RSS Feed for This PostCurrent Article

Your Short Sale Questions Answered Here


Get Your Short Sale Questions Answered Here!

Get your short sale questions answered by our team of real estate agents, negotiators, attorneys, mortgage brokers, title companies and more.

Just add a comment to the post, and we will answer your questions usually within 24 hours or less.  RSS feed your question to get an immediate notification when it is answered.

The Trademark Team

Comments (13)

Trackback URL | Comments RSS Feed

  1. Jim McNinch says:

    I’m not an attorney but we see this quite often. The answer is going to depend on the lender and type of loan and if it is the first or Jr lien. However,

    “Holder hereby certifies as to the satisfaction of said mortgage, without satisfaction of the indebtedness secured by said mortgage, and hereby directs that the same be canceled of record.”

    basically means that they released the lien but not necessarily the debt. If they fully wrote off the loan (forgave the entire debt) you should have gotten an IRS 1099 for the difference between the lender’s net at the sale and what you owed them.

    If they didn’t write off the debt, they may reserve the right to purse collection of that deficiency. Not saying they will, as many times they don’t.

    Check your credit report. If it is a collectible debt, it may show up there.

  2. Miko says:

    I short sold my home back in Nov of 2011. To my understanding the Mortgage was fully satisfied. When I looked at the Satisfaction of Morygate online, part of it read as follows:

    “Holder hereby certifies as to the satisfaction of said mortgage, without satisfaction of the indebtedness secured by said mortgage, and hereby directs that the same be canceled of record.”

    Does “without satisfaction of the indebtedness” mean I still owe the debt?

    Miko

  3. Jim McNinch says:

    Sharon:

    Unfortunately, yes they can although we seldom see this – if the bonus is on the buyer’s side! I assume it is. If not, put it on the buyer’s side of the HUD1. If that doesn’t work, escalate the file to a supervisor or manager.

    Also, are you sure it was the short sale lender and not the buyer’s lender that refused this? It’s the buyer’s lender we run into trouble sometimes.

    We always get our fee from the buyer so we don’t charge the seller or agents for our negotiations. Our fee goes on the buyers side of the HUD1 and has been our business model for 8 years without a problem. So, I am not sure why they would object.

  4. admin says:

    Short sales are meant to help people avoid foreclosure by selling their home, when they have a true and confirmed hardship. They are not intended as a way to negotiate a loan modification. If your inlaws can afford a reasonable payment (it is understood they cannot afford the adjusted payment under their current loan) and want to stay in the home, then they should be working with their lender towards a loan modification and home retention. Lenders are very open to these types of negotiations at this time.

    Now, as a direct answer to your question regarding short sales and fraud. Fraud is a legal issue and you should check with an attorney if you suspect something might be fraud. Just note, most lenders will not allow a short sale to a related party and/or will not allow the seller to remain in the home after the short sale process. These lenders will require that both the buyer and the seller sign affidavits of arms length transaction. Here is the wording from a recent document that my sellers and the buyers had to sign on an approved short sale:

    “[Buyer and Seller] Hereby affirm that this is an “Arm’s Length Transaction”,

    No party to this contract is a family member, business associate, or shares a business interest with the mortgagee. Further, there are no hidden terms or special understandings between the seller or buyer or their agents or Mortgagee.

    The Buyers and Sellers nor their Agents have any agreements written or implied that will allow the Seller to remain in the property as renters or regain ownership of said property at anytime after the execution of this short sale transaction. None of the parties shall receive any proceeds from this transaction except the sales commission.”

    I would definitely advise that YOU check with an attorney if the short sale lender requires such an affidavit, before you sign such a document under the circumstances.

  5. deborah says:

    Is it legal in Texas to short sell a property to a family member of the purchaser?

  6. admin says:

    Steve:

    I am not an attorney but I am a land lord and we do many short sales for investors that have rental properties.

    First, the tenant has a contractual obligation to pay rent. They are in fact living in the property regardless whether or not the owner is paying theior mortgage. That does not give them the right to live free of rent. It sucks for the tenant to get sometimes a short notice.

    Most contracts have a 30 day notification sale clause. They should be notified regarding the pending foreclosure and short sale as quickly as possible.

    I am not aware in Texas of any legal rights the tenant has if the home is sold per the rental agreement. If the home becomes bank owned, and it is a government backed property, there may be some extended rental privliges and a possible “Cash for Keys” moving credit.

  7. Steven says:

    If a tenant discovers that the homeowner has not made payments to the properties mortgage in six months and the property is now in pre-foreclosure prompting the homeowner to consider a short sale. What rights do the tenants have? Are they obligated to continue paying rent?

  8. admin says:

    Gwen:

    If they don’t sign the promissory note, there is little else for them other than foreclosure. I would first try to negotiate the note down or eliminate it all together arguing the seller’s hardship. If the seller has sufficient finances, you may not get far. I would then try to get lower monthly payments and/or lower payoff time. If the seller can pay a little every month over 5-10 years or more, that is usually a lot better on their credit and better than a foreclosure. Note: according to some stats I’ve seen, almost 80% of the promissory notes default or go unpaid. These notes are unsecured but once issued can remain on your credit report.

  9. Gwen says:

    During the short sale process, if the seller’s lender requires them to sign a note for the defiency amount and the seller does not agree to it, is it best for the seller to allow the home to go into foreclosure?

  10. Jim says:

    Warren:

      Q: Was there additional recovery help built-in for the lender in a bill passed by congress if the loan was initiated during a certain time frame?

      A: The “American Recovery and Reinvestment Act of 2009,” passed the House and Senate on February 13, 2009. The President signed the bill on February 17, 2009. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.

        FHA, Fannie Mae and Freddie Mac Loan Limits -The bill reinstates last year’s 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans. These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750.

          For the few areas where the 2009 limits were higher, the higher limits will apply. In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any “sub-area”, i.e. an area smaller than a county. The Secretary’s discretion is again limited by the $729,750 cap. These 2009 limits will expire December 31, 2009.

            Q: Is the standard Fannie Mae/Freddie Mac insurance limited so it would be necessary to pass additional help legislation?

              A: See Above.

                Q: Do you know if there is a policy on a short sale discount percentage for Fannie Mae/Freddie Mac backed loans? Would the percentage be based on a formal appraisal? What does BPO mean?

                  A: Property may be occupied or vacant. Most MI insurers request 91% of the “as is” appraised value; FNMA requires 90% of the “as is” appraised value.

                    BPO means “Broker Price Opinion” or a Market Analysis the lender will have done on the property being sold short. A BPO is done by a real estate agent or broker.

                      Some lenders will conduct an appraisal by a licensed appraiser rather than a BPO.

                        As you can see above, as their payoff percentages are based on the BPO, it is critical to ensure the BPO agent has all the necessary information to provide an actual market value as possible. We find many do a cursory job and submit a BPO value higher than true market value. It should reflect what the property will “sell for” in today’s market – not what its appraised value is.

                          Warren: I suggest you join us for our webinar this coming Thursday. I think you will find it beneficial and may answer any additional questions you may have.

                            You can sign up at http://www.trademarkforeclosureprevention.com or send me an e-mail at info@shortsalereporter.com

                          • Warren says:

                            Thank you, Jim. The 1st position lender is an 80% conventional loan, most likely Fannie Mae/Freddie Mac insured. Was there additional recovery help built-in for the lender in a bill passed by congress if the loan was initiated during a certain time frame? Is the standard Fannie Mae/Freddie Mac insurance limited so it would be necessary to pass additional help legislation?
                            Do you know if there is a policy on a short sale discount percentage for Fannie Mae/Freddie Mac backed loans? Would the percentage be based on a formal appraisal? What does BPO mean?
                            Thank you again, Jim.
                            Warren

                          • Jim says:

                            Warren:

                            Thanks for your comment.

                            If the loan is government backed, such as a FHA, Fannie Mae or Freddie Mac, then the lender could recoup some of the spread between the short payoff and the amount of the original loan.

                            While some lenders and servicing companies have standing short sale policies from these government agencies they need to follow, they may also have some leniency in approvals. Or, they may need to send the short sale to the government agency for approval – which can take an additional 1-3 weeks in our experience.

                            I would always ask the lender during your first contact with them what type of loan it is – just so you know what you are dealing with.

                            Another reason for that is so you know the discounts they will allow below their BPO or appraisal price. For example, FHA was at 82% below BPO price but they recently raised it to 88%.

                            Jim
                            http://www.shortsalereporter.com
                            http://www.trademarkforeclosureprevention.com

                          • Warren Walters says:

                            Can a 1st position lender who agrees to a short sale recover the deficiency from the US Government? Did the US Congress pass a law on this, and what are the requirements for the loan to qualify, i.e. time-frame, amount of loan, etc?