A short sale, often touted as an alternative to foreclosure that saves the homeowner's credit from ruin, could leave some homeowners on the hook for tens of thousands of dollars. The Puget Sound Business Journal (subscription) reported June 26 that Bank of America's home loan servicing department has quietly inserted language into its standard short sale contract that makes the seller liable for the difference between the loan's amount and the sale price. The change, the article said, could drive up foreclosures when financially strapped people are unable to pay the difference, which is typically five figures.
The article starts with the story of Mindy Moore of Edmonds, WA, who thought Bank of America would absorb the $30,000 loss on the sale of her condo. Because it will not, she still owes that money, which means she still faces foreclosure -- something a short sale is supposed to avoid -- or bankruptcy. Bank of America told the newspaper that it added the repayment requirement to protect investors and creditors from losses, but a short-sale consultant told the newspaper that the change could actually harm the bank by forcing it to keep foreclosures on its books. That could hurt the bank's bottom line and with investors, and eventually discourage buyers from pursuing short sales from the bank at all, since buyers could have their homes repossessed to satisfy the previous owner's debt.
As Corona loan modification lawyers, we are particularly interested in this issue because Bank of America now owns Countrywide Financial. During the housing bubble, Orange County-based Countrywide originated billions of dollars' worth of loans in Southern California, many of them subprime and now underwater. Though some of those homeowners are eligible for loan modifications under a legal settlement, many others could see their efforts to avoid foreclosure and meet their responsibilities through a short sale stymied by this contractual language. And the housing market as a whole will only be hurt by more foreclosures. The move doesn't even help the bank itself, as any losses it would have taken in the short sale would only be replicated by a foreclosure.
The article notes that some borrowers may be able to negotiate away this language before a short sale is completed. Anaheim-based Howard Law LLP represents clients facing just this kind of problem. Our San Dimas mortgage loan modification attorneys advocate for homeowners who need help getting their lenders to agree to a short sale -- or understanding the conditions the lender puts on such a sale. We also negotiate aggressively on behalf of homeowners who believe they can keep their homes if the lender is willing to modify their loans and lower their monthly payments to a sustainable, realistic amount. Even if you haven't been able to reach the lender on your own, or have been given a bureaucratic runaround, our Lake Elsinore loan modification lawyers can often get results -- because when lawyers call, banks pay attention.
If you need help getting your lender to agree to a change that could save your home or your finances, you should call Howard Law as soon as possible. For a free, confidential consultation, please contact us online or call us toll-free at 1-800-872-5925 today.