I am working on a WAMU short sale. I have warned my client of a def judgment and a 1099. WAMU says they issue a “deficiency balance” and will continue to pursue the difference owed. Can anyone shed some light on this? I am worried that my client may come back and sue me even though she has signed releases of liability stating she can not come after me for this difference. Isn’t a def judgment and def balance basically the same thing, just different names? I know that the defecit is an unsecured debt and essentially WAMU can do nothing more than threaten and harass to get it. I am planning on telling her to ignore their requests for payments. IS this the right thing to do? I also told her that should her house be sold on the courthouse steps, WAMU could still come after her for the difference. Right? Any tips would be appreciated.
Thanks short sales. I understand that. What I want to know is other than threatening her, reporting to credit bureau, there is no action the bank could legally take to get the money owed. It would cost to much to sue her (deficiency is 30K) Here in Texas, they can not garnish her wages. She will just keep getting harassed, and she can continue not paying. It is an unsecured debt; It is better than a foreclosure on her credit. Right?
Assuming the appraised value is the same as the loan amount, I am pretty sure the deficiency in this case is only $20,000. I would be interested to see where in the note or security document that they can allocate all of the other costs to the deficiency.
Deficiency varies depending on the house — I think that is clear
Attorney fees are not that high – some banks have told me they may charge as low as 2K but I used to think high amounts and I have been corrected by both banks and attorneys
Holding cost also depends on the property.
What I have understood and biggest gain for the bank to do a shortsale is the “freezing” of funds. I have been told that the gourverment freezes the bank funds by an amount ranging from 2 to 8 times the value of the property. I am not definate on how many times over and I think it depends on the bank and amount of foreclosures they have in inventory and also i am not sure if they take the amount owed to them or the appraied value of the property.
Either way, if they foreclose on a house that is $200K the bank will have to increase its reserve, hence not able to loan an amount ranging from $400K (if 2 times are required) up to 1.6M if 8 times are required of them. Even if we go middle of the road, the amount of money they are not able to loan or play with is between 800K and 1 mil.
Additionally, I was told that if they exceed the norm (based on other banks), they may audited for loaning money too easy, especially if they are FHA (they will chech to see if the bank actually checked on all documents that buyer presented as proof of income, etc. and they do not want to go through all that more than normal.
Please remember and do not work for a bank nor the goverment. I am just someone who works shortsales and it is my experience.