It's been over a month since my client was encouraged to foreclose on his home due to Chase bank's lack of action to release my client from debt on a short sale in his bank approval letter. Because of my client's strong desire to be 'socially responsible' by choosing to short sale his property while possibly doing less damage to his credit, it took a veteran real estate broker, an attorney and my vigilant client to lobby and advocate for a short sale, making total sense to Chase bank that they stood to lose less money in a successful short sale than foreclosure. . .
Unfortunately, the battle was lost when Chase just couldn't see themselves stepping outside the box which would have created a win-win for all parties. To add insult to injury, my seller lost a total of 6 highly qualified buyers over a 12 month period due to Chase's zero communication and lack of incentive to do anything in a timely fashion. When Chase did respond, their staff managed to send over approval letters with expired dates. When asked to correct these bank approval letters, Chase took so long, the buyers walked . .Damn it, what in the world do these BIG name banks do with their time and more importantly, why such INCOMPETENT staff dealing with people's lives???
My young client only 5 years ago, started a new life buying his first home. It is was time when homes sold in less than 24 hours after a seller would sign a listing contract, interest rates were moderate and home prices were rising exponentially. Sadly, we have heard and read so many related stories as of late.
Just over 30 days ago, my client's attorney wrote the following letter as the last ditch effort to have Chase release my client from debt by changing the definitive verbiage in their bank approval letter. Of course names are hidden for confidentality:
August 18, 2010 Chase Home Finance LLC XXXX, Via Facsimile: 1xxx - xxxx --
Dear Ms. G :
I am the attorney representing the D family in the short sale of their home. We have all been working together with Chase in an effort to avoid foreclosure and to reach a mutually agreeable resolution for all parties involved. To that end, we have submitted to your institution a strong offer and all the required documentation. We have obtained approval from your institution, which we are thankful for, but it in fact encourages foreclosure because of the verbiage chosen. Again, while we are grateful for the approval of the short sale, which enables the family and your institution to potentially avoid foreclosure, we are writing to formally request that the verbiage used therein to be changed to reflect the realities of California foreclosure law as it would be absurd to ignore the same. The subject property is located in California and your institution holds both first and second position with its liens.
Pursuant to California foreclosure law, your institution will be prohibited from obtaining from my client any deficiency should the short sale not be consummated and your institution forecloses (see California Code of Civil Procedure 580d and 726a, which prohibits a deficiency judgment after a non-judicial foreclosure). In other words, according to California law, should your institution sell the property at an auction, it will not be able to pursue my client for the deficiency that will naturally result in this upside down market and so it does not make any sense for you to reserve the right to pursue the deficiency as you have in the approval letter; by doing so, you are actually encouraging foreclosure.
Moreover, California case law provides that where a senior lien holder, that is the same as the junior lien holder, forecloses the juniors will similarly be prohibited from obtaining a deficiency judgment (see George v. Simon 4 Cal. App. 4th 63 (A bank's action to recover the deficiency due under a promissory note secured by a junior deed of trust was barred by Code Civ. Proc., § 580d (deficiency judgment after private foreclosure forbidden), where the bank had previously foreclosed a senior deed of trust on the debtor's property).
To reach such an absurd conclusion flies in the face of good faith and is one of the reasons homeowners are so upset with your institution. I understand that it may make sense to reserve the right in another context, but not here. As such, I write asking that you reconsider your position in the short sale approval letter that attempts to reserve any wrongly perceived deficiency balance rights that your institution and/or its investors believes exists and allow the short sale to be consummated in line with California law.
Again, should you not release liability; you are actually encouraging foreclosure because California foreclosure law will protect my client more than consummating the sale. Assuredly you do not wish such preposterous result nor would the investors once they review California foreclosure law. Please know that it is not lightly that we come to you with this request. Generally most lenders will step outside of the box and analyze the situation for what it is and make a financial decision. It is only because your representatives in this situation are not considering the best interest of your institution that I must write. If you have any questions, or if you would like to contact me to discuss the short sale, please do not hesitate. I look forward to resolving this matter quickly as it has been an arduous process thus far.
Sincerely, R T, Esq. L Law Firm
Yes, the bank rejected this clear request. In my opinion, I don't even think the bank staff understood the letter. . .
The startling point about this issue, there are thousands of people in my client's same situation and yet our government are bailing out these banks.
Does anyone know the definition of insanity?
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