Discounted Payoff NOT Short Sale

[Account Closed]

Does anyone have experience negotiating a Short Payoff/ Discounted Payoff with Bank of America? NOT A SHORT SALE
I've been through all their departments including the Office of the President and they all say they don't do this.

Any tips would be highly appreciated. Thanks

[Dion DePaoli]

Anytime a Mortgagee receives less than the amounts due in full under the terms of the note which results (or is intended) to satisfy the same note and security instrument it is a "Short". The mortgagee is "short" of Paid In Full.

A Short Sale and a Short Pay are both possible but carry different burdens stemming from the Mortgagee. A Short Pay, would refer to a refinance transaction where the borrower is allowed to pay less than what is due in order to have the Mortgagee satisfy the existing mortgage. The key here is the borrower remains on title to the property. Clearly a Short Sale, is where the property is sold and thus is conveyed to a new third party.

Short pays are hard from the big boys. Much of this has to do with some implications in the secondary market. When a short sale takes place, the borrower, who is not paying back all the money they borrowed is allowed to sell the property and the lender takes less while also making sure the borrower is not unjustly enriched as a result. In a refinance this line gets a little blurry.

It is important to note here, a short pay means a new Mortgagee will enter the picture. Often times, a Mortgagee who forgives principal will either want to stay in the loan to recover forgiveness (in idea not accounting standards, since once forgiven, it is written off) by collecting interest on the loan or they grant the reduction but expect to see the borrower sell the property.

The most recent examples of Short Pay transactions would be the many HAMP and HARP loans that are originate every day (hundreds of thousands or loans). Those programs required principal forgiveness in order to qualify for the loan. There is your short pay. The problem is/was those loans carried incentive to the Mortgagees to encourage the short. I am guessing yours does not offer such things.

So do Short Pays happen? Yes. They are not uncommon. Should BOA Servicing know of such things? Yes, but in my universe everyone has an equal opportunity to be stupid.

@Aldolfo Pontaza - what is your role here in dealing with such things? Are you a borrower or owner of the property?

Maybe we can give you some ideas of how to address if you share some of the detail here.