Trouble with 2nd mortgage
Real Estate Investor · melbourne · Member since 2008 · 44 posts · 1 vote
I am having trouble with Chase on a second mortgage. After numerous conversations they continue to say they will settle for nothing less than the full amount $50,000. They are saying my bid for the house is to low at $132,000. I do not understand their fixation with the $132,000 since the are not they are not the primary lender. Their are no current comps in the area and the current listings run about $240,000 with nothing moving. Chase requested a BPO which I walked with realtor and reviewed the area MLS with her and while she did not give me her BPO price she did say those listings are not moving because they are to high. In my most recent conversation with Chase they said the BPO came back at $300,000 which I know is rediculous. Has anyone else had these issues or advice. Thanks.
Did Chase do the BPO for the 2nd?
What is the lender on the first say?
Are you sure you are talking to the right department?
Offer to do an appraisal. Did they tell you what they site as comps?
Yes Chase did a BPO for the second.
Wells is the first and they are still trying to find one of the 3 packets I have faxed them so far but I wanted to start with the second anyway.
Yes, I have been speaking with loss mitigation daily.
I'm not sure what I can gain offering to do an appraisel. I walked the BPO with the agent and she said the local comps that I provided, which were current listings, were actually to high and that is why there are no current sold comps. I provided listing comps at $240,000 and talking to Chase yesterday they told me the BPO came back at $250,000 today they told me they came back at $300,000.
Thank you for your reply if you have any additional insight please post.
Why is the 2nd doing BPO's?
2nd's are a PITA a lot of times.
get rolling with the 1st and ask them what they will accept in offering the 2nd.
get back to chase and tell them the first is only going to allow x-amount.
There are a lot of good Short sale peeps here on BP, if you keep us updated I'm sure you'll get several different but very valid points of view and strategies to help you out.
Nick,
I really do not know why the second wanted a BPO it was the first time I have heard of that but others have told me since that it happens occasionally. I will continue to work with the first as you suggested. I'm not giving up on this one yet, just baffled by the progress so far.
Thanks for your response and suggestions.
Ken,
I do many short sales as an agent. I have never done any as an investor, so take my advice with a grain of salt.
Having said that, it sounds to me like Chase thinks you are a shark. How much is owed on the first?
If the BPOs are in the 240-250 range, I'm not surprised that they said no.
Thanks for your response David.
$450,000 is owed on the first. It was purchased in mid 05 right at the market peak. The last comparable sale was in 03/08 at $300,000 and now all the listing comps are at $250,000 and below. The BPO agent told me nothing will sell unless it is at 80% of list or below so I assumed the BPO would come in around $200,000 maybe lower making my initial offer of $132,000 seem resonable to me. It sounds crazy for a $500,000 home to have a $132,000 starting offer but in this market it has little chance of selling over $200,000.
Can you explain to me why the second would be so concerned what is owed the first? I can understand the first negotiating a higher price. Thanks again, you give great advice to everyone.
Ken,
I would not be too happy with your offer either if I were them. The reason the 2nd cares so much about the first is because whether they have any chance of getting some money is totally based on what the property is worth and how much the first will discount. If the first is 450k that means they are discounting from 450k to 82k if the second gets the full 50k on your 132k offer. That is pretty unrealistic in my view. Say for another example, someone comes in and offers the BPO value of 250k. For the property to sell even at that price the first would have to discount from 450 to 200k for the second to get its full 50k. Again, that is not going to happen. Because the first has priority lien position, the second gets nothing until the first decides what it will take. So my point is the second has no idea what it can get until the first decides what it will settle for. If the first is unmotivated to sell, the only way for the second to be in control is to payoff the first. I don’t know about you, but I am not spending 250-450k (the first mortgage again, depending on what they will take) to protect my 50k. The second is at the mercy of the first.
Yes, properties values have dropped a lot but I doubt it has lost more than half its value and thus a 250-300k BPO sounds a least semi realistic to me. Of course I don’t know all the details so take this with a grain of salt but after reading the above I am sure you have more insight into what the banks are probably thinking. No matter what the second is screwed pretty badly on this one. They will be lucky to net 10k but of course for now they are saying they will only take 50k. For example, FHA on a first mortgage short sale will only pay a max of 2k at closing for the second mortgage or no short sale. At least that was what it used to be.
Why the second wasted money on a BPO doesn’t make much sense to me either. I guess your offer prompted this but if I were Chase, I wouldn’t have wasted the money on it at this point, but the banks don’t always do the logical thing. It is a waste of money because they will probably pay for another BPO when the first finally gets an offer it will accept, which may not happen for a while. Then they can decide what they will take.
Always start your negotiations with the first. After you have something concrete with the first, you can deal with the second. The only exception would be if you were trying to buy the second note from Chase. But that would be an entirely different (and lengthy) conversation. This stuff is so much easier to explain talking about it as opposed to writing about it.
Good luck
Mike C
Actually, I don't doubt that for a minute. REOs here sell for less than half what they sold for a few years ago, and Denver hasn't been hit nearly as hard as Florida. I've looked at MLS listings in Phoenix that are a third of what they sold for at the peak.
Thanks Mike,
I faxed in my package for both the first and the second at the same time but the first has still yet find one of my four fax attempts, so I began talking to the second. Going forward I will always start with the first, and will finish with the first on this deal before I readdress the second.
I realize that it seems to be an unrealistic offer but as any Floridian can tell property values are off by more than 50% from the peak in a lot of areas including mine. Some of your fellow Ohio investors that rolled the dice in Florida at its peak can vouch for me. Simply put, the BPO agent said the house would not move at any price over $200,000. The most recent comp. was a year ago at $300,000 and the market has been crushed since then. Jon 1/3 of peak is common here as well.
Thanks all for your insights and please post any additional information you may have, as I am along way from giving up on this one.
Hey if the values have dropped that much in your market (and others) as you and Jon have suggested, I stand corrected. The swings haven't been as high or low here in OH. It seemed reasonable to me but that was just a reasonable guess on my part. I am not there so I shall keep quiet next time.
Make sure your package has everything the bank needs: usually a form from their website listing their expenses and income, 2-3 months of recent pay stubs and bank statements (more is better as it will take a while for a file to run its course), child support if it is being included in their income to show affordability, social security or pension income if it is being used, authorization signed by the home owner so you can speak on their behalf or they won't even speak to you, 2 or 3 years of tax returns if they are self employed and a hardship letter should be a good start.
Good luck
Mike C
Sorry Mike, I was not trying to be disrespectful so don't keep quite I appreciate everyones imput. Your right OH did not go up as fast or come down even faster as we have.
My packet is solid but I do have a question. Some suggest adding media articles documenting the severe downturn specific to our area and others say it is a waste of time. Are there any best practice suggestions out there.
Is the property listed?
I still have a feeling that your offer may not be taken seriously due to "packaging".
As per your question about supporting documentation, I don't think it ever hurts to add data that supports your case. I just sent a twenty something page packet to the bank supporting an offer (complete with letter of explanation).
It's well worth the time for me (or better yet, well worth someone else's time) to submit the supporting docs...
Thanks David,
My total packet was 25 pages for the short sale. I'm not sure what you mean by packaging unless your thinking I left something out. I'm comfortable that I have submitted all the neccessary paperwork but I am going to wait on the first,which I received an email finally that my packet has been received, before I resume the 2nd. I learned my lesson there.
thanks for everyones imput and please continue to post. This site is invaluable.
I'm not sure what you mean by packaging unless your thinking I left something out.
Yeah, I was clear as mud. Just to reiterate, I don't do SS as an investor so take it with a grain of salt. But, If a property is not listed, and there is a low offer from an investor, I would just guess that you will have an extra hard time getting approval.
All the experts scream "it's all about the numbers and the bottom line", but what they leave out is that the packet has to get by the first and second line of defense before reaching the decision makers.
Having a complete packet that meets all their (usual) criteria, makes it easier. A listing agreement may not be required, but the absence of one may make your packet a little less complete.
Ken,
You are not being disrespectful at all. You know your market better than an outsider plain and simple.
As far as adding articles to support your case, I personally think they are a waste and I doubt the bank would even look at them. All that matters to them is what the value is when they do a BPO. Others may feel differently but if I received too much extraneous info that I didn't feel I needed, it would not really help your case any.
David is giving you good advice here as well. Make your life as easy as possible by sending in everything needed the first time. As he suggests, check to see if this home is listed. Because if it not, they will probably make it be listed for 3 months prior to entertaining lower offers. This is especially true if the impression I get that this home is a fairly recent addition to the bank's loss mit area is true and it has never been listed. Even though it is a long shot they will get a lot more money, they will still sit on it for this time, which granted doesn't make much sense. Unless you offer what they listed it for, which is pretty unlikely, you could be waiting a while to get anywhere.
Good luck
Mike C
As far as adding articles to support your case, I personally think they are a waste and I doubt the bank would even look at them. All that matters to them is what the value is when they do a BPO.
Just to clarify. I agree whole-heartedly with that. Any supporting documentation that I send in is to dispute a bad/inaccurate BPO.
Click my sig link to see a copy of my most recent letter sent in disputing a bpo (as of 3-7-09).
When I first spoke with loss mitigation they asked if I had a listing agreement but seemed fine with me telling them no since I was buying the property.
The property was listed last year for $350,000 but had no chance of selling and has been pulled off the market since January. The house next door has been listed for $245,000 the last couple months and can't move either despite being a nicer house than the one I'm trying to short.
Has it been you experience that the lenders are truthful when they tell you a BPO price or is it part of the "game". As I stated before I have been given 2 different BPO numbers both higher than I felt confident the agent would turn in?
Thanks for the clarification David. You are right about the BPO as well. Everything starts and ends with the BPO value. Influencing it can help you if you can do it.
Ken, I think the processor telling you the BPO value doesn’t really have a reason to lie so I would believe what they told me. It is not the processor’s money they are talking about. It is the banks so they really don’t care what the value would be except to get more deals, which is obviously easier the lower the value. I would ask for clarification on the two different numbers given.
Your second post is a little confusing. In the first one you said that chase said the value was 300k, but in the second post you said it was 250k, then 300k again. Could that 250k be what the Wells BPO was or as it seems in the rest of the thread, chase has given you both 250 and 300k? I guess it doesn’t really matter at this point as you need to deal with wells for now. You need to find out what the Wells BPO value is if it is not this 250k. The good news is it was previously listed and did not sell. That means you may not have to have it listed again to make a lower offer than the BPO value.
As far as the 80% figure quoted by the BPO agent that means they are not totally out of the loop. As discussed above, the value that comes back is very important because on a short sale the bank has to net a certain percentage of the BPO value, but it is more complicated than that. Let me explain why here. You should also find out who the investor is on this loan. Chances are it is just serviced by wells and is actually owned by someone else. Probably fannie or Freddie. The reason this matters is different investors have different amounts they need to net in a short sale based on a percentage of BPO value. So if after all expenses they net the required percentage, they approve the short sale. If it doesn’t, they don’t. This percentage is determined by the regulations of the investor. If wells is the servicer and also own the loan, then it is on their books and can do whatever they want. That means you should explain that you understand how the game works (using info from this paragraph) and try to figure out what their regulations will allow them to take. They will probably not tell you directly but if you play with the numbers and you are nice, you should be able to get close enough to know if you should do a deal or not.
If you say I know Freddie will take 86% of BPO net on a short sale, what will you take? If you are nice, they may tell you. If memory serves, it is either 86% or 91% that Freddie needs to net. Remember, the processor is not losing money. They can make more money in incentives by closing more short sales, not by losing less money. And that 80% number mentioned above is usually below what they will take on a net basis.
Find out the wells BPO value and who the investor is if you can. When you get this info we will go from there. With all the recent legislation, these percentage numbers could be lower now but I will check on that when the time comes.
Good investing
Mike C
Mike,
On the quoted BPO's in my first conversation with Chase they stated the BPO was $250,000 and on my second conversation was told $300,000. I was under the assumption that they would not typically share the BPO price yet I got two different quotes.
My initial hope before meeting the BPO agent was to get it down to $200,000 since I was offering 65% of that as a starting point in my negotiation. After walking the BPO I was confident that $200,000 would be the highest amount submitted and I would be off to the races. If I had to come up to 86% of $200,000 I would consider it.
Tomorrow I will start with the first, so hopefully things will get a little clearer soon.
Again, you guys have been incredible. Many thanks for the continued support.
UPDATE!!!
My offer of 131k has been countered with 229k from the first, remember this was a 500k house in 2005. I'm looking to get the property no higher than 185k and am thinking of offering 170k back to the lender. What has been everyones experience with counter offers and can I expect to get them closer to my number than theirs? I will resend my offer tomorrow so any advice before then would be greatly appreciated. Thanks in advance to everyone on this great site.
Hi everyone,
I am Ken's partner and will try and answer some of the outstanding questions I see on this thread. Wells Fargo is not the owner of the loan, just the servicer. The owner is Freddie Mac. The only counteroffer we have received so far is the $229,500. We then sent in an offer of $170,000. They came back and said they can go no lower than the $229,500 and we would have to provide at least 3 COMPS within 1 mile of the location from sometime in the last 3 months to see if the BPO agent would lower her BPO price.
David, nobody can jump in front of us to get this property, as we have it under contract and the property owner is satisfied with us, at this point. We are just attempting to get this property down as low as possible on the BPO, since my understanding is that Frddie Mac requires at least 91% of the BPO price to allow a short sale to close.
If anybody has any other suggestions, please let us know. We have provided the COMPS to Wells and the stated it could take up to 13 business days to hear back as to whether the BPO has been lowered or not.
If and when Wells accepts our offer, we then have to go back to Chase on the 2nd. We made a mistake when sending in the HUD-1 to the 1st. We stated that the 2nd would only get $1,000, so we have no room to negotiate with the 2nd. We will just have to hope that they will accept the $1,000 and go from there.
My question is "Can we put any excess to the 2nd on the Buyers side of the HUD-1 and pay them out of our pocket without the 1st rejecting the complete HUD-1?"
[My question is "Can we put any excess to the 2nd on the Buyers side of the HUD-1 and pay them out of our pocket without the 1st rejecting the complete HUD-1?"]
Of course you can. The 1st is only looking at the sellers side on the hud becauase thats what they will pay. If they only allow $3k to the 2nd and the 2nd wants $5k, on the same line on the hud you would put on the sellers side $3k and on the buyers side $2k.
I have done this many times before. They normally dont question it.
I didn't read all through these posts as I probably "should have" but time is money right?
Here is what I would do. Definitely focus heavily on the first and getting them to order another BPO. Offer to pay them for another agent to come out and do a "better" job. Simultaneously, you can also do your own BPO and have that submitted as well. I find that the key is to make sure you are at the property when the BPO is done. This is a MUST.
With regards to the 2nd... show them the HUD1 where the first will allow no more than (whatever you are willing to pay them but it should be no more than $2-3,000) When you talk to the 2nd lienholder, tell them that you would LOVE to pay them more but the 1st just won't allow it as they have already taken such a substantial lose and are ready to accept your offer anyway. Let them know that on certain circumstances you can pay them outside of escrow ahead of time but you can't go over (whatever number is justifiable to meet your cash-buy criteria). I have successfully had a bank that continually said NO to me that was in 2nd position to say YES when I stated this.
You can also let them know that you are willing to give them something instead of nothing as the bank will more than likely accept your purchasing the note as well. This way you would be the foreclose-ee and that would wipe off the 2nd completely.
There are several additional tactics that could be explored as well based on what they say.
If all else fails, and occasionally it will, wait until it becomes an REO, keep the bank apprised of the situation with teh 2nd and tell them that they already have a cash buiyer once they own it and tehy won't have to list it, fix it up, etc. This has worked for me int he past as well.
Good luck and keep us posted.