2ND LIEN HOLDERS: I’ve Got a Bone To Pick With You

by Joe Salcedo on 11:27 pm

“The ultimate tragedy is not the oppression and cruelty by the bad people but the silence over that by the good people.” -Martin Luther King Jr.

Since the beginning of this year, I have noticed a trend on my short sale listings with the second lien-holders:

They have become more aggressive in trying to get more money and are not afraid of causing a foreclosure to their buyer, even if they meet all the qualifications of a distressed individual.

I have gone through short sale crashes due to this reason. And these cold blooded people on the second will not even look at the short sale package if the payoff on the HUD1 (that the first lien-holder is offering to them) does not meet their payoff requirement (in essence, saying: “we want more money!”).

In my experience, the bank who holds the 2nd-lien in this home will not even look at any short sale package if the pay-off is not 5% of the purchase price.

I think this is severe neglect and paying attention to the above quote, I don’t want to be silent anymore. This action by the banks on the second is criminal.

The short sale package consists of the following:

1) Authorization Letter
2) Hardship Letter
3) Financial Information Worksheet
4) Listing Agreement
5) Latest two Pay stubs
6) Tax Returns (Last 2 years)
7) Bank Statements (Last 2 months)
8) Buyers Pre-approval Letter
9) Purchase Agreement
10) Estimated HUD1
11) CMA (Comparable Market Analysis)

Take a look at number two of that list: Hardship letter–the reason(s) why the borrower has defaulted on the loan.

But this bank said that they won’t even take a look at the short sale package if they don’t get the right payoff?!

My client’s hardship is that the main borrower lost his job back in March, then lost his mother, who is the co-borrower, not too long after that. Needless to say, this is a legitimate hardship financially and emotionally. Yet the bank won’t even take a look at that letter because the payoff is not what they want?! (BofA is the senior lien-holder and they offered $6,000.00. $4,000.00 short of the 5% required by the 2nd lien-holder)

Now tell me dear reader, is that criminal or what? I understand that my seller and their borrower agreed on that payment years ago and short sales are not determined on the hardship letter alone but more on the purchase price vs. market value. But the senior lien-holder (1st loan) has already approved the sale and offered their proposed payoff. Meaning, our purchase price is at fair market value. But no, they will not even take a look at the short sale package unless they are satisfied with the “proposed payoff”.

“Websters dictionary describes “greed” as: –nounexcessive or rapacious desire, esp. for wealth or possessions.”

And “oppression” as: –noun
the exercise of authority or power in a burdensome, cruel, or unjust manner.

My opinion on why these 2nd lien-holders are now being such bullies is this:

They have 6 years to pursue the deficiency. On a foreclosure or a short sale. They have finally have the manpower and the know-how on how to go about pursuing each defaulted loans they get.

This loan was originally both with Bank of America but was sold to the 2nd lien holder bank while I was processing the short sale through Equator.

I offered to pay half of that $4,000.00 (to be taken out of commission) but not the whole thing or else I would have worked for free (I have a wife and two kids so not a very good idea, noble yet hungry.) I asked the buyer’s agent to split the cost since my seller is not capable of this financially and again emotionally (he just lost his job, mother and is now about to lose his home and I’m going to ask him to come up with $2,000.00?!) but his buyer knowing that there is a house next door selling for $15,000 less than what they were in contract with us, decided to walk.

This is one of the many sad stories that I bet is constantly happening all over the country yet no one is speaking out against these 2nd lien-holders.

Hopefully this will help.

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“Joe’s your man if you need someone to trust. Joe Salcedo is a hard working Realtor. Joe is very professional and will go the extra mile.”

– Philip Duane Johncock

“I was laid off from the state in November of 2007 due to major budget cuts. We were no longer able to make our house payments as the job market was just beginning to get worse and worse. My agent in San Jose found Joe Salcedo in Reno for me and told me he has a lot of experience in short sales. He priced our home at a very realistic price in relation to the market values at the time. Joe was very professional and before we knew it we had an offer on our home. In September of 2008 our home closed and the bank forgave the difference. A short sale comes off of your credit in a much, much shorter time than a bank foreclosure. We will be forever grateful for the assistance of Joe Salcedo”

– James and Marsha McGinnis (feel free to call for a reference, Joe has my number)

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