Replies to This Discussion

Permalink Reply by Tamilyn Simard on January 19, 2012 at 3:19pm

Yes, had one close last month without any waiver language. If you read carefully the letter does indicate that if they will accept the short sale and release the lien if the approved amount is received by the "X" date.

Permalink Reply by Angela Alfe on January 19, 2012 at 3:28pm

Just FYI...releasing the lien means that they keep their options to pursue the deficiency.

Permalink Reply by Tamilyn Simard on January 19, 2012 at 3:44pm

Angela yes I agree but they do not have any other letters now. And based on a conversation with Chase and the attorney for the seller, the seller moved forward with closing based on statements made by the lender which is documented. Based on the statement made from the lender they only use 2 approval notices now, 1 with a deficinecy amount that they will pursue and it is given in writing and 1 with no amount given.

So based on those verbal statements made by the lender that they will not pursue the deficeincy the seller closed escrow.

 

Permalink Reply by Angela Alfe on January 19, 2012 at 3:56pm

As long as the seller is told that there is still a possibility that the investor may still choose to pursue deficiency later.  That is the sticky point with these letters...you never really know...and so it is better to have clients aware of the fact that while the lender/investor "most likely" will not pursue deficiency, the possibility is still there.

And, talking with someone from the lender won't mean squat.  If it's not in writing, it doesn't mean anything.

My point was simply, never promise or guarantee anything.  Let the seller know the facts and let them make their choices from there.  :)  If the exact verbiage of "we will not pursue deficiency" is not in the letter, don't advise anyone that "because I spoke with someone at Chase, they said that unless there is a dollar amount there, they won't pursue..." because if it's not in writing, it's not true.

Permalink Reply by Seth Russell on January 19, 2012 at 3:59pm

...I've requested that the Seller make direct contact with the Negotiator for this very reason..I agree its open-ended but Chase has indicated the same thing to me this morning about these 2 Approval Letters. They informed that they wont pursue the deficiency however I'm having the Seller document this directly with Chase for the record.

 

Thanks for your input..

Seth

Permalink Reply by Angela Alfe on January 19, 2012 at 4:23pm

Yes, but regardless of who the seller TALKS to at the lender, it is the investor who will determine whether to pursue deficiency later on down the line.  So, just because the seller spoke with Cindy Smith today and she said that deficiency would not be pursued, it still does not mean anything because it's not in writing (and they will not put it in writing) and the person telling you this is not the end investor and not in control, anyways.

This is why we tell our sellers (and why our sellers also have attorneys advising them), "Well, it's not a full release because of this language...and despite what someone might say either way...there is no way to say that they will or will not pursue deficiency.  Please contact your attorney for more information and to ask any questions you have pertaining to the approval letter."

Permalink Reply by Seth Russell on January 19, 2012 at 4:52pm

..couldnt agree more with the Attorney referral...we do this as a standard practice on all short sales..good advice..thank you.

Permalink Reply by Angelica Molina on January 20, 2012 at 12:21am

I totally agree with Angela, I had a short sale approved with Chase the 1st of last month,  the letter  didn't state the waiver language,  and on top of it they were asking for a $500 contribution from seller at closing. I went back to the negotiator, he told me the same thing about the 2 type of letters, he said Fannie Mae doesn't go after the deficiency, I even went to the next step and contacted Fannie Mae, however they couldn't help me, so I went back to the negotiator, showed him my seller didn't have money to bring at closing,  it took the bank 3 weeks to give me another approval letter with the changes made.  we closed the 4th of this month, I had a very happy seller right there, and to me that's priceless, of course  was happy getting my pay check which was well earned.

Seth- Just don't give up, we owe it to our sellers to go even the extra mile with this type of transactions. 

Permalink Reply by Angela Alfe on January 20, 2012 at 11:17am

Who told you Fannie Mae doesn't pursue deficiencies?  They absolutely do!  They usually do not on homeowners who have proven that they do not have the income...but Fannie Mae can and will pursue deficiency and this is why there are approval letters that do not include deficiency releases.

Do not ever tell your seller (and do not let anyone else tell them either) that because the investor on their loan is Fannie or Freddie that they will never be pursued for deficiency.  That is false.  That is incorrect information.  As I said before, regardless of what anyone at the lender says...regardless of what happened to 99 out of the last 100 people...if there is no full release verbiage in the approval letter, there is always the possibility of the investor coming back to collect (unless a 1099 is given).  To tell your seller anything else, to give them a possible false hope is wrong.  And the only person's advice that is on the line is yours.  Do not put yourself into such a bad position.  DO NOT ADVISE PEOPLE THAT CERTAIN INVESTORS DO NOT PURSUE DEFICIENCY AND SO THEY SHOULD COMPLETE THE SHORT SALE BECAUSE THEY WILL NEVER BE PURSUED.  Absolutely doing your seller(s) an injustice and you open yourself to a lot of liability.

Permalink Reply by Joseph C. Alfe on January 20, 2012 at 11:37am

Wow I cannot believe how many agents here have no clue that they are practicing law without a license, and are opening themselves up for future consumer lawsuits. Almost every state AG opinion letter that I have read states that while most of the short sale process can be handled by a non attorney, almost every single AG agrees that any discussions regarding deficiency and approval letters are in fact, the practice of law.  Add to this the willingness to believe a lender when they say "Sure, it's an open ended approval, but we (or Fannie, Freddie, etc) won't pursue deficiency..."  You want to bet your license on that?  Bottom line, IF THE APPROVAL LETTER DOES NOT SPECIFICALLY WAIVE DEFICIENCY, THEN DEFICIENCY EXISTS!  THINK PEOPLE!

www.josephalfe.com

www.ssprocessors.com

Permalink Reply by Scott Marvin on January 27, 2012 at 1:53pm

So does that mean over half of the real estate agents across the country are at risk of being sued. It is not possible to complete a short sale without discussing these things with the bank. Somebody needs to change the laws because our country is in trouble and we need good short sale agents to help fix our broken economy.

Permalink Reply by Angela Alfe on January 27, 2012 at 2:13pm

It's one thing to discuss things with the bank, it's quite another to advise your client that even though the approval letters do not contain deficiency waiver, the "negotiator said they won't pursue deficiency" or "that lender/investor never pursues deficiency..."  That is not only very wrong advice, it is dispensing legal advice regarding a very legal document.

You cannot, should not, tell ANYONE this.  And if your client comes back and says, "Hey, I talked to so-and-so at the lender and they said that they won't pursue deficiency" your answer should be more like, "Well, if it is not in writing, you cannot rely on that information.  I would strongly advise you to speak with your attorney and see what the ramifications for you could be and make your decision based upon the letter you have in your hand."

I would say that there are way more than 1/2 of the Realtors doing short sales that could be sued.  There are, actually, a lot of Realtors being sued over this very reason.

Think, folks!  If it ain't in writing, it simply ain't true!

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