Bank of America - Short sale with collectible Debt

[scottp999]

Originally Posted by faith

Hello,
In the case of a homeowner who has a 1st and 2nd mortgages, the investor or the lender does not seek for the deficiency judgment but their PMI(Private Mortgage Insurance).

PMI is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.

.
PMI protects a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership. Since they paid the lender whatever is the loss, they now turn to the homeowners to get back whatever money they can get back from the borrower. That's why when you do a Short Sale it is best that you do not sign a promissory note required by the banks or lender, instead negotiate to pay 5% to 30% of whatever the balance owed, payable in 5-30 years and no interest. Asking them to give you a letter stating that they will not pursue any deficiency judgment against you. AND you do not sign the escrow papers UNLESS they give you that letter. EVEN if THEY, the Bank says they don't give you a letter, you still demand OR ELSE YOU WILL NOT SIGN THE ESCROW, no escrow, no SHORT SALE, NO Short Sale, no MONEY to the BANk.

I wished SIE have asked for help first before signing the documents and checked the BBB search of his agent. I am sure that agent's rating is F. If there's a lower grade than F that's what I will rate that agent.

SIE don't worry, just follow your heart and read the previous posts.

God bless you always.

Ok. I'm trying to follow you here. I understand PMI, but does PMI pay if there is a short sale or just when there is a foreclosure, or both? I would think PMI covers the losses to the owner of the loan (in my case Freddie), and that they might include all servicing related costs for the default servicing efforts (Collections, Loss Mit, Foreclosure).

So if someone has only a 1st mortgage (freddie), Primary residence, put down say 10% and has PMI insurance, then I still do not see how BOA would have standing to come after anything if the Owner of the loan does not want to pursue a deficiency, then the BOA recovery department should not have any thing to do with it unless the investor is hiring them to do collections on the unsecured difference and directs them to go after it? Otherwise what would BOA need to recover? They would be reimbursed by the Investor for servicing costs based on the seller/servicer agreement they have with Freddie, and Freddie could then go to the PMI company for losses, if they cover short sale losses. If PMI does not cover short sale losses then the loan owner is agreeing to take the loss themselves? Why would BOA recovery have anything to do in that situation? Am I thinking correctly.

I could see the recovery department coming after people if BOA actually was the owner and servicer of the loan, or if it was an investment property, or they took tons of cash out, and the investor agreed to pay BOA to do the unsecured collections of the difference.

Am I way off base in thinking that they may not pursue a judgement on a 1st mtg, primary residence, FHLMC?

[faith]

Originally Posted by scottp999

Ok. I'm trying to follow you here. I understand PMI, but does PMI pay if there is a short sale or just when there is a foreclosure, or both? I would think PMI covers the losses to the owner of the loan (in my case Freddie), and that they might include all servicing related costs for the default servicing efforts (Collections, Loss Mit, Foreclosure).

Originally Posted by scottp999

So if someone has only a 1st mortgage (freddie), Primary residence, put down say 10% and has PMI insurance, then I still do not see how BOA would have standing to come after anything if the Owner of the loan does not want to pursue a deficiency, then the BOA recovery department should not have any thing to do with it unless the investor is hiring them to do collections on the unsecured difference and directs them to go after it? Otherwise what would BOA need to recover? They would be reimbursed by the Investor for servicing costs based on the seller/servicer agreement they have with Freddie, and Freddie could then go to the PMI company for losses, if they cover short sale losses. If PMI does not cover short sale losses then the loan owner is agreeing to take the loss themselves? Why would BOA recovery have anything to do in that situation? Am I thinking correctly.

I could see the recovery department coming after people if BOA actually was the owner and servicer of the loan, or if it was an investment property, or they took tons of cash out, and the investor agreed to pay BOA to do the unsecured collections of the difference.

Am I way off base in thinking that they may not pursue a judgement on a 1st mtg, primary residence, FHLMC?

Hi Scottp,
PMI is an insurance policy that a lender buys to protect a portion of the money they lend. Confusing because it is a relationship between the lender and PMI but the borrower pays for it. It is usually purchased as a percent of the money lent 10%, 20%, and 30%. Most lenders require it for mortgages where the borrower puts less than 20% as a down payment. This protects the lender against default in a normal real estate market where fluctuations in value is within the insured amount.

For example: on a $100,000.00 loan with 20% PMI. When the borrower defaults and the lender takes the property back through foreclosure, the lender will sell the property. If the net proceeds do not cover the entire loan plus collection fees, maybe it gets a NET of $80,000.00 The lender would file a claim with the insurance company for the 20% that they lost.

PMI does not have to pay a claim until there is a foreclosure and a documented loss to the lender. In a short sale you are trying to negotiate the sale of the property prior to foreclosure. When the short sale package is submitted to the lender they in turn submit it to PMI and request that they pay the claim early. PMI is under no obligation to pay the claim early and can elect to wait and see if it actually goes to foreclosure sale. In most cases, the lender will not agree to the short sale unless they are getting some portion of the insurance claim. So, in many cases the PMI agrees to pay the claim early but only if the borrower agrees to make some kind of contribution.

Although it doesn’t make sense that a seller is force to sign a Promissory Note, in many cases she is not left with many options. PMI is paying the claim no matter what, and they want their money no matter what. There is NO advantage to paying the claim early. The lender is not going to go against PMI and risk their claim being denied.

You can successfully negotiate short sales with PMI. It’s a little more difficult, because the PMI Company typically wants the homeowner to sign an unsecured note for $20k or more, and I will not sign that promissory note if I am the homeowner.

I did not sign the promissory note when CW Negotiator forced me to do it. He told me that the PMI will not release the Short Sale unless I sign the Promissory Note. I said, let it foreclosed, I will file for bankruptcy, I told them I will not sign the Promissory Note, I have Purchase Money mortgage and never refinanced and covered under anti-deficiency judgment CA Section 580b.Georgia where SIE is a recourse state.

After 4 months they have approved the Short Sale, CW told me that the investor decided to buy out the PMI for $14k. I said I want everything in writing; I emailed him also and told him I want everything in writing or I will not sign the escrow papers. I told him you guys get at least your money; I did not get anything and lost everything. He sent me a letter and was included in the escrow papers stating CW, its investors and insurers will not pursue any deficiency judgment against us. I also emailed the negotiator about the 1099C, who will mail me the 1099C and how much the amount forgiven. He answered back and told me the investor will send me the 1099c and mentioned how much the amount forgiven.

The letter and the email plus the reconveyance letters I’ve received from the County were very useful in filing for my income tax and disputing my credit report. The reconveyance letters said paid in full. CW and BA both reported I still owed them money. I sent CW and BA the letter and the email and the reconveyance letters from the County Recorder's office. BA and TRW and Equifax sent me letters and copies of my credit report showing the amount was paid settled in less than full balance.


I hope this helps God bless and take care.

[scottp999]

Faith,

Excellent reply. That really clears the muddy waters for me. Exaclty what I needed to know! I'm at the point in the shortsale process where BOA has all of the information, has completed the appraisal, and we are waiting on the decision from them and the investor. We are hoping for a good outcome.

We lost the first offer due to the long process, but got a second. BOA has an interest in approving it because the new offer has an approved loan from BOA, so they will make the originations fees on that new loan and it will most likely be serviced by them to generate more servicing fees each month. Hopefully that will grease the wheels a little for them to have additional future revenue at stake?

I appreciate all of your help here. We did not have any contact from BOA for over 2 months. I used the email contact information for management on this thread and got a direct call back from the analyst in about 2.5 hours after those emails were sent.

So again thanks to you Faith and everyone else that contributed to this thread!

[scottp999]

As a side note, we have the same Loss Mit Analyst that Shakir mentioned in this thread. I have also seen his name on another realtor blog. When he called, he was very helpful and polite, so I think at the very least we also have a good Analyst that knows what he is doing and gets through a big case load.

[faith]

Originally Posted by scottp999

Faith,

Excellent reply. That really clears the muddy waters for me. Exaclty what I needed to know! I'm at the point in the shortsale process where BOA has all of the information, has completed the appraisal, and we are waiting on the decision from them and the investor. We are hoping for a good outcome.

We lost the first offer due to the long process, but got a second. BOA has an interest in approving it because the new offer has an approved loan from BOA, so they will make the originations fees on that new loan and it will most likely be serviced by them to generate more servicing fees each month. Hopefully that will grease the wheels a little for them to have additional future revenue at stake?

I appreciate all of your help here. We did not have any contact from BOA for over 2 months. I used the email contact information for management on this thread and got a direct call back from the analyst in about 2.5 hours after those emails were sent.

So again thanks to you Faith and everyone else that contributed to this thread!

Scottp,
Make sure you email your negotiator and the Executives of BA twice a week to ask them of when they are going to approve the Short Sale. The Negotiators are bombarded of claims, they have case load of about 300-400 claims. Constant communication makes them remember you and give you attention especially if you send email to the Executives. They will tell you to stop sending emails to the Executives, just ignore them, remember a squeaky wheels get the grease. Tell them you don't want anymore buyer to back out, remind them that the home prices are going down and send them a copy of the printout..

You can go to www.zillow.com, and check the selling prices and the sold homes in your area. Pick the lowest one at least 4, copy, it paste it and email it to your Negotiator and the Executive team. Your agent must have back up buyers so keep showing your house to prospective buyers. I have 7 buyers backed out on me due to long process, 6 backed out on the 1st listings, 1 on the 2nd. I also told my Negotiator instead of filing for Bankruptcy and hire a lawyer, I rather used the lawyers fees and I only have $3,000 on my savings and give it to the PMI to get them approve the Short Sale. The investor came to the rescue by buying out the PMI for $14k and I kept my $3,000.

CW paid 5% commission to the agent and BA will pay 5% commission to your agent, no costs to me or you. The buyer in the beginning of the transaction made an extra $8,000 offer with a condition to apply it to his closing costs. CW agreed. My selling price was $290k, they made an offer of $298k to apply the extra $8k to their closing costs. BA will approve the Short Sale if the offer is within 85% to 90% of the fair market value of your home. The fair market value of my home at the time was $300,000 and 90% of that is $270,000, so they have extra $28,000 to give to the PMI but only bought them out for $14,000. Now the value of that home really went down. The recently sold homes were $182,000 and the selling prices now is down to $160,000 per zillow.com .

Remember, right negotiation, persistence, patient, courage and boldness is the key to succesful Short Sale. This is a long and very draining, frustrating and emotional process. Stand firm to the end, and keep your hopes up, pray and I will pray for you and family.

May God gives you favor from BA and their Negotiator, Investor, agents, buyers and everyone that deals with approving your Short Sale. May He bless you and your family and make His face shine upon you.

Take care and God be with you.

[SIE-1]

Hello Faith –

Thanks for all the great info. I never did receive a call from the BoA VP. I guess that is for the best, because (in addition to your great advice) it gave me time to think about some of my options.

Since I have been out of work for about a year now, and given the fact that (much like a lot of Americans today), I am currently upside down in my current house, I really don’t have any income or assets for BoA to come after me for. So, I think that might effetely make me “judgment proof” if BoA decides to try to sue me. That said, I really don’t want to have to file bankruptcy.

I plan to call a bankruptcy lawyer this afternoon to get some more specific information about my options. My concern is that I have heard that many bankruptcy lawyers recommend or push people into bankruptcy, even though it may not be the best course of action.

I’ll keep you posted.

[faith]

Originally Posted by SIE-1

Hello Faith –


I plan to call a bankruptcy lawyer this afternoon to get some more specific information about my options. My concern is that I have heard that many bankruptcy lawyers recommend or push people into bankruptcy, even though it may not be the best course of action.

I’ll keep you posted.

SIE,
Hello again,
Please don’t file for bankruptcy, unless you really have to. It does not help people stop foreclosure. According to American Bar Association , 96% of the people who file for bankruptcy end up losing their homes anyway—so they’re left with a foreclosure AND a bankruptcy on their records.

In some cases, bankruptcy is still a viable option, and I am glad that you have decided to see a bankruptcy lawyer. Check Georgia BAR Association for the lawyers license and make sure you ask how much he charged, do not accept per hour rate but a flat fee., make sure you ask for a free consultation on a first visit. Most of them give you free consultation during the first hour but be very careful.
>>
I have bad experienced with lawyers. One said in his ad that he charged free consultation so I went and we talked about less than an hour. I gave him all my records and documents. So I thought that was free. I decided not to hire him because I cannot afford him. Three days later I received a bill from him asking to pay him $900+ for that supposed to be free consultation. When I called he told me to stop calling his office and to pay that $900+ or he will take me to court. I used my credit card to pay him and he returned my documents after I paid him.

But I have a good personal injury lawyer who defended me to the end when I had a car accident. He has been a good lawyer for me and only charged me less than normal rate. Actually ever since I've hired him as a lawyer in 1981, everytime my family needs lawyer consultation. I called him, even traffic ticket for my husband and the car accident I've had in 2005. He send me Christmas card every year since 1981. I can call him anytime and he calls me right away. So there are still good, caring, truthful and honest lawyers out there. you just have to look.

Anyway, I wish you the best among the bests.


God bless and take care.>>

[notlateyet]

I thought I would post an update:

After gathering all of the required documentation, my agent emailed it to the senior negotiator from the president's office who was handling my loan modification. The negotiator called on Friday to confirm receipt and explain that she would be sending the documentation to the short sale department to be assigned.

The loan mod negotiator also mentioned that my loan mod had been denied--partially because she knew that I was planning to move forward with a short sale and because my payments were already less than 31% of my gross income.

So, it looks like the short sale really is my last resort. When do you all think that I should contact the loan mod negotiator to ask her if my file has been assigned to a negotiator in the short sale department?

(The one piece of good news in the story at this point is that I should be assigned to a "senior" negotiator because of my previous contact with BOA's home loan and insurance president's office.)

Any thoughts?

[Garry]

I have a thought but your not going to like it, the banks can stick the short sales and deed in lues up their rears, why is everyone so willing to be nice to the banks? Have they been nice to you? Take the fight to the bitter end like they are, make them spend every dime it takes to get you out, maybe they will learn to stop taking and start helping.

[scottp999]

SS package has made it to Freddie for review..

They said the ratio (offer to payoff) is 79%. Does that sound like a good number? In addition the ratio of the offer to appraisal was 97.5%. The ratio of offer to what the neighboors house 2 doors down sold for 1 month ago is 100%.

Any comments welcome on how accepting the investor may be to those ratios, when there is a true income hardship that puts the front end dti of the borrower over 65-70% and they have no assets.

Any guesses on the investor reaction? Primary residence, owner occupied, no second mortgage, no refinancing...original purchase loan.

[giacona]

I have a countrywide/B of A loan. This is a conventional loan and is refinance money but was always my primary reisdence. They are getting 84% of the balance. It scared me that they will sue for defeciancy rather then send a 1099 since it wasn't purchase money. Is there any truth to this?

The realtor thinnks they will 1099 due to the enconomey and what the gov't has said.

Please advise.

[faith]

Originally Posted by giacona

I have a countrywide/B of A loan. This is a conventional loan and is refinance money but was always my primary reisdence. They are getting 84% of the balance. It scared me that they will sue for defeciancy rather then send a 1099 since it wasn't purchase money. Is there any truth to this?

Originally Posted by giacona

The realtor thinnks they will 1099 due to the enconomey and what the gov't has said.

Please advise.

Giacona,
The realtor and the government can not help you in your Short Sale. You have to do the negotiations yourself. Do not sign anything nor the escrow papers until you negotiated with CW or BA that they will not pursue any deficiency judgment against you.

California and in some states non-recourse laws apply only to “purchase money” loans (i.e. original home loans that are used to purchase property). Almost all HELOCs and home equity loans are considered recourse loans and lenders for these loans may sue borrowers to recoup loss.

In California if you have a Purchase Money Mortgage and never refinance there is an Anti Deficiency Judgment called California Section 580b meaning your lender can not pursue any deficiency judgment once the house forecloses or sold. If your home qualified as a principal residence and has purchase money mortgage then if you do Short Sale, the balance owed called deficiency judgment is covered under CA Section 580b.
CA 580b states.-
No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser.

Where both a chattel mortgage and a deed of trust or mortgage have been given to secure payment of the balance of the combined purchase price of both real and personal property, no deficiency judgment shall lie at any time under any one thereof if no deficiency judgment would lie under the deed of trust or mortgage on the real property or estate for years therein.

A deficiency judgment may be awarded to the mortgage issuer if the borrower fails to repay the entire mortgage when the home is sold. If the home’s value drops and the borrower cannot sell the property for at least the money due on the mortgage, a deficiency judgment serves as a court order to the borrower to repay the difference between the home’s sale price and the remainder on the mortgage. This is also known as “recourse on the loan.

The bank can also seek a deficiency judgment against the former homeowner for the remainder of the money due on the home. Likewise, the bank can seek recourse if the bank sells the property through a means other than auction, and does not recoup the money still owed on the home. State law in California protects you from recourse on your original loan, but what about your second mortgage or lines of credit? The cash-out refinance you may have done is also not protected from recourse.

The lender may approve the Short Sale but their insurance company called Private Mortgage Insurance will hassle you to sign a promissory note to pay the second . That’s when you negotiate to settle the 2^nd, offer to pay the second mortgage by paying 5 percent or 10 percent of the balance owed, say you owe $90,000, offer to pay 5 percent first, if they said no offer 10 percent which is $9,000 payable in 5 years and no interest. Get a letter stating that you have settled the second and there’s no deficiency judgment against you can be pursued after the Short Sale, and the credit report will show paid and settled in less than full balance

Do not depend on your agent so much, do not sign the escrow papers until you get a letter from CW/BA that the Short Sale is accepted as paid in less than full balance and they will not pursue any deficiency judgment against you. Do no sign the documents if you don’t understand anything. Now is the time to negotiate everything. Your lender is being paid 5% commission by CW/BA and no costs to you. CW/BA does not mail you a 1099C, what they do during tax time, they want you to call them to mail you the 1099C and they will ask you to pay the deficiency judgment before they mail the 1099C. That’s why it’s important to negotiate now than later. Have everything in writing or email the negotiator how much the balance was forgiven, who will mail the 1099c and a letter stating they will not pursue any deficiency judgment against you before you sign the escrow. Be bold, be wise, persistent, patience and ask a lot of questions.


You may also seek a legal advice and pay him an hour or two and ask his opinion about your situation.


God bless and take care.


This is not a legal advice but for your information only.

[Nathan Fransen Esq.]

I think this discussion is typical in that short sales are more and more common and questions arise as to the homeowners rights and responsibilities after the fact. I think Faith makes a good point in that getting a 1 or 2 hour consult with an attorney is wise. I would go as far as to say it should almost be considered a requirement. There are just too many moving pieces.

Here is a quote from a case that is somewhat relevant. Notice that the Court says the anti-deficiency rights can be waived in subsequent transactions (i.e. short sale). I have had people come in my office that are surprised to find out they now owe a large amount of money due to their short sale that they otherwise would not have owed.

"Although a purchaser of real property can waive the protection afforded by Code Civ. Proc., § 580b (prohibiting a deficiency judgment after a sale of real property under a deed of trust given to the vendor to secure payment of the purchase price), in a transaction subsequent to the sale, that protection is not waivable in advance." Shepherd v. Robinson (1981, Cal App 1st Dist) 128 Cal App 3d 615, 180 Cal Rptr 342, 1981 Cal App LEXIS 2546, overruled DeBerard Properties, Ltd. v. Lim (1999) 20 Cal 4th 659, 85 Cal Rptr 2d 292, 976 P2d 843, 1999 Cal LEXIS 3340.


I really can't give any specific advice in this forum, but as always, be cautious and consult with a good attorney.

[RJ2shields]

Well short sale is dead . We started at 750K ( what the bank appraised it at twice)and have droped it to 525K and still falling. We are now pursing Deed in Lieu . We sent in all paperwork and told them we are leaving Nov 1. Which provoked the only response I have gotten from BoA. 'What do you mean leaving' ???? It would be funny if it wasn't so sad. So I explanied 'moving' to them . Big truck comes takes everything . We lock door and leave. We have tacken very good care of house but can't take it anymore . Don't know what bank does about what we will owe if they can ever sell this 750k house and 12 acres... Anyone have experience or know of Deed in Lieu blog ?

[Sparkss]

I had read in another post that a DIL didn't carry a 1099 with it. But that didn't sound completely right to me. Any "experts" that know one way or the other about that ?

Best of luck w/ your DIL. BofA told us that the house had to be listed for a min 3 months and eligible for a short sale before they would consider a DIL.

[Dave_R]

Tomorrow I will be starting the Short sale process. Think blog is great. How can I subscribe to this thread???

Thank you

[CMA1969]

Okay, after going through 8-9 months of CW now BofA, I have decided to walk away. Upside down in Ca with a 30 year ARM. With the pitfalls of the short sale/deficiency, etc, should i just walk away and suck it up? At least they cant come after me for deficiency judgment per CA law.

Please, any input would be GREATLY appreciated.

[wcj654]

Hello all -

First of all, great information on this forum - it's greatly appreciated.

Just wondering what you all would think about this...

My short sale with BOA closed in late June of 2009. (I had a first and second with them.) Yes, like everyone else, I signed their awful documents converting the deficient balance into a collectible balance. It's now early October, and I haven't heard a peep from BOA (knock on wood). My credit report reflects that the first mortgage is satisfactorily closed for less than full balance, and now has a zero balance on the report. The second mortgage is noted as closed, charged-off, and still lists the balance of the mortgage.

I'm being optimistic that BOA isn't going to call, but is that realistic? How long is it typically from the time of closing until you get your first call from their recovery people? Also, if I'm in grad school full-time, and will be for the next three years, and am taking out student loans just to cover basic monthly expenses, what do y'all think are the chances that they'll still try to squeeze some money out of me? The balance on that second mortgage is for a little less than $30K.

Thanks in advance.

Joe

[scottp999]

What was their document that you signed? Dd you sign a promissory note? A little unclear on what you did since, I didn't have a second lein to work with and we signed a promissory note with the MI company that BOA is not a party to at all. The MI company has a seperate servicing company for the promissory notes. The loan is not noted as charged off, but settled.

I would think that if they do contact you that you could use it as an opportunity to negotiate the 30k. Maybe get it down and do a promissory note at 0% over 15-20 years in exchange for them to update it as showing "settled" on your credit report. Also, get them to say it is satifisfied so there will never be any future attempts to collect on it.

Of course, all of these circumstances are so unique, and alot depends on what state you live it, who the investor is, is there mortgage insurance, etc., etc. The more detail you post the better replies you are going to get.

[faith]

Originally Posted by wcj654

Hello all -

First of all, great information on this forum - it's greatly appreciated.

Just wondering what you all would think about this...

My short sale with BOA closed in late June of 2009. (I had a first and second with them.) Yes, like everyone else, I signed their awful documents converting the deficient balance into a collectible balance. It's now early October, and I haven't heard a peep from BOA (knock on wood). My credit report reflects that the first mortgage is satisfactorily closed for less than full balance, and now has a zero balance on the report. The second mortgage is noted as closed, charged-off, and still lists the balance of the mortgage.

I'm being optimistic that BOA isn't going to call, but is that realistic? How long is it typically from the time of closing until you get your first call from their recovery people? Also, if I'm in grad school full-time, and will be for the next three years, and am taking out student loans just to cover basic monthly expenses, what do y'all think are the chances that they'll still try to squeeze some money out of me? The balance on that second mortgage is for a little less than $30K.

Thanks in advance.

Joe

Well Joe,
I don't know what to say to you. I wish you asked this forum before you sign that promissory note, now it's too late. If you are my brother I will slap your wrist and tell you to stand in the corner for 7 minutes, Not, lol,

Charge off means you still owe the Bank and they will use Collection Agency to bother you pay the deficiency judgment. However if you have a Purchase Money Mortgage, Never refinanced, and your home is your Primary Residence, you are covered under California Civil Procedure Code Section 580b which means if the lender foreclosed on a home or short sold the home, that lender can not pursue any deficiency judgment against the homeowner once the house is sold for less than what the owner owed the bank. So if the bank called you about the DJ (deficiency judgment) tell that bank that you are covered under CA Section 580b and if they want to pursue it they have to take you to court and the judge will decide for you because of anti deficiency judgment law in California. BA will not waste time and money to take you to court because it is very expensive procedure and takes time. If you own a lot of property and million dollars in your savings, 401k, stock and bonds, they will take their chance to take you to court even though they know they will not win because of CCP Code Section 580b.

If the Collection Agency calls you, you can do two things, hung up and dont talk to them, tell them to do a Debt Validation or either tell them to give back the debt to the original lender which is BA. You don't deal with Collection Agencies but the original creditors only, in this case BA.

If the Bank of America insisted and you are not protected by CA Section 580b because you have refinanced your loan, you can tell to settle the balance owed to pay it down by making an offer from 5% or 10% of the balance owed. For example, you owe $100,000, settle it by paying $5,000 or $10,000 payable in 5 years and no interest with a condition that this satisfied the balance owed and they will cease from any further collection and put everything in writing.

How long does it take before BA collects. They probably will not, they will just keep reporting it to your credit report every month, they will use Landsafe Credit Report to inquire of your credit or other credit agencies to make sure that you don't buy any home or cars or apply for other debts.
It took 8 months for me to see their report even though I have letters stating they will not pursue any DJ against us, letter from Negotiator that the balance owed is forgiven. Before I signed the escrow I made sure that they put everything in writing that they will not pursue any deficiency judgement against us. I also emailed my Negotiator how much is the balance forgiven and who is going to issue the 1099C. I've got all the documents in writing and by email so when CW now BA did not give me my 1099C I made copies of the papers and sent it to IRS and Franchise Tax Board. I completed form 982 and checked line 1e, I put the amount forgiven in line 2 and line 10b1. that's all I needed and they both have accepted it. I also explained to IRS and FTB the reason why I lost my home and that my attemp to get the 1099C many times failed. If you don't get the 1099C next year, complete 982 anyway, to avoid penalty from the IRS and FTB.

IRS Debt Forgiveness is in this link:
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

Hope this helps.

[wcj654]

Faith and Scott -

Thanks for the information - really appreciate it! And thanks for not putting me in the corner, Faith. ;-)

Scott, regarding your question - I do not remember signing a promissory note. I signed those "the balance becomes a collectible balance" generic docs from BOA, but at closing there was no new promissory note - I thought there would be, but there wasn't. More details - home was in Oregon, it was a primary residence, never refinanced. The 100% financing was all used as purchase money.

Faith, unfortunately, the home was not in CA. When I was debating the merits of foreclosing vs. shortsale, I came across the CA laws - but to my knowledge Oregon had no such protections for the second mortgage, even if it was used as purchase money. So it seemed like the short sale was the best way to go. I like what you're thinking, though - I hope they don't call! Even if they do, I don't know what I have to offer at this point.

Any more advice/information? Feel free to post! =) Have a great weekend.

Joe

[JohnBurns]

All - reading these posts really gives me some hope, because Bank of America is not helping.

I received an approval letter with similar writing, "bank will charge off the remaining debt as collectible balance". The short sale is 150k short, and I've been told that its better to file for bankruptcy then to sign this letter.

I have spoken with the negotiator for hours, but to no avail. They are saying that its my choice, either accept the terms or file for bankruptcy - but there is no negotiation prior to closing.

Please guide me as to what steps I should take. How can I get them to change the language on this approval letter? I have read many horror stories and learned that the negotiation needs to be prior to signing anything...but how can I get them to work with me?

Thanks in advance for your help, I would highly appreciate any advice you can offer.

[rbolski_in_NV]

John,

I am in a similar boat as you. We have an odd situation as we built our house as owner builder and BofA is actually the 3rd, but they act like they are in the 1st position. After months of back and forth we finally received the same letter/offer that you did. Originally, they weren't going to review our file until Nov. 15th, but I then submitted a request to expedite the process and attached a foreclosure sales date notice. 2-hrs later I had that offer from them. It was great to get, but only half the battle has been fought.

I have met with a bankruptcy lawyer who is also a friend. He said the offer is basically a promissory note and you are signing something that they already have the right to anyway. The language basically says that they are going to sell the debt off to a collection agency, although it may stay in house for a while.

I am meeting with a real-estate attorney on Tue.

For now, I don't know what to do. I am still searching. I see the options as:

• Play nice with BofA. Pull on some heart strings and ask for some compassion. Call/fax every other day.
• If they deny it, write back and say it is the end of the road for me and really need them to work out something. Sound desperate.
• If still denied, there is a difficult decision:
  • Short sale and try and settle
  • Short sale and declare bankruptcy
  • Foreclosure and play the game
    • Lump sum payment for partial debt
    • Payment plan for partial debt
    • Bankruptcy
      • Ch. 13 is pointless for me. I need Ch. 7 or nothing. Note that the means test to qualify is changing on Nov. 1st.

To me, I want to put this all behind me and move on. I want to "start a new life" Jan 1. I don't want the debt looming over me forever. But, I just don't know how that will get done yet. If I declare bk, I really need to do it by end of Nov to take advantage of my unemployment and shows lower income.

This mess consumes so much time that I want it to be over. My belief is that money talks - and a sob story will gain some traction. I am going to use both to get work on those settlements.

I like the idea of not rolling over - but to fight the battle for the settlement. To me, a real walk away is foreclosure. If I go through that, why not just tac on a bk? I hate to do this as it is against what I believe and my values, but I have done everything that I can possibly do. The ball in in their court. Do they want some - or do they want none. My young family is more important to me and I will swallow my pride and do what is best from a financial perspective.

I have been humbled by this experiences. Like Faith, I am relying on prayer and giving the worry to God. It is difficult to do.

That is my 2-cents.

Ryan

[JohnBurns]

Hi Ryan,

Thanks for sharing your experience. On a positive note, there have been a few success stories - people have been able to convince the banks to share their terms and that tells me that we shouldn't give up.

My thinking is similar to yours. I really hope that this short sale is the end to this...I cannot accept that there will be a $150k sword hanging on my head even after the bank closes.

Sorry there is not much advice I can offer as I myself have not been able to get any positive momentum going at this point. Please continue to post updates and I'll do the same. I'm sure we can benefit from each others story.

Regards!

[scottp999]

John - I have a hard time putting together all the details from your previous posts. It gets confusing since you have a 1st and 2nd lein, which one is doing what?

1) You are in VA

2) 1st lein is Country Wide/BOA. Country Wide/BOA approved on 9/9 with no disclosure of what the reporting to the credit bureau will be. Since then they say it will be a charge off, they reserve the right on a deficiency balance. Investor is Freddie Mac. No request for a prommisory note.

3) 2nd is held by PNC and is taking $6500, with the right to come after the deficiency.

Questions:

1)What are the current loan balances on the 1st and 2nd leins?
2)What was the offer amount and the total proceeds on the HUD 1 to BOA, and the total amount going to the 2nd PNC?
3)Is there mortgage insurance on the 1st?
4)What is the Credit Bureau reporting that PNC will do?
5)What was the current property value when BOA did their Appraisal for the short sale process?

The recovery department referral and credit reporting seems harsh. After the short sale closes, will your monthly payments not be reduced enough so that you could pay a promissory note of something at 0%? In our case there was Mortgage insurance and the promissory note and "settled" for credit reporting is part of the closing process (Investor was Freddie, Mortgage Insurance was Radian). I was able to talk them down only about 25% on the amount they wanted. Maybe if your investor is Freddie Mac without Mortgage Insurance the policy is to be harsher on the credit reporting as terms of the short sale, and send you to the recovery department. Maybe when you get to the recovery department you can negotiate a promissory note with better credit report terms. You defintley need input from other poeple that have dealt with the recovery department, post short sale closing.

It seems with Mortgage Insurance you get full terms up front prior to closing(which are better, settled to the credit report and negotiate a promissory note earlier). Without MI you get the worst case terms prior to closing and then maybe get a chance to negotiate those terms after closing?

There have got to be some experiences posted here with the Recovery Department.

Have you called Richard Shults at BOA? His number is posted in this thread, is goes to his voice mail and I believe his is the first level manager for Loss Mitigation.

Like you, we just wanted to get on with our lives and not go through a foreclosure and bankruptcy process over the next 1-2 years. Good luck!