Qualifying for shortsale

12 Replies

I am in contract on a short sale. Long story short: 2 liens on property. Seller has qualified for short sale with senior lien holder and been approved. 2nd lien holder is more confusing. There are two names on property title and loan, mother and daughter. Mother has no problem qualifying for short sale. Daughter has had falling out with mother a decade back and has not lived in the home since then. She lives in another state and wants nothing to do with the house or her mother. 

1st lender did not require any information from daughter to approve short sale. 2nd lender is asking for daughters information and hardship letter etc. She has steady job etc. I believe even if I can convince her to send in all info, it will disqualify them from short sale. 

What options do I have? Can they do a quit claim deed and to get daughter off title?  Any pointers would be appreciated.

@Sean Dougherty if the daughter is on the loan for the second then there is no way around it. Second lien holders can be the hardest as you are sometimes asking them to take zero or very little. This gives the second little motivation. The daughter is kinda stuck also and it would most likely be in her best interest to figure things out. If the daughter lives far away and that’s where her job is it could possibly qualify as a hard ship. Good Luck! Aaron

If the daughter is on the loan she generally has to submit the paperwork, even if she weren’t on title.  The only hope is to convince the daughter to cooperate....a foreclosure on her credit won’t do her any good.  The fact that she has a steady job is not a killer.....she has her own household to pay for and I’m sure she could show she couldn’t pay for this mtg too.

In any event, the daughter will most certainly have to sign the deed and most lenders would have required her to sell the purchase contract, since it would be meaningless without her signature.

All people on the loan need to cooperate or else the deal likely will never get done with the servicer. If MOM has POA for daughter on property that my work but would need to confirm with title they are okay with that.

just to clarify situation. Daughter has been cooperating to the extent where she has (relictantly) signed whatever docs were necessary. That is how we entered escrow and 1st lien approved sale.  Now 2nd lender is asking for daughter to qualify. (1st lender only needed mom to qualify and daughters signitures on all papers. They didint ask for daughters info.) I will try to convince daughter of the benefits of selling it short vs foreclosure, but i doubt she will cooperate. 

Not possiblt for a quitclaim to remove daughter from title? Seems that wouldnt be allowed simply for the purpose of removing owner who disqualifies the shortsale? Just an idea tho. Wanted to get some feed back.

As Wayne points out, there are two factors to consider, that often times are mingled together. Title ownership and loan ownership. You can divest yourself of title ownership all you want, and almost any way you want. You only divest yourself of loan ownership (AKA Liability/Responsibility) by payoff (Outside of stuff like lien stripping in BK and other less common tactics). So, quitclaiming is not relevant if someone is also on the loan as an obligor. If the daughter is on the loan, she'll need to cooperate. Can the junior lienholder go ahead and approve a short sale without her? Well, they could. Would they? Not likely. I can see them doing that, and then down the road, the daughter sues the lender for the impact of a short sale on her credit report, for a transaction she did not participate in and/or did not authorize. It won't matter that the impact of a short sale is less than it would be on a foreclosure. It will matter that they negotiated without her consent or authorization.

Ok I got it. Thank you for those answers. New developments are, it seems that second lender will accept a minimum settlement without info of daughter. All they require are her signatures. Now we have to submit settlement amount to 1st lender to see if they are willing to pay. Any advice moving forward from this point is appreciated as well.

Lets see what happens. Thanks again.

Good luck with it, but the original hud submitted to the first lender should have had the payment to the second on it from the beginning.  It’s harder to change the amount after they have already agreed to a number.  Whoever is handling the short sale should have known this.  The buyer may end up having to come out of pocket for the second’s payment, or raise the price to cover it, but maybe not.

Yes we are aware that may be an issue. The situation was that we could not locate the 2nd lender. The loan had been assigned to a bank that went out of business. It took us 3 months to finally locate the loan. So we submitted hud 1 in mean time and some how the 1st lender approved the price w/out the 2nd lenders info. So lets see where it goes.

@Sean Dougherty Daughter needs to look after her own credit. She does not want s foreclosure against her. See if the buyer will offer daughter cash for that ( grand piano ) in the basement ? $2000 should motivate her. Private transaction is not on the hud.

It's not a good situation for a short sale.  You'll probably want to get the daughter to sign a power of attorney for the mother to sign all sales related documents.   I would also continue to escalate the issue with the 2nd.  At a minimum see if the daughter will sign/date a hardship letter that you prepare requesting Short Sale acceptance.