Understanding Stubborn Banks! Stubborn Banks are accepting short sale offers yet often only throwing a $3,000 to $5,000 bone to the secondary lender, citing it's there policy. This of course often kills a short sales, when the secondary lender refuses to take less than $5,000 or what ever citing it's there policy.
OH MY! The First Bank won't allow any more to go to the second. The Second Lender won't take any less! Worse! The amounts involved are often a mire pittance!
If the seller can afford the difference the Bank wants it. If the Buyer is willing to pay more the Bank wants that money, too!
Why? Why would a Bank risk further losses over as little as $2,000? Why would the Bank be so stubborn?
Let's start with why a Bank would accept a short sale? The first reason and most important reason a Bank accepts a short sale is because they see it as in their best interest! They could care less how you as a debtor or REALTOR® see it, they answer to their stockholders and regulators not the debtors or entitlement mobs! The second reason is pragmatic, if the debtor's condition has substantially and uncontrollably changed! That's the reason for the "Hardship letters" the debtor must acceptably explain his position, "I quite my job I don't want to work any more" or "you got Federal "bail out" money so I'm entitled" won't get you a short settlement with any Bank!
So why won't they allow a reasonable amount to go to the second lender? Because, they see the second as creating the problems! Especially cash out seconds that are so common! The Bank made a safe or an insured loan to a qualified applicant then along comes a secondary Lender who loans the Debtor even more money, with little or no improvement in the debtor's financial position! Simply put the Bank sees the secondary lender as greatly responsible for the debtor's problems and worse the National problem. Often ignoring the fact that they may have originated the second, except when they still own the second!
From the Bank's position money going to the secondary lender is like paying Bonnie and Clyde to only rob you on Tuesdays, Wednesdays, or Thursdays because they have large deposits on Mondays and bring in lots of cash on Fridays to cash checks! They're pragmatic enough to pay a little because if they've accepted a short sale they believe it's saving them money, but see the payments to the second Lender as extortion!
I have a solution for some! Watch for it.
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