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Paul Jerome

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Dealing With a Second Mortgage on a Short Sale

05-14-09
Paul Jerome

Anyone who closes short sales knows that these second mortgages can be tough to deal with. When the first forecloses, the second can still go after the borrower for the full balance by suing on the promissory note, so they tend to want to hold out for as much as they feel they can claw back on the short sale and their behavior can potentially kill the transaction.

Readers of the Broken Credit Blog know that I purchase short sales in Florida and throughout the U.S.A. Call me crazy but I like the challenge of orchestrating a perfect short sale strategy all the way down the finish line. And along those lines, here's an example of how to successfully deal with a second mortgage on a short sale.

Bear in mind that the second can offer a full release of liability, a lien release only, or a partial release with signature loan. The shorting second wants the seller to commit to paying back the deficiency while the seller wants a full release. Solving this negotiation puzzle takes time and a calculated strategy. Contrast this with the fact that the normal short sale submission involves a buyer who is extremely anxious and desiring/demanding to close within 30 days of contract. This is why the short sale and the type of release need to be negotiated in advance of any end buyer. Here's a follow up to Estoppel The Insanity:

HSBC Second Mortgage Crummy Short Payoff

Seller Counters By Crossing Off Crummy Terms

HSBC Gives In

I love a happy ending.

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Florida Real Estate Agents Required To Be Licensed As Loan Originators?!

03-28-09
Paul Jerome

Has anyone seen the text on SB 2226? Loan originators must be licensed in Florida which I agree with; however, here's the definition of 'loan originator':

"an individual who, directly or indirectly, solicits or offers to solicit a mortgage loan, accepts or offers to accept an application for a mortgage loan, negotiates or offers to negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower or lender, processes a mortgage loan application, or negotiates or offers to negotiate the sale of an existing mortgage loan to a noninstitutional investor for compensation or gain."

Basically, anyone who is negotiang Florida short sales must be licensed as a 'loan originator' and that would include real estate agents as of this date because there is no exemption or at least none that I could see. I wonder if this is gonna sneak through unchallenged...??

C'est la Vie.

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What’s A Short Sale Discount?

02-13-09
Paul Jerome

Let me dispel some myths here about short sales. Not all short sale approvals are created equal. Taking 30%, 40%, 50% off a mortgage balance is not that big a deal at this stage in the housing market.

You really see what dire straights the housing market is in firsthand when these extreme short sale payoffs are received.

Here's a first mortgage of $253k shorted for a net of only $82,195 which is "full and final satisfaction on the first mortgage indebtedness". Nice!

This one is $186k shorted for $59,100. Now, when the short payoff is silent as to the deficiency but references the purchase contract, then check with your attorney about including words to the effect of "this contract contingent upon (shorting lender) providing full release of liability with no rights to the deficiency" which may effectively produce the same result.

And I think we may have a new short payoff record. One of my negotiators called me a few hours ago to let me know that HSBC is accepting $15,000 as their net on one of our purchases. It's almost getting to where houses are cheaper than cars.

Thanks for tuning into this weeks episode of what's a short sale discount.

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Another (Un?)Successful Short Sale Closing in Florida

10-15-08
Paul Jerome

A mortgage with a $211,657 balance on a home that's worth considerably less. A contract comes in at $100k, another at $120k, and another at $170k. Which of the three contracts should the seller accept?

The logical answer is for the seller to accept the $170k contract, right?

Let me tell you why I feel that's probably the wrong contract to accept to get the property sold.

The seller accepts the $170k contract and the listing agent puts the short sale package together to submit to the shorting lender. The lender orders a BPO and, by the time the lender counters, the $170k buyer is gone. Now what?

The shorting lender is looking for a $170k buyer. Why shouldn't they? You've already shown them that there was one buyer who (for a moment and before he came to his senses) was willing to offer $170k. He's since changed his mind and made offers on other properties or closed on another one similar for $155k.

This is a subtle problem with short sales that doesn't get talked about much. Lenders are debt collectors. They don't care about customer service. They don't care about anything but generating the highest net present value on the disposition of this property. The lender wants you to bring another buyer at that high price and you can't. Plain and simple. The property is headed to foreclosure.

Had the seller accepted the contract from an honest, ethical investor at $100k who was willing to play the games that the shorting lender likes to play, then the short sale could have been pre-approved at a lower amount and prepared for any buyer that wanted to offer the lower amount.

The result would be that the $211,657 mortgage debt could be negotiated down to $103,625 and sold to a buyer with FHA financing at $116,500. This one closed yesterday.

This is what I do. I buy, process, and close short sales with a team of a few dozen employees and contractors in Clearwater, Florida. I also provide FHA financing to buyers of short sales. I have seven different exit strategies and among my favorite is to purchase the property for cash, although we have a fail safe of terminating our contract and substituting another buyer that purchases directly from the seller. You make the real estate commissions.

If anyone reading this has any single family homes for short sale and there is a documentable hardship story that can be presented to the lender in order to obtain a full release of liability, then contact me and we'll see how we can work together. But whether we work together or not, please make sure you are giving your sellers a fighting chance to sell their short sale by avoiding the subtle and not widely discussed pitfall that I have described above.

Paul 702-988-2560

Call me anytime or visit my blog for free information on how to get your credit issues resolved.

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Testimonials Are Nice

10-02-08
Paul Jerome

Here's a great testimonial today from Lynn: Lynn Buys a Home!

OMG! This is a wonderful site. I had never checked my credit before, now divorced, wanting to buy a home and it was now necessary. I have brought my score up 85 points in 7 weeks thanks to this site and your free credit seminar. I was approved for my loan today thanks to you.

I disputed (only one item was left unchanged) since inaccurate information was all the credit bureau seemed to have. I paid off collections in the order of earliest to latest for PFD. I sent return receipts for validation which were ignored and so removed. I opened a secured card since I didn't have any open revolving credit. I became a joint owner of Sears credit with my Mom. And BAM! all added up to to points...EX 82pts, Equ 85 pts, and 65 pts TU. (* Note to readers that TU is much slower and harder to battle in my case)

I can't thank you enough. I am so proud of myself. If i can do it then anyone can. I am a single mom and a home owner! I have never handled the credit arena before but this site has taught me well. I am going to continue to grow..... just as soon as you teach me how the buckets work. LOL

Lynn

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