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Permalink Reply by Joseph C. Alfe on December 19, 2010 at 12:26pm

why is this ridiculous? The sellers owe the money! Doing a short sale with the notion of having no deficiency on every one is a mistake. That being said, negotiate with MI. Offer a cash settlement. For a 55K note, 5K might do it. Or, negotiate down the note. You can probably get it down to 25K at 0% interest. This can be good for the seller because if they pay the note it will improve their credit. If they can't pay the note they can always file BK, which they will have to do anyway if they foreclose. Also note that many people who sign notes never actually pay them because lender just charge them off and release them.

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Permalink Reply by Mike Linkenauger on December 20, 2010 at 12:20pm

This is VERY common.  Like Joseph said, encourage sellers to get the deal closed and clean up the mess later is usually the best course of action.  Once it is closed, it is unsecured debt and will typically be settled for pennies on the dollar.  An MI company would also likely face legal challenges if a borrower protested the note after the fact.  Like I said, we run into this VERY frequently, we pretty much always encourage the seller to just close and settle for 5 cents to 20 cents on the dollar after closing.

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Permalink Reply by Betsy Burkey on December 20, 2010 at 1:16pm

Sheyenne,  This is becoming more common across the board, however you cannot guarantee the seller can settle for less- that maybe one scenario, but no guarantee.  I negotiated direct with the MIP company and on my first case they would only settle for down to 50%-  not the 5% I was expecting and half of that amount in cash, which the seller did not have.

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Permalink Reply by Mike Linkenauger on December 20, 2010 at 2:35pm

The 10 cents on the dollar comes in AFTER closing when the unsecured debt isn't being paid, goes to collections, THEN gets settled several months up the road.  We have never heard of paying more than 20% of the prom note, ever.  Many of them are never even collected on, many times the lenders left hand doesn't know what the right hand is doing, OR, collection agencies are refusing to purchase the notes for ANY amount because borrowers are not paying on them!!  After all, they were collected on questionable legalities to begin with.

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Permalink Reply by Betsy Burkey on December 20, 2010 at 2:39pm

It is a crazy market and I expect to see many new surprises. I am glad to hear about after closing settlements as it helps the sellers make decisions.  Thank you for your insite

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Permalink Reply by Sheyenne Schultz on December 20, 2010 at 5:43pm

Joe  I DO understand what you are saying. And I agree 100%! This is NOT my listing. I am the buyer's agent on this one. And since I HAVE come across this before. This is EXACTLY what I told her to do. It's very frustrating because I cannot control this. I have told her what to do and what the options are. She is going to have to either try and negotiate with MIP at a lower price for them to accept and have seller pay it or have her seller's sign a promissory note at 0% over x amount of time and move on. I will follow up with her AGAIN to see if this is their plan of action, but doing nothing is wasting everyone's time. Shy

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Permalink Reply by Joseph C. Alfe on December 20, 2010 at 7:46pm

I know Shy, that's why I require that I negotiate short sales when I am the selling agent.

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Permalink Reply by Chris Andries, CDPE on December 20, 2010 at 8:39pm

This is very common.  What I try to use is the 5 for 5 rule.  5 % for 5 years.  I would never go higher than 10%.

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