How to get rid of a promissory note after a short sale

Brian,

That employee may say they don't care, but the truth is, that they will seek legal action to collect on the promissory note.  They do this one of two ways: either to merely turn it over to a collection agency, or have a regional servicing lender office turn it over to a collection law firm for legal action.  Although it is often the case that people default on those loans, it usually speaks to the fact that they were in deep financial doo-doo to begin with and were already likely to bankrupt.

Thanks for the comment, Brian.

Bill,

I don't advocate ever being dishonest.  However, when a client came to me for advice on financial matters, bankruptcy is always an option to consider.  With the lawyer stating that possibility, it carries weight and encourages them to consider alternatives.  It is absolutely truthful, and a consideration even if the client is not personally considering it.  The idea here is to communicate to the lender that there are various options being considered, stating the most severe possibility.  With a financially strapped borrower, getting rid of the promissory note will benefit both the client and the lender.  A client who has rehabilitated themselves will likely have to pay a higher percentage.

Again, thanks Bill for your comment.

Jon,

Yes, it is true that sellers/borrowers often are irrational about the options available to them, and presenting this future possibility of negotiating away the promissory note may make it more palatable.

Thanks, Jon

Ken

Well, Satar, I am working on the exposure, lol.  Everything I do, from books, to training, to coaching, our mediation services, and these blog articles, are all to help short sale agents.  Making my living from doing what I love is certainly a joy and pleasure.  What you don't see are all the phone calls and emails I receive and I am able to track their progress and success.

Thanks, Satar,

Ken

Lynn,

Yes, you have pointed out both ends of the spectrum.  Most promissory notes, however, are enforced.

Thanks for your comments.

Ken

Christine, no, planning a strategy for negotiating with lenders is not fraudulent.  This response is based upon the court decision that bankruptcy planning also is not fraudulent. 

Gabe, you're welcome.

Ken

That's a difficult two-part question to answer.  As far as how long it takes, it all depends upon if the second is the investor or merely the servicer, what entity it is, and how their caseload to processor ratio it is.  Typically it takes up to a couple weeks.  Remember, everything I say here is true except when it is not! lol

Now, as to chances.  With some entities, the chances are good.  However, the PN is often a settlement of the deficiency balance and there are a number of factors coming into play in their decision-making.  Please see my other blog article about those factors.  If the attorney can mitigate against those factors, the chances are much better.

An exception:  there are some entities who hold seconds where they are the investor and they have an internal policy to penalize the borrower by strong demands and are willing to lose money just to hurt them.  If you have one of these, then they will not negotiate and they may actually hope the borrower won't take the deal.

Good luck!

Ken