negotiating a 2nd lien

Can someone please tell me how to approach a bank when they are in the 2nd place. Who do I ask for, what do I say, do I send them a short sale package.


Monique in Texas

Hey Monique, have you already submitted the short sale package to the 1st? I send a full short sale package to the 2nd after I receive the payoff or approval letter. I include the HUD-1 that has the amount the 1st lender will allow to pay the 2nd. Then you have to negotiate with the 2nd to see what you can get them to agree to. Most will agree to 1-15k on loans over 100k in my experience depending on the amount owed. They know they’ll get nothing if the property goes to foreclosure.

Monique I have to strongly disagree with SD Foreclosure relief. Once a first Mortgage approves your short sale they will only want to extend your approval so many times before they close your file and you must start over. Both the 1st and the 2nd must be negotiated simultaneously. If not, you have a buyer who is waiting to long and may eventually walk.

The way explained above by the previous person only increases pit falls. Depending on who the first is with and depending on who holds the second will depend on how much you need to offer the 2nd. The 2nd could be with a particular holder who generally asks for a high amount or could even be charged off.

I work in an office of short sale negotiators, hundreds of files run through here. Once you see enough files and get a feel for particular banks and you already know what you should offer.

Let me know if you have any questions.
Feel free to PM me. Good Luck!

The first is with Litton Loans amount owed 119000
The second is with EMC amount owed 20000

The BPO will be in early next week and I dont know what to do with the 2nd. I have not submitted a Hud1 yet.I have been advised to submit this once I understand what the numbers would look like… Dont know what to do

On zillow the house could go for 160000, I offered 80,450. Please advise if you know anything. :flush

If you submitted your offer now its time to wait and negotiate the numbers.

A word of advice is to submit your package to the 2nd and get moving or it might screw everything up.

I’d submit the 2nd at the same time, or shortly after you submit the SS package on the 1st. The 2nd will think they are very important and could refuse to cooperate. They’re going to be ticked, because who wouldn’t be! The borrower gets a 2nd only because they were believed credit worthy, yet when the borrower defaults, they know they’re hosed at the foreclosure auction. However, most have the right to release the lien with or without a full settlement. Some will chase after the deficiency judgment, some will not.

Try to see what it will take to get a full settlement on that 20K with EMC. It’s worth it to get a full settlement even if it means your profit will drop dramatically, because you’re in this to help out the borrower, AND make some profit, right?

The HUDs to each should show different numbers. The 1st HUD should show just the net payoff to the 1st loan (leave off the 2nd). It is much more advantageous to not have the 1st leinholder to not know that a 2nd loan exists. On the 2nd HUD list the full payoff amount the 1st (not the discounted payoff you’re offering - the actual full payoff of the loan) and then for the 2nd offer them 10% of the $20K. You’ll also want to submit two different purchase contracts to each lender as the purchase price will differ.

I’m curious about your post, mloughlin. If you’re right, then I’ve been doing this wrong. That would not be good, so I’d be curious to see what everyone else does, but this is what I do.

I prepare one HUD, showing the complete story for payoffs, including all expenses. Then I forward another HUD to the 2nd lienholder, showing the discounted payoff for to the 2nd … actually, I’m going to have to pull this up at my office to see what I typically do. I might just be sending the same HUD to both parties, so that the 2nd will see that the 1st is taking a discount off the mortgage amount.

I hope others comment on this thread because I’d like to know what is the best practice.

I’m sure there are numerous different strategies on how to handle submitting HUDs to two different lenders. However this is the best way to not get stuck in the conundrum of each lender wanting to see an approval from the other. An example of this is if each lender knows the other exists (which typically doesn’t happen unless you let them know or put it on the HUD). If they know about each other, most likely the 1st will insist they receive the approval from the 2nd before they will approve a shorted payoff and the 2nd will insist an approval from the 1st before they will issue an approval letter. Obviously this is not a good scenario. I’m sure you will come across other strategies, however historically this strategy has proven most effective for myself and other associates.

MLOUGHLIN - What are you doing?

How is the first not knowing about the second and vice versa? What you are doing does not make sense at all! You are submitting two different contracts to the two lenders? They have to know about each other, how are you going to close? What happens when they pull title? How is the fianl HUD going to be prepared?

In some instances if there are loans with two different lenders they may not know each other exists. It doesn’t matter a great deal if they do know, however it is better if they don’t. I do submit two different contracts and two different HUD’s to each lender. I do a simultaneous closing so the final HUD is not an issue. I use a unique approach that may not be universally accepted, however it does create positive results.


The first lien holder will always know of the other liens on the property, they will do a title search before approving the short sale.