Bank of America Deficiencies

Bank of America Deficiencies

One of the questions we are most frequently asked by our sellers pertains to the deficiency after the sale is completed – the balance remaining after the bank agrees to a discounted payoff. For instance, if you owe $200,000 and your bank agrees to accept $150,000 to sell the house, what happens to the other $50,000? This is a question to which many people want the answer, and probably you too, right? Going into a short sale, one of the biggest issues in your mind is whether or not you’ll be able to walk away and start over when it’s all said and done.

Most first mortgage holders will agree to waive the deficiency or forgive the debt, so you can just walk away. Many junior mortgage holders will not make any such agreement, but that’s another blog… One of the biggest lenders in the United States, Bank of America, has historically – and notoriously – refused to waive the deficiency in writing, choosing instead to decide what they will do with it after closing. Whether they would forgive the debt or pursue you was an uncertainty. That changed last week.

Jack Schakett, Senior Vice President for Credit and Loss Mitigation Strategies at Bank of America, reportedly said that if you cannot afford the payments and can prove that you have few or no assets, the deficiency will be waived. So if a financial hardship put you behind on your payments, you will most likely be “free to go”. If it is determined that you do have assets, a fee will be set for you to pay at closing. For instance, if the house being sold was a rental, and you had other assets, they might ask you to pay a lump sum or sign a promissory note. It might be the same if you were moving for new employment.

This is huge. This takes all the mystery and guesswork out of the transaction. Either way, the borrower knows upfront what is being accepted or required, which, I think we can all agree, is a step in the right direction for Bank of America. Finally! All that being said, we received a Bank of America short sale approval letter yesterday, and the same old ambiguous language is still in there.

If you find yourself in need of a short sale cash offer and someone to negotiate with your lenders, give us a call to see if we can provide both of those to you.

Melissa

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