Hi,

I had heard this also - I have proposed a short sale with Wells Fargo holding the first ($112K) and B of A the second ($30K).  My offer is for $66K, which is in line with the comps (Arizona is a blood bath right now).  I have about $10K to secure the release of the B of A lien, if need be, and fully expect B of A to pursue the balance... or, at least, to preserve their right to do so.  I have a short sale company working fo rme, and I don't think they would have accepted my property otherwise.

Robin - thanks for the great comment.  With the $30k bal., the BofA Home Retention Team will be looking for the minimal sum of $5k because remember, it's 10% or $5k, which ever is greater.

Depending upon your Client's financial picture and hardship, they will either accept the $5k or request more.  But either way, they will pursue the balance post C.O.E.  Also, I'd absolutely agree with you that your 3rd party negotiator would likely not have taken the file if the BofA balance was high.

Thanks again for the comment.

I spoke with you today and was impressed with your depth of knowledge and experience in this matter. Before I ask my next question, here is my situation to remind you:  I have my first with BOFA ($330k) and second is a BOFA HELOC ($110k). As we discussed on the call, my first gets fully paid off and second gets $40k from short sale proceeds. BOFA has accepted the short sale but with the following caveat on their acceptance letter: "... the bank will release the lien and charge off the remaining debt as collectible balance. Our recovery department will be in contact with you to make arrangements on this balance".

Can you confirm if the recovery department can both 1099 me as well as collect the deficiency or just one do one of the two? Have there been cases where they would just send 1099 and not collect the deficiency.

Thanks again for your help,

Mr. Salam - the quick answer to your question is..... "it depends."  It depends on several factors; such as - the state you reside in, whether or not the loan in question is an original purchase money loan or the result of refinance subsequent to your purchase, etc.

The important thing to remember is that this is a negotiation, therefore everything is negotiable.  Whatever you can negotiate with them as the lien holder and get them to stipulate such in writing, goes.  In other words, if you can get them to agree not to issue the 1099 as part of the agreement, then so it shall be.

As I stated during our conversation, I've not yet had an experience with BofA quite like yours where they were getting such substantial pay off from the sale.  I still believe this provides you with unique leverage.  Remember, for them the magic number is 85%.  Grant them 85% recovery and they will forgive the remaining debt and forego pursuit and recovery actions on the balance.

Whether or not they can preserve their right to post COE recovery, together with the issuance of the 1099 is likely something you should clarify within your state of origin, with a tax consultant.

Dameon,

Is there any possibility from your experience that the BofA recovery department can forgive the remaining debt at what they are getting i.e. $40k out of $110k or is 85% their mimimum requirement. If I can prove insolvency to recovery department and the fact that neither do I have funds to pay the remaining balance in cash to make it to 85%, nor do I have cushion in my monthly income to pay it to them in installments what should their response be? Can they come after my wages, cars etc?

Again, people like yourself make internet a very valuable resource for researching and sharing experience - so thank you.

If you can show verifiably, a state of insolvency, demonstrated by your CPA, Attorney, etc. then you may infact have a case.  Please understand that for the bank, whether its Loss Mitigation Dept., or Recovery/Collections, the name of the game is ALWAYS loss mitigation.

Whereas, you certify your insolvency, demonstrate to them that pursuit of this debt is cost prohibitive; not fiscally worth pursuing.  This is the language they understand.  The basis of ALL their analysis is always going to be; does it make fiscal sense?  They have closely guarded proprietary formulas they use to determine cost justification, one can only speculate.  There is a "magic" number, a percentage point beyond which it becomes cost prohibitive.  Many times they are rigidly following formulas established by their investor, whether that be Fannie, Freddie, etc.  So therefore it may vary dramatically from file to file.  Point is, you'll never truly know until you engage them directly regarding YOUR file.

As for wage garnishments and other more aggressive tactics, deficiency judgements, asset attachments, etc., their ability to implement is going to largely depend on the state you're in.

It is very difficult to get a short-sale lender to do so but I always suggest that you attempt to have them spell out in writing within the lien release agreement, what future right to recourse they will implement or exercise.  That document is a binding agreement between the parties.  As I always say, its a negotiation.

BofA is just one of the very tough Loss Mitigation depts. to deal with.  They've set these protocols and are rigidly adhering to them with very little "sway", if any.

Good Luck, and you are certainly welcome!

Deficiency versus 1099, as noted above, varies by lender and situation.  It is my understanding lenders will first attempt to collect any shortage via promissory notes.  When they are unsuccessful therewith, they charge off the note and file 1099 (Primary residence qualifications and IRS Form 928, the insolvency form, can get you out of the 1099 tax consequence, and, as noted above, whether or not you did a refinance and if so, what you used any cash out for, cash out for home improvments is NOT taxed, verify everything of course with your CPA).  The process and what happens after COE is dictated by the actual investor, the company/group that actually funded the loan.  I have only heard in VERY rare circumstance (twice to my knowledge) where deficiney liens were ever actually filed against owners, and in both cases, this was against investors that voluntarily told the banks they had other properties with equity.  I have spoken with VP's at GMAC and at Indy Mac who both stated:

"Ben, why would we file deficiency liens against Mr. Smith/Homeowner?  In order to do so, after the sale we would need to find out where he lives, find out how much he makes and if he has any equity in any property he owns, take him to court to win a judgment, then attempt to collect on that judgment.  We have hundreds if not thousands of cases and doing so would require extensive resources.  Aditionally, if the homeowner decides at any point to file bankruptcy, all our time and efforts would be for nothing."

Keep in mind roughly 80% of loans are owned by an investor, pension fund, or hedge fund, loans that were securitized and sold off.  THESE are the groups that would need to file deficiency liens and tehse are the groups that make the rules for shortages.

It has been my experience what lenders will accept on a short sale varies WIDELY, but, the basic principals below ALWAYS seem to hold true:

These groups/lenders TYPICALLY accept:

FNMA - 92% of BPO

FDMC - 92% of BPO

VA - 88% of BPO

FHA - 82% of BPO

Conventional - -75% - 95% of BPO

Second - 5% - 10%

Third - 5%^- 

liens - -5%

 Again, these vary depending on market and property condition.  Getting them to accept lower numbers is merely based on one's ability to negotiate and speak with the right person.  Also keep in mind that the company to which the homeowner writes their check each month, the loan servicer, typically earns TWICE AS MUCH MONEY servicing late payments versus servicing homeowners with on time payments (this is the number one reason short sales often are delayed for months and months, their exists no financial incentive for servicers to push for quick closings).  The second reason being that typically accepting short sales only creates more work for the loss mit. department and that decision maker (they typically have 20 to 40 pages of disclosures that must be completed when short sales are accepted.  If they frustrate you and yuo go away, so does the case....it simply gets deleted out of loss mitigation and goes to REO or the foreclosure department....one less file for them to work on)

 Short sales are a nasty and irritating business, but, can be very helpful for homeowners needing to sell and wanting to avoid foreclosure.

Just my 2 cents, we have been doing these full time for the past 3 years and can tell you they are not getting any quicker or easier.  Persistence and patience seem to be the only way to make things happen!!!!

Another tip for dealing with first lien holders that REFUSE to give a second lien more than $1000 or $2000, "gently" remind them it will likely cost $10,000 or more for them to run the property through the foreclosure process, get it re-listed and sold......reminding the decision maker of this will often help get deals through......

So since I am in a battle with BOFA and not willing to release the lien and do the charge off and set up with there recovery dept here is my transactions dealings.

Will accept the short sale, but seller will be held accountable for the remaining balance as stated above, but the sellers in my case is all a first and we are in Arizona as well a non deficency state, so it makes no sense to not release when they are getting appraised value on the property and in a declining market taking thru the foreclosure process and letting it sit for months before returning to market and maybe getting vandalized etc and getting less makes no sense at all. If I am reading the above article correctly if the seller is given a 1099C they can cancel it out with a form 928 insolvency. makes sense if they are insolvent then what can they get. Is anyone else having a problem with just a first deed of trust and them being held by BOFA.

I realize my situation is similar to ones already mentioned, but if I may ask so that I am clear for my own personal situation?

I have a $350K 1st with a local credit union and a $200K 2nd with BofA. If I were to "short-sell" and a buyer made an offer of $350K (which is on the high side of what my house is worth), the way I understand what has been said is that the credit union would get their $350K (satisfying the loan) and BofA would get "screwed" for $200K, but would not accept the short sale unless an additional $20K (10%) was made to BofA. And even after that, they would 1099 and send their bone-breaking thug collectors to get the remaining $180K?

As a former employee of BofA, I am ashamed of their actions. This is one of the many reasons I left and vow never to return and have pulled all of my assets and placed them elsewhere. F-U BofA.

The answer is yes I have, many times over!  What a headache.  The way we worked through it on most such occassions was to utilize a blank B.P.O. form from one of the Asset Management firms we conduct B.P.O.s for.  We complete, professionally, using the name of an agent in our office not party to the transaction.  In every such instance submitting this form with a letter of explanation to justify pricing has worked; everytime.

Secondly, we've had instances where Countrywide was the Sr. lienholder to the BofA Jr./HELOC.  For these we've awaited the outcome of the Countrywide valuation.  Without asking for the specific value sum, I simply ask if their value is in line with our offer sum.  They have no problem generally providing that topical data.  We then respond (re-submit) to BofA stating that reality in the letter of explanation, also submit the B.P.O. for for their review, and this has been successful 9 of 11 times too date.

Good luck!

My short sale with BOA is closing tomorrow 2/24/09.    The offer they accepted is $ 125,000 which is $ 5,000 less than the appraisal they had done which came in at $ 130,000.   I owe $315,000.   I received their letter last week stating they have approved the short sale net of $ 112,000 and will charge off the remaining balance as a collectible balance.     I also have to contribute to BOA $ 5,000 at the closing and pay my attorney $ 3,000 plus pay the delinquent hoa fees of  $ 1600.00.   It has taken 5 months since the submittal of the offer to BOA and my attorney has done everything and tried everything to negotiate with them and this is the final straw and going to closing tomorrow.  BOA is paying the realtor commissions plus has also paid delinquent real estate taxes.

 so--- there is a good possibility that they could come after me for a big balance ?  

Another question....   in the charge off/deficiency in the short sale...which in my case may be   $203,000....can they 1099C you AND also file a judgement deficiency or start collection procedures ??  or is just one or the other ??   the property is an investment property in fl.

Pam;

I hate to state this so succinctly, but that is a terrible outcome due to very poor, very inexperienced negotiator on your behalf.  1st, it sounds like BofA was in a Sr. lienholder position here???  If this IS the case, then having to contribute the additional $5k is rediculous.  Also, the HOA sum of $1,600 is also rediculous.  We always expedite the filing of a lien from the HOA.  If it is a lien on the property, the Sr. lienholder has no choice but to pay it because it is now a lien against the property.  If it was a lien and your "attorney" couldn't get them to pay it, that's terribly inexcusable.

As for the $3k sum to the attorney, that is unfortunate given that, a Realtor negotiating on your behalf would have likely done a better job and they get paid by the lender as well.  We negotiate short-sales all over the Country, I wish you had contacted us to assist you.

As for the looming prospect of collection action regarding the remaining balance, (the bank's total overall loss), you will definitely get a 1099 reverting their loss, to your gain.  The short-sale approval letter will clearly indicate the terms for the balance and what rights of recourse they are "reserving" or going to pursue.  ADDITIONALLY, that is specifically something else your negotiator should negotiated on your behalf.  PLEASE remember, a short-sale is a mutual agreement between the borrower and the lender; meaning, there should be NOTHING in its conclusion that YOU (borrower) do not agree to!!!!!

Many attorneys, even real estate attorneys are out of their league when it comes to short-sales; not all, but many.

Good luck.

Hi Dameon -- Boa is the only lien holder on the property.    The Hoa never put a lien on the delinquent homeowner fees since  BOA already did lien against the mortgage. 

 All the approval letter says is they (BOA) will net $ 112,000 and the rest will be charged off and collectible and they will be in touch.

There are no other figures or anything else.

Help me....what else can I do before tomorrow ?  I haven't signed the BOA approval letter. 

Pam,

I am SO very sorry; there isn't much you can do at this point.  I fear mainly that if you "buck" and look to counter in any way that BofA will likely not respond favorably, not to mention apparently with any continued negotiations your attorney fees are going to go up.  Whether or not you accept that risk is something only you can answer at this point.

Your options are straight-forward.

You can reject the BofA terms of approval and counter in the for of a written letter detailing the terms you propose.

You can accept the terms they've put forward.

Although you are prepared, and scheduled to close tomorrow, the question is, are you mandated to do so.  Meaning, is tomorrow the close-by-date stipulated on the BofA approval doc.?  Ask your attorney why isn't BofA paying his fee.  Ask him/her why you have to come in with a supplemental $5k, it seems arbitrary and punitive.

Hi -- the close date is tomorrow...but I know it could be probably extended a day or so till I figure this out...which I what I am going to tell the attorney tomorrow.     In the BOA approval letter....it does not state I am contributing anything...which I think is really odd, isn' it ?    I think I am confused about something.   BOA has a lis pendens against the property for the mortgage/promissary note.  The HOA does not have a lis pendens.  so when you are saying a lien...what exactly are you saying ?     The bank does or does not have to pay the HOA fees ?  there is only one lis pendens in public records under my name by BOA...and the HOA is listed with my name as a defendent.

Iwill ask the attorney why I am paying $ 3,000 for his fees and what is the $ 5,000 for ?   I know he worked with another client in a short sale with BOA..and they paid his attorney fee.    He told me last Friday that BOA will not pay the HOA delinquent fees.  

In my last sentence above....BOA paid his attorney fee.. not the client.   so why in the heck is he asking me too ??  double dipping ?

Can the buyer sue me if I don't go through with the deal ?    I signed an addendum to the purchase agreement/contract last Friday stating that I would pay $ 8000.00 at closing.       Now my mind is really thinking if I have done the right thing.       

Hmmm..  my mind is so confused now about what to do.    so If I don't have a lis pendens filed by the HOA....then it sounds like it is o.k. not to pay it...but how will the property close if that money is owed which is why the attorney said I had to pay it since BOA wouldn't ?    the HOA certainly does not have time in the next few days to file a lis pendens I wouldn't think.  ??

I am putting everything on hold tomorrow until I get some further answers....especially from BOA since I am supposed to be contributing $ 8,000 at closing.     Will keep you updated.    I think I may "smell" something deceptive with this attorney. 

FYI --  the buyer will not pay any more either.   They have already come up $ 4,500 in their purchase price to get this deal moving forward with BOA.  They will not pay one more penny I was told.

I discussed with the attorney last Friday when he told me I had to come up with the $ 8,000 - what were the options ?   He said in his dealings with BOA -- that if it went to foreclosure that I would most likely get a judgement deficiency, the same day as the foreclosure sale..especially here in florida.  He said the deficiency judgement would be a lot more than the charge off/collectible balance through the short sale.     so that is why we decided to go forward on the short sale.    My main concern now is...why doesn't the BOA approval letter state I am bringing $ 8,000 to the closing..what is it for...and why am I paying his $ 3,000 attorney fees.     so will get some answers tomorrow and let you know.    I can't even think straight right now.

thanks for your input...muchly appreciated and talk to you tomorrow.    Do you have a phone number ?    I will give you my e-mail address if you want.... let me know.

Everyone needs to keep in mind the persons working FOR the banks are called NEGOTIATORS for a reason, they get paid to milk EVERY short sale for as much money as possible, the attorney, the agent, the buyer, the seller, etc.

Negotiators actually get in trouble if they do NOT say "no" to your offer at least twice, regardless of what you are in fact offering (each short sale accepted is reviewed at the end of each month by the asset managers in loss mitigation).  If you have time to walk from the closing, and B of A learns this, they will get MUCH more flexible on terms and conditions as the days/weeks pass (they even actually start returning phone calls).

Check out our web site or contact me directly and I can help -- BBenita@comcast.net.

Our web site - -www.United-IG.com, for those interested, we offer tracking access for your short sales on our site as well as downloadable forms, HUD software, and bank contacts.  We have been doing this full time for almost 4 years and have gotten VERY good at making things happen (knowing when to contact corproate offices is the key to success in short sales)

All the best to those of you, like me, crazy enough to be working short sales.

Just wanted you to know we are not closing today....we have until the 27th now.   I want some answers from BOA in writing on the approval letter and also some answers from my attorney.

Will keep you updated.

Any comments would be greatly appreciated prior to Friday the 27th and the earlier the better.

Latest update. From what I have been told and heard this through several people and now on my own short sale...as of January 1st 2009....BOA is getting a lot tougher on short sales and what they demand/require . Therefore  BOA will not budge on where we are for the closing on this short sale on Friday.  BOA is paying $ 17,450.00 in commissions, delinquent real estate taxes, doc stamps etc as seller to close this.  They want me to contribute $ 5,000 and pay the attorney who has reduced his fees $1,000.  And  I pay the HOA fees too.   So --this is where we are and I just want to move on and end this nightmare.     

In regards to the HOA fees, a lot more lenders are not paying large debts to the HOA. WAMU, and another lender I talked to last week said they only pay $1000 to HOA liens, or up to 6 months of dues, if the offer is decent. The HOA needs to take a concession and remove the late fees and interest to make it easier for the short sale. This takes time to accomplish too, since the board normally has to approve it. 

Cash contributions are becoming very much requested when the home is not a primary residence. The collectible balance (if pursued) will be collections calling. Well, you're probably used hitting ignore on the phone to them. Maybe once a month answer and tell them you can't pay, if you can't pay. Eventually, they will make you a 10% offer on the debt. That's good to settle thousands of dollars. My understanding is, if they issue a 1099c, they are "writing off" the debt, and can't try to collect. It's one or the other.

Other than that, you need to email your governor etc, and ask them to implement laws like California and Arizona. From what I understand of their laws, if the bank agrees to the short sale, then they legally cannot pursue the deficiency. You're actually out from under the house.

Good luck and god bless you and your family through this difficult time.

Our company processes short sales as well. We have been encountering that BofA junior lien holders now want 5% of first lien holders net proceeds.  As well, now other lenders as junior lien holders are now requesting a % of the first lien holders net proceeds and will not take the nominal payoff of $3K or $5K as first lien holders were offering.  Is anyone else experiencing this as well?

Thank you for your response.  Yes they are demanding what ever the first's lenders proceeds are after closing cost 5%, this is their policy.  I told them that the first lien holder is only allowing $2500 and where would the rest come from they told me realtor commissions, buyer or the seller.  The first told me anymore money from anyone they get it.  It is a hostage situation of the deal.  So I am back at the drawing board with the first.  However, I am experiencing it not only with BofA but other junor lien holders as well.  Don't know if they are all adopting same policy.  Thanks again.

Dameon,

What a great bunch of info on B of A.  I have a short sale to do that the distressed homeowner has (4) four mortgages on his gorgeous million $$ plus house and BofA (who now owns TB&W) holds a 1st mortgage on it for $420K.  The other loans are a 2nd to US Bank (heloc) for $200K, a 3rd to an x-wife for $200K, and a 4th to 1st National Bank of the Rockies for $170K. 

I have worked with TB&W before and have been successful but they pulled some funny stuff that got their license pulled and they are out of business now.  Can anyone give some advise for the other lenders I mentioned.  And, if someone was very kind-hearted a name or two of a decision maker that if fun to work with and fair.

Thanks for this site.

Diana,

Contact me off line at BBenita@comcast.net and we can talk about helping.  I run a short sale company (have for the past 4 years, since BEFORE they were the "in" thing) and have some great contacts as well as a great team in place for negotiations.  4 liens is a challenge, but, not insurmountable.

Sincerely,  Ben Benita, www.United-IG.com, 703-754-7551