subject: Negotiating Short Sales With Two Loans, Same Lender - Short Sale Education [print this page] Negotiate with only one lien holder is the best short sale scenario, but what do you do when there are multiple liens with the same lender? It has been WHB Solutions experience that negotiating with the same lender can be an advantage depending on the lender.
For example, if both the first and second loans were held by Chase, there is a good chance of getting a short sale closed. If there was one loan with Countrywide and a second loan with Bank of America, it will be hard to get a short sale closed. Even though Bank of America bought Countrywide, they have different loss mitigation departments with different short sale approval guidelines.
We a short sale file that we could not close because Bank of America, as the first lender, would only give Countrywide $3000 in a short sale approval. Countrywide wanted $25,000 and would not give a short sale approval unless this was received. We tried to provide reason and arguments on how Countrywide would receive nothing if the property went to foreclosure and that they are technically the same bank and the overall short sale would net more money than going to foreclosure. Countrywide was so stubborn to get their money, they ended up getting nothing. It does not make any sense.
In a case where you have two loans that were originated from the same lender, it has been our experience that the second lien holder is more flexible. A typically response is that the second lien holder would give an approval for $3000 any day, but no full release or giving up their rights to deficiency is provided. Depending on the homeowners situation, they may be excluded from any future deficiency rights. Either they prove insolvency to the IRS or they qualify for the primary residence exclusion rules.
Typically, in any short sale negotiations, getting an agreement from the second lien holder should be obtained before going to the first lien holder. If this is not done, you would not have the right numbers to show what the first lender would net. So to avoid going back and forth with the both lenders, find out what the second lien holder is expecting to approve a short sale first.
In the majority of short sales, the first lien holder is the one who files for foreclosure. Once this filing occurs, many times, the second lien holder would move the loan to their Charge Off or Debt Recovery department. We have noticed that it is much easier to obtain an approval when this happens as the guidelines of providing an approval is less strict. At the point it is in debt recovery, the expectation is that the dollar amount they are looking to recover would be less than what would be expected if it was still with the loss mitigation department. Keep in mind that loans sent to a debt recovery department are sold on pennies on the dollar and there is a high possibility where no money would be recovered.
