Comments on: Foreclosure – Short Sale – REO – Bank-Owned – What’s the difference?

By: Michael P Lindekugel

Michael P Lindekugel — Sun, 19 Apr 2009 19:14:02 +0000

If it appears the borrower has "other assets" they are coming to collect. It is probably more common on more expensive homes especially with small banks and "private client services". The FDIC requires additional cash reserves for each additional REO. Small banks have a hard time raising required capital to meet the financial ratios within 30 days. Westsound Bank is hurting. The unannounced knock on the bank presidents door right before closing on a Friday....not a good thing.

Junior lien holders wouldn't foreclose unless they determine it is profitable. It is better to have the unsecured collectable debt. Two mortgages with the same bank haven’t been tested in court. Attorneys tell me the two loans are independent. Bank X foreclosing on the first lien would not prevent Bank X from collecting on the second.

Judicial foreclosure in WA is very rare. Banks use it if they smell assets.

Generally, the best option for the distressed seller is to have an experienced agent/attorney negotiate satisfaction with release, payment in full with no recourse from all the lien holders. The properly negotiated short sale is reported as a debt paid in full on the credit report. There is nothing to indicate it was a short sale.

By: Kevin Lisota

Kevin Lisota — Thu, 16 Apr 2009 19:49:35 +0000

Interesting legal citation Michael. This brings two questions to mind. First, even if they are able to do so, how many junior lien holders will pursue a deficiency judgement? Seems fruitless in the face of a foreclosure.

Second question is what happens when the foreclosing lien holder is also a junior lien holder? There are many cases of 1st and 2nd mortgages held by the same bank.

By: Michael P Lindekugel

Michael P Lindekugel — Thu, 16 Apr 2009 17:01:07 +0000

There is a misperception that WA is non deficiency non judicial foreclosure state for all the lien holders. Washington is a non deficiency state for the foreclosing lien holder. The WA Supreme Court confirmed in 2007 that “wiped-out” junior lien holders following trustee sales CAN pursue its losses based upon the promissory note itself. See Beal Bank SSB v. Sarich, — Wn.2d –, 167 P.3d 555 (Sept 13, 2007).

By: Orlando

Orlando — Wed, 15 Apr 2009 11:37:38 +0000

Using an experienced short sale negotiator can solve a lot of these problems…

By: Robert Urban

Robert Urban — Tue, 07 Apr 2009 13:58:15 +0000

I have been reading about the "bank walkaway."

It seems to be in a kind of legal limbo but it looks like a trend? Could this be a candidate for item #8? I guess we stay tuned.