I can't think of any worse combination of lenders to be dealing with on a Sacramento short sale than having a first with Countrywide and a second loan with Bank of America. (Unless it's Bank of America on the first and Countrywide on the second.) No matter how you look at it, it's double hell.
A short sale transaction I'm working on right now has that "winning" combination. Although both lenders are technically Bank of America, the second lender wants 5% from the first. On top of that, Countrywide wants a $5,000 cash payment from the seller, which the seller has reluctantly agreed to pay. Countrywide scrutinized the seller's financial documents and sent me an email saying it was obvious the seller was transferring money into his account from somewhere, so he has access to cash and they wanted it.
However, the short sale approval letter we received from Bank of America very clearly outlines that it will release the mortgage but report that mortgage as a charge-off, as a collectible debt. Then its recovery department will contact the seller after closing to make arrangements to collect the balance. Can it get blood out of a beet?
I should note that this second mortgage is a hard-money loan. According to C.A.R., second loans that are wiped out in a foreclosure retain the right to pursue a deficiency judgment because the security for their loan is lost. The seller in this case is damned if he does the short sale and damned if he doesn't.
He asked me for advice, and the best I could legally do was suggest he contact a lawyer. I am not licensed to give legal advice. He wanted to know if his lawyer could get Bank of America to change its mind about the charge-off demand. Personally, I doubt it -- especially given Bank of America's policy and the time frame of 2 weeks before the short sale approval letter expires. But that's a question for his lawyer to answer. Oy.
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Elizabeth Weintraub is an author, columnist for The New York Times'-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you.
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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
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Elizabeth - They can go for a deficiency ... good luck! If the seller can't make the payments to save their house what does the lender think they are going to get going after them? A judgment and the right to harrass them the rest of their life. They are the ones that made the loan. 5%! That is ridiculous if the 1st is short. We are seeing them get $3k at best. If they won't cooperate walk and let them get wiped out. There are some sellers that are lying - we just lost an escrow because of that. The seller reported no other assets, but the holder of the 2nd had a 2nd on his other property. STUPID! Be sure your folks are being truthful about other assets - advocate to the best of your ability - but don't get dragged in to a losing proposition.
It's no wonder why these banks are in trouble....
If you have worked that market long enough to write a book on the subject, and cannot find a solution, then it sounds like your seller is out of luck. I cannot stand to do short sales because of the way they are handled by most lenders. Good post.
Elizabeth, My heavens...BofA and Countrywide are the same bank now, so its like one half of the whole is working against the second half. Kind of schizophrenic if you ask me...
Elizabeth - I just don't understand the lack of business sense in many of these institutions.
Elizabeth, Thanks for the great information!
How about a first with WaMu and a second with B of A? That would be the slowest boat that I could think of. I agree with Amy above--kind of bi-polar or schizophrenic . . .
Elizabeth: I think my new favorite bank to deal with is Wells Fargo. Quick, efficient, and logical...at least to date. I'm sure they will eventually turn up as looney as other banks are.
Hi Elizabeth,
I had a similar situation dealing with Chase with first and Wells Fargo on the second. The seconds are losing huge sums and are now putting the strangle-hold on sellers by demanding they make payments as a pre-condition to them agreeing to the short sale. This is becoming more common in practice with these larger banks. The seconds are flexing their muscles and unfortunately, the sellers are agreeing to their demands to close the deal and get over this difficult chapter of their lives.
Elizabeth, banks just are not good at selling homes. These two have numerous bad stories in the short sale area.
I have huge dislike for both of these banks. Haven't had short sale experience with either, but they are real ugly on REO's.
Call the people that are administering the TARP and see if they have enough left to bail out this seller?
Elizabeth,
I am afraid I am getting just this dreadful combination, and I am not really encouraged by your experience. Will have to really seriously think about it and see if the Seller would even want to consider these options.
Thank you for a warning
Elizabeth, I had a second lien holder Citi on the day before closing send over a letter stating they retained the right to go after my sellers after the closing, but would not stop the closing.
No they wouldn't but I called them and said, OK, we are bringing in 10K to settle a debt of 40K, this will be removed or you can keep your stinking house. I am DONE.
My sellers who got into this mess, due to medical issues were NOT going to be harrassed for years and put back in the hospital again.
I seriously was going to call off the sale.
They got me the letter and we closed.
Short sale Hell comes in a variety of flavors...charge their_______it is a SHORT sale...not a pay it off over longer sale...............grrrrr....have a super weekend !
I've had pretty good luck with Wells Fargo, IndyMac and Citimortgage -- as long as the loan wasn't sold to Fannie Mae, those have been sending short sale approval letters within 6 weeks.
Elizabeth: These days all Countrywide loand are now BOA Home Loans... This can be TRIPPLE hell.
Looking forward to reading the new book
Hi Roland: We're still dealing with different negotiators, though, on the Countrywide -- now B of A -- short sales, but it's all the same mess. Just last week I heard from Wells Fargo on a short sale. We received a response within 3 weeks of submission. The BPO was completed, the negotiator assigned, the file reviewed and a decision rendered. If Wells Fargo can respond in such a timely manner on short sales, why can't Bank of America?
The Short Sale Savior, by Elizabeth Weintraub, available in bookstores everywhere and Amazon.com. This book features "real-life stories" from many agents who blog on Active Rain, including Roland Woodworth (message above). Thank you, Roland.
Bank of america is really a pain in the ass due to their twisted policy on promissory note from the seller. They don't understand that the seller is hard up and cooperating to do a short sale and BA is trying everything to forelcose on the property. If they want to a nonperforming asset go ahead and have one. Short sale is a better option than foeclosure but still they don't undersatand.
I am trying to negotiate SS with Chase/Wamu who has both loans. The second is only about 40K. No problem approving the short sale but will not totally release it. They want 50% before removing that verbiage. I am beating my headas I got 20% for the second and they still will not agree. Seems incredibly short sighted as they will get nothing and the first suffers even more as an REO will bring far less than the buyer we have currently, and they take a chance to try to get....maybe what...10 cents on the dollar for the second? and is that really providing shareholders value knowing you let a decent short sale lose for this amount of money? The first will get over 200K with the sale to begin with. ACCCCKKKKK. it seems like they cannot see the forest for the line of trees in the way.