First Mortgage Lenders are requiring more specific information as to hardship, financial status and ability to pay any deficit later.
We have not seen first mortgage lenders actually filing suit or liens to enforce there right to seek a deficiency, but most are having the borrower (Seller) sign a statement that they do have the right to seek a deficiency. Probably the financial information provided will be analyzed and a determination will be made at a later date. If the home is not the primary residence, it is more likely that the lender will seek a deficiency.
First Mortgage Lenders limiting payment to a Second Mortgage Lender to $3000.00 or less, no matter what the total outstanding debt is.
It has been interesting to see the give and take between the first and second mortgage holders- even when the first and second mortgage holders are the same company! Both are well aware that if the deal does not work and the first mortgage lender forecloses, the second mortgage holder will receive nothing; but, this has not stopped the second mortgage holders from trying to play hardball and get even more. The first mortgage lender's limit of the second usually wins out.
Second Mortgage Lenders requiring promise of payment of remaining balance after closing.
Since second mortgage lenders are getting the short end of the deal, so to speak, in these short sales, more increasingly we have seen second mortgage lenders requiring the borrower (Seller) to sign either a payment plan letter or a statement that they will repay at least a part of the deficiency within a certain amount of time.
We see lender's only allowing a maximum of 3% Commission if only one agent is involved. If two agents are involved 6% maximum commission and often less if it is not a FNMA backed loan.
Even though we have all read the notice that FNMA backed loans will allow a 6% commission, lender's are still scrutinizing the commission very thoroughly. First, not all loans are FNMA backed loans and are therefore not held to the 6% requirement. Second, the lenders are questioning agents out of the same office and the same company and the amount of commission that has been requested.
Title companies are more wary of insuring the new buyer on short sale transactions and are imposing there own rules before they will insure.
Without title insurance, no deal will go through even if there is short sale approval from the first mortgage lenders. The new buyer must be able to obtain title insurance or the deal will fall through.
Title insurance companies are worried that the short sale lender will rescind their approval because of non compliance with their instructions or they determine it was not an arms length transaction after the closing. If this were to happen the title company would be paying a claim or at the very least defending a claim.
Therefore, closing attorneys have been informed that all requirements of the short sale lender must be adhered to strictly, any language in the short sale approval letter that leaves room for the short sale lender to rescind the deal must be approved by the title company and unless there is full disclosure in all regards to the short sale lender, the title company can refuse to insure.
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