Short Sales: Deficiency Judgments & Promisory Notes

For homeowners who have been unsuccessful in negotiating a loan modification, there generally remains two other options – a short sale or foreclosure.

While a foreclosure involves the bank taking possession of the mortgaged property back through a legal process by which the owner forfeits all rights to the property leaving the mortgagor (aka the former homeowner) homeless and with a credit devastating foreclosure on their record. A bank short sale involves negotiating with your bank to accept a payoff in an amount less than the current principal owed, and in most instance but not always with an agreement to accept the short payoff as payment in full. That said, some banks are requiring homeowners to sign a promissory note which gives the lender legal recourse to recover the difference of the unpaid amount.

Mortgage servicers say their actions are often dictated by their contracts with investors or mortgage insurers. Bank of America Corp., for example, will attempt to seek a promissory note whenever it is feasible in a short sale in the interest of protecting investors and shareholders from the losses, a spokeswoman says. In the case of a foreclosure, the investor or insurer is generally the one who pursues the deficiency, but we do ourselves on some-bank-owned assets, she says.

Not every troubled borrower is hit with such a claim. Often, mortgage companies don’t go after borrowers for unpaid amounts either because state laws prohibit or limit such actions or the cost outweighs the potential return. Borrowers subject to a deficiency may also elect to file for bankruptcy in an effort to have the debt discharged.

How a borrower is treated can depend on mortgage company policy, the size of the unpaid debt, whether the borrower has a job or other assets, or whether the home was bought as an investment. If there isn’t a financial hardship, there is a greater chance the investor or mortgage insurer will pursue the homeowner for more, says David Knight, a senior vice president at Wells Fargo & Co.’s home-mortgage unit.

A PMI Group Inc. spokesman says the mortgage insurer primarily target[s] borrowers who are not experiencing hardship but those who simply elected to walk away from the property due to its decline in value

The Importance of a Hardship Letter

Based on the above comments from a few national lenders, it is obvious how important it is to clearly present a real hardship to your bank during the negotiation of your loan modification or short sale. It’s equally, if not more important that you identify an experienced short sale specialist to represent you in the short sale negotiations with your lender. We at The Opland Group have been actively involved with short sales for over 10 years now, we’ve trained with former loss mitigators, that is the individuals who work for the banks and negotiate these sales, and in this time have assisted countless homeowners in obtaining short sale approvals that included full and complete waivers of the deficiency balance allowing these homeowners to avoid foreclosure and gracefully exit their homes without the devastating impact a foreclosure has on one’s credit. Our rate of success is more than five times the national average and this in part has lead us to become the premier short sale specialty group in Columbus and Central Ohio.

If you, or someone you know is facing foreclosure Columbus, Ohio and are interested in attempting a loan modification or a short sale, please contact The Opland Group. We offer professional and confidential  real estate advice and look forward to helping you!

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Downtown Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Galena 43021 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickeringto, 43147 Polaris Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235

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