Incentive to 2nd

I have heard that it costs a bank a lot more to foreclose than to do a short sale because non performing assets are bad, etc, etc.
The question is this, if there is a 2nd lien, how does it affect them? The 2nd is not foreclosing, and obviously if 1st forecloses, 2nd doesn’t get paid, but it doesn’t show up as foreclosed property on their books.
What’s their incentive to reliese the lien?
Thank you in advance for any answer.

Come on guys, can’t believe nobody has an opinion on this.
What do you tell the 2nd lien when mit guy tells you, “The investor is telling me, we can’t accept $1,000”.

We need more info.

Are you dealing with a HO in FC?

If you are, the 2nd should have been informed that the 1st is foreclosing, you pretty much answered your own question about incentives, but if the FC isn’t filed in court yet, they won’t believe you.

Maybe your HO is only a couple of months behind

It’s a short sale transaction. HOs behind a lot. 2 months after NOD.
It’s an 80/20 deal. 1st is foreclosing. 1st is ok with short sale.
I approached the 2nd about short sale, and offered 1k.
2nd is being very stubborn. I sent them the ss pkg, including
proof that 2nd is forclosing; they are also awared that HO is very behind on their
account as well. 2nd should have plenty of incentive to take the
1k but rep keeps telling me that “the investor will not accept 1k” (balance is 100K)
here is the question:
How do I negotiate with the 2nd?
It just seems to me that the 1st is easy but I always get stuck dealing with the 2nd liens.

The servicer of the second has to abide by the contract and/or guidelines they have with the investor on the loan. In today’s market any lender who is in second position on an 80/20 that was originated in the last two years should be well aware that they are looking at a complete loss if the homeowner stops paying.

That said it could simply be that it isn’t worth their time and effort to settle for 1% of the loan amount.

All you can do is lay out the numbers for them. If they won’t budge, move on and forget about it.

How much are you offering the 1st?

I am dealing with a servicer that has charged off its 2nd position. Their attitude is that they have already taken the hit on their books. They claim that the tax advantages are better for the investor than my 1k offer. They want 5k to release the lien. Original amount owed was 30k.

I’ve up my offer 500 and will go to 2k but I will let them know that is my final offer.

Can you offer more and still make the deal fall into your plans? 1k for 100k, have you NO shame (ha,ha) hell I might even tell ya’ to go fly a kite if I were them. Maybe start at half of the amount that you are willing to pay to keep this deal profitable for you. I would say after this point to make one last offer in the middle and let them know this will be your final offer. Then move on for your sake and that of the homeowner. I know it is supposed to look bad on the books having non-performing loans hanging around but I think some of these lenders have a “magic” formula they work off of and if certain factors are not met or do not add up for them they pass. After this there is very little you can do other than pay what they ask. I do hate the idea of paying say 10k to a second who will get $0 at auction. But if that is what it takes to get the deal done at an acceptable profit level for you then do it. Always double and triple check to make sure your comps are valid.

you say that all I can do is lay out the numbers and move on. I say there’s got to be a way to convince these people othewise. I know ther are people out there convincing 2nds to take 1k. And that’s what I wanted to learn as far as the approach. I know lenders will tell you one thing with hopes to negotiate a bigger figure.

also thanks for your input. You are also going through this right now and they have told you that tax wise it’s better for the 2nd if property goes into forclosure rather than take 1k. This tells me that accounting wise, it’s better for 2nds to go through with foreclosures. But why?, Anyone know?. What do you guys think about 2nds selling this non performing asset to investors for pennies on the dollar and netting more than 1k. I’m starting to think that this might be the reason. But even then, why do some lenders do take 1k?

i’t an 80/20. value:500k.
the 1st is netting 410k.


I think the tax excuse was just that, an excuse not to except my first offer. It’s almost never better for the 2nd to foreclose, but they will if the numbers do not add up for them.
My case maybe different because the loan is already charged off. Though one would think something is better nothing.

If I am reading this correctly the Full Market Value (FMV) is 500k, and the 1st wants to net 410k after the short sale? This is NO deal. What are the actual numbers for this home?
-What are your goals for this home
-Comps for the area. Actual sold prices for the past 6 months. FMV?

  • Amount owed on 1st and 2nd
    -Repairs needed. Any home can burn up 5k-10k quickly.

You said it’s an 80:20 at 500k total

You said the 2nd is 100k

You said the 1st is netting 410K

That equals 510k

So you’re paying the first 100% + costs and trying to make your discount off the second.

That’s why 2nd’s pissed off

And what I’m telling you is that there is no magic argument that is going to sway the lender. It is purely analytics on their part - all numbers. And if they have certain criteria or guidelines they must adhere to they are not going to deviate because you have a special approach. Now that being said I imagine if you could work your way up and establish a relationship with a decision maker in the organization you’d have a much better chance of swaying them. People are still people after all…