I just received a short sale approval from a lender, but the owner (borrower) used a DSELP grant for $9,000 towards closing cost when they purchase the house, now the bank is asking the borrower to repay that before they can proceed with the short sale, the way they want to do that is to have the borrower sign a promisory note for 30 years at 5% interest, that is a monthly playment of $49 but they also suggest the borrower to request a payment reduction.
Can someone help me with ideas to help my client or to help my client understand this obligation and what could be the consequenses if they go to foreclosure with this grant?
$49 a month is nothing. Since it was originally a grant, might not even be reported on credit after closing if seller defaults on the prom note. Just about ANY prom note can be settled for 5-20 cents on the dollar outside of closing. Get it closed, move on to the next! Of course, before encouraging the seller to do this, definitely try to get the amount reduced, and then see if buyer would be willing to make a contribution to settle.
That is such a minor amount of money in the grand scheme of things.