"I have a property that I am trying to do a short sale for. The realtor that I am working with is not able to negotiate with Bofa (heloc) to settle the account. They want to take $5000 in cash to release the lien but charge-off the remaining balance (about $200,000). Do you think you can help me on this case?"
Thanks,
Natalie
Hello Natalie,
Very common set of circumstances relating to a BofA HELOC account engaged in short-sale review; actually this is their standard resulting resolution. Unfortunately, they almost always include a clause regarding the deficiency in the approval docs, its standard. I always instruct people that BofA will likely always include such a clause in the fine print so to speak. However, the clause does not sucinctly state that they WILL pursue these monies, rather only that they preserve the right to do.
This is important because the reality is that they rarely do. You must understand that it is about mitigation of loss, loss management. Whereas, they concede their will be a loss, however they will take measures to ensure the loss is mitigated somewhat; to whatever extent possible. Pursuing you for a deficiency costs the institution money. That expense, which can be considerable, is internally attributed to that file thereby increasing the accrued loss for them on your loan. Its really case by case Natalie; whereas if its finacially economical, justifiable they will consider exercising their options and avenues to pursue. If it is not, then they won't.
Example; if they are already absorbing a fiscal loss on your file of say, $86k, how much economic sense does it make for them to incurr another $15k in expense to chase the $86k? Those "risk vs. recovery" formulas are closely guarded secrets for them and I can only speculate. But at some point, at some number or threshold it no longer makes sense to them.
The higher the balance, the higher the liklihood they may pursue. But having a high deficiency does NOT ensure that they will. They will always preserve their right and ability to do so shuold they choose.
Couple of variables will dictate whether or not your Realtor can get any movement from them.
1 - Has the account been charged-off yet? If so, it will be in the Recovery Dept.
2 - What is the total outstanding principle?
3 - WHO IS THE SR. LIEN HOLDER??
4 - What is that Sr. lien remaining principle balance?
The answers to these questions will determine your probable outcome. You should confer with your Realtor and share the following information I offer to you.
From the questions above:
1- Important to know because it determines in which dept your file is to be reviewed for short-sale; either Loss Mitigation/Home Retention, or.... in the event of charge-off status, the Recovery Dept. Each dept has separate criterion/protocols for handling short-sales. For example; Home Retention will start by requesting 10% of the principle as cash at closing to provide Jr. lien release. Recovery will start at 5% of Purchase value. On most files, if you do the math you will note that the Recovery dept formula is much more expensive for YOU. However, it has been my experience that Recovery dept. is preferrable compared to Home Retention. Recovery dept personnel: - have much greater flexibility and autonomy to make immediate decisions - they are much more attentive, likely because they are each handling far fewer files than their Home Retention counterparts. - once they are assigned, the file file is typically theirs indefinitely. So, if your account is in Recovery it may be more hopeful.
2- The remaining balance, or the deficiency is important because if it is very high, their will be a greater call for a higher percentage of recovery.
3- Important to note if your contention is with regard to the cash at closing. This is because if the Sr. is BofA, Countrywide original, or BAC (the BofA, Countrywide hybrid firm) than your BofA HELOC file must accept $3k for release of lien, They can start by asking for 10% of the balance, or for 5% of the Purchase value. but at the end of the day, if the Sr. is held by a sister firm, they must accept the $3k. They will not volunteer this fact, they may even lie, or not know about it... but it is fact, just keep pressing.
4- Sometimes, if the Sr. lien holder is facing tremendous, or very high loss, the Jr. will show some restraint in what they ask for.
Anyway Natalie, hope this info has been helpful... I wish you good luck.
Dameon V. Russell
Administrative Partner
The Montano Group
Century 21 Landmark Network
Office: 916.266.4848 x109
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