After 18 long months of negotiating a short sale for a client, and after three failed attempts simply because the bank simply couldn’t act, it was paralyzed by its own inefficiencies, that bank being WaMu… we finally entered into an accepted short sale , however, the acceptance letter said that the deficit liability “may” be waived.
This is a big problem as the deficit was not insignificant. In fact, if the shortfall was not forgiven, it would be best to advise the delinquent borrower, our client, to consider waiting for a higher sale to reduce the liability for the shortfall or allow the home to go to auction, since the liability for the shortfall will be removed with that. event.
So here’s the point, if the bank is willing to accept the short sale and allow the closing, why should the borrower be the only one footing the bill for the short fall liability? Shouldn’t the bank be willing to forgive the shortfall considering that the borrower is willing to sell his house for the benefit of the bank?
I think so. That’s fair.
When we confronted the banks dealer with this issue, they told us, “well, that’s just a norm, and we don’t usually go after a short fall liability.” Well, then why hold on to this opportunity? Why not fully release the borrower and forgive the short sale shortfall? Shouldn’t that be a reasonable part of the deal? The legal department of the banks said “NO”.
Our move is to inform the bank that we will not close unless the borrower is released from deficit liability. If that means the bank won’t cooperate, then we’ll go into foreclosure, you might as well. This will result in a much larger loss for the bank, but at least the borrower will be relieved of deficit liability. It is as if the bank is willing to take less and spend more because it cannot understand the concept of fair dealing.
The negotiator agreed and sent it to the legal department, which with its one-sided do-it-all attitude, turned down the request saying “we prefer to leave it as it is, in case one day we want to reconsider it and keep the borrower obligated.”
Enough! I say enough, how can it be that the resolution is all for the bank and nothing for the borrower? Although they continue to admit that they do not pursue liability for short falls, they are unequivocally unwilling to release the borrower. Why? Because they keep the same attitude that they have throughout this whole thing, all for us, nothing for you. Make us whole, you failed, they say.
Although it is clearly unlikely that the bank will ever seek this recovery from the borrower, they want to hold on to that card just in case. So why should the borrower participate in a short sale? It would be in the borrower’s best interest to allow foreclosure when there is at least no more past due debt in the end.
Dumb bank and dumber bank lawyer, yes, unfair game. It will eventually come back to haunt them…wait and see. Maybe he already did, since WaMu is gone, he had bugs because he failed. Not surprisingly, however, the attitude of failure prevails. When will they learn?