PNC has issued a new mandatory form that must be signed if a borrower is doing a short sale. The Seller/Borrower must sign a statement that says, “I/we agree to remain responsible for the payment of the remaining balance on my/our Account pursuant to the terms of my/our note or line of credit agreement”.
Before you read anything further, please take a moment and go down to the bottom and look at the form. It is in 3 parts containing 3 separate boxes of statements. The first box is the SHORT SALE DEFICIENCY AGREEMENT. I will discuss this later in this blog.
The next (middle) box is the AUTHORIZATION TO CLOSE LINE OF CREDIT which would only be applicable to there being a home equity line or “signature line” of credit. This type of statement is usually obtained from the Seller/Borrower in some affidavit form by most closing agents as it is necessary to clear title. The form is then sent to the lender prior to the actual closing occurring so there is no post closing drawing on the line of credit, which was supposed to be closed and released.
The last box is the REALTOR OR THIRD PARTY AUTHORIZATION. This form is typical, although somewhat abbreviated probably so it all fits on one sheet of paper with the other items. But there is one ominous additional sentence that you never saw before and it takes me back to the first box at the top of the form. The language in the box explains what a short sale is and then says, “If the borrower [the seller] or the [Seller/]Borrower Representative and PNC Bank are able to mutually agree upon the terms of a Short Sale, unless prohibited by applicable law the [seller/]borrower(s) will remain responsible for the remaining Account balance after the agreed upon amount has been applied to the Account”.
Back to the first box, the SHORT SALE DEFICIENCY AGREEMENT – This new document was puzzling to me and how to use it, since most seller/borrowers want (but don’t always get) a short sale with a complete waiver of deficiency. So without being bashful, I asked PNC what to do if the seller/borrower wanted or needed a deficiency waiver.
The answer from PNC was somewhat cryptic (no surprise) but said I should just cross out the top section of the form. The response did not address the sentence in the Third Party Authorization section, but we will cross that one out too and see what happens.
The actual response says, “If it is a lien release only (the settlement amount will be lower) then they will be responsible. If it is Settlement then they will not be responsible for the balance (settlement amount will be higher). If they want the 2nd option you are able to cross off the top portion-that is the only part you are allowed to alter.”
Like I said, that does not quite do the trick since there is that same sentence in the bottom section, so I am going to have to "alter". My further inquiry was about what PNC meant by “Settlement”. The answer was that the borrower should, “come up with a settlement agreement that the borrower is agreeing to pay one lump sum and then the remainder of the deficiency balance is waived.” So I can’t tell if that is a situation where the sale proceeds are the “lump sum” or if there is expected to be some contribution besides the sale proceeds as the “lump sum”. This form may have something to do with the Standard Short Sale rules by Freddie Mac (see their flyer) that became effective November 1, 2012. One new rule is that Seller/Borrowers that are less than 31 days delinquent must make a cash contribution to the loss. But the new Standard Short Sale also says that 90+ day delinquencies should be given a waiver of deficiency. So it would seem there is quite a conflict in this form.
This new lender created form is a further evolution being attempted by a major lender / servicer in the short sale process and debt resolution environment. Please let us know of any experiences you have in this regard with PNC and this new form.
The actual form is presented here for your review.
_________________________________
© 2012 Richard P Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
See our easy to find articles at
Comments(26)