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Bank of America Short Sale Approval in TWO Weeks? Its not what you think . . .

I was surprised, out of the blue, to get a short sale "approval" letter for a property who's package only got into processing with them 2 weeks ago.

This is a second loan on this property. A little over 300k is owed on it.

I was surprised that the letter said:

"Bank of America agrees to accept $320,000 in certified funds as settlement in full of this loan. Upon the bank's receipt of the payment of $320,000 the bank will release the the lien on the above property."

Yes, don't be blinded by the approval part of this letter, take note that this is NO settlement at all.

So I called and the rep said, we have a new guideline. "In non-deficiency states we are no longer accepting short sales for anything less than 85% of the full loan value." Period. This is important.. not only as it may signify the death of many short sales around the country (in non deficiency states), but that their expectation is (per the rep) that the first loans, upon foreclosure, will have to buy them out to release the lien.

So helping people with short sales just got that much harder in California... for anyone with a Bank of America loan (presumably a second loan or heloc product). Bank of America is going to force the hand of many, many borrowers. If this is true, and is becoming the new, true guideline, many will be now going to foreclosure instead of settling the debt thru a short sale as for most, there is just no room to pay the second 85% of the loan value. The other option is to force folks into promissory notes in order to accept the short sale ... for some that will work, for others, with true financial devastation and hardship, the idea will be overwhelming...

Thoughts??

Posted by Catherine Myers, Walnut Creek, CA Real Estate on 08/08/2008 11:39 AM

Comments (14)

bank of america, b of a, foreclosure, promissory notes, short sale

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14 Comments on Bank of America Short Sale Approval in TWO Weeks? Its not what you think . . .

AUG

2008

I was just told 10% of total owed on a heloc for a settlement. WA is a non-defic. state also. 10% has been their standard of practice up to my reading of this blog. I was told this two days ago. When did you find out this info? I can't imagine this is true or they would be up to their ears in property. Are you sure it wasn't 85% of appraised value when they hold the 1st?

Why would any senior lien participate in this? Furthermore, why would any borrower participate in the note in a non-def. state? I'll have to look into this.

Thanks for the heads up.

That is what she said 85% of loan value. I have another approval coming today from B of A where they hold both first and a heloc. Its being approved... with just 5k going to the second on paper.

what's to stop a borrower from agreeing to a note then filing bankruptcy and thereby discharging the note. It's unsecured - wouldn't a Chapter 7 relieve the homeowner. (as drastic as it might be)

AUG

2008

Wendy, absolutely nothing is stopping someone "in distress" from doing exactly that. So often a note is worth the paper its printed on... not much...

AUG

2008

I have a 2nd with B of A, my realtor submitted my package today. i owe $112K on the first (Wells Fargo is servicing) and $30K on the 2nd with B of A. I'll let you know what they say.

But- I find it illogical that they are demanding 85% in NON-deficiency states... after foreclosure, they get nothing, they cant pursure a judgment against the homeowner.

Now, in contrast, in a DEFICIENCY state, I could see not wanting to allow the short sale, and give a full release, when they can get a judgment...

AUG

2008

wow! I need to make sure I'm doing this right. I just listed a short sale that has a second. yikes!

AUG

2008

I am also dealing with B of A, they are second lien holder.I was told two weeks ago that with their new guidelines they will only consider offers of at least 10%, and Realtor commission max 4%. Makes no sense at 10%, can't imagine 85%. Also, why would they even care about our commission? They are getting what the 1st lien holder will approve anyways!!!!!

OCT

2008

B of A told me 10% or $5K, whichever is greater, to approve the short sale... and NO FULL RELEASE. After the closing of the short sale, their Recovery Department will call you to make arrangements regarding the balance.

AZ IS a non-deficiency state. However, there is an exception for non-purchase money loans (like HELOCs) who are NOT the foreclosing lender (so, when the 1st forecloses and wipes out the 2nd). Basically, the junior lender doesn't HAVE a lien anymore, so they aren't suing for deficiency, it is just a suit on a note default. Very clear case law. And, B of A knows it now.

It doesn't matter though-- despite the appraisal by Wells Fargo for $82.5K, B of A insists that the property is worth $130K and won't approve a sale for less than slightly below what they believe the value is. So, my buyer backed out.

I'll be letting it foreclose, and I'll have to deal with B of A after the foreclosure. I shouls have about 50% saved by then, so hopefully that will be enough.

Good luck,

Robin in Mesa

NOV

2008

I have had three short sale offers at the appraised value and Countrywide DBA Bank of America have dragged this out turned down first one, took over 2 months to make decision on second, buyer purchased next door, and now haven't made decision on 3rd short sale. Waited so long had to do another appraisal which was less than 6 months ago, changed my locks so agents can't show home, I have complained to every outside agency. Office of Thrift Supervision no assistance. Tried to make me sign deficiency judgement for 59k on second mort and pay 12k cash which I don't have. Finally after 3 short sale requests now not asking me to sign def judgment but still asking me to pay 12k on second. Just found out Countrywide 1st mortgage just filed foreclosure while they are telling they are in negotiations for short sale. They have been absolutely deceptive and unethical. Anyone no a lawyer? We must be able to file a class action suit. songbaby@aol.com

DEC

2008

I am aware of more and more lenders in Missouri that accept the short sale then start the calls and letters a few months later demanding payments. We should all be VERY careful on how and what we say to our clients that are in a short sale situation.

These banks are out of control.

FEB

On August 5, 2008 my husband and I signed a sale of agreement to purchase a short sale and the owers signed the agreement also. The owner's owed 520,000 and we put a bit in for 475,000. The lender is Bank of America and we as of Feb 21, 2009 have not heard nothing at all from the lender. We love the house, but 7 months is ridiculous. The owners have not made a mortgage payment in a year and NO one lives in the house it is empty. The gas, electric and water have been turned off since September 2008. PLLLLLLLLLLLEEEEEEEEAAAAAAASSSSSSSSSSEEEEEE help we need closure

FEB

wow - that sounds just like Countrywide or carrington but I've never had that kind of neglect from BoA. I guess you've had the file escalated and talked to someone at the Office of the President (or whatever BoA calls it)?

Who's handling the short sale? you didn't mention a Realtor.

JUL

bank of america negotaiator S is pain in the butt. he does not listen at all. he want to forclose

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