2nd In Foreclosure
What happens when a 2nd goes into forelcosure and the 1st mortgage is not in default. Does the foreclosing lender have to buy the 1st?
What would be a ballpark discount on the 2nd for this scenario?
1st Mort Payoff = 236487 (good standing)
2nd = 60062
BPO= 248,000
Thanks,
Brian
Georgia uses a security deed, non judicial power of sale. This process is quite rapid.
The second mortgagee will proceed with the foreclosure process and, if unimpeded, will take title to the property subject to the first mortgage. I can't really speculate on a 'ballpark' discount... since you've omitted many essential elements of the puzzle. Read my last article on, "How to Prequalify a Short Sale Candidate" which will give you an idea of what information is needed to make such a determination.
So would the lender make payments on the 1st or would they have to fork over the full 236k?
Seller has a hardship due to his personal business being in lawsuits to get their customers to pay. He has had the house on the market at 339 for 2 months with no offers.
The roof is 11 years old and there was a termite problem on the disclosure.
The lender sent a letter offering a short payoff or loan modification to an investor.
I didn't ask but I don't think they are FHA because the limit in Georgia is around $179,000 on an FHA loan.
There are no other liens. $1700 in taxes due.
Your primer says that a 2nd mortgage may accept pennies on the dollar. So would it be unheard of for this lender, Countrywide, to take 1000-6000 for the loan?
3rd question, would the seller submitting an application for short sale consideration halt the process? Do you have a sample short sale application form?
Thanks,
Brian
Brian, how the second mortgagee handles it's foreclosure on this particular loan is anyone's guess. Even though Countrywide services the loan, they may not own the loan but might be servicing it for another investor and as such, might have to adhere to their specific criteria.
If Countrywide pursues foreclosure, they can force the sale of the property such that the first would be paid in full (or they themselves might seek a discount) and they will seek to maximize their recovery.
Based upon what you have described, Countrywide should certainly consider accepting a short sale payoff. The key, as the Primer explains, is to identify the as-is, fair market value and make a compelling argument as to why it would be in the mortgagee's best financial interest to accept your Proposal.
If the mortgagee were to receive a completed short sale application and Proposal, including the Buyer's prequal and articulated HUD 1, they might adjourn the foreclosure... but they are not required to afford any consideration whatsoever.
Call the mortgagee and be prepared to FAX the LOA. Ask that they send a workout application (including short sale).
As I said, their criteria and application for preforeclosure workout for this particular loan might differ from one used for another loan.
WOW!
If I may........
This is the perfect candidate for a s/s if ive ever seen one. The house is OVER-ENCUMBERED. Countrywide will be more than willing (most likely) to take a short on the 2nd. You would consider this as more of a loan discount than a short sale since you would be assigned the 2nds position for an amount. It is VERY strange to me that the 2nd would foreclose on this property being that they have very little equitable interest. Usually the 2nd will have their fingers crossed that the problem will be remedied. Afterall, would you want something back that you paid $60k for and now its worth only $10-20 or would you cross your fingers and hope the worth improves (SEE -STOCK MARKET!)
Imagine what the shareholders would say to this !!!!! Lets see, HORRIBLE abuse of appraisal inflation, LTV nightmare, WHERE IS THAT DARN UNDERWRITER...Lets just say someone pushed this through the system. UNless it DEPRECIATED or something killed the previous condition of the house.
Let me know if you need any help on this one.........
Forgot to answer ALL of your question-
The 2nd has the right to bring the first current and either ASSUME the loan or pay it off.
Imagine putting $230K to protect $60K in a house worth $240
in other words, the house is worth $240 with $290 owed against it. If it goes to foreclosure, and no one bids on it, unless the 2nd starts the bid at 1/2 of what they are owed.....They would be better off selling this fast fast fast...
Run on this one, dont walk....being that a BPO was already done, the lender should be ready to deal with you. It doesnt matter that the first is current. The house has more against it than its worth. Even if the 2nds REO dept gets this one back,they have to have it prep'd and also have the market time, not to mention 5% commissions off the sales price...
NEED I GO FURTHER?
The problem could be the BPO itself. Most BPO's done for lenders are way too high for the current market (at least here in Atlanta). The agents doing the BPO's overestimate the BPO to try and get the listing after foreclosure.
Are you meeting the BPO Agent at the property and supplying your own comps?
Tom
Forget it folks way to over encumbered and the banks are idiots they must think it is worth at least the loans on it.
Run do not walk unless you want to spend the next 3 months banging the lenders!!!!!
And most are not very aware of the market and the RE Agents have a real agenda going on.
SKI
Getting the first to short is crucial to this deal. Since the 1st is not in arrears, and therefore not at lis pendens stage of foreclosure, they wont even consider a short.
Doesnt sound like a possible deal to me - if you are lookign for 20% discounts like I am.
Thanks for all the advice on this.
I decided to pass on this deal, the only way I could get the numbers to work would be if the 2nd was willing to take $5,000 for their $60,000 note. Just didn't seem realistic. Also I felt the timetable would be a little to fast for me for only my second deal. Here's my Cost Analysis for those that are intersted.
Max Sale Price 279,000
Closing Costs 3,400
Carrying Cost 8,500
Marketing 9,700
Minimum Profit 16,000
Equals Max Offer 241,000
Take over the 1st of 236,487, that leaves 4,913 for a short on the 2nd.
Thanks to the advice and ShortSalePro's primer, I'll be ready to move quicker the next time a ss opportunity comes by.
Regards,
Brian
Dear Brian,
Lots of words and calculations. Well thought out. Do me a favor, Moniter this all the way, attend the sale, observe the players. Then, make an offer thru your dear friend and close companian the Real Estate Broker. Offer him a one (1) percent commission to represent you. He will of course put in for a six (6) discuss with him the undefined five(5). Your offer should then reflect the true value of the property minus of course your projected profit. Send with this offer the highly complicated repair and reconditioning costs to bring the property to market. Sit down smoke a cigarette or something of a similar nature, and wait for all those wonderful bank persons, reo specialists etc. to work it ****Must Reach Senior Investor status before posting URL's***he education you really need and who knows the Lord God of Real Estate Speculators may smile upon you. Countrywide, skill levels about 70% they do make great booboos, cause they hire the unemployable in large numbers. When IndyMac split away or created itself most of the "Forward Thinkers" also left. This is not a business you can run by SOP (Standard Operating Procedures). Keep me informed, I like to learn also. Lucius