Tuan, Home Seller in Fort Washington, MD

How to negotiate with 2nd lien holder once 1st lender has approved short sale?

Asked by Tuan, Fort Washington, MD Tue Jan 1, 2008

My first lender (Countrywide) has approved the short sale. They are telling me that they will offer the second lien holder (Chase) $3000 and will not negotiate with them (is that true?). I owe the second lien holder $99K. They tell me that I am to send the offer to Chase and negotiate with them to get their approval.
Can someone with experience with these negotiations advise me on how to negotiate with the second lender? What should I tell Chase and what should I expect? What if the second lender does not want to accept the $3000 offer from the 1st lender? Thank you for your input.

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To my experience, this whole thing is a fraud concocted by banks and most of the homeowners participating unknowingly. Think about this, If banks are accepting short sales, they want to make sure that their money is secured by FDIC foreclosure/shortsale programe upto 80 to 95%. Courtesy of our tax paid dollars. Banks are looting us left and right.
Consult an attorney, Countrywide is sold to Bankof America and they should be lienient under govt. deal. Try to work out with buyer out side the escrow to makeup the the demand.
0 votes Thank Flag Link Mon Oct 25, 2010
The second lein holder needs to receive a package for sale identical to the package sent to the first lien holder. In order to receive an approval, you will need a HUD sent along with your package showing the second lien holders name and amount being given to them. Follow up is the key to sucessfully negotiating and receiving approval. Yes, you are the one to negotiate between the two banks to receive approval. Keep in mind that if you have PMI on this property, the bank may come back with an unsecure note with little or no interest to be paid back by the seller/owner to approve the transaction. I work as a CDPE and do nothing but this type of work in Maryland. I hope this helps!

Denise Lane
Marsh Realty
0 votes Thank Flag Link Mon Sep 14, 2009
Negotiating the 2nd will produce a different result depending on who the servicer is and who the investor behind the 2nd mortgage. Some lenders require the deficiency note terms to be structured before the short sale is closed, other with the Recovery Division after the close. If the 2nd is with Wells Fargo Equity for example, it is their money and they have been instructed to NOT give debt forgiveness unless of extreme hardship cases...so a note will be likely with the Recovery Division...Also depending on the hardship and the lender, you can negotiate less than 10 % for the 2nd lien release...but to advise on negotiating with the 2nd is not something that can be done here...to much to explain, and you have not shared enough information to pinpoint the advice you require.
0 votes Thank Flag Link Fri Aug 21, 2009
They are in 2nd position they have no power lately 2nd mortgages are looking to get 10% includes money from the first.So in this case i would go 2 ways.First thought would be your in 2nd position if it goes to Auction you will recieve $0.00 they have heard that before.Second what usually works is that take $3,000 at the closing and do a Promissory Note for the remaining 10% which would be $6,900(10%=$9900-3000=6900) over 72 months at 0% Interest which would be $95.83 but at that point it becomes a Unsecured Line of Credit like a Credit Card.
0 votes Thank Flag Link Fri Aug 21, 2009
The answer for me would depend on how big a short sale on the first Countrywide is accepting.
They don't want the notes or you to assist because technically you are cash poor and that is why you are doing the short. Very common that lenders will require excess cash to go to them...not the buyer, realtor, or anyone else.

The buyer theoretically should be getting a good deal without the 3%...and possibly I would be negotiating more with them to take it or lose it...if there is enough equity, they won't want to lose it. However, I would be negotiating more on Countrywide to pay the extra 3%. They stand to lose a lot more than 3% if they kill the deal and have to carry the house through foreclosure. Depends a lot on their sense of urgency.
0 votes Thank Flag Link Mon Jan 14, 2008
Ok, I finally got approval from both Countrywide and Chase for the short sale. But I have the following issue:
Countrywide is only approving seller concessions of 3% and does not allow me the seller to assist in closing costs in cash or promissory note, otherwise any money I bring in at closing would have to go to Countrywide. The buyers are insisting on getting 6% concession otherwise they will walk away. I am trying to find a way to get that missing 3% if we can not convince the buyer to lower their demands. We initially thought about reducing my realtor's commission and transfer it to closing costs as realtor's concession. Then I would pay my agent outside but my agent says that is against the law and her realtor will not allow it. So we are stuggling to find ways to get that missing 3%. Some ideas we thought of are:
- ask the buyers to increase the loan amount and roll the extra 3% in there. They don't want to do it.
- ask both realtors to reduce their commissions but the buyers' agent does not want to give up more than $1000. That's too little.

I'm willing to do anything to get this done but I am tied by Countrywide's requirements. If anyone can think of a solution, please let me know.
Thank you for your feedback.
0 votes Thank Flag Link Sun Jan 6, 2008
If the property goes into foreclosure, the second lender gets nothing - their lein is wiped out, so quite often they will acdcept whatever is offered to them - but, be aware, they may hold you responsible for the short fall - go to an attorney that is well versed in these matters - make sure they are familiar with short sales!

Bill Wootan - Leader of Team One
Century 21 H T Brown Real Estate, Inc.
Web Reference: http://www.billwootan.com
0 votes Thank Flag Link Wed Jan 2, 2008
Hello Tuan,
Let me preface this by saying. Get an attorney. I am not an attorney and this is not, in any way, to be construed as legal advice.

Having dealt with short-sales it is my understanding that the 2nd lein holder has no say in the transaction. They cannot stop the sale if the 1st position is satisfied. As the 2nd lein holder they cannot start the foreclosure process if the 1st lein holder is current. They must show the 2nd lein as satisfied so the Buyer's can get a clear title report. If there is any money left over after the 1st lein is paid then the 2nd lein holder get the rest up to the 2nd lein amount. There are also possible tax ramifications in a short sale or foreclosure.

I found some information at http://www.shortsalecenter.com. I do not know who they are and I do not endorse them. You may want to call them and find out your options.

Good Luck
0 votes Thank Flag Link Tue Jan 1, 2008
The second lien holder doesn't have a leg to stand on and they could end up with absolutely nothing.
0 votes Thank Flag Link Tue Jan 1, 2008
You should have an attorney representing you or (I'm not an attorney, so what I'm offering is not legal advice) a foreclosure consultant. There are a number of good ones in PG County.

Conceptually, Countrywide is right in that the second mortgage holder generally is willing to accept very little. It's either, in this case, the $3,000, or nothing. As one real estate guru likes to say, "It's not much, but it's better than a poke in the eye with a sharp stick." And my guess (heck, it's more than a guess) is that Countrywide knows what it's talking about with short sales.

There'd be no harm in consulting a bankruptcy attorney, but (again, I'm not a lawyer, so this isn't legal advice) bankruptcy will only put the foreclosure on hold. There will be a resulting bankruptcy plan that you'll have to adhere to, and that'll involve making your mortgage payments. The foreclosure can be delayed so long as you're making those payments, but if you slip up, you're back to square one. So, think very long and hard before going the bankruptcy route.

Hope that helps.
0 votes Thank Flag Link Tue Jan 1, 2008
Don Tepper, Real Estate Pro in Burke, VA
Hello Tuan,

Your best bet, in my humble opinion, is to consult an Attorney. If you cannot afford one you may be able to qualify for free legal advice from a pro bono offering. Here is a couple links that may help:
http://www.lsc.gov/map/lscinfo.php -

http://www.freeadvice.com - or.... http://forum.freeadvice.com may be good.

Personally, I would rely on Countrywide's advice and contact your second lien holder. I have two loans with Countrywide and know a couple of their local agents personally. The second lien holder has the opportunity to also buy out your first lien if they so choose, but it seems unlikely that they would accept only $3,000 for their $99,000 loan. Have you thought about Bankruptcy protection? You will find that most Attorneys who do Bankruptcy will give you some free advice as an initial consultation.

Have you thought about renting out your home? In most cases the rent would not cover the loan payments but you never know. It works for some people.

Best of luck... you are not alone. A lot of people are facing the same dilemma.

Web Reference: http://www.realhomes.us
0 votes Thank Flag Link Tue Jan 1, 2008
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