What are the typical results in a short sale for junior lienholders?

Submitted by Shawn from CA - 01/13/2010 - 10:45am

Do the junior lienholders typically settle and allow the short sale? Approximately how much do the settle for? Is there any agreement to waive/allow deficiency judgements whether or not they are purchase money loans? How often to the stand in the way of a short sale allowing the foreclosure to be completed?

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Comments

Submitted by Michelle - 01/21/2010 - 2:20pm

It depends on the lender in all cases. Some want 10 to 15 cents on the dollar and ask for contribution from everyone including a promissory note from the seller. Others stand in the way of a short sale by not giving a full satisfaction payoff demand. All of these things items are typically negotiated by the realtor. You can see more information on each lender by going to the ForeclosurureRadar Short Sale Report http://www.foreclosureradar.com/short-sale-report
It is also important to note that many lenders are sending second mortgages and HELOCs (home equity lines of credit) to the collection/recovery department after approx 6 months of missed payments. They can be very difficult to deal with when negotiating a short sale.

Submitted by Danny R - 04/16/2010 - 12:06pm

There was an interesting segment on CNBC (Jan 2010) covering large banks holding underwater 2nds who were illegally demanding money in cash from buyers and/or buyer agents outside of official settlement statements, or they would block a short sale. http://www.cnbc.com/id/34877347/Big_Banks_Accused_of_Short_Sale_Fraud
Excerpt: "Since many second lien holders are getting very little, they are now allegedly requesting money on the side from either real estate agents or the buyers in the short sale. When I say "on the side," I mean in cash, off the HUD settlement statements, so the first lien holder doesn't see it."
... "So these second lenders are asking for the payments off the closing documents, off the HUD statement, usually in a cashiers check prior to closing. Once they receive that payment, they will allow the short sale to go through, which according to RESPA laws and the lawyers that we have spoken to on the topic is not legal." ... "Brandt told me he's heard from at least 200 agents that they've had these requests made by representatives of Citi Mortgage, JP Morgan Chase, Bank of America and other large banks."

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