BANK OF AMERICA STARTS TO HELP THOSE IN NEED
In Las Vegas and Reno, residential short sales are finally getting done, at a growing rate. The main issue in dealing with a short sale is getting the deficiency judgment waived. Several lenders and servicers are routinely waiving the deficency judgment. Wells Fargo will even send an e-mail expressly waiving their right to pursue a deficiency judgmnent. Litton Loan Servicing, and Quality Loan Service Corp. will agree to waive the deficiency judgment prior to the short sale getting approval.
The primary problem is still Bank of America (BAC), although the pressure is on according to the Las Vegas Sun’s article regarding Senator Harry Reid’s negotiations with BAC here.
Currently, as far as we know, BAC is unwilling to expressly waive its right to pursue a deficiency judgment against the homeowner in residential short sales. BAC, however (sometimes, but not always) will remove the language in its short sale approval letter that reserves its right to pursue a deficiency judgment, in exchange for the homeowner paying a lump sum (i.e. $5,000 or whatever sum is agreed upon) to BAC.
BAC, may replace the reservation of rights language with the following language:
“There may be tax consequences associated with entering into a short sale. The seller is encouraged to seek guidance from an independent tax advisor, and/or attorney, before proceeding with the short sale.”
While not expressly waiving its right to pursue a short sale, BAC is impliedly and knowingly doing so. The hypothesis that we are operating under, is that if BAC sues the homeowner for a deficiency judgment, the homeowner will get the lawsuit thrown out of court arguing that BAC already settled the case.
As evidence of the settlement, the homeowner needs to present the “before” approval letter with the express langauge, and the “after” approval letter with the new language, and the cancelled check showing a deal was clearly struck. Obviously, it would be better to have a written, signed release, but for reasons unknown, BAC won’t do that (although this author believes it will do so sometime early next year based on the new HAFA or HAMP guidelines).
More likely, BAC will not even pursue the homeowner as it should realize that it has knowingly and intentionally waived its right.
Our hypothesis is premised on the idea that it is not necessary to provide a release document to prove that BAC waived its right to a deficiency judgment, but only proof that it did, in fact, waive its right. As a caveat, without judicial precedent or guidance from the state legislature or the White House, the Las Vegas judges may not know what they will do when they encounter this situation (and neither do we).