Processing a Mortgage Debt Forgiveness for 2nd liens During a Short Sale

During the last 2 years of processing Short Sales there has been a change when processing 2nd liens. The normal way to process them is to submit the short sale package to the 2nd lien holder or servicer and begin negotiations. Approximately 6 yrs ago when I started negotiating the banks would take a minimum of 1k - 3k to approve the short sale. Then as the time passed and lenders and servicers started to see an overwhelming response to the "Short Sale Revolution", the payoffs to the 2nd lien holders started to increase from 6k, 10k, 10%-15% of the balance or a promissory note. 

These pass two years processing 2nd liens have changed. Now there are principal foregiveness for 2nd liens that are becoming easier to process short sales. 

When the borrower receives a letter like the one above which is an example of the letters that are going out please read carefully and follow instructions. The seller should call in immediately when receiving the letter to confirm there participation in this process. 

IMPORTANT if the home is in a short sale and is in foreclosure with a sale date your negotiator should be able to postpone the sale date and explain to the 1st lien holder about the process for the 2nd. The 2nd lien holders process is not something that will happen within a 1 month time frame it is approximately 60 days and if it's a HELOC in some cases it could be 1 month. At the end of the process a full reconveyance can be requested by the county recorders office and the seller will receive a 1099-C which is the cancellation of the debt.

If you have any questions contact InsideTheShortSaleDepartment.com

-The Short Sale Department