Short Sale “Promissory Notes” and Foreclosure “Deficiency Judgements”: How Much Will YOU Owe YOUR BANK After a SHORT SALE VS FORECLOSURE?
Every homeowner who is looking to short sale their property should be asking the following question: “On a short sale, will I have to pay the bank the difference between what I owe and the final sales price of my property?” The answer to this is both yes and no. Don’t worry, I’ll make it simple for you to understand.
*UPDATE 3/13/10 Feel free to visit my new blog post regarding how to negotiate & waive short sale deficiency balances*
#1: Let’s define terms:
Foreclosure Deficiency Judgment: A deficiency judgment is a lien against the borrower whose foreclosure does not produce sufficient funds to pay the mortgage in full. It is an actual judgment, that is, you are being sued. Thus, the borrower is liable to pay the difference between what they owe and what it sells for on a short sale or in an auction. The option to pursue the borrower is only available if the lender proceeds with a Judicial Foreclosure (basically, the lender sues you for the difference). Keep in mind that in a Non-Judicial Foreclosure, the junior lienholder can still pursue a deficiency judgement in many states. All of this can be determined based on original loan documents and/or the type of loan/lender.
Short Sale Deficiencies as Unsecured Notes: Short sale deficiencies are realized when the short sale does not produce sufficient funds to pay the mortgage in full. Short sale deficiencies are typically:
a. Waived in exchange for a pay off
b. Accounted for via promissory note for the deficient balance or percentage of the balance
c. Collected after the short sale as unsecured notes, that is, they will not be able to secure the lien against your other assets (since you’ve already sold the collateral property in a short sale) unless they actually sue you. Again, unless the lender/PMI/collections agency sues you in court and actually files a “deficiency judgment” against you, the note shall remain unsecured. For the most part, lenders will not sue their borrowers as it is more costly for them to do so then to keep in unsecured. Lenders often “reserve the right to pursue the deficiency” in a short sale, but what typically ends up happening is that the unsecured note most likely ends up being substituted with a 1099 (tax on sale) for the deficient balance (which they will charge off), which most homeowners are exempt from (Mortgage Forgiveness Debt Relief Act of 2007).
I Think I`ve Been Hit With an Invoice for the Deficiency/ I think I’ve Been Sued for a Deficiency Judgment: No need to fret. We can help significantly reduce and ultimately eliminate unsecured notes and deficiency judgments whether it was incurred via short sale or foreclosure.
Promissory Note: A promissory note is also an unsecured note and a contract between the lender and borrower where the borrower agrees to pay the difference (or a percentage of the difference) between the amount owed and the sales price of the property. This is usually presented during a short sale and can only be enforced if the borrower agrees in writing. These notes are also negotiable after the short sale.
#2: Let me explain why you are better off pursuing a short sale vs. a foreclosure.
In Washington state, a majority of foreclosures will be non-judicial, meaning that the lender will not be able to pursue you, the borrower, for a deficiency judgment. However, in other states, as well as some WA. based lenders (ie. BECU) do proceed with judicial foreclosures and borrowers may be liable to pay a deficiency judgment.
The number one reason why we advocate pursuing a short sale vs. a foreclosure, is that a foreclosure (regardless of whether it is a non-judicial or judicial foreclosure), will prevent you from obtaining a mortgage for a minimum of 5 years, in addition to extensive damage to your credit, whereas a short sale will have far less damage to your credit in that most borrowers will be able to obtain a mortgage after 2 years of conducting a short sale. Also, the deficiency (or tax consequences) in the event of foreclosure, if is collectable, will be significantly higher than in a short sale (since properties sell at extremely discounted prices at foreclosure auctions).
The second reason why we advocate short sales is that promissory notes and deficiency judgments before and after the sale are, for the most part, negotiable. In many cases, the deficiency owed can be negotiated to a percentage (ie. 10% of a Bank of America HELOC loan) or sometimes completely waived. The lender may forgive the balance in exchange for a small pay off or an affordable payment arrangement with the borrower. This largely depends on two factors: 1. The strength of the negotiator 2. Lender policy and type of loan. Sometimes, it is even possible to have the buyer pay the difference!
Again, should the lender reserve the right to pursue a deficiency, at least you have a short sale on your credit report vs. a foreclosure. Keep in mind that it is rare for the lender to actually pursue the deficiency and therefore the unsecured note will most likely be replaced with a 1099 issued by the IRS for the taxes owed on the sale. You will want to explore the Mortgage Forgiveness Debt Relief Act of 2007 to verify whether you are exempt from this tax.
In addition, if the remaining deficiency is pursued by the lender, the deficient amount can, even after the short sale, be negotiated down further with the assistance of an experienced debt negotiations specialist. Keep in mind, there are situations where the lender will absolutely not allow a short sale unless the homeowner signs a promissory note for the full amount of the difference. We have recently discovered that BECU will not approve a majority of their short sales unless the homeowner signs a promissory note for the full amount (our team has, however, been able to negotiate these down to a fraction of the deficiency).
In these situations, I strongly suggest hiring a professional short sale negotiator to aggressively negotiate the balance before the short sale as much as possible, then having a debt negotiation specialist pick up the tab after the short sale. You will want to explore these options before considering to file for BK.
#3: Finally, let me answer this question in the simple terms: “On a short sale, will I have to pay the bank the difference between what I owe and the final sales price of my property?”
Yes: As we discussed earlier, the lender may ask you to pay the difference in the form of a promissory note and will not allow a short sale unless a note for the full amount is signed by the borrower or the “right to reserve to pursue a deficiency” is outlined in a statement signed by you. In these situations, again, it may be in your best interest to have your short sale negotiator bring down the balance as much as possible before the short sale, then to have a debt negotiation specialist negotiate the balance even further after the short sale (if the deficiency is actually pursued by the lender/pmi/collections agency).
No: It is possible, in a short sale, to negotiate the deficiency owed down to a percentage that can be paid or to even waive the liability completely. What this means is that, say, if you owe $500,000 to your lender but your property sells for $350,000, a strong negotiator may be able to get the lender to settle at $350,000 and not pursue the deficiency with the homeowner (in exchange for a pay off or sometimes a payment arrangement with the borrower). That means the homeowner will be able to walk away from their short sale (although they may owe the IRS a tax for the difference, which most homeowners are eligible for exemption under the Mortgage Forgiveness Debt Relief Act of 2007). A negotiator will accomplish this by demonstrating to the lender what their losses will be in the event that you, the borrower, allow the property to go into foreclosure or if you file for bankruptcy. The negotiator will argue that it is in their best interest to proceed with the short sale, and will present all the market data, financial comparison sheet, etc. in order to make a strong case.
Hopefully this answers many of your questions regarding deficiency judgments, unsecured notes, promissory notes and how they relate to short sales and foreclosures. If you have any questions, just respond. You WILL receive a prompt response.
Your friend,
Kevin
Kevin,
Thanks so much for your advice, I am speaking tomorrow with the loan modification team to see what options might be available for me. I will keep in touch with you to let you know how the process is going thanks again for your advice!!!!
Thanks, Chris and Erin
I have a recourse loan first and second
short sale is approved
deficiency language not removed
paid in full not put in
only thing is no net due on close of sale with a promissory note of $0
will BofA go after me if I sign for the staggering balance difference?
This communication is from BAC Home Loans Servicing, LP, a subsidiary of Bank of America, N.A.
BAC Home Loans Servicing, LP is required by law to inform you that this communication is from a debt collector.
Please write your account number on all correspondence.
SPO Approval 11525 10/26/2009
6. The property is being sold in AS IS condition. No repairs will be made or be paid out of
the proceeds, unless specifically stated otherwise.
7. Seller is to contribute $0.00, to assist in the closing of this transaction. This contribution
will be in the form of:
a. PROMISSORY NOTE (Signed, notarized and returned at closing): $0.00
If a promissory note is required, it must be signed and returned to BAC Home Loans
Servicing, LP prior to the close of escrow. It is the responsibility of the closing agent to
ensure that the executed and notarized promissory note is returned to BAC Home Loans
Servicing, LP.
If a promissory note has already been signed and agreed to between the seller, investor
and the Mortgage Insurance Company, a signed certified copy must be provided to BAC
Home Loans Servicing, LP at the close of the short sale transaction. It is the
responsibility of the closing agent to ensure that BAC Home Loans Servicing, LP
receives the copy.
*** Sales proceeds will be returned if the note has not been received. This will
result in a delay of the transaction and/or possible cancellation of this short sale
transaction. ***
b. CERTIFIED FUNDS CONTRIBUTION (Due at closing): $0.00
8. The sellers will not receive any proceeds from this short sale transaction. If there are
any remaining escrow funds or refunds, it will not be returned to the seller; it will be sent
to BAC Home Loans Servicing, LP to offset the loss.
9. The property must be free and clear of liens and encumbrances other than those
recognized and accounted for in the HUD-1 approval, on which this approval is based.
10. There are to be no transfers of property within 30 days of the closing of this transaction.
11. BAC Home Loans Servicing, LP does not charge the borrower for statement, demand,
recording, and reconveyance fees on short payoff transactions. Do not include them in
your settlement statement. BAC Home Loans Servicing, LP prepares and records its
own reconveyances.
12. Other: All funds must be wired. Any other form of payment of funds will be returned.
Payoff funds must be received within 48 business hours of the HUD-1 settlement date.
13. Other: Should the closing be delayed and the Investor/Insurer agree to an extension of
the original closing date, the Borrower(s)/Seller(s) will be responsible for any per diem
fees through the new date(s) of closing, extension fees and foreclosure sale
postponement fees. The Borrower(s)/Seller(s) will be responsible for any additional
costs or fees over the stated approved amounts.
14. Completed Assignment of Unearned premium and Important Notice Regarding Income
Tax Reporting is to be emailed along with the final Settlement Statement.
If the seller is entitled to receive any proceeds based on a claim for damage to the property
under any policy of insurance, including homeowner’s, lender-placed, casualty, fire, flood, etc.,
or if seller is entitled to receive other miscellaneous proceeds, as that term is defined in the
deed of trust/mortgage (which could include Community Development Block Grant Program
(CDBG) funds), these proceeds must be disclosed before we will consider the request for short
sale. If we receive a check for insurance or miscellaneous proceeds that were not previously
disclosed, BAC Home Loans Servicing, LP will have the right to keep the proceeds and apply
them to BAC Home Loans Servicing, LP’s loss after the short sale. We similarly would have the
right to claim the proceeds to offset our losses if it were not previously disclosed and it was sent
directly to the borrower.
I have a similar situation with b of a they will take the short sale offer i have they want me to sign a promisory note but have verbage in their paperwork that sounds like they can still come after me at a later date for the balance , can they do this or should i get them to agree in writing they will not come after the deficiency help!!!
Completed a short sale of a property in CA. First mortgage send me a 1099; however, haven’t received a 1099 from the second. Does receiving 1099 from first mortgage mean that they now can not go for deficiency judgement? As of the second, will it mean the same if I get 1099? If I don’t get 1099, does this mean they can go for dificiency judgement if they wish? Thanks in advance
I live in Washington State and have a first and second mortgage with Chase/WaMu. (When I purchased my house in 2006, WaMu provided me with two mortgages to cover the cost of the house.) When my husband left me in April 2008, I immediately put the house on the market. In December, my agent told me I was WAY underwater and should try for a short sale or foreclose. She told me I had to stop paying my mortgage, or Chase would have no incentive to give me a short sale. She told me that as long as Chase got its money, it didn’t care about me. So, as of 1 January 2009, I stopped paying my two mortgages.
I received a short sale offer in July 2009, which Chase approved for both the first and second mortgages on the condition I agreed to pay an additional $3K after closing to compensate Chase for its losses on the second mortgage. That short sale deal failed due to a problem with the buyer’s financing. I now have another short sale offer that is better than the first offer. However, this time Chase is refusing to honor the $3,000 it was willing to accept to close my second mortgage debt obligation in July. Chase has said that it will pursue me for the full amount I owe on my second mortgage (approximately $40K) until the debt is paid in full.
I have always, until this experience, paid my debts on time and in full. I applied for a short sale under two hardship reasons: (1) severe loss of income and (2) underwater mortgage. First, my husband’s name is not on the mortgage, he refused to assist me financially in covering the mortgage. The divorce became final in July 2009. The combined mortgage amount for the house is $400K, and I cannot afford to continue making the mortgage payments on my own each month. Second, my home’s value is far less than the amount I owe on the mortgages. The house’s value crashed from $445K when I purchased the house in 2006 to less than $300K as of the BPOs performed by Chase in October 2009. I owe approximately $400K.
I only want Chase to honor the amount it agreed in July to accept from me to cover the second mortgage debt obligation ($3K). Changing the amount when it had already approved the first amount of $3K is unethical. I hired a short-sale negotiator in January, but she feels her job is fulfilled because Chase has agreed to the short sale. I have an appointment with an attorney on 2 November who seems to be competent, confident, and willing to help me. Do you think the attorney will be able to intimidate Chase into honoring the $3K it agreed to in July? Should I threaten bankruptcy? Can you think of any other tactics I should use to pressure Chase to negotiate?
And thank you in advance for any advice you can provide me. Your website has been the most helpful resource BY FAR!!
Jessie
Kevin,
This has given me so much information I have been looking for. I do have more questions. My wife has a house that is in final neg with the lender. They said yesterday that we will be cleared of everything if we sign a promisary note for $16k. They said it is non-negotiable. Who should I talk to about this before she decides to sign it.
Thank you,
Jason
Orlando, Fl
Kevin,
Thanks for the insight. Your blog verified our short sale process. In our case, the lender didn’t forgive us for the balance and no promissory note will be signed. So it looks like the balance will be a unsecured note which the lender will “reserve the right to pursue the deficiency” and we’re exempt in paying taxes (primary residence under the Mortgage Forgiveness Debt Relief Act). The question I have now is down the road, if the lender sues us for the remaining balance, what are my options? And do you know of a good debt negotiator?
Thanks, Joe
Joe,
The 1099 and deficiency judgement are mutually exclusive, meaning that you can only receive one of the two. You will either be pursued for the deficiency or taxed for the “waiver” of deficiency, which is like “income” to the IRS
Jessie,
I highly recommend asking the attorney what his/her track record is with these files. The best tool in the toolbox is EXPERIENCE. “Persuasion” and the ability to argue are not that valuable in short sale negotiations. Experience supercedes these things. For example, our negotiators will call Chase and immediately call them out should they misrepresent any of their policies, since we know them all. Larger banks work on percentages, so when lenders realize that we are all too familiar with their bottomline, they tend to get straight to the point.
Jason,
I recommend asking for a written letter stating that the deficiency balance will be in forgiven, because lenders end up pursuing you anyways just in case you “forget.”
What percentage is the note compared to your loan?
Joe,
I refer all clients to one debt negotiator.
You can get in contact with him via clicking the “deficiency, debt & credit repair” tab on the top of the website.
Thank you, Kevin. I might be calling your office.
thank you so much Kevin! this blog would really be of great help to me…… i’ll be waiting for more advices from you…. http://www.forms.com/
Promissory Note
I have a short sale that is approved, but there has been some talk about a promissory note. My question is that is a short sale with a promissory note worth it? I purchased a condo for 150K, 100% interest only loan, and am selling for 70K and the 80% SunTrust part has agreed and the 20% Chase part may ask for a promissory note, which will be for 42K?
Also, what happens if a promissory note is not paid?
If you 80/20ed this property, I would assume your 2nd is 30k.
I’m assuming the extra 12k is in arrears?
They want you to sign a promissory for the whole amount + arrears.
That is too much.
Kevin
I owe them about $47,000 (20% of loan). I have decided to sign the promissory note to avoid foreclosure and not have the 80% to worry about.
LCS Mortgage told me that if I pay something each month and come to the table with a lump sum, that they may accept it? We will see?
Also, my thoughts were my debt goes from 150K to 42K and I avoid a foreclosure.
Nick, you might really want to consider clicking the “http://seattleshortsaleblog.com/deficiency-judgement-debt/” and working with someone to negotiate your note even further.
Read my latest post on 1-2 punching your bank. The title is fun, but the content is serious and can save you many thousands of dollars..
I received a letter from LCS financial that my account was paid in full and the lein had been released, after my short sale went through. There had been talk about a promissory letter, however it was not in the closing documents. They are now sending me a letter that a mistake has been made and they want me to sign a piece of paper that I will pay $400+ before the 30th of each month. My plan, at this point, is that I am going to wait until they start calling me asking for my payment and tell them that I have a letter stating that I am paid in full and I am not going to sign anything else. Is this a good idea?
Yes, if they ask, fax them proof of the release. This is a lending practice that I absolutely hate, which is to try and pursue a deficiency on uncollectable debt. They capitalize on fear and a lack of knowledge.
They called and said that I still owe the debt and I do not have to sign a promissory note in order for it to be valid, which I think is bull%#@$. Does a promissory note have to be signed in order to be valid? I am not going to pay and just wait it out?
They called again last night and they still do not have a promissory note that is signed. Should I contact a mortgage lawyer? If so, any suggestions on lawyers to use? Should I look for a local lawyer?
Here is an article on the short sale deficiency judgment in Nevada http://foreclosurenv.wordpress.com/2009/10/28/what-is-a-the-right-to-a-deficiency-judgment-worth/
Foreclosurenv,
Indeed, the devil is in the details. Great article. Feel free to share more.
I have short sold my house in July of 2008. The Negotiator sent me a letter included in the escrow papers in first page of that letter states that CW and its investors and insurers accepted the short sale and the 2nd page stated that CW and its investors will not pursue any deficiency if the reference loan closed. I have emailed the Negotiator regarding the statements on the 2nd page and he responded saying that the letter states they will not pursue any deficiency and said he has gone over and above beyond what he can do and it’s for me to decise to accept it or not. I asked him if that includes the 2nd mortgage and he responded saying yes the 2nd mortgage is included and they will received $14k out of the net proceeds, so we have signed the escrow. Six months later when I checked my credit report there was a default report stating we still owed $86,828.42 so I sent a letter of dispute to CE and BA and TRW and Equifax, BA responded stating that they have made a credit adjustment paid settled less than full balance. TRW and Equifax reported the same thing. Then last week when I checked my balance in my checking accounts, I saw a Mortgage 5013 included as a new account with a balance of $86,828,42 so I called BA and was told that CW and BA is now attaching all the mortgage loans of every homeowners who has a checking, savings, credit card account to their account. I told him that I short sold my home and I have proof that no deficiency against us. He gave me 4 different phone numbers and was finally transferred to collection dept. He told me that the 2nd mortgage still shows active as if it was never short sold. I was referred to my negotiator and was told they will call me back but they never did. So my husband and I decided to close my checking acct and the teller questioned us. why we were closing the account because we have mortgage with BA, my husband said, closed the account, this thing has been paid off. She referred us to the Manager to be able to close the account. I think they are attaching the mortgage loans to the customers checking or savings acct to freeze the account and to take payments from their account to be applied to the mortgage owed. That’s why we closed our acct we have fixed income, we are 60,61 years old. I have short sold my home due to losing my job due to a car accident and was hit by uninsured driver. My husband retired to take care of me, I have a retiremtn check of $450 a month from previous employer. We have paid our bills on time and used up all our savings until we run out of money. After we have short sold our home, we have sold our truck and paid off the credit card we owed to BA for $8,200. My Kaiser coverage exhausted under CalCobra and when I have applied for extension Kaiser denied my coverage due to cataracts, osteoporosis, asthma and GERD, my premiums with Kaiser was $292 a month and my attempt to get Medical coverage with Kaiser failed and denied. My daughter’s car 2002 needs a major repair so instead of have it repaired, we gave her our 2006 Toyora and used the Kaiser premium that I used to pay Kaiser to pay a Hyundai car payment. I have pawned my jewelries for $100 so we have food to eat till next pay check since we took our remaining balance from BA and used that to open a new acct with a credit union which is only $200.
I have emailed Bank of America’s President barbara.j.desoer@bankofamerica.com, I also emailed Pres Obama, Sen Boxer, Congressman Bob Filner, and 10news to ask for help.
My question is am I still liable for the 2nd mortgage when I was told that there will be no deficiency, I did not sign a promissory note to pay the 2nd. I am just confused and don’t know what to do. Any advice is greatly appreciated. I have purchase money mortgage and never refinance and in a non recourse state.
Thank you.
Faith,
Your story is truly heartbreaking. I am so sorry that BOA has put you through this. They cannot collect on an uncollectable deficiency that they waived at closing. Are you being represented by an attorney?
Kevin
Thanks Kevin,
No I don’t have a lawyer, cann’t afford one. I am in San Diego, California, my house that was short sold was in Menifee, California about 2 hrs a way from San Diego. I am preparing a letter again to BA or CW and will ask them to remove that Mortgage in my account. Well, I have closed the checking account already. But not the credit card acct. I still owed $1677.42 on that.
Thanks so much for your response, God bless..
I have spoken with Ceasar Ramos at the President’s office and have emailed you his contact. If they do not take care of this within a few weeks, just let me know, and I will personally file a report with the AGO and CPD.
Thank you so much Kevin,
You are an angel send by God. I have emailed all the CEO and executives, president and negotiator of Bank of America but to no avail..
This is how it looks like when I sign online to check my account:
Account Balance
Mortgage-5013 $86,828.42 View options
Per teller of Bank of America in San Diego we still have this Mortgage showed as active. Per Shawn of BA with direct line of 800 669 6607 ext 8753, this 2nd Mortgage still shows active., was referred to the Negotiator Adam Herson who is now a Manager on November 11, 2009 but never returned the call.
I called Ceasar and left a message in detail and mentioned your name also.
I have just finished crying because I could not believe that none of them respond to my email. I have mailed a letter also the the CEO and just hope that he will respond to my letter. This is really giving me so much pain and headaches and sleepless nights. They have all the evidence stating no deficiency judgment against in the escrow papers and via email including the Reconveyance Letters from Riverside Country Recorders office stating the Deed of Trust was paid in full for both loeans with the loan numbers on it. I don’t know their system shows the second mortgage as active where it should be closed, paid, settled in less than full balance.
I thank so much from the bottom of my heart. God bless you always.
Faith
Dear Mr. Kim,
I am writing in hopes that you address a question I have about my short sale approval letter with Bank of America (BofA).
Simply put, I have a single non-recourse loan on my underwater home in California, and BofA has just approved a short sale offer without requiring a promissory note. However, the approval letter states their right to pursue the deficiency (which in California, a non-recourse state, is I believe only prevented in the case of foreclosure, not short sale).
I am alarmed by this text because my deficiency will be 200K. I have asked them to be specific in their approval letter that my debt obligations will be fully settled following the short sale payoff. They agreed to drop the text about the deficiency pursuit, but they won’t change the letter to explicitly say that I will be fully settled following the short sale payoff. I don’t want a collections agency to come after me for the deficiency, which I cannot afford.
My question to you is, am I right to be worried about this deficiency? How can I get assurance from BofA that they will cancel the debt, issue me a 1099, and leave me free and clear and fully settled following the short sale payoff?
Thank you for any information you can provide.
Sincerely,
Jeff
Jeff,
Most lenders typically do not like to provide that kind of language. Try to have them express (written) an intent to issue a 1099 or negotiate a promissory note in exchange for pay off language
Hi Kim,
I called Cesar Ramos but he did not return my call. I’ve sent a letter to the CEO of Bank of America and I hope I get a response from him next week sine this week is a holiday.
Here’s the contact numbers, mailing address of CEO, Pres And Executive of BA and their negotiators and senior management.
Bank of America’s CEO, President, Executives, Management and Negotiators names and email address
CEO – ken.d.lewis@bankofamerica.com
President – barbara.j.desoer@bankofamerica.com
EXECUTUVES- brian.t.moynihan@bankofamerica.com;
steele.alphin@bankofamerica.com;
joe.price@bankofamerica.com;
walter.e.massey@bankofamerica.com;
Senior Management –
dan.b.frahm@bankofamerica.com
adam_herson@countrywide.com;
Negotiators:
colleen.haggerty@bankofamerica.com,
britney.w.sheehan@bankofamerica.com,
nicole.nastacie@bankofamerica.com,
keith.banks@bankofamerica.com,
michael.jones@bankofamerica.com,
bradford.r.dinsmore@bankofamerica.com,
michelle.shepherd@bankofamerica.com,
maryellen.baker@bankofamerica.com;
kacie.miller@bankofamerica.com; david.kozik@bankofamerica.com; melissa.a.henderson@bankofamerica.com; bitha.mackellar@bankofamerica.com; annabel.lopez@bankofamerica.com; juanice.neal@bankofamerica.com; minerva.roman@bankofamerica.com; jeremy.roberts@bankofamerica.com;
Customer Advocates:
Khara Turner…800-601-2522 ext 8560, khara.turner@bankofamerica.com
Kacie Miller …800-601-2522 ext 8559, kacie.miller@bankofamerica.com
Negotiators:
David Kozik…800-405-0078, ext 3047, david.kozik@bankofamerica.com
Pam Preciado 800-669-2443 ext. 5105
Cesaer Ramos 800-669-2443 ext. 3592
Clint Vale (negotiator Andrew Kane’s supervisor) (972)498.2561
Heidi McNaughton—1st contact from email to President Barbara. Desoer She is not a negotiator, but requests documents and assigns a negotiator to you.
1-800-669-2443, ext. 3392
fax—1-805-520-5414
Melissa A. Henderson (Negotiator)
Senior Operations Analyst
Office Of The Chairman – Home Retention Division
Bank Of America
LA-LM ADMIN PL
800-405-0078 x 3057 Office
866-619-4249 Fax
450 AMERICAN ST
Mail Stop: CA6-921-01-09
Simi Valley, CA 93065
melissa.a.henderson@bankofamerica.com
Cynthia Cutarez HEAD OF HOME RETENTIONS (CA) Direct Line
661-951-5939
Tabitha Mackellar…Senior Collector…(800) 405-0078 X5583
tabitha.mackellar@bankofamerica.com
Annabel Lopez…Customer Relations Advocate..(800) 669-2443 X2710
annabel.lopez@bankofamerica.com
Juanice Neal…Customer Relations Advocate..(800) 669-2443 X5034
juanice.neal@bankofamerica.com
Steven Nielson Customer Relations Advocate..(800) 669-2443 X7810
Customer Relations Advocacy… (800) 669-2443 X2773
Jessica Gadeng (not sure of spelling)…Senior Collector..(800) 405-0078 X5667
Here’s some FHA Negotiators numbers…I think they are located in Texas..
Minerva Roman (972) 498-6485
minerva.roman@bankofamerica.com
Jeremy Roberts (972) 498-6701
jeremy.roberts@bankofamerica.com
Mr. Kenneth D. Lewis, CEO of Bank of America
100 N. Tryon Street
Mail Code NC-1-007-18-01
Charlotte, NC 28255
Is Ceasar helping you out at all?
No, I left a long messages describing in detail but he did not return my call. Also Shawn the guy I’ve spoke to and referred my call to Adam Herson both him and Adam Herson did not return my call. I have sent all of the executive team including the CEO’s, president of BA, Adam Herson, and some of the negotiators and management team on Nov 16, 17 and 19 but no response. I have sent CEO Kenneth Lewis a priority mail letter with return signature and was received on Nov 22 by M Oggan, don’t know what happened to that. I am still waiting for his respond on that either by mail or email.
Thank you so much for all your help. God bless you.
Hi Faith,
Until they respond, do not make any payments and do not worry about this outstanding debt. They cannot do anything to make you pay this amount. Do not give them a single penny, because they have already agreed to a full settlement in 2008. Enjoy your thanksgiving and really, do not worry. You have proof of settlement, so that is all you need.
They cannot garnish your wages, begin debiting funds, etc. This is simply a mistake (a harsh one), but the bottomline is, consider this nothing more than a mishap. You do not owe them a penny.
Hi Kevin,
We did a short-sale on our home in AZ a few months ago and did receive a waiver from the first mortgage, Wells Fargo, that they will not be responsible for the difference (about $70,000).
My second loan for about $29,000 released the lien for the short sale for $3000, but are now sending me payment coupons for my back payments with a remaining balance of about $26,000. What are my options here? We absolutely can’t afford the payments. Should I hire an attorney or work with a debt negotiator or contact the bank itself?
Thanks!
Hi Laura,
I would be curious as to what the purpose of hiring an attorney would be, since an attorney would not contest the collectable amount. A release of lien does not mean forgiveness of the deficient balance. An attorney would take one look at your situation and tell you that the 2nd lienholder does have the right to pursue this deficiency.
If the attorney was in the business of debt settlement, however, that would be a different story.
What you will want to do at this point is to try and settle for less then what is owed, and that is something you could accomplish with a debt settlement expert.
You can access our preferred partner here:
http://seattleshortsaleblog.com/deficiency-judgement-debt/
sorry, make that that we will not be responsible to Wells Fargo for the remaining balance (bit of a typo there).
How long AFTER closing a short sale with Bank of America should I expect their recovery department to “come after us”? We closed a short sale on our homestead residence in Florida on 9/15/09 – today is 11/30/09 and the ONLY communication we’ve received is notification from the court that the lis pendens has been lifted AND a letter from Bank of America that went to credit bureaus stating that the debt was settled for less than what was owed. We had 2 mortgages on the property and the letter to the credit bureaus is unclear if both loans are addressed – I suspect it is just the first mortgage.
The first mortgage was roughtly $375k with $325k of the short sale going toward it. The 2nd mortgage was with B of A but sold to Wells Fargo and was for $100k with only $3k going toward it but Wells Fargo is not showing up on my credit report at all.
We still owe $150k plus expenses. We brought -0- in to closing (we have no money) so all closing expenses were deducted from the short sale proceeds (which is why the $335k short sale paid off only $328k of loan.)
When we signed the short sale document, we had to sign the B of A letters saying that they would expect payment on the balance owed and that their recovery department would be in touch. They wouldn’t do the sale without it…we tried to get it modified without luck….they delayed on 4 previous offers and we lost those sales so we really wanted to get this one through – we were running out of time before foreclosure!
If we get a 1099 at the end of the year, does that finish things and indicate that they will not be coming after the outstanding balance? I make $13k a year and don’t have a prayer of paying off this debt.
The good news is that I don’t owe anybody else any money….but now we live with my mom & dad….ah well. Things will get better!
Cassandra,
Things will get better! If they 1099 you, the deficiency has been forgiven.
Lenders technically have up to around 7 years to pursue the debt, although they usually begin collecting within months sometimes within a year of closing
Kevin, I have a short-sale pending in WA state. They are asking for a Promissory Note for $10,000, interest free payable over 10 years. They won’t accept a cash settlement of less up front, which seems odd but oh well. Can I negotiate that $10,000 down later? The lender is Aurora and it only has a 1st mortgage.
Myron,
Yes, you can negotiate the 10k after the sale. Make sure the remaining deficiency is accounted for and you at least try and negotiate a release of the deficiency
Thanks,
Kevin
Help. We have short sale approval on 1st with B of A. 2nd is with Chase who will not accept the $3000.00 the first is offering. 1st negotiator said they would accept 10% which is $12000.00…that I do not have. New negotiator says they want at least 21% to close short sale and will still come after me for the rest of the loan. Loan amt is 120,000.00. We have 4 children. I lost my job 3 yrs ago. we lived off my husbands overtime for that time but now the city(he is a gang policeofficer) haw cut all overtime indefinately. I am at a loss. If it goes to foreclosure they say they will also come after us…please advise.
April,
If you do not have sufficient funds to pay off the amount, this fact needs to communicated both orally and in writing (reflected in your short sale package, including bank statements, pay stubs, etc.) They are not going to keep asking for something that is clearly not there
Who is negotiating this short sale? You really need representation.
As far as recourse rights, where is your property located?
We’ve been approved for closing our property with Bank of America on a short with a Promissory Note required and to be signed, notorized, and returned to B of A after closing. The Promissory Note in in the amount of $0 (zero) dollars.
Does this mean B of A is agreeing not to pursue a deficiency judgement?
Thank you
Hi Gretchen,
Unless they remove the language reserving the right to pursue a deficiency or provide a letter outlining forgiveness of the deficient balance, no.
O.k .. but reading your general comments about short sales you wrote “Short sale deficiencies are typically accounted for via promissory note for the deficent balance or percentage of the balance.”..
If the Promissory Note is in the amount of $0.00 doesn’t this negate the realm of possibilities they have a right to pursue anything?
Thanks again
Your promissory note is for $0, which is clearly not accounting for any of the deficient balance. I recommend asking your representative to ask what the lenders plan on doing with the deficiency, rather than assuming the deficiency has been waived because of the note.
Mr. Kevin Kim,
Thank you so much for your info and answers on this page. I am in Florida, and a week away from closing the short sale of my home.
Regarding the promissory note for $0.00 just doesnt make sense to me. I have requested(as you advised) an additional letter outlining forgiveness of the deficent balance. My own atty was not prepared for me to request this. BIG thanks to you. -Bruce-
Dear Kevin,
I found the reference to your website on the BK Forum. You had solicited your knowledge and services in response to a shortsale inquiry. Boy am I glad I did. I have not yet stopped payments, but have lined up a seasoned ( or so I believe ) shortsale expert in my area. I live in Ca. and have a first mrtg of 215k and a second of 150k. The market value of the house is approx. 170k. The second is an adjustable and we have been paying interest only. Because my husband has experienced a pay reduction, we will soon be over our heads and on our way to a BK. We are entertaining a shortsale instead. The real estate agent we will potentially be working with says he thinks we might be successful if we offer the second a promissory note of 25k. to agree to the sale. My question/concern is how can I feel confident the 25k will be enough and do you believe they will return with a demand for $ on 150k. What are the odds the first mort. will be satisfied with the say 170k they might see and not want the difference too? Any thoughts or insight will be greatly appreciated. Thank you..Eli in Cali
Elizabeth,
When filing for BK, one must consider the opportunity cost of having (basically) no credit nor the ability to obtain a mortgage for 5-10 years.
When a homeowner signs a promissory note, it should typically be accompanied by some sort of language stating that the remaining deficiency balance will be forgiven. Have something in writing because if you don’t, they will still try and collect the balance.
The 1st is being almost completely paid off and generally does not pursue the deficiency. Your negotiator should know to demand something in writing.
Thank you Mr. Kim for your timely response. Where can I access info on your fees regarding the services of a debt settlement expert and as I was curious about in my last post, does a 25k note to the second lender on a 150k loan sound like something you would feel might fly? Is it to our benefit to use a local short sale expert?
Click the “debt settlement” tab on the top of my website. I would not, however, begin consulting with one until you actually incur the debt.
It is to your benefit to work with a real short sale expert and to your loss to work with a “newbie” in the business.
Our California team alone has closed 800 in the past few years..that is the type of experience you want working for you. We have three teams that service all states.
If you’d like a personal introduction or would like to work with our in house realtors and negotiatiors, click the “short sale negotiation” tab above and submit your info. We will get back with you.
Thanks,
Kevin
Kevin, best info site yet. I just received approval letter from BofA and realtor opened escrow 12/16/2009.
(short sale) same verbage that I am reading”may pesue a dficiency judgement for the difference in the payments received”. My wife and I are in fear of the bank coming after us later?????????
Hi Glenn,
What state are you from? How large is the deficiency? Do you have a large amount of assets?
Whether they will ACTUALLY PURSUE THE DEFICIENCY largely depends on whether it is worth pursuing the deficiency to the bank.
Keep in mind that when the banks discharge the deficiencies and 1099 you, they recuperate a substantial portion through the tax write off.
So unless the bank actually sues you because they think you have enough assets to pay the deficiency, usually they will just let it go and discharge the debt. It is scary to have the language in there but do not let that intimidate you. It costs them a lot to actually pursue that deficiency. They reserve this right for special cases, ie. investors with multiple assets with large amounts of equity, etc.
Kevin
Thanks Kevin, Caloifornia and all my assets went to purchase home in Yorba Linda Ca in 2004 deployed to Iraq in 2005 and sold that home and purchased Riverside Ca home in late 2005. All equity from 20 years gone in that home. 680 purchase short selling for 385. Starting over! No assets.
I would say move forward with the short sale..since your other alternative is to simply allow your property to go into foreclosure, which gives the non foreclosing lender(s) (if you have a 2nd or 3rd mortgage) the right to pursue a deficiency judgement.
If they begin to seriously pursue you, you may want to consult one of our debt settlement negotiators. A link to their input form can be found above
Hi Kevin,
Your blog has been very helpful and informative.
I am dealing with an investment property with only a first loan with Chase. I am being told by a short sale negotiator that Chase has a boiler plate letter with verbiage as follows:
“…Chase has agreed to your request for a short sale and will accept a minimum of $XX to settle your account and release the lien(s) on the above mentioned property.”
“To the extent that your original obligation has been discharged…”
“Proceeding with this transaction may have state and fed tax implications……”
“…as consideration for discounting the payoff on the loan(s) which is secured by a mortgage encumbering the property”
Does this seem like we would have closure with Chase and that they would not pursue a Deficiency Judgment?
Thanks
Jake,
No, this language does not gaurentee that they will not pursue a deficiency. Whether they actually pursue a deficiency depends on your strength as a borrower. Do you make money? Do you have assets? If you do, they may consider pursuing you.
The only way to gaurentee no deficiency at closing is to have a letter outlining forgiveness of the deficiency like this one:
http://seattleshortsaleblog.com/2009/09/09/example-of-a-lender-pursuing-a-deficiency-judgement-that-they-arent-entitled-to/#more-25
I personally negotiated this and I’ll tell you, it does not happen often. The borrower must be completely insolvent with little to no income.
Kevin,
Thanks for the informative reply.
Yes, I do have a 6 figure income and have assets in retirement funds and some equity in my primary home. However, my job outlook is very uncertain and my expenses with this property outweigh my net monthly income by nearly $3500.
I am being told by the short sale negotiator that Chase is giving 1099s in almost all cases right now. From your experience, (especially with Chase) are you seeing this from lenders?
I feel that I can successfully short sale the property, but am concerned that there won’t be closure for up to 6 years. I’d appreciate any advice. BTW, the property is in Nevada.
Thanks
I would move forward because what is your alternative but to allow your property to go into foreclosure? If you have a 2nd lien, they can still pursue you for the deficiency
However, Chase still may pursue the deficiency after a short sale. I have seen them make the attempt to do so (not successfully).
There’s no gaurentees, but at least now you have someone to go to in the event that something happens
We just did a short sale on our home and we had to sign a promissory note for the $43,000 difference to Fifth Third. We don’t have the money to pay the monthly payment on this amount. We only agreed to pay the difference to get the home sold. We are in Ohio. What should we do now. They did not want to negotiate with us at all. They said they would get their money from us one way or the other. Any information would be helpful.
You may want to consider debt settlement, or settling for less than what is owed on the promissory note
Follow this link and complete the contact form:
https://crn.infusionsoft.com/go/contact/kevinkim/
Kevin, Found your site extremly helpful, yet I have a few questions,
Last year I expeinced a hardship and was unable to pay my mortgage on my first loan with chase. The rep. on the phone told me I had a 3 month forberance and at the end of the 3 months as soon as I made a full payment the balance would be added to the end of the loan. Stupid me did not get this in writing. 2 months later Chase contacted me stating my loan was 2 months late and how did I intend to pay it. They said they had no record of my prior call. I did not have the Funds to make the loan Current and was given the option of applying for the making home affordable program. 3 months trial payments and then my loan would be modified. The three months turned into nine and I made the trial payments on time each month. On Dec 24th 2009 Chase called me to say that I had not Qualified and now owed them 7K and that if it was not payed by Jan 1st They would forclose. After calling back after the holidays I was informed that I could re apply for a diffrent type of loan mod. with trial payments higher than my original payment. With no other options I accepted. On Jan 3rd I recieved a letter stating the payment for the trial with 3 payments of 1741.00 and then a 4th of over 6K. I called them and stated that I could make the small ones but did not or would not have the funds to pay the 6k. At this point the rep told me that there were still options on the first trial mod and to continue the lower trial payments of 1550.00 I Live in WA state and the balance of teh first loan is 220K with a Second for 17K with Wells Fargo. Current market value of the home is approx 200K. My main Question is should I go with the negotiator provided by the Real estate agency or seek independent legal council? Also should I continue to make the trial payments to Chase or stop sending them money?
Also do you think I have any grounds for a lawsuit for the way that Chase has misrepresented? My Credit Score was excelent before this but for the last 10 months they have reported that I was 3 months behind and only making partial payments. This has destroyed my Credit.
Any advice would be helpful and I appriciate your time and imput!
Although I cannot give you legal advice, I assure you that your story is common. Lenders give mixed messages all the time.
For information on our short sale negotiation services, feel free to click the “short sale” tab on the top of this website and submit your request. We will get in touch with you within 24-48 hours.
As far as your credit score, a legal firm can help accomplishg this.
Follow this link and call for a free consultation:
http://www.lexingtonlaw.com/?tid=662.0.14149”
I am using this service as well.
My Mortgage company “American Home” has approved my short sale request but they are demanding that I accept a promissary note of $20,000 to be paid off over ten years. Should I accept it? The negotiater will not consider removing or loweing the amoun, they would prefer a foreclosure. I was trying to avoid foreclosure in good faith but I don’t know if I should continue paying such a large a fee on a property I don’t have.
I owe about $150,000 on a 80/20 adjustable rate type loan and the Short Sale amount is for $40,000. (Miami-Dade, Florida).
I don’t know what to do.
I believe Florida is a recourse state, which means in the event of foreclosure, the lenders may pursue you for the deficiency. You may want to move forward and just settle the debt later
Debt Specialists can be located here:
https://crn.infusionsoft.com/go/contact/kevinkim/
Thanks
Kevin
We recently got approval on a short sale from Wells Fargo. Our home (primary residence) sold for $145,000 and we owed $144.900 to Wells Fargo. We have a HELOC with Chase for $59,000. Wells Fargo agree to give Chase $3000. Chase has sent us an approval letter however stating that we are still responsible for all defiency balances per the terms of our contract. We have about 2 weeks to make a decision on whether to accept this short sale or not. What will happen in the future? Will we have to go back to paying our interest only loan? Can they take money from our accounts? We are very worried beause we are almost retirement age. What typically does Chase do?? Our home is in Arizona. Will we have to pay taxes on the $56,000?
Please help. We have an attorney but he didn’t seem to negotiate anything!!
DD,
I am sorry that you are experiencing so much stress. Do you have enough money for a settlement? You may want to negotiate a promissory note for a portion of that HELOC or perhaps a cash settlement right at closing. While some lenders will charge off the balance, some won’t and will pursue the deficiency
Thanks for your reply, Kevin.
No, we don’t have any money. My husband lost his job 2 weeks ago.
Our attorney did try to negotiate a settlement. We would have signed a promissary note for $10,000 but Chase wants the money at the table at time of closing. If they file a 1099 does that mean they can still go after the deficency?
If they issue a 1099, that means the deficiency was forgiven / charged off / released. They cannot issue a 1099 and pursue the deficiency simultaneously.
You may be exempt from the tax obligations, ask your CPA about the mortgage debt forgiveness act of 2007
Kevin, you have been so helpful! We will get a CPA. There are so many people that don’t know where to turn. Thank you for being there for us!
On a sad note. After waiting over 3 months we just found out today that our buyer has pulled out of the contract. Now we start the process all over!
Kevin,
I’m in the process of a short sale in New Hampshire but I live in UT. We received a letter from BOA stating that they agree to accept the short payoff. They reserve the right to pursue deficiency judgment for the difference unless otherwise agreed.
They state in the letter the following:
- Seller is to contribute $0 to assist in the closing of this transaction. This contribution will be in the form of: A promissory note for $0 and certified funds contribution of $0.
Questions:
1 – Because I live in a different state than the property involved in the short sale, which state laws apply?
2 – Because the letter states that $0 is required from the seller to close the home, does that mean there is really no promissory note required?
3 – We are due to close on the 26th of Feb, is it too late to involve a short sale negotiator to try and get the “pursuit of deficiency judgment” waived?
4 – What are my chances of actually getting that judgment right waived?
Thank you for your help – your blog has been very informative.
ZR
1. State law applies to the state the property is located..
2. There is no note but they may pursue you for the deficiency post the short sale
3 & 4: Rather than asking them to remove the deficiency, perhaps try and get them to tell you whether they intend on issuing a 1099. This will let you know whether they plan on pursuing the deficiency. A negotiator may be able to remove the language in exchange for a promissory note for a percentage of the deficiency, but they will probably not be able to remove the language completely without any concessions made by the seller
Thank you for the reply and for the quick turn around. This site is fantastic!!!
hello,
just found your website and have been reading the posts. i am a buyer, involved in a short sale. my seller is working on the short sale agreement with wells fargo who is the 1st and 2nd. to approve the short sale, the lender is asking for a CASH payment of 7800 from the buyer or the house will goto auction. the seller is asking me to split the difference to help the short sale go thru. is this typical? can a cash payment be demanded like that with the threat of auction or foreclosure? i don’t have all the details from the seller’s side but it seems like a hostage type situation. we like the house and if this is the deciding factor we will probably pay, but…any thoughts?
Thomas,
You are not the only party benefitting from the transaction, thus shouldn’t be the only one to foot the bill. In this same scenario, we often negotiate for the lender to cover the contribution.
The $7800 can be split between multiple parties:
1. Listing Agent
2. Buying Agent
3. 3rd Party Negotiatior (if there is one)
4. Seller (if they have any money)
We just finished a short sale on our home in California with Chase. The difference in the sale price vs loan amount is $450K. If Chase sends us a 1099 for the $450K the IRS will forgive us but what about the CA state taxes? I believe the “CA forgivness Bill” ran out in Dec 2008 and has not been re-enacted yet?? Any info on what CA state taxes might end up being?
Thank you for your informative website.
I would contact your CPA regarding the Mortgage Forgiveness Debt Relief Act of 2007
Hello Kevin,
Great article, I live in Florida and I recently did a short sale with my house. I had two mortgages and the first one (Chase) already sent me a 1099-C and they display my mortgage as settled in my credit report, but all the second mortgage (GMAC) sent me was a release of lien and a letter stating they would accept a partial payment (10%) as a full compensation of my debt, and there is also a part on that letter where there is a space for unsecured notes and it’s checked “N/A”. But my mortgage appears as transferred to another lender in my credit report and haven’t gotten any 1099-C for the deficiency. I called them and cannot give me any information on my account since they don’t handle it anymore, and when I called e-trade bank, which supposedly have my mortgage now, they couldn’t tell me anything since I am not on their database apparently, should I be worried with this apparent mess?
Thanks
The 2nd may or may not pursue you for the deficiency. If they issue a 1099, this means they will not. If they do, you may want to try and work with them to settle the debt for less then what is owed
Hi, Kevin,
As I stated a while back after over 3 months and a short sale approval the buyer backed out. It is up for short sale again. If we get a similar offer do we have to start all over on all the paperwork? How long could the second short sale approval take. Hopefully shorter than the first time.
Secondly, we have a rental property that is upside also. If we have to foreclose on our primary residence and decide to let the rental go too, will it effect our credit twice as long? We are so confused.
Nearing retirement.
DD
No, you can improve your credit even if you short sale more than one home.
I suggest you check out our credit deletion section on this website:
http://seattleshortsaleblog.com/credit-deletion/
With our system, you can improve your credit after a short sale sometimes almost IMMEDIATELY via credit deletion.
Kevin,
We have been in the short sale process with Chase for a year and a half. I will not go through all of the “issues” but the bottom line is we were told we were approved for a short sale a year ago with a promissory note required of $5,000. We are in Florida. They then called 2 days before closing stating the MIP dept declined the request because we were current on our mortgage. We had moved since we were told we were approved. Now, we are approved again, but this time with a $25,000 note required. This is not an option for me to pay. We owe $160,000 and the offer on the home is for $80,000.
On a separate note, I am the only one on the mortgage. My husband bought a house in just his name. If we have to go the foreclosure route, would the defficency judgement be against both of us given we are in Florida?? What is the difference between foreclosure and a deed in leu?
Thanks so much in advance!!
Florda is a deficiency judgement state so do not let your property go into foreclosure, since your lenders will have the right to pursue the deficiency. What I recommend is having your negotiator continue to press the issue and minimize your deficiency as much as possible. It is ALL ABOUT negotations.
Hey Kevin…great website!
I looked through a bunch of these and couldn’t see a similar question answer set…so here goes. Location is Indiana. Had a 80/20 loan with National City. We closed our short sale in December of 2009. Owed $320 combined on the two loans before the sale. In the short sale, the first mortgage was paid off in full and the second recieved $5000 to release the lien on the property. In the short sale approval letter for the second it states that our loan would stay in effect as it was and would just transfer to a “unsecured loan” upon closing. I was kind of confused because at closing we weren’t required to sign anything reguarding this 2nd mortgage. It just stated in our closing documents that they would get the $5,000. So…it’s now a few months later and I haven’t recieved any information reguarding making payments or status of this 2nd loan…so I started researching. It appears our second loan had been paid off. Apparently National City had the loan insured 100% with United Guarantee (which we didn’t know about). After we closed on the short sale, they filed an insurance claim. I spoke with United Guarantee who informed me that they paid National City in full and we do not owe any deficiency to them. I even had him send me a letter…in which he states that they were the mortgage insurer for the 2nd loan and they agreed to accept $5000 as proceeds from the short sale on that property. They also state… “The sellers were not required to sign a promissary note and United Guaranty does not intend to pursue for any deficiency balance.” National City tells me that my account has been closed, as does United Guarantee. They both tell me I owe nothing. United Guarantee says they will not issue a 1099, National City said they will possibly issue a 1099A next year. This is crazy to me. The amount owed after the short sale was $55,000. I planned on filing for bankruptcy to get rid of this debt once the house was sold…but now i’m not so sure that I should. I fear that 5 years from now…this will come back to haunt me if I dont. Do you have any experience with mortgage insurance companies…and do you have any advise for me? I’d appreciate it! Thanks so much!
Sorry forgot a few notes…the original short sale acceptance letter for the second mortgage stated “Except for the release of our lien in your property, all other terms of your contract remain in full force and effect, you will remain liable for the outstanding balance.” I read this to United Guarantee…they said it was probably to cover their butts just in case the insurance wouldn’t pay the claim. I don’t remember ever signing this letter…I think I just had to call them and verbally accept it. Sorry for multiple posts…Thank you!
Bets, you sound like you are in a good spot. If the 2nd is not going to pursue a deficiency and the 1st plans on 1099ing you for the deficiency, that means your deficiency balance has been forgiven.
You need to contact a CPA about the mortgage debt forgiveness act of 2007 to see if you qualify for the exemption. If you qualify for this exemption, then you will NOT have to pay the 1099 tax obligation
The 1st mortgage was paid off…that one is not an issue. The 2nd mortgage…was paid off by United Guarantee…I’m just not sure if either one of them (the second mortgage or the insurance company) could come after me for the deficiency in the future. My credit was outstanding before all of this…and now is horrible. I’d rather file for bk now and not have to worry for the next 10 years about a deficiency judgement. National City was very unsure when I talked to them about any kind of 1099…should I just wait this one out and see if I get a 1099 next January? Ugh…Just want this to be overwith.
I completed a short sale last year in RI on my primary residence, where i had a 1st and 2nd mortgage. Lender got rid of the entire second and took 75% payoff on the 1st. Haven’t received a 1099-C in the mail for either. Called the bank, and they said one wasn’t issued on my file, but that it was state specific as to whether or not they would, and couldn’t tell me why. (Gee – thanks). So my question is… how would a certain state dictate whether or not that bank is required to send out a 1099-C? I’ve read on the net that banks are not actually required to do so, which is probably within their right I guess. The way I see it, the 1099-C tells me they are writing it off as a loss, which obviously helps them, and sets me at ease. If they DON’T issue me one, am I to expect a nice surprise here soon when I open my mail and find them pursuing the balance owed?
The paperwork I signed said “…Upon satisfaction of all terms of this approval, the mortgage will be discharged and a release document will be forwarded to your escrow department for recording (which I received). The release document is an indication that the loan debt is considered satisfied by SPS. It is not an indication that the loan is paid in full…”
Any advice would be appreciated. Is Rhode Island a state where they can’t chase down the unaccounted for debt?
Kevin,
I’m in the process of a short sale, but i received a letter from the 2nd mortgage and this is what they wrote on the letter. I’m just concern about what this really means. I don’t want to be stuck with a loan once the short sale goes through.
This is what it stated :
The note will not be released nor will the note be endorsed “Paid”, and the request for reconveyance will indicate that the debt represented by the note has not been fully paid. You, will of course, be given full credit for the proceeds actually received but ______mortgage company specifically reserves the right to collect from you the remaining amount under the note.
Please help what should i do , should i sign the agreement or decline.
This issue is in the state of Florida.
Hello Kevin,
Wells Fargo approved a short sale in CA. With a promissory note for $35K to be paid off in monthly payments for 30 yr interest free. Loan amnt is $329K approved for $185K. One loan only. In the letter it states:
“will release its lien, contingent upon the following terms” xxxxxxxxxx
“Upon satisfaction of all terms specified above, the mortgage will be DISCHARGED and a RELEASE document will be forwarded for recording”
My questions are: If they are asking for a promissory note it means thay will not go after us for the balance and will issue a 1099? There is no languare saying they will proceed with collection of balance, but not waiving the right either, except for above wording. Should we ask for a specific letter?
Do you think the promissory note can be further negotiated after closing, since they are giving us a payment plan?
Your advise will be greatly appreciated. Thank you.
Thank you so much for all of this information. I recently put my rental up for a short sale due to it being vacant for almost 4 months and we can’t pay two mortgages plus all other expenses anymore. My questions are as follows:
1. I want to protect my high FICO score as much as possible. If a short sale is approved and I sign a promissory note, will my credit be impacted? My home has enough equity to pay off my 1st, but not my second so if I agree to pay the difference I’m hoping my credit wil be minimally impacted.
2. How long does the process take? My broker told me there are no set rules. We’re wondering should we pursue continuing to try to rent it while it’s up for sale to avoid our continued loss of income.
3. I have a good job, assets, and investments and am continuing to pay the mortgage on my rental property to avoid impacting my credit. What’s the chance of them approving the short sale? Also, can they come after any of my other assets? My 1st is with GMAC and my second is with Citi
Also I forgot to state that I’m in California
Great site, thank you! I have a Realtor handling a short sale for our house in California, two loans the first for $330K and the second $285K both refinanced and not purchase loans. First offer we accepted for $440K so the 1st (Wells Fargo) will be paid off no problem, the second (BofA0 will receive about $70K. We just received an acceptance letter from BofA but just last week the buyer got tired of waiting and cancelled the contract. In the acceptance letter Bof A states:
– ……may pursue a deficiency judgment.
– Furthermore, there may be tax consequences associated with entering into a short sale.
– Promissory note must be signed and uploaded into short sale system prior to the close of escrow. Promissory note : $0.00
– cash contribution $0.00
The problem is it took BofA forever to get us this acceptance letter and just last week the buyer cancelled! We lowered the price a little and we received a new offer but this time for only $400K, so we have to start all over and we are not sure if this offer will be acceptable to BofA.
The only assets we have is a $100K equity on a house we recently bought because we were afraid we would lose our house to foreclosure and used an inharetance money for the $100K and to start a new life in another city also in CA.
Can BofA put a lean on our new house after the short sale is closed? I plan to borrow money from family to start a business, can they go after my future business? What can I do to protect my future assets (I have none now and deeply in debt). Thank you.