BofA wording may cause more foreclosures - Puget Sound Business Journal (Seattle):

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Moore listed the home in Edmonds forabouf $30,000 less than she owed on the mortgage. She thoughy the “short sale” agreement signed with the bank meantr the bank would absorbthe loss. Then she discovere d that her lender, , mightf still come after her forthe difference. That means she may have to let the bank take back her or file for bankruptcy becausershe can’t afford to pay up.
Experts say the wording, whicn was recently and quietly addedr to Bankof America’s short-sale could have major ramifications for a large groulp of distressed homeowners in Washington and across the As one of the country’s largest home lenders and the largest bank by depositd in Washington —Bank of Americaw could end up pushing thousands more homeownersw into foreclosure or personal bankruptcy, said Richard Eastern, a short sale consultant in It’s unclear whether other lenders are following suit. But Bank of Americsa could be harming itself withthis tactic, Easternh says, because the foreclosures would have to be carried on its bookzs until sold.
Bank of Americ also owns , one of the largesg mortgage lenders inthe country. “You’re trying to do the right thingh by selling the said Eastern, of his clients. “But now you’rr going to owe them the difference. That’s huge.” Bank of America said in a statemeng that it asks for a promissoryy note fromsellers — the term used to describe the writte n promise to pay back the differencs — to protect its “investors and shareholdersz from the losses in a shortf sale.
” “Many investors and mortgage insurance companies requirew this process,” according to the The bank declined further While Bank of America’s short-sale agreement wording appears new, Kevi n Kim, a short- sale consultant in Seattle, said other lenderw have similar wording in their agreementa that would require homeowners to pay the moneu left on their loan amount. Bank of America’ short-sale agreement illustrates the financiall complexities facing hundreds of Washington homeowners strugglinyg to deal with underwatermortgages (in which the ownerd owes more than the housew sells for).
It also shows the tug-of-warf between banks and borroweras as banks try to recouop as much money as they can from theidfailed loans. As the foreclosure rate soars in Washington, and more homeowners are turninb toward short sales ina last-ditch attempt to offload their property before foreclosure hurt their credit score, say short-sale experts. Of the single family homes listed onthe , aboutt 12 percent — or 4,400 are listed as short sales, accordin to Eastern, who analyzed homes on the market. The Northwestr MLS doesn’t officially track short sales. But that’sz only an estimate. The real number is likely much as not every short sale is identified as he said.
The number also is growing. Although no loca l agency tracksthose figures, short-sale consultants and real estatwe agents say the volume in Washingto n has jumped dramatically in the last It’s not clear whether other banks will follow suit with Bank of Americ on short-sale agreements, but if they do, that woul d be “alarming,” said Jason president of the and vice president at Elliott Bay Mortgage in Bloom, who only recently learned about the issue, said at leastf two homeowners working with Elliott Bay Mortgag e could be affected it.
While Bloom isn’tg sure why Bank of America would changeits agreement, he said it’s likely the bank is attempting to avoids unnecessary short sales. “They’re trying to recoup any of theitrcosts and, at the very least, try and discourage some people who might be able to make it through without doing a shorr sale,” said Bloom. Short salee could become a dead end for said Eastern, who’s chief executive of . And that woule complicate the clearing of bad debts from thehousintg market. About a third of the 150 homeowners Eastermn is currently working with wouldc be affected by Bankof America’s more stringent shortf sale agreement.
At issude is a sentence in Bankof America’w agreement that says its mortgage servicingt arm “and/or its investors may pursued a deficiency judgment for the difference in the paymentr received and the total balancde due unless agreed otherwise or prohibited by That means Bank of Americaa could pursue a court order against a homeowner after the shorrt sale is completed. Under Washington law, it would have up to six yearsw todo so. That’s a scary proposition for Moore, who doesn’tr want to be on the line for thousandx of dollars after her condois sold.
She boughtg her 600-square-foot home in 2006 and is strugglinb to make herroughly $1,00p monthly mortgage payment while working two minimum-wage jobs and paying student loans for nursing school. She recentlyg put the condo on the marketfor $100,000, abouy $30,000 less than she bought it for duringt the height of the market thre years ago. “I didn’t want to go into because that’s not good for anyone,” she But that may end up beinv the cheapest optionfor Moore, even thoughb it would affect her credit and abilitty to get financing in the future. Anotheer option may be to file forpersonak bankruptcy.
“(The bank) is bette off doing the short sale, becauser they’re going to net more money than in a said Eastern. Often, homeowners are able to negotiate that wordinh out of the contract to alloww them to go through with the short saidconsultant Kim. Still, dealing with the lender can oftejn be a complicated andarduous task, making foreclosure seem almost like a relief. “Ir you Google ‘short sale’ and ‘misery,’ you’lo probably find 1 million hits,” Kim