HSBC requiring deficiency letter?? What does this mean?

HSBC is in 2nd position and requiring that I get a notarized letter signed by the borrower that they will be responsible for any deficiency left on the loan after the short sale.
Should I send this letter in with the short sale package. I thought the sellers would just be 1099’ed on the shorted amount?
Any help from anyone explaining how the shorted amount gets taken care of would be great.
Shaun Greer, Boise, Idaho

It would seem the banks have finally got wise to us.

What HSBC is basically saying is that they will not take a loss even though they are in 2nd position.

If your client signs the paper, the short sale will go through, 1st position will take their money, and HSBC will send a nasty letter to your client telling them that they still owe the balance.

I wouldn’t sign it, and I wouldn’t advise anyone else to sign it.

Thank you for your input. I will be overnighting the short sale package tomorrow.
I will not include this document in the short sale package.
I will post the banks response in a week or so…
Thanks for the input.

Shaun Greer
Boise, Idaho

What does HSBC have to lose? If the property goes to auction they lose their money. At least if it goes to auction you will lose your’s too. Certainly they can pursue the debt whether or not a SS goes through, but with the notarized letter at least they have served notice to the homeowner that their toes are going to remain in the fire.

Were I the homeowner I’d sign it, they’re screwed either way but to my perception they are screwed the least if they sign and sell the house than if they don’t sign and have their credit trashed even more by the foreclosure.

If they sign the letter, they’re inviting HSBC to collect the deficiency.

If the SS goes through, 1st position will tell HSBC what they’re going to get, and the rest is a 1099 that’ll never be collected because the IRS will forgive it with a 982.

Signing the letter is as good as saying ‘We’ll do the short sale, and we’ll pay you the rest too’

So what would be the point of doing the SS?

won’t this convert the mortgage secured 2nd into an unsecured note as well?

AFAIK when the SS is complete, both positions are considered paid deficient and therefore released.

It sounds to me like HSBC’s just trying to pull a move.

HSBC called me today and said they need the form signed from the sellers. They said they need the form signed for internal use, in order to move forward with the short sale. They said they are not asking the sellers to sign a note for the deficiency at the closing table. The entire deficiency will be charged off, 1099’ed and HSBC has no legal right to go after the sellers after a completed short sale.
This is good news. The HSBC representative is very helpful as this point and told me on the phone she does not expect to get the full amount of this loan. I have the BPO scheduled for later this week. I will updated this posting after the BPO.
Thanks to who ever put this website together and all that post to it. The many tips and experience people leave on this site are helping me in my 1st short sale buy….
Shaun Greer, Boise, Idaho

I thought 1099 is 1099 and defiency judgment is debt to the owner. Could it be the loss mitigator is a new hire ?

what is the maximum amount it take to have 2nd agree to the short sale ?
if the 2nd doesnt agree to the “lesser amount”, does it mean SS is a no no even though the first foreclosed ?

if the 2nd foreclosed on a home, can he get more money than if the 1st were to foreclose ?

what is the time limit for starting a SS ? for instance, can we call a short sale when the owner has 5 days before the auction, 10 days , etc? when do u make the call ?