The knee jerk reaction by many is to refuse to sign a note upon a junior lien holder’s demand. One may successfully argue that position. However, in the end if the junior lien holder will not let up the Borrower is not in any worse position if they sign the note.First, they already have a note with that lender on which the lender will sue. This new unsecured note replaces the original note that is secured by a mortgage. The Borrower can always attempt to settle that new note at some point in the future.The main advantage in signing the note is that the Borrower will have avoided the foreclosure and any possible deficiency judgment that may occur on liability to the first lender. Furthermore, in avoiding the foreclosure they may be eligible for a conventional mortgage once the Borrower does not have any mortgage late payments in the past 12 month cycle.Basically, we recommend all attempts be employed to avoid the proposed note and to seek a full release of liability. Typically, as a last resort the Seller may be able to offer some additional money at closing in lieu of the note. However, in the end there is virtually no reason not to sign the proposed note if that is the only way to avoid the foreclosure.
Read more…
Posted by Lynn Pineda on October 19, 2009 at 2:42pm
I don't know if anyone else is experiencing this but I have had a number of recent Short Sale approvals come through in which the 1st Lender isn't acknowledging any proceeds of the Short Sale to go to the junior 2nd Lender; written approval with $0 to junior 2nd. I'm having to go back and get the approval letter adjusted and that is just how I'm treating it; I'm bringing it to their attention as if it was a simple oversight by the Lender and they "forgot" to include the $'s. However, what is really going on?I'm just beginning to work out these scenarios and have yet to have responses from the Lenders other than one who has requested a new HUD with the balance owed to the 2nd to reissue to the investor. Can this be an oversight by Lender in not including the amount from the initial HUD that is to go to the 2nd or is there something else going on? You know if these 1st position Lenders were suddenly in the 2nd position that they'd dig their heels in for their money.Have any of you come across this recently?
Read more…
**********************************
like buttons
************************