WHICH AFFIDAVITS ARE FAKE AND WHICH ARE NOT?
Within less than a week since the announcement of the famous foreclosure freeze, we have realized a sudden uptick in lenders agreeing to waive their right to pursue a deficiency judgment for a short sale. What has worked so far is simply advising the lender that the short sale will not be completed, unless the lender agrees to release the homeowner from any potential liability resulting from the short sale. This works better on the first mortgage than the second mortgage.
The alternative to a short sale failure is foreclosure. That alternative is non-existent for some lenders, and severely hampered for others. If the homeowner rejects the short sale approval letter because the lender does not expressly forgive the homeowner’s debt, everything screeches to a stop. Second mortgage holders can sue the homeowner without having to foreclose. But that is not the case for most first mortgage holders- they usually have to foreclose. Their best alternative is to approve the short sale with the homeowners’ terms.
This foreclosure freeze has created a once-in-a-lifetime opportunity to get a deficiency judgment waiver during a short sale. It virtually backs the lender into a corner with no viable option but to forgive the remaining debt. But this will not last forever. Soon, the lenders will fix the problem and revert back to their old ways.
Another unintended consequence of the Freeze occurs during foreclosure mediation. The lender must present at the mediation session, an affidavit supporting the merits of the foreclosure. The person whom signed the affidavit on behalf of the lender is almost always unavailable at the mediation. There is no good way to distinguish that affidavit from the millions of other affidavits that were allegedly forged. The admission by many banks that they were relying on false affidavits to support a foreclosure raises a real concern as to whether or not that particular affidavit used at the mediation is a forgery.
How do we know if the affidavit is valid? Maybe the affidavit should be placed in front of Las Vegas Judge Mosley and see what he thinks about it. Or maybe the lender just forgives the deficiency judgment and we don’t go in front of the judge.