********************************
like buttons
Comments
There are many lenders and investors that have no issue with any party to the transaction, including the agents, making payments to junior liens or other expenses not approved by the short sale lender. In fact BofA and other large servicers place this right in their approval letters.
I've had buyers and sellers pay towards the junior lien. I have it done at closing and before closing. Always with full disclosure to the lenders.
"Please be aware that any additional fees that were not approved on January 14, 2013 will not be covered
by Bank of America, N.A., and will become the sole responsibility of the agent, the buyer or you to pay at
closing."
However FNNMA and FREDDIE both have this as part of their new guidelines for the standard short sale.
Allowable Subordinate-Lien Payments for Standard Short Sale/HAFA II and Deed-in-Lieu of Foreclosure
Servicing Guide, Part VII, Section 604: Preforeclosure Sales and Section 606: Deeds-in-Lieu of Foreclosure
Fannie Mae is requiring any payments to subordinate lienholders to be paid from the sales proceeds at closing for either a short sale or deed-in-lieu of foreclosure, in exchange for a lien release and full release of liability for the borrower. Allowable payments from the sales proceeds to all subordinate lienholders to facilitate lien releases must not exceed $6,000 in aggregate.
The servicer may offer the maximum payment of $6,000 for subordinate lien amounts of $6,000 or greater in order to facilitate the transaction. If there are multiple subordinate lienholders, the servicer has discretion to divide the subordinate lien payment among subordinate lienholders so as to maximize the chances that all subordinate lienholders will release their liens. The servicer must not authorize the settlement agent to pay more than an aggregate of $6,000 of sale proceeds as payment(s) to subordinate mortgage lienholders. If an individual subordinate lien, or total subordinate liens are less than $6,000, the payoff can only be up to the subordinate lien amount owed. No exceptions will be made to the $6,000 aggregate cap.
Prior to releasing any funds to a subordinate mortgage or lienholder, the servicer must obtain written commitment from the subordinate lienholder that it will release the borrower from all claims and liability relating to the subordinate lien in exchange for receiving the agreed-upon payoff amount. The servicer must require the closing attorney or agent to either confirm that they are in receipt of this commitment from subordinate lienholders or request that a copy of the written commitment provided by the subordinate lienholder be sent to the servicer with the HUD-1 Settlement Statement which is provided in advance of the closing.
Subordinate mortgage or lienholder(s) may not require contributions from either the real estate agent(s) or borrower as a condition for releasing its lien and releasing the borrower from personal liability.
So.....the answer is that sometimes you can and sometimes you can't.
The only suggestions I have heard through this network I am not sure were completely ethical although agents said they done it. I have repeatedly experience that no parties, buyer, seller, or agents can contribute to the 2nd lien. But you can cut a side deal with Cenlar outside of closing that you will send a check for the balance beyond the 6K at closing. If it is on the HUD, Freddie Mac will not allow. That is what I've experienced.
Call me to discuss further if you'd like - 864-485-9283
Hi Kevin. Thanks for your response. The second was already widdled down to $12K from $43K and they told me they would rather foreclose rather than accept $6,000.00 as a payoff. I don't think the buyer wants to pay the $6000 difference but I haven't asked her yet. It's kind of hard for buyers to think they had to pay MORE than LIST price already and then ask for an ADDITIONAL $6000 cash. However, I have a back up offer that may want to do it. I am still hoping I can get the second to accept the $6K from the first lien and be done with it but I am not hopeful at this point. Thanks again.
If the subordinate lien holder will not release its lien for $6,000 (or a lesser amount if there are other subordinate lien holders), can the borrower or another party contribute to the lien release payment?
If the subordinate lien holder is accepting $6,000 (or a lesser amount if the $6,000 is being divided among more than one lien holder) in exchange for a release of its lien, it cannot require or accept additional funds from the borrower, real estate professional(s), buyer, or other party to the short sale transaction. When funds are offered from the short sale proceeds to satisfy a subordinate lien, the intent is to obtain a complete settlement of the lien and debt using those funds alone.
http://www.freddiemac.com/singlefamily/service/short_sales_FAQ.html#18