The unsecured promissory note and the Short Sale

I signed a $80,500 promissory note to PMI under duress....they approved my short sale but did not tell me until closing. Then the day my first payment was due the PMI sent it to collections. Collections asked me to send a letter with in 30 days if I wanted to contest the note. I did with certified return mail. I received the return certification but never heard from them until I checked my credit file that has 180 plus days late. Since this is unsecured can they attach my wages? Will this go away in seven years?

Hi All: I am looking for comments about this one particular situation I am working.  I was the fourth realtor to handle the sale.  Previously the seller was always chasing the market, and not doing proper price reductions.  We agreed to the listing only as a short sale along with guaranteed price reductions.  Synopsys of home is:  Client received home as part of divorce settlement as it originally had value.  Originally listed by realtor No 1 at $370,000 owed $280,000, originally had equity.  Final result solid offer $235,000 with 25% down and good scredit scores. Bank in it's infinite wisdom, decission process took three months, along the way, they received updated proposed HUD-1's.  Bank did not do an appraisal but a BPO and will not share the results.  My belief is that the BPO was right around the $235,000 number.  Ulitmate lender (unknown), had one PMI company, they split the risk with two other PMI companies.  Two agreed to the short sale with no strings and the third wants unsecured promissory note for $40,000  Client has mediocre job, assests consist of five year old auto that is free and clear.  They have large amount of credit card debt, student loans and charges associated with trying to keep the home.  The bank has not started the foreclosure process yet.  If the client signs the note, they must move out prior to closing which can be accomplished in less than 30 days.  When they move out and get an apartment, plus normal living expenses there is no extra money to pay the promissory note.   If the note is sold and collecton is started then the client can file bankruptcy and it all goes away, remember they have no assets except for a small job.  Other scenario is client does nothing more and allows the foreclosure process to begin, the sheriff sale may be had in 45-60 days, if that, then the redemption period is 6 months, and another 30 days for eviction, remember the client at this point has not made a payment in 5 months. Adding all this together, client may get 14-18 months in the home with no payments being made.  Jump ahead, after the foreclosure sale process is complete, the bank takes the property back, gives it to an assigned REO broker, the new sale price is now going to be offered on an REO as opposed to an occupied nice home, I am sure the new offer will be anywhere from 15 - 24% less than the orginal $235,000 price undless the market makes a sudden turn upward.  We are in the Detroit market and statistcally we are dropping 1-2% per month as values decline.  If house is sold for much less, then the debt owed by the client increases, if the 1099 is issued for the difference as imputed income, it gets reported on the tax return, but has no tax consequence, if law suit is then filed, bank wins, trys to collect, client can still fle bankruptcy, and probalby be successful.  I would appreciate any phone calls or written comments, especially what am I missing about understanding the PMI process. 

Thanks in advance to anyone that takes the time to read this and respond.

Bill Janiga

RE/MAX Homes Sale Services,

Plymouth Michigan

Cell:  734-564-2729

bjsept23@gmail.com

My daughter, HARD working mother of two girls. Just lost her job in handbag industry. Ex stopped paying child support etc etc etc...then tonight she tells me that when she sold her condo (short sale) two years ago she signed a $20,000 promissory note!!!!!!!!!!! I'm an inactive realtor and was not advised of this at the time as she had too much to handle and was told to just do it. I believe I understand that requesting forgiveness of debt, or bankruptcy are the only answers. Do I understand correctly? She has nothing  - barely a rented apt and an old car so there are no assets, as luck would have it we can not help. Please forgive me if this is not well written I feel as though I can barely breathe. I don't know how I found this site but glad I did.

Thank you,

Pam

I am listing agent on a $150K condo.  Seller owes $190K.  There is PMI involved.  Bank BPO came in at $140K.  I've presented an offer for $155K ($5K over list).  PMI company will only accept if Seller signs a $25K promissory note.  Seller is 72, retired, no savings and credit card debt of $68K.   He has income of about $64K from pensions and soc. sec. but it all goes out to pay minimums on debt load.  Basically, he's broke.    I sent him to a Bankruptcy Attorney for advice and once the short sale is done, he plans to file bankruptcy to remove the credit card debt.    My question:   Can the Promissory Note to the MI company be included in the bankruptcy???  I'm in the State of Washington where non-judicial foreclosures are the norm and there are no deficiency judgments.   In reality, I almost think my Seller should take the condo off the market and file bankruptcy on the whole thing.  That seems to be in his best interest, rather than signing a promissory note.   Am I thinking straight on this?

Mukilteo Realtor:

Well it sounds to me that you are thinking it out correctly however, my opinion shouldn't matter here, especially when you have involved a bankruptcy Attorney of which, i am not. I would seek his opinion on this one.

I have a unique situation...

I had an 80/20 loan in CA, total ~$310,000. The first was ~$250,000 and the second was ~$60,000. Both were used to buy the home to begin with.

After a nightmare year of the banks not communicating with each other, losing 5 buyers, and endless back and forth, we finally got both banks to approve a short sale at $169,000, but the second only would approve it after a promissory note for $6,000 IN ADDITION to the $3,000 they were getting from the closing. We said that was ok, but the sale and closing went by with NO promissory note. Now, they (the second leinholder) are screaming about how they don't have a note and will come after our kneecaps if they don't get one. Now, don't get me wrong, I enjoy my kneecaps. But, do they have any recourse? Or does their complete ineptitude prevent them from doing anything but whining in hopes that I suddenly take pity on their poor bailed-out selves and send them $6,000 out of the goodness of my heart?

I moved from USA back to my home country of Canada after a short sale, as I am sure you all know close to the deal closing in came the promisary note for 13k if we didnt sign the folks ready to move into our house would be out in the cold. I agreed to sign, we moved out of the country and signed over power of attorney, we just recived a letter asking us to sign the promisary note that this documnet could not be signed by power of attorney. I have a contract job for 3 months then I will be out of work again, the primary reason we had a short sale in the first place, I sent a letter back telling them I could not agree to pay on this until I have a full time job. My question is what can they do now that I have moved out of the country.

Thanks.

2 days from closing, I was told I would by the title company have to sign a promissory note. I told them I would not and it is supposed to be written off ($79,000). I was then told I would be sued for "poor performance" by the buyers real estate company and the buyer himself if I did not show up to close. I stuck to my guns and told them I would show up, but I would not sign a promissory note and told my agent to get it done. The agent told me all the bank (WaMu) would do is settle for $8000 at closing. I told them I had $4000 and they would not take it and that's all I had but they would not accept it. I did the closing and did not sign the promissory note (it was never presented to me or brought up during closing).

6 months later, the balance was sold off and they are trying to collect. I told them to show me where I agreed to re-pay the balance and they have not responded. So, my question is do they have the right to collect the balance even though I never signed a promissory note? If so, has anyone had any luck settling afterwards and for what amount?

I will. Thanks for the quick reply.

Hi everyone,

I have been reading through everyone's situations and I am feeling pretty hopeless.  I too was presented with the promisory note "option" from my private mortgage insurance in the amount of 30,000.  I have a buyer and contracts in place.  I have been calling lawyers and they have not been calling me back.  I just can't seem to figure out whether or not signing the note is a good idea. 

My husband and I may be able to afford the payments, especially when I get a job.  But we really don't want to.  We really want to be forgiven and handle the tax repercussions ourselves.  The idea of spending 30k for a house that we aren't living in, or recieving any tangible benefit from the use of that money enrages us.  We are already taking a hit on our credit and are loosing all the money we put into the house to begin with.  But what do you do when it seems to be a loose/loose situation all around? Its either pay now or wait for foreclosure, and then bankruptcy.  Right?  Am I missing something here?

- Denise

We are in the process of short sale in Reno, NV. We owe 99K, got an offer of 39K. It's now in the hands of the bank for approval. The property was bought as partnership, two single, individuals. This was originally bought as a second home, we live in CA. We've had it for about 7 years. A year ago we decided to rent it out to help out with the payment because I lost my job. I have other properties in CA and have IRAs. My partner has a job and also has assets (primary residence, 401K, IRA). I am already expecting that the bank will not approve the short sale because based on our financial information, it does not sound there is a hardship even though I am now unemployed and not having enough income to pay all my bills. I keep reading about this promissory note ... what would happen if I am willing to sign a promissory note but my partner would not? Will the bank allow a separate promissory note? If that happens, based on our financial and debt amount, what would be the expected amount of promissory note? The buyer is paying cash on this deal, and the property is currently rented out. So it's a good investment for the buyer.

Thank you Jesse for the response. Our property is in NV and yes, it is a joint tenancy. I am just afraid of the mortgage company making us pay for the whole deficiency knowing that we have significant IRA assets. I am relying on this IRA in my retirement since I rolled over my pension plan when I took a buy out from my first employer.