When the 2nd bank or PMI company won't let go...

[rory breaker]

I am in the final stages of purchasing a home via short sale (this forum has been a ton of help by the way) and it looks like its going to come down to something that happened when the home was previously "sold" via this process.....the bank that holds the PMI portion of the loan is asking for the seller to contribute some ridiculous amount, like $20k, to satisfy the lien. He absolutely will not sign a promissory note and would prefer bankruptcy. Financially, there is no way he can pay it, so I dont blame him not wanting to sign it.

My questions:

1) How bad is it for this guy if he goes into bankruptcy, versus foreclosing on the house?

2) It seems ridiculous that the bank is asking him for $20k when thats almost the entire amount of difference between the loan due and what Im offering. Is there a way around this? Is this a negotiable number? BOA/Countrywide, who is holding the 1st portion of the loan, says that if the PMI company says thats what they want, there is nothing they or we can do, it's either yes does the seller want to accept or no, he wont and they foreclose. Is this accurate?

3) If they do come back and ask for $20k or $15k or $10k or whatever - what should we do? How do we go about eliminating this number? Remember, this is NOT BOA/CW asking for this, its the other bank/PMI company. Has anyone had luck reaching out to the other lienholder to negotiate or ask their exec team to remove the promissory note requirement in good faith?

Your help/direction is much appreciated!!!!

[HopingtoFind]

Originally Posted by rory breaker

I am in the final stages of purchasing a home via short sale (this forum has been a ton of help by the way) and it looks like its going to come down to something that happened when the home was previously "sold" via this process.....the bank that holds the PMI portion of the loan is asking for the seller to contribute some ridiculous amount, like $20k, to satisfy the lien. He absolutely will not sign a promissory note and would prefer bankruptcy. Financially, there is no way he can pay it, so I dont blame him not wanting to sign it.

My questions:

1) How bad is it for this guy if he goes into bankruptcy, versus foreclosing on the house?

2) It seems ridiculous that the bank is asking him for $20k when thats almost the entire amount of difference between the loan due and what Im offering. Is there a way around this? Is this a negotiable number? BOA/Countrywide, who is holding the 1st portion of the loan, says that if the PMI company says thats what they want, there is nothing they or we can do, it's either yes does the seller want to accept or no, he wont and they foreclose. Is this accurate?

3) If they do come back and ask for $20k or $15k or $10k or whatever - what should we do? How do we go about eliminating this number? Remember, this is NOT BOA/CW asking for this, its the other bank/PMI company. Has anyone had luck reaching out to the other lienholder to negotiate or ask their exec team to remove the promissory note requirement in good faith?

Your help/direction is much appreciated!!!!

So lets see if I can try and help with your questions. When you say "the bank that holds the PMI portion of the loan", what exactly do you mean by that? Is there one or two loans on this property?
PMI is an insurance that a lender takes out on the loan. PMI would not insure just a portion of the loan, so maybe you're talking about two different loans, one of which has a PMI.

1) How bad is it for this guy if he goes into bankruptcy, versus foreclosing on the house?

Bankruptcy is the worst hit on the credit, worse then foreclosure or short sale.


2) It seems ridiculous that the bank is asking him for $20k when thats almost the entire amount of difference between the loan due and what Im offering. Is there a way around this? Is this a negotiable number? BOA/Countrywide, who is holding the 1st portion of the loan, says that if the PMI company says thats what they want, there is nothing they or we can do, it's either yes does the seller want to accept or no, he wont and they foreclose. Is this accurate?

Are you saying they are not willing to settle for less then full amount... was not clear from your statement. Everything is negotiable if two sides are willing to negotiate, if they are not willing... I not sure what you can do, other then offer more money.
Again, not clear as to what you mean by 1st portion of the loan, are you talking about 1st loan?
If lenders are not willing to negotiate you cannot force them. Short sales are voluntary, and it sounds like these lenders or lender has PMI and doesn't care because they will get their money after foreclosure.

3) If they do come back and ask for $20k or $15k or $10k or whatever - what should we do? How do we go about eliminating this number? Remember, this is NOT BOA/CW asking for this, its the other bank/PMI company. Has anyone had luck reaching out to the other lienholder to negotiate or ask their exec team to remove the promissory note requirement in good faith?

You can counter or you can walk away. You cannot "eliminate", you can just tell them, this is what we are willing to pay and if they do not agree, find something else.

[rory breaker]

Sorry...I know kind of convoluted. Bear with me as Im new to this...here is a better explanation:

When the seller took out the loan with CW, he didnt put 20% down so naturally there was PMI involved.

I believe we are now, after CW/BOA hopefully approves their portion, at risk of the PMI company coming back and saying "hey we insured your mortgage, and you defaulted, so you owe us x amount of dollars to make up for it"

I understand everything is negotiable, but looking for specific experiences with this aspect of a short sale as I think it will come right down to whether or not we can get the PMI company to let go of this obligation, as the seller simply doesnt have the resources to support such a request.

[BadBobMo]

The note holder needs to deal w/PMI not the seller, don't break your back on this deal it's all greed, in the end they even might try to talk you into paying it by working the numbers.
Look around the coroner for another deal. Don't push to hard on one of our brothers who is losing there home.

[HopingtoFind]

Originally Posted by rory breaker

Sorry...I know kind of convoluted. Bear with me as Im new to this...here is a better explanation:

When the seller took out the loan with CW, he didnt put 20% down so naturally there was PMI involved.

I believe we are now, after CW/BOA hopefully approves their portion, at risk of the PMI company coming back and saying "hey we insured your mortgage, and you defaulted, so you owe us x amount of dollars to make up for it"

I understand everything is negotiable, but looking for specific experiences with this aspect of a short sale as I think it will come right down to whether or not we can get the PMI company to let go of this obligation, as the seller simply doesnt have the resources to support such a request.

Lender (CW/BOA) took out PMI, which basically means they have nothing to loose in this deal, whatever happens they will get paid.
So it is PMI company that you will need to negotiate with, because it is they who will loose if house forecloses and Seller files BK.

If PMI is not willing to negotiate, then there is not much you can do... everyone's experience is different and has little to do with what is happening in your particular case.

As someone else suggested, look for another opportunity, if this one is not working out... Maybe the price you have settled on is too low and they think they can get more, which might or might not be true. But it is what it is.

[rory breaker]

"Look for another house" is good advice maybe, but not one Im willing to accept We want this house. We want to understand everyone elses experiences so we can better control the situation versus letting it control us.

We will definitely have to deal with the PMI company, not BOA. Thank you for clarifying that, thats what BOA said as well.

If the PMI company is saying $20k, and the seller says no thanks Ill just file for bankruptcy, the PMI company gets nothing then, correct? So wouldnt it be in everyones best interests to:

- put together a package that details the sellers hardship and shows the PMI company he literally cannot afford to pay
- explain to the PMI company that the seller WILL file bankruptcy, giving them nothing
- show the PMI company that the offer on the house is more than fair, and they would be hard pressed to try to get something better in foreclosure (what should we include here - how do you calculate/estimate foreclosure fees?)

Etc...those are the ideas Im trying to get from you guys in order to put together our plan for saving this house.

To the other poster who suggested I back off a bit...Im trying to influence all parties here. IMO the seller is lucky to have a buyer who is trying to help his interests as well. Best case scenario we work hard to negotiate the PMI company down to nothing or a small amount that maybe I can help the seller pay to just be done with it. Again, IMO, this seller is lucky to have me involved in the deal...Im acting to prevent him from having the worst possible financial hit on his record and get out of this bad situation scott-free.

[rory breaker]

testing post.....................

[rory breaker]

Here is the problem - we dont want to find another house around the corner, we want this house. We are not "pushing" on the seller, in fact IMO he is lucky to have a buyer who is so interested in pursuing the house and saving his butt from foreclosure or bankruptcy, and willing to go the extra mile.

For example, looking for ideas like:

- Reach out to the PMI company and get them to lower the promissory note or eliminate it altogether. Using detailed records of hardship (paystubs, current bills, debt owed, etc) to show them literally, the seller cannot afford to pay them a dime.

- Explain to the PMI company that the seller WILL file for bankruptcy, leaving them, the PMI company, with nothing. Show them that the offer on the house is strong, and after foreclosure fees and current market value, there is not a chance they would get close to the same amount and won't see a dime from BOA either. What information should support this argument (ie how do we find out what foreclosure fees are approximately, etc)

These are the types of ideas Im hoping other people have employed which has resulted in the PMI company either eliminating the need for payback, or significantly cutting it down. If they come looking for $20k, there is absolutely no way the seller will come close to that, and I wont pay it for him either. If we can get it down to something reasonable like $3k just to call it a day, we can probably figure something out. We need to make the PMI company aware that if they turn this deal down, they will not get a PENNY from the house selling for less in foreclosure. That argument is valid, correct?

[rory breaker]

Here is the problem - we dont want to find another house around the corner, we want this house. We are not "pushing" on the seller, in fact IMO he is lucky to have a buyer who is so interested in pursuing the house and saving his butt from foreclosure or bankruptcy, and willing to go the extra mile.

For example, looking for ideas like:

- Reach out to the PMI company and get them to lower the promissory note or eliminate it altogether. Using detailed records of hardship (paystubs, current bills, debt owed, etc) to show them literally, the seller cannot afford to pay them a dime.

- Explain to the PMI company that the seller WILL file for bankruptcy, leaving them, the PMI company, with nothing. Show them that the offer on the house is strong, and after foreclosure fees and current market value, there is not a chance they would get close to the same amount and won't see a dime from BOA either. What information should support this argument (ie how do we find out what foreclosure fees are approximately, etc)

These are the types of ideas Im hoping other people have employed which has resulted in the PMI company either eliminating the need for payback, or significantly cutting it down. If they come looking for $20k, there is absolutely no way the seller will come close to that, and I wont pay it for him either. If we can get it down to something reasonable like $3k just to call it a day, we can probably figure something out. We need to make the PMI company aware that if they turn this deal down, they will not get a PENNY from the house selling for less in foreclosure. That argument is valid, correct?

[rory breaker]

Sorry for the multiple posts guys - if a mod can kill 7/8/9/10 i'd appreciate it.

[CAMusicTeacher]

Hi Rory,

My husband and I are also buyers trying to buy a CW short sale. I wanted to respond that we had a similar situation on a different short sale.

We were not the original short sale buyer (who'd backed out) but got the short sale approved. We bid 15K higher than the previous offer and our short offer was accepted. After we accepted we were told PMI was asking for 5K from homeowners--who were refusing to pay. We asked if they'd split the amount but were told they did not care if they went into foreclosure. We weren't happy because most likely they have more money than us (they were bidding on some of the same houses we were) but that is another story.

We tried to get the bank (Citi) to get the 5K included in our purchase price but because it was PMI demanding the money they could not so we set up an addendum where we would come in with the 5K in a cashier's check. This was a MISTAKE.

We are doing a teacher loan which has strict rules. It's much better than FHA but like FHA has regulations. Basically since the 5K was PMI money and not money towards the house or closing costs, the loan would not be approved. We tried a different addendum that got shot down. In the meantime, our loan was moved among 3 lenders at our bank--it seemed like no one wanted to touch our loan because of the 5K in PMI costs. If we did it and the underwriter found out it could be considered fraud and both the lender and my husband and I could get in trouble one lender told me. They had already told the underwriter asking if he'd make an exception so he already knew.

If you agree to pay the PMI in cash the only way to get around the loan is to pay the money directly to the homeowner and then have them pay the PMI and not even tell anyone but your agents who would write up a separate contract between you and the homeowner. We learned this too late.

In the end we walked from this home not just because of the PMI and loan issues, but also because it wasn't the right house for us. I looked at that house as a home we'd live in and sell in 5 years. The current short sale we are waiting for (which is another whole saga!) is a home I want to live in until we grow old.

I don't know if the bank can do anything with negotiating with the PMI company. Citi was the bank and they were very good to us. After finding out we would be paying the 5K PMI penalty, they lowered our loan by 5K. We didn't ask them to do this but the negotiator (who I don't know his name) did this on his own--so if you agree to pay the PMI penalty in cash, they might be willing to lower your loan.

[BadBobMo]

saving his butt from foreclosure

Then I would go ahead till him that!
Good Luck

[CAMusicTeacher]

I would say it's really tough for the buyer for short sales. We have bid on 8 short sales in the past 10 months and have had near misses with 4 and a half of them due to a wide variety of reasons--from the PMI problem to another where the bank decided to go to foreclosure and not do a short, to the original buyer who'd backed out coming back, to a switch of listing agents with the new agent deciding she didn't like our loan etc . . .

I say half because the current CW short sale we are hoping for--we were told they were taking another buyer after the agent told us way back when we were the only buyer (found out from another buyer this listing agent told them the same thing about being the only offer!) but just found out that the "first" buyer had backed out so we are hoping the negotiator takes our offer.

I will say that after we were told we weren't the offer for the CW/BofA short, I cried but tried to stay positive. A week later, we looked at two other shorts (one approved) and bid and both shorts told us right away they wanted to work with our offer--then we heard about the buyer backing out on the the CW/BofA short we really wanted, so now we're back waiting for it. I was seriously thinking something was wrong with our offer--with us?--but now I know shorts are just really crazy and it takes a lot to get through them.

[cahomeowner]

thought I would add another perspective from the homeowners point of view.

the banks lack of response is what cause buyers to place multiple offers on different properties. I have successfully complete 4 short sales in different states with different lenders.

it took over a year to complete those. we had so many buyers come and go. the problem is the banks are too slow. by the time they get to the file the bpo is old, the values have dropped or the buyers has walked.

I have had offers sitting on the negotiators desk for weeks and sometimes months. I heard negotiators tell me that they work on a first in first out basis some even said they were still working on files from 6 months ago. hope that gives you a little perspective on what happens on the other side.

I have had 2nd's and even PMI companies demand promissary notes. as a homeowner I did not have that kind of money. eventually those demands were removed. I think the further along the house goes into the foreclosure the looser the requirements. promissary notes, coming to the closing table with cash, etc seem to be the norm...the longer it goes into the foreclosure the easier it might be to remove those items.

now as a buyer I would be looking for homes that were way deep into foreclosure as opposed to those that are just entering the process. some banks may be able to close short sales in 3-6 months but I can tell you from my own experience that was not the case with Wells Fargo, First Horizon, Ocwen, etc.