Short sale approved but scared

[giacona]

Ok, well my short sale is approved. My 1st loan with countrywide came through on 9/1/09. However they are not requiring a promisarry note which is a good thing.

The thing I do not like is the language of the approval it states they have the right to come after me for a defeciancy. However the approval letter says nothing about the recovery department getting in touch with me nor does it say anything how they will report the credit.

The negoitater robin howard will not budge on this language and the invester is Freddie. I am not sure if that makes a difference.

Now I also do my personal banking with B OF A. Since I am approved would I be better off moving my finances to another bank once this closes so they can't see what I am doing?

Now the 2nd lender is getting 6,500, but they also reserve the right for a defeciancy.

I do not have the money to pay either lender. If they pursue me for the difference I may be forced into a CH 13 bankruptucy since I do not qualify for a chapter 7.

Also these is all refinance money none is orignial purchase money so I am not sure what the means. My attorney seems to think bank of america will 1099 me and is not sure about the 2nd lender pnc.

Can anyone please provide input?

Do the Banks get any type of write off by sending a 1099 to the seller? If there is little chance of collecting?

Also If they do send the 1099 will it be for the 2009 tax year or can they send it later? This is just so gut wrenching and not sure what to do here.

[Evan Bedard]

Hi Giacona,

Also these is all refinance money none is orignial purchase money so I am not sure what the means. My attorney seems to think bank of america will 1099 me and is not sure about the 2nd lender pnc.

Can anyone please provide input?

Do the Banks get any type of write off by sending a 1099 to the seller? If there is little chance of collecting?

Also If they do send the 1099 will it be for the 2009 tax year or can they send it later? This is just so gut wrenching and not sure what to do here.

I believe your attorney is correct, if Bofa chooses to pursue for the deficiency balance they will issue you a 1099 for the deficiency. As far as your second lender they will probably not pursue for defiency since they are collecting 6,500 for the short sale. Many lenders are accepting 5-10% of the second mortgage to settle the loan..

[SinkingInFlorida]

We have a similar situation with PHH. Their approval letter says, on the one hand, that they "will execute a full Satisfaction and Release of Mortgage" upon receipt of funds as provided above and, if applicable foreclosure activity will cease.

A paragraph later it says, "Please be advised that the Mortgage Investor reserves the right to pursue any Deficiency at a later date."

We asked our Loss Mitigation (Judi Matias) about these two very different sentences and were told that the 2nd one was to protect the Mortgage Investor against any fraud if its discovered after the sale that this was not an arms length transaction.

This couldn't be more arms length if we tried, so we asked Judi to add the clarifying langauge into the letter, but she says no, the language stands, take it or leave it.

The lender told our real estate agent that a 1099c would be issued for the difference between what we owe and the short sale price (about $81K).

We're fine with this but are very worried about that open-ended sentence and that they'll 1099 us and still want to come after the difference.

Is there something else we need to know here? Are we misreading the letter?

Does anybody know how to get in touch with Judi's supervisor, Sandy Preston - OR - what is the chain of command at PHH. We've had enough of getting transferred to Mumbai only to get them to transfer us back to the states.

Our closing date is set for October 17, 2009. Any quick words of advise are greatly appreciated.

[Evan Bedard]

Hi sinkinginflorida welcome and thank you for joining.

The lender told our real estate agent that a 1099c would be issued for the difference between what we owe and the short sale price (about $81K).

We're fine with this but are very worried about that open-ended sentence and that they'll 1099 us and still want to come after the difference.

I'm not sure how to get a hold of her supervisor sorry. But as far as the short sale your lender will typically just issue a 1099 for the deficieny balance. They should not take further action after that..

[JohnBurns]

Thanks for all the informative posts.

I received an approval letter from BOA for my short sale that reads, '...the bank will charge off the remaining debt as collectable balance. Our recovery department will be in contact with you to make arrangements...'

Can someone please share their experience for negotiating with the bank after receiving such approval letters? Any suggestions on how I should approach them. My sale is ~150k short, and I don't think signing a letter that says I owe them this entire amount is a smart thing to do.

Please help!!!

[Enough Already]

John,

I personally would not sign off on that. The banks are crazy. What's the point of doing the short sale if you walk away owing $150K?

To start, do you know if your loans are recourse or non-recourse? That will make a big difference in your position.

In my case I live in FL and my loans are recourse meaning the bank can sue me for the loan deficiency after foreclosure or short sale. I have a realtor who's got a good bit of experience in dealing with the banks and negotiating forgiveness of the debt. If for some reason we're not able to do that, or settle for a reasonable amount of money we will not sign off on the sale of the house.

If your realtor isn't able to negotiate with the bank you may want to consult with a real estate attorney.

Good luck!

[giacona]

My short sale did close with B Of A and I did sign the note stating they have the right to come after me for defeciancy. However my note did not say anything about their recovery department.

The only thing that worries me is this was not orginal purchase money. I did refinance, but all the money went back into the house with this loan. The other thing is, I do my personal banking with B OF A who I love for personal banking. For now I have moved everything to another bank just in case they decide to take a peak whats in there even though it's illegal.

I know they can either send you a 1099 or sue for defeciancy they cannot do both. Since I closed my loan in decemeber does that mean If they do send me a 1099 will i receive it sometime in december or Jan of 2010 for the 2009 tax year? Or can they hold it and send me a 1099 when the feel like it? Like 2 or 3 years down the road? I know they have six years to come after me for defeciancy but I am wondering when they 1099 will be sent if they decide to do that.

[JohnBurns]

Hi 'enoughAlready', I live in VA and the bank can sue me for the difference. I have not had any luck with the terms. I've spent hours talking to the negotiator and their answer is the same - accept the terms or file for bankruptcy. Actually, they were trying to convince me that I should accept the short sale and file for bankruptcy when their recovery dept comes after me....rediculous. I thought that was extremely selfish and tells me that they simply don't care how this effects me (or any customer for that matter).

Have you had any luck with the negotiations? I'm very curious to know as to what type of responses you've been getting from the bank. Please keep me posted.

[Enough Already]

Hi John,

Thanks for the update. I don't have any updates at this point. I'm still waiting to hear back on whether the short sale has been approved or not, and then I guess I'll find out what the terms are. We had our BPO 2 weeks ago, so I guess we should hear something in the next few weeks? You never know with these banks. I'll be sure to post when I know something.

In the mean time I found a good blog post on a FL attorney's web site regarding settling the 2nd loans, and I posted it in the Deed in Lieu forum. Here's a link: Banks Have Incentives To Settle With Judgment Debtors Quickly For Low Amounts of Cash

I hope this info will be of some help to you. Good luck and please keep us posted!

EA

[JohnBurns]

Hi EA,

I had received my approval letter about 2-3 weeks after the BPO. Actually, my BPO had come 20k lower than the offer and we had to amend the contract so that added another week. You should be hearing back soon, hopefully you'll get a clean letter - without the collectible debt language and won't have to deal with this.

I read the info in the link you posted. I dont understand why the banks are eager to settle AFTER the deficiency judgement, but don't even want to talk about it before closing. This is the point that I have been unsuccessful in getting accross.

I truly truly hope and pray that I don't have to deal with any of this after I close. Am sooo ready for this to end.

This is a great forum and we should all continue to share our stories so everyone can benefit. I'm going to call again tomorrow and see if the response is any different.

Regards!

[FormerBofAVictim]

B of A approved my short sale, but made it clear that I would be contacted AFTER the sale closed, and that I would be responsible for the deficiency.

I have heard many horror stories about people making 20 year arrangements to pay off their old houses.

Kind of defeats the purpose of a short sale.

I refused to sign and the house is now in foreclosure.

[Enough Already]

JohnBurns,

Any luck with your short sale? As you may have read we seem to have hit a wall with ours too.

We're thinking now that we may still go with the short sale, rather than foreclosure because the deficiency amount will be a lot less with the SS.

EA