2nd Lien Holder...Not Budging....

[danietar]

My husband and I are smack-dab in the middle of our short sale. Luckily, the 1st lien holder (ASC) has approved the shortsale. {Background: we currently owe approx $153K on our home. Our potential buyer came in with an offer of $86K - which the 1st lien holder approved. The 1st negotiated with the 2nd and offered them $2700 - which according to our realtor is more than generous}

Our 2nd lien holder is not accepting the offer as the negotiator has expressed that they want more however the 1st is not willing to give up any more additional money and neither is the buyer. My husband contacted the 2nd negotiator and expressed our hardship. The negotiator said that since our 2nd lien was refinanced with them they have rights to hold us to payment and will not forgive the debt. They choose to deny the short sale and come after us for payment (while possible foreclosing on the 1st) then accept the offer just because of the refinance. The negotiator also expressed that they want more money from us but will not provide an actual dollar amount.

Our loan is currently an 80/20 with the original loan for the 20% with Chase. The loan was closed with a variable rate which in 2005/2006 our monthly payments continued to increase. We felt it was better to refinance the loan locally (ARIZONA) to have a fixed rate and keep our payments low. The local lender (2nd) was gracious enough to do this. However, they have now become unreasonable in their demands for this short sale.

I have been doing some research in these forums. I hear recommendations about speaking with an attorney. I also checked into Arizona's Anti-Deficiency Laws and a revision to this law (ARS 33-814) was put into affect 09/30/2009. After reading over this revision, I see that this will affect mostly investors and people with second homes. However, it seems like we are protected under this revision. I have also done some research on several local attornies websites and the following was stated, "A purchase money loan, when extended, renewed, refinanced, or "worked out," retains its purchase money status, and the borrower retains the attendant protections." (link: Articles : Mesch, Clark & Rothschild P.C. - Attorneys - Tucson, Arizona)

Are we protected?

Any feedback would be greatly appreciated. It seems like our only option would be to request attorney feedback regarding this particular law.

Thank you!

[Evan Bedard]

Hi danietar welcome and thank you for joining.

I have been doing some research in these forums. I hear recommendations about speaking with an attorney. I also checked into Arizona's Anti-Deficiency Laws and a revision to this law (ARS 33-814) was put into affect 09/30/2009. After reading over this revision, I see that this will affect mostly investors and people with second homes. However, it seems like we are protected under this revision. I have also done some research on several local attornies websites and the following was stated, "A purchase money loan, when extended, renewed, refinanced, or "worked out," retains its purchase money status, and the borrower retains the attendant protections." (link: Articles : Mesch, Clark & Rothschild P.C. - Attorneys - Tucson, Arizona)

Are we protected?

Any feedback would be greatly appreciated. It seems like our only option would be to request attorney feedback regarding this particular law.

Yes I would also strongly advise to consult with a local real estate attorney that has experience with the short sale process. They will be able to answer your questions for your particular state..

[babbles]

I may end up in the same situation. EMC my 1st, as horrible as they are, may be willing to do a short sale but declined me for a mod after 9 months. The 2nd I have feeling may not agree. How do you play hardball with them? Stop paying them? Try negotiating with them yourself directly?

[HopingtoFind]

My understanding that in CA if you refi with a different lender it is no longer considered purchase money.
If you're not protected under purchase money and 1st ends up foreclosing, you will still have to deal with 2nd coming after you.
How much additional does 2nd want? Generally they agree to 5% to 10% settlement. Maybe if you sign a promisory note for an additional amount they will agree to a short sale.

[babbles]

If you do a promissary note for the balance, will they still report you negatively to the credit files? I am actually willing to do that but if they will report negatively then there is no use of doing that.

[babbles]

If you do a promissary note for the balance, will they still report you negatively to the credit files? I am actually willing to do that but if they will report negatively then there is no use of doing that.