Comments on: Short Sale “Promissory Notes” and Foreclosure “Deficiency Judgements”: How Much Will YOU Owe YOUR BANK After a SHORT SALE VS FORECLOSURE?

By: Fl Short Sale

Fl Short Sale — Sun, 04 Mar 2012 15:44:16 +0000

I’m in the process of a short sale on a residence that we moved out of in September. I have a first and second mortgage. The first has approved the short sale with a $5K contribution. The first will provide the second with $6K in the settlement. The 2nd is Suntrust and they refuse to approve the short sale without a significant cash contribution or a promissory note. They want the cash contribution outside (prior to) of the closing transaction. The Arm’s Length Agreement that I signed with both the first and second state that there are no agreements that the Lender is not aware of. I feel like the Suntrust is coercing me into signing the agreement to make the short sale happen, and they are fraudulently doing this by suggesting that this agreement be outside of the closing, without the knowledge of the 1st. I’ve hired a BK attorney who has written Suntrust a letter to advise them of the wrongdoing as well as let them know that their unreasonable demands will force me into a CH 13 BK. I’m curious if you have any recommendations? Can the 2nd deny the short sale (if the 1st has already agreed) unless we sign an agreement that we believe requires us to violate the Arm’s Length Transaction? Our short sale has been going on for months and our buyers are ready to walk. PLEASE HELP

By: John Trujillo

John Trujillo — Sun, 26 Feb 2012 00:55:27 +0000

Hello,

I had an investment property in Colorado foreclose in August of 2011. The balance on my loan was $241,000 and the property foreclosed for $144,000. This left a deficiency balance of about $96,000.

I started receiving calls from a collection agency who claims that the are collecting for Freddie Mac. They are asking for a settlement on the deficiency balance.

In January of 2012 Freddie Mac sent me a 1099-A. But I have not received a 1099-C.

1) What is going on here? Are they going to send me a 1099-C and forgive the debt? Or are they trying to collect what they can on it with the intention of sending the 1099-C later?

2) If I do a lump sum settlement of say $6000 on the $96000 deficiency balance, can they or will they then still send a 1099-C for the remaining $90,000?

3) I am including the 1099-A in my taxes this year, but will the IRS be expecting a 1099-C even though I don’t have one? Does this increase my chances of an audit?

Thanks so much for your help.

By: Prefer Forclosure instead

Prefer Forclosure instead — Thu, 02 Feb 2012 23:13:13 +0000

Here’s why I would understand why people prefer forclosure instead…

In a short sale, UNLESS the lender agrees (you have to have a good agent to fight for this) then they will forgive the difference and just issue you a 1099-c (which is still good till 2012 mortgage forgiveness act, but that is only Federal, consult with your state law).

In reality, unfortunately there more Agents that are just out to make the sale, not saying everyone, but a handful of them.. that would just agree on whatever the bank says, and unfortunately most of the homeowners are not savvy and does not educate themselves with what’s going on, an djust relying their trust with their dishonest agent. So they don’t read the paperworks and just sign off whatever documents, even the docs that states that homeowner will be responsible with the difference of the sale.

if you have a good honest agent that looks after their client interest first before themeselves (as most of them are.. right?!) then short sale is good to go.. even though people says that you can buy in 2 years.. you better make sure you do have enough money down and needs to be prepared to actually pay more on interest and pmi.

FORCLOSURE on the other hand.. Agent’s and the banks don’t like it, because of course agents don’t make a commision on it, and the bank supposedly spend more money if they forclose (but go figure why sometimes they would rather forclose than approve a legit shortsale offer)

BUT the good news is, if you are on a non recourse state, and if your loan is a purchase money, (meaning all the loans we’re paid to the house, and no cash went to the homeowner) then the LAW ACTUALLY PROTECTS YOU FROM DEFICIENCY JUDGEMENT.

Keep in mind, Forclosure or Short Sale, there will still be tax implication. like i said currently under the Mortgage Forgive relief act, federal exempts the 1099-c intil 2012.

In forclosure, with non recourse state and purchase money, you don’t have to worry about the lender going after you after the sale is done.

IMO

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By: Peter

Peter — Fri, 16 Dec 2011 02:40:39 +0000

Hi Jeff,
I know of a debt settlement expert that can help you further negotiate your deficiency in your area. Please email me at Peter@seatteshortsaleblog.com and we can further discuss your situation. Thanks

Peter

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By: Jeff of Florida

Jeff of Florida — Mon, 12 Dec 2011 00:27:43 +0000

HI!

We sold our home via short sale and closed last week of March 2011. Second lender’s right for deficiency judgment wasn’t waived, as they never agreed to it. Our Deficiency Balance is around $33200.
We are just renting a house at the moment and still anytime now they could sue my family for a Deficiency Judgment.

How can you help in this kind of situation? Can this debt be forgiven or at least be settled very soon? Just in case you can, how long does this usually take? It is very stressful to think about it and there’s know way we can afford to pay it because of our financial situation. We might as well file for bankruptcy rather than pay it.

Thank you for your time, I greatly appreciate it!

Sincerely,

Jeff

By: SSB

SSB — Fri, 09 Dec 2011 00:23:16 +0000

Hi Lynette, Visit here to see if you qualify for the mortgage forgiveness debt relief act. I suggest consulting with your CPA and calling the IRS to make sure that you qualify. Also, I would contact your attorney for this matter. If I were you, I would pay the lump sum and release yourself from any and all deficiency but make sure that you are free and clear on writing. Hope this helps

By: Lynette

Lynette — Wed, 07 Dec 2011 02:50:06 +0000

We purchased a house, but b/c of job loss, we foreclosed in Nune of 2011. The bank note at the time was $132K. The house was bought back by the bank for 58K and they paid (or forgave) the PMI….resulting in the final amount owed as 47K. We have been recieving phone calls from a company saying that they will help us settle the debt for pennies on the dollar (meaning they will accept approx. 5K) and then our debt will be considered paid. We aren’t sure what to do. Do we pay the 5K and be done with it all or do we wait if or until they serve a judgement against us for the 47K?? We are in Ohio and I know this is a recoarse state. Will they really sue us…in all honesty? We only had one mortgage on the property. What about taxes? Will we pay taxes on the 47K (because it wasn’t paid), the 5K (should we choose to pay it to settle the outstanding debt), or will we qualify for the Mortgage Forgiveness Debt Relief Act of 2007? Please help!

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