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Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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Resolved Question:

I own one home, currently under contract for short sale, closing date March 16, 2012. I purchased the home in 2007 for $171,000, I currenly owe $162,901. The contract sale price, accepted by Lender (Seterus, Inc.) is $118,000. I requested a deficiency waiver as a condition of sale. I received an agreement letter from Seterus through my realtor.

I understand one of the conditions to be that I will bring $4300.00 to closing and give this to Seterus as part of the $114,546.70 which Seterus requires to close the sale. The difference between $118,000 Buyer's payment and $110,246.70 received by Seterus before my $4300 contribution is the amount paid to Buyer and Seller agents out of the $118,000 sale price.

Questions:

I wish to know whether the letter constitutes a bona fide Letter of Deficiency Waiver. Also, I would like to know if any unilateral moves by Seterus (such as seizing the property before closing date) would invalidate the Deficiency Waiver.

I am particularly concerned about Condition 3a, which I understand to say Seterus may cancel the agreement before closing. Since there is no indication of notice, I assume they are claiming the right to cancel the agreement without notifying me.

Here is most of the letter (it may be truncated by JustAnswer software):

Dear X,
Seterus, Inc., is the servicer of the above-referenced loan (“Loan”). We are pleased to advise you that subject to the conditions in this letter, we can offer you a discounted payoff in the amount of $114,546.70, which includes a borrower cash contribution of $4,300.00 in the event you are able to sell the property securing this loan through an arms-length transaction. The discount expires on 3/29/2012 (“Expiration Date”). To accept this offer, you must complete the following steps prior to the expiration date.
1. All of the above named borrower(s) or guarantor(s), if applicable must sign the letter below. Each signature must be notarized. You should be able to obtain a notary at your bank.
2. We must receive your fully signed and notarized copy of this letter by 3/29/2012. You may fax this letter to the fax number referenced above or mail to the mailing address referenced at the end of this letter.
3. The following cancellation clauses must be added to the listing agreement and sales contract as specified below.
a. If required, the listing agreement must include, “Seller may cancel this agreement prior to the ending date of the listing period without advance notice to the broker, and without payment of a commission or any other consideration, if the property is conveyed to the mortgage insurer or the mortgage holder.”
b. The sales contract must include, “The seller’s obligation to perform on this contract is subject to the rights of the mortgage insurer (if any) and the mortgage holder relating to the conveyance of the property.”
4. We must receive the full discounted payoff amount of $114,546.70, by bank wire transfer, bank check, money order or certified funds on or before 3/29/2012. You must send the funds to the address referenced at the end of this letter.
5. Any contribution of funds from the borrower(s) other than the contribution, if any, specified in this letter must be approved by Seterus, Inc. in writing.
6. We must receive a copy of the signed certified HUD-1 Settlement Statement for the sale of the property by 3/29/2012. You may fax this to the fax number referenced above or mail to the mailing address referenced at the end of this letter. The HUD-1 Settlement Statement must be in accordance with the Estimated HUD-1 Settlement Statement, wich indicates a purchase price of $118,000.00. Any amounts paid to junior lien holders to obtain lien release(s) shall not exceed the total sum of $0.00. Our credit for seller paid closing costs must not exceed $3,540.00. Realtor commission must not exceed 6%. By signing below, you acknowledge that Seterus, Inc. and the holder of your note relied upon this Estimated HUD-1 Settlement Statement to approve the discounted payoff settlement. Any surplus funds shown on the Final HUD-1 Settlement Statement also must be paid directly to Seterus in accordance with the instruction in item #4 above.
7. The HUD-1 Settlement Statement must identify borrower(s) as the seller(s) and Axxx Yxxx as the buyer(s).
8. Final HUD-1 to be approved by us 48 hours prior to closing. Email HUD-1 XXXXX@XXXXXX.XXX.
9. This offer is subject to the acceptance of all and any requirements by the mortgage insurer company if your loan is insured.
Please note that if you have an escrow account, unless otherwise required by applicable law, Seterus, Inc. will make your tax and/or insurance payments only if your account is less than 30 days delinquent or your account has sufficient funds. If your account is more than 30 days delinquent or has insufficient funds for disbursement Seterus, Inc. will not advance funds and you will be responsible for any tax or insurance payments, penalties or interest.
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 2 years ago.

cfortunato :

hi JACustomer,

Expert:  cfortunato replied 2 years ago.

Hi JACustomer,

Why do you think Seterus is the seller referred to in section 3.a.?

Customer: replied 2 years ago.
Dear CFortunato,

I don't know that Seterus is the seller referenced in Section 3.a. This may be an incorrect assumption on my part. I seek your expertise in determining the most likely significance of this and the other 8 conditions that are part of the agreement.

Best Regards,
John Trine
Expert:  cfortunato replied 2 years ago.

You are the seller.

1) The statement referred to in section 3 says that if the property is foreclosed before the date referred to, then the contract is cancelled. I know there is no mention of foreclosure, that is what is meant by the property being conveyed to the mortgage insurer or mortgage holder.

2) There is no deficiency waiver in the your contract.

 

I think this is what you wanted to know. If not, please let me know.
Thank you.

Customer: replied 2 years ago.
Dear CFortunato,

I attempted to send a reply about 30 minutes ago, but it appears it did not go through. I will try again.

The complete text of the Seterus agreement did not get sent to you, due to JustAnswer limitations on message length. I will attach the final three paragraphs of the Seterus letter below.

I have 4 questions:
1. Does the Seterus Agreement constitute a formal Notice of Deficiency Waiver?
2. If Seterus forecloses before closing day, can Seterus nullify the Agreement, sell to Buyers directly, and demand the deficiency from me?
3. Can Seterus do #2 above without notifying me or involving me?
4. If I bring the $4300 to closing and give it to Seterus, can they demand that I pay the full deficiency?

Here are the last 3 paragraphs of the Agreement:

Please note that if you have an escrow account, unless otherwise required by applicable law, Seterus, Inc. will make your tax and/or insurance payments only if your account is less than 30 days delinquent or your account has sufficient funds. If your account is more than 30 days delinquent or has insufficient funds for disbursement Seterus, Inc. will not advance funds and you will be responsible for any tax or insurance payments, penalties or interest. Any remaining funds held by Seterus, Inc. in your escrow or suspense account will be applied toward the remaining amounts owed on your loan after payment of the $114,546.70.


Unless otherwise previously negotiated and explicitly stated on the HUD-1, any funds in excess of the discounted settlement amount on the HUD-1 Settlement Statement will be paid by Seterus, Inc. and applied toward the remaining amounts owed after $114,546.70. Under no circumstances shall any funds be disbursed to the borrower(s).


Upon completion of all requirements by borrower(s), Seterus will execute a release and a discharge of the deed of trust/mortgage, including any deficiency balance and, if necessary, will dismiss any pending legal action to collect this obligation. As required by law, Seterus, Inc. may issue a 1099C, Forgiveness of Debt, as a result of this Settlement Agreement. Borrower(s) acknowledges that there may be tax implications resulting from debt forgiveness. Borrower(s) should consult with a tax advisor.

This agreement may have credit reporting consequences. For information about your credit score, go to: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm

Our printed name below constitutes our execution of this offer, and it does not need to be counter-signed by Seterus, Inc.


Sincerely,

Seterus, Inc.


Expert:  cfortunato replied 2 years ago.

1) Yes - the part of the contract you just sent includes a deficiency waiver.

2) Yes.

3) Only if you there is a "power of sale" clause in your mortgage agreement. Such a clause allows a mortgage lender to foreclose without going to court.

4) Not if the rest of the contract requirements are satisfied.

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
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