Sellers might still be liable for losses after short sale

Check the fine print before going ahead with a short sale:

Bank of America, which bought Countrywide in 2008, advised Lopez’ client to pursue a short-sale when he sought a plan to cut his monthly payments. Lopez says he was stunned when BofA sought a note from his client, a former contractor who now delivers pizza and drives a truck for a fish company, to help make up the gap between the mortgage balances and the short-sale price.

The rising tide of “short sales” by troubled home owners facing foreclosure is prompting lenders to become more aggressive in their attempts to pursue former homeowners for their loan losses in a short sale. In a short sale, a house is sold, with a lender’s approval, for an amount that won’t pay off the mortgages on the property.

Often, the troubled home owner assumes the loss will be eaten by the lender. But Bank of America and Chase have quietly added language in their short-sale agreements that require the borrower to sign a promissory notefor the shortfall.

SOURCE: BIZ JOURNALS