Lenders seem to stepping up their collections efforts after short sales.
Question / Comments: I just completed a short sale on my house in Corona, CA and Citibank is the second on the house is coming after me even though the house is sold and I am insolvent. What should I do?
Info Request: Short Sale
Answer:
The first thing I would do is go over all the documents and communications involved in your transaction and recreate the terms of the deal.
There is a chance you were released from the remaining loan balance in writing.
Some lenders provide clear releases of liablity from the remaining loan balance.
Some lenders clearly state you will be liabile for the remaining loans.
Some lenders ignore the subject
Some lenders provide misleading releases
And some lenders provide a multitude of different types of releases and you have to read them all.
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Also based on the terms of the transaction and what actually happened, you might be able to argue the lender has no right to collect after releasing its lien. This is a complicated argument and I would review the case law and compare and contrast your facts with the cases.
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Finally you might want to talk to an attorney to discuss all your options. I have always wondered who advises people to close on short sales if they do not have a law license.
I have a whole section on California short sale law at UpsideDownRealEstate.com
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Hind sight is always 20/20. However, a short sale specialist should be reviewing any approval letters along with an attorney versed in short sales well before the closing. The seller needs to know ahead of time if he/she have been released from liability.
And right now fewer lenders are letting borrowers completely off the hook, especially 2nd mortgages.
Checking the approval after the fact may prove to be closing the barn door after the horse is gone. Do it ahead of time and confirm with an attorney that it says what you think it says.