New Bank of America Rules for Short-Sale Negotiations

If you're trying to negotiate a short-sale with Bank of America, you may be in for a rude awakening. According to a post by Dameon Russell of Century 21 Landmark Group in California, Bank of America has tightened up their policies regarding short-sales, specifically with their junior liens (2nd+ trusts).

Bank of America stated that short-pay offers for release of lien are to be declined unless the offer is equal to or greater 10 percent of the oustanding balance. And this is only the starting point/minimum - the amount may be greater in some situations.

In addition, the "offer" has to be cash and it's due at closing. No promissory notes in lieu of cash or dividing the sum into some cash and a promissory note.

In addition (excerpt from Dameon Russell's post):

They [Bank of America] now clearly state that they fully intend to pursue the balance anyway.  Important also to note that the 10% figure is not automatic, meaning this is a MINIMUM starting point.  They are now also requiring the verbiage on the HUD, line # 505, to not include the word "settlement"; it must say offer.

Apparently, using the word "settlement" potentially curtails their ability to pursue the balance of the debt in the future.  Whereas, if an offer of 10% is accepted by them, they want to be absolutely certain it is understood that the remaining balance is NOT forgiveable and that they reserve all available recourse to collect that debt from your client after C.O.E.

IF, the cash offer to BofA for release of lien is equal to or greater than 85%, they will consider that a "settlement" and the balance forgiveable.

Note that this policy is retroactive to July 1 so if you have a short-sale negotiation currently going on with Bank of America with a junior lien involved, you will be affected. Check with your agent and/or loss mitigation contact at Bank of America for more information.