Short sale approved with B of A. Need quick advice.

[nal67]

We just got approval for a short sale with BofA for a vacant lot. The letter reads:

"This letter confirms Bank of America's agreement to settle the above referenced loan on the following terms:

BofA agrees to accept $XX in certified funds as payment in full of the loan. Upon receipt of the payment the Bank will report the account to the credit bureaus as "Settled", with the explanation "Account legally paid in full for less than the full balance." ...

In addition, the Bank will be reporting the amount of the debt forgiven to the IRS... (1099c)

Please confirm you acceptance..."

Questions:

1. My short sale specialist says this means I don't have to worry about a deficiency judgment. Should I be worried that is doesn't specifically address no deficiency judgment or is it pretty clear cut that settled paid in full means they cannot seek to obtain further funds.

2. Any idea how much this explanation will ding our credit. I believe someone else said only 10 points in their case. We've got stellar credit in the high 700s right now but none of my contacts know what this will do.

FYI,

-We are paying off apx. 70% of the loan balance via the short sale.
-They did not ask us to contribute any additional funds nor sign any promissory note.
-Purchase money loan and I believe it is a portfolio loan for BofA and not sold to a third party.
-We were not late on our mortgage.
-We got the approval in less than a month from when it was assigned to the correct analyst.

I think we are pretty lucky from what I've been reading but we have a unique case in that we had some leverage because of some legal issues that we needed to fix that made the lot worth a lot less if we didn't.

[brunok]

Originally Posted by nal67

I think we are pretty lucky from what I've been reading but we have a unique case in that we had some leverage because of some legal issues that we needed to fix that made the lot worth a lot less if we didn't.

Can you explain in detail? I'd love to know what leverage is required to make them move this fast.

[mbmullen]

The lender has two options in dealing with the deficiency. They can either give you a 1099 for the loss OR they can ask for a deficiency judgement, not both. If the demand letter says you will receive a 1099 then that is the option they have chosen.

There doesn't seem to be an answer for how much it will ding your credit. I've asked everyone I know that is in the mortgage business and they all say we'll know when we pull our credit in a few months.

Congratulations on getting it done so quickly!

[nal67]

I'm curious as to whether that is really the case from a legal standpoint. The lenders that I have talked to have stated that they will issue a 1099c and still have the option to pursue collection activity. I was wondering how that would work if you were issued a 1099 and later repaid the debt. Would you be able to claim it back or would they issue some sort of reversal or is the debt really uncollectible once they issue a 1099c.

brunok, we would potentially lose an easement for access if we did not sell to a buyer willing to take over some shared costs right away. We used that as justification for getting the bank to approve in record time.

[ccbelland]

nal67, are you able to Post the entire letter as an attachment? I am in a very similar situation whereas the Short Sale covers only around 65% of the loan. I was told that in order for them to 1099 me or forgive the debt, it must be 80% or more. The actually letter would be VERY helpful (you can black out your name,etc.). Who was your Loss Mitigation rep that was on this Approval Letter?