“Dear Steve,
I am a real estate agent negotiating second lien with Chase
During the course of my negotiations on the second lien with Chase through their agent I was told by that agent that he would not submit the request for second lien release to his investor unless he gets (Chase) 8% of the total ORIGINAL second loan. Usually and as a normal practice rule and mutual understanding between lenders, a max of 6% of the current purchase contract or $6,000 whichever is less is allowed to the second lien from the proceeds. I certainly pointed that fact out to the negotiator. However, his response was that it is a new RULING that was recently passed by the Department of Justice that the first lien holder must allow 8% of the ORIGINAL second mortgage and that the first lien holder would not object to that amount according to the ruling. My question is: is it true? I called the Department of Justice and I was told that they never heard of that.
Mike”
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The Answer
Dear Mike,
I had to check with a real estate broker friend and here is what he said.
“Unfortunately this sounds all too familiar. It happens all the time when 2nd mtg’s are involved. I have not heard of anything to do with the DOJ requiring 1st mtg’s to offer 8% or 2nd mtg’s to take 8% (although I wish there was, my life would be way easier).
He is correct 6% is the norm, and most major banks servicing 2nds understand this and will (reluctantly) agree to accept it, knowing that they will probably never get more than the 6% being offered. I’m going to take a wild guess here though, and say that this 2nd is sitting with Chase Recovery, the same guys that collect on the pre charge-off Chase cc debt. They are known for bullying agents around on short sales, and many times don’t pay much attention to what is customary with a normal short sale.
In the end, this doesn’t sound like they are too far away, one side or both will almost always budge, but they can make it a huge pain in the butt, wasting a lot of time.
If I find that we’ve reached an impasse I will ask the buyer to come up a little to cover the difference to the 2nd, this can work if the buyer is already getting an incredible deal.
As a last resort, I will ask the Seller’s to accept a prom note for the difference, especially if they have plans to file BK after the short sale is complete.”
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