Question from agent: "I've been working on a file with BofA. [Countrywide] first and HSBC second. HSBC responded immediately several months ago wanting $7500. BofA responded with a counteroffer a few days ago wanting $5k more from the buyer, $3k to the HOA lien, and 0, nothing for HSBC. HSBC insists on $7500.Sellers live elsewhere and do not want to pay anything. What do you suggest beyond contacting the negotiators which I've already done? The first is not Fannie, Freddie, FHA or VA and, despite no payments since 10/09, it has no lis pendens [nod]. So, now what?"
My Response : The good news is that HSBC responded fast. You simply need to negotiate them down.
Here are a few general rules with 1st and 2nd mortgage negotiations.
Rule #1: Most first's will pay the 2nd 10% of the total amount owed. So, get the 2nd to give you a payoff. Then ask the first to allow the 2nd to get paid 10% of their total.
Rule #2: Fannie and Freddie will only allow $3,000 to the 2nds. It doesn't matter how little or much they are owed.
This loan is probably sliced and diced, and their rules vary all over the place. Here is what I would do from here.
First, get HSBC down, unless they are asking for 10%. Then, escalate the file at BOA. You will probably have to escalate both files.
The first not paying the 2nd is stupid. The negotiator may think they are smart because they hard negotiate hard. Good for them. They are actually stupid, because they are losing money.
Send them the example below about another stupid lender that negotiated to hard and lost $50,000. Here is the story. We met some buyers at one of our Sold-In-A-Week sales in March of this year. They told us they were buying a house in Gainesville at 1740 NW 113th Drive for $275,000.
We had a house for sale two doors down from the house they had put an offer in on. The house they were looking to buy was a short sale. They mentioned that the short sale had drug out for months. Something about 3 mortgages and the junior mortgages were hard to work with. We talked to them a couple months later to see if they would consider our listing. They wanted to wait it out for the other house.
I noticed this house when I was looking for comps. From the MLS history it appears they walked around August 2009. The price was recently dropped to $229,900 and the house went back under contract. That's a big loss for the short sale lender.
I talked to the agent with the listing. The first mortgage was RBC, owed $337,500. The 2nd was BOA, owed 70k. The house was selling for $272,000. She submits the short sale offer to both companies. RBC gives her an approval in a month. BOA never gave her an answer.
Here is the problem. BOA has no incentive to put time into this short sale file when they are only getting $1,000. Most 2nds will get a minimum of $3,000, and often 10% of whatever they are owed. RBC was greedy and wouldn't offer enough money to BOA. As a result, they lost $50,000. Was that a smart business decision?
She should have gotten RBC to give BOA $3,000 to $7,000. She should have escalated the file at both banks. That's probably what it would have taken to get an approval.