Short Sale NOO Greenpoint 1st CW 2nd Or....

Foreclosures, Short Sales, Tax Foreclosures
1

Hello all.
My Client has a NOO property and is current. His 1st loan adjusted 6 mo.s ago. Self Employed income is on the decline. $3092/mo.negative. Needless to say payments are difficult. Property is in CA

1st balance is $490,000 Greenpoint Mortgage
2nd balance is $72,000 Countrywide

$562,000 Total

Value is approx. $390,000

We conference call Greenpoint today. The Rep. does a financial analysis then transfers us to Loss Mitigation. LM tells us there is nothing they can do until he is 90 days behind in payments. They advise us to list the property for a possible Short Sale. They say he can not offer a Deed in Lieu because of the Junior Lien. They basically said they wouldnt even consider a short sale until the property is listed for 3mo.s or the HO is behind 3 mo.s. So they said bring us an offer and then we will consider it.

We conference call CW. They said if the property is sold via short sale, they will pursue the homeowner for the entire amount because they wouldnt get anything. But they have to agree to the terms of the Short Sale. Is this true they will pursue the HO for the entire amount?

The HO has maintained good credit and is looking for the best option.

[b]If he falls 3 mo.s behind his credit is screwed. Since this is a NOO property he will get 1099’d right?

Has anyone gotten a short sale approved with Greenpoint where the HO is current?

What will happen with CW will they accept $1k-3k?

Can he offer a Deed in Lieu?

OR… Should he stop making payments and let them FC? In this situation how long can the tenants stay?[/b]

Your help is very needed and appreciated. Thanks

2

I suggest you have HO send a hardship letter asking for “special forbearance” first. It will accomplish getting the loan to the “right” LMs. You may have spoken to customer service or collection department that is not authorized to speak about short sale or loan mods. Having a harship letter and financials in the hands of the lender puts the loan in a VERY different process than just calling in.

Regarding CW, they can pursue the HO for the balance if their loan is recourse, like a HELOC. Check the note on the 2nd to determine if it is covered by PMI, because you may need to deal with the insurer at some point if it is covered. If the 2nd is a closed second mortgage, or non-recourse, then the debt is wiped out with the disposition of the property. (Although the HO will still be liable for the lender’s loss as debt forgiven income since it is NOO.)

Has anyone gotten a short sale approved with Greenpoint where the HO is current?
I have never done a loan with Greenpoint, but I have closed SS’s with CW where the sellers were not late on payments. The key is to document the hardship. Provide as much financial information as possible to show that either savings will run out or there has been a change in income, whatever. Don’t wait until seller cannot pay, start the short sale process and list the property or put in an offer yourself (lowball if your have to).

If he falls 3 mo.s behind his credit is screwed.
Right. His credit will show the 30-60-90 late for each loan he fails to pay on time.

Since this is a NOO property he will get 1099’d right?
Yes, but have seller talk to a CPA about net operating losses from this or previous years to mitigate some of the tax liability from 1099 forgiven debt income.

What will happen with CW will they accept $1k-3k?
They may agree to send a “release of lien” for $1K-3K, but will try and stip that the seller sign an unsecured note for the balance of the loan at escrow.

Should he stop making payments and let them FC?
I would never advise anyone who can still pay on time to deliberately ruin their credit this way. Try the short sale/straight lising first. However, if the seller decides to stop paying, make sure they understand the consequences and you have them sign a disclosure that you did not coerce them or suggest to them to stop paying.

In this situation how long can the tenants stay?
If you have a short sale in process, the tenants can stay until you get approval and escrow terms. Note, that if lender gives you only 10 days to close, you or the buyer should accomodate a full 30-day notice to the tenants.

Can he offer a Deed in Lieu?
The process for a DIL is almost the same as a short sale. You have to document the hardship and send all financials to the lender. DILs must be approved by the lender as well, and they will approve a Deed in Lieu with some requirements:

  1. Property must be listed for sale for at least 30 days before a DIL can be approved.
  2. Must be done prior to 60 days from Foreclosure.
  3. There must be NO OTHER LIENS on the property (no 2nd or HELOCS other than the 1st Mortgage.)
  4. Property must be vacant
  5. A full interior appraisal must be done.
3

Deal Hunter, thanks for the great information. One more question please. If the HO decides to let the bank Foreclose, can the 2nd Lien holder CW (HELOC) pursue the HO because the loan is recourse? Thanks in advance!!!

4

Yes, HELOCs are evil. When I first saw these loans on the market 8-9 years ago, I warned all my loved ones. Unfortunately, the only thing that will cut the legs out from under a HELOC lender pursuing you is Chapter 7 bankruptcy.