Crazy New Guidelines for 2nds
It is important to understand your servicer and investor guidelines before taking on a short sale
with a 2nd from a smaller local bank or credit union. You may not be able to get there from here.
We were surprised on a couple of short sales in the past two weeks because the servicer for
the 1st note required that the 2nd note holder accept the small approved payout and waive the
remaining deficiencies. Yes you heard right! They required that the 2nd waive deficiencies. As you
know, most smaller banks can’t and don’t waive deficiencies. They often require an additional
cash contribution at closing, an unsecured promissory note for some or all of the deficiency, or
The strict guidelines did not stop there: They also forbade any additional contribution to the 2nd
note holder from any party in an attempt to get the remaining deficiencies waived. I know what
you are thinking….”that is the HAFA guidelines. It must have been submitted under HAFA.” Nope,
this was not a HAFA short sale. Wow, as if it were not difficult enough already.
The only way that we could get around the strict guidelines was to either pay off the 2nd in full
prior to closing or negotiate a separate settlement with the 2nd and complete that settlement prior
to closing. This is not available with all banks nor would it be possible with some of the larger 2nd
notes. So, be nimble on your feet because the sands are always shifting out here.