Recently, I told you about a couple who inquired about Fairfax short sale deficiencies.
This couple told me, “We have a first mortgage with EMC. Just got an approval letter on a short sale. NO language in letter that says ‘satisfied in full’ or words to that effect.”
The couple continued with their story: “The letter only says ‘conditions for EMC’s acceptance of this discounted payoff are X.’ Will they sell the note to a collection company and then hound us for years to come?”
In part one, we told you that – in our opinion – if your loan is with Fannie Mae, Freddie Mac, FHA, or VA loan, you more than likely won’t have to worry about a deficiency. There is one more type of loan where more than likely you won’t have a deficiency.
It’s known as a “sliced and diced” loan. Here is an example of how this loan works. A homeowner gets a loan from Countrywide. This loan is then sold to Goldman Sachs along with a thousand other loans.
Goldman securitizes that block of 1,000 loans. They hire Bank of America to act as the “lender.” Thus, Bank of America becomes the one that collects payments each month, does the accounting, and forwards on the money to the owners of the loan. Goldman is now receiving consistent monthly.
Here’s what happens next.
Goldman sells off the rights to that income stream. They sell certificates that symbolize partial ownership of that block of 1,000 loans. These certificates are similar to stock certificates that represent ownership of part of a company, such as Microsoft or Exxon.
If you have a “sliced and diced” loan, then you are much less likely to get a deficiency. That’s because the owners of these loans are almost like zombies. For instance, let’s say a certificate owner lives in Albany, New York. Do you think they’re going to chase Fairfax VA home owner down for a deficiency judgment?
It doesn’t sound likely to me. The “lender” in these cases, Bank of America, isn’t putting collections as a top priority. After all, they have hundreds of thousands of loans to handle. Thus, many Fairfax VA homeowners with these types of loans never get a deficiency judgment.
If I was short selling a house and I had this type of loan and the lender wouldn’t approve a complete release of future debt, I would still do the short sale. Why? Because – in my opinion – the likelihood of a future deficiency is slim.
Even if you demand a complete release, the lenders often can’t grant it.because your loan has 1,000 owners. It would be impossible for them to get approval of a complete release from each owner.
The above is my opinion. It is not legal or accounting advice. Please contact a competent attorney or other professional because the circumstances vary, depending upon your situation.
Thanks for reading this,
Thierry is a Real Estate Agent at RE/MAX Premier, and Host of Talk Radio’s, ‘Inside Real Estate’
Phone: (703) 322-0600.
Thierry Roche specializes in loan modifications and short sales in Fairfax Virginia. Fairfax Loan Modification Help. Fairfax Short Sales. Fairfax Short Sale Realtor. Fairfax County Short Sale Realtor. Fairfax VA Short Sales. Fairfax Realtor.
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