This is fantastic news from Jack Schakett, Bank of America Senior Vice President for credit loss and mitigation strategies. A huge stumbling block for a homeowner doing a Short Sale is the fact that their lender may pursue a deficiency judgement.
The government has programs to protect homeowners from this type of recourse, but those programs must be applied for and approved by your lender.
This extremely good news for California homeowners, as Bank Of America/Countrywide was a predominant lender during the real estate boom…..
According to Band Of America, Short sales, where the bank agrees to accept less for a home than the balance of the loan, are expected to rise as adjustable-rate mortgages reset this year and unemployment remains high.
Another concern for banking officials are strategic defaults _ when someone who can afford to continue paying the mortgage decides to walk away or attempt a short sale even though it will negatively affect their credit.
Jack Schakett, said this week if a borrower proves he or she cannot continue paying the mortgage on a house and has few or no assets, the bank will waive its right to a deficiency judgment during the closing of the short sale deal.
But, if someone can afford to pay, or has assets, the bank will try to negotiate a set fee for the borrower to pay at closing to the bank. If the borrower refuses to turn over any financial information, the bank will retain its right to go after the money in the long run.
“We want to help customers who legitimately can’t afford to make payments, but we
don’t want the ones who have a bunch of money to just be able to walk away,” Schakett said. “We’ll let them out of the transaction, but they have to share some of our pain.”
Schakett, who spoke this week in Austin, Texas during a National Association of Real Estate Editors conference, said the change is part of a new proactive approach to short sales that the bank is trying to take.
“Customers would like to know if they do a short sale deal, are they done, or not,” he said. “It’s best for both of us to know what we are going to get.”
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