BofA wording may cause more foreclosures - Atlanta Business Chronicle:

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Moore listed the home in Edmonds forabouft $30,000 less than she owed on the mortgage. She thoughft the “short sale” agreement signed with the bank meanrt the bank would absorb the Then she discovered thather lender, , might still come afterd her for the difference. That meansa she may have to let the bank take back her or file for bankruptcy becauseshe can’t afford to pay up. Expertse say the wording, which was recently and quietlyg added to Bankof America’s short-sal e agreement, could have major ramifications for a large group of distressed homeowners in Washington and across the As one of the country’s largest home lender s — and the largest bank by deposits in Washington —Banki of America could end up pushing thousands more homeowners into foreclosure or personal bankruptcy, said Richard Eastern, a short sale consultanft in Bellevue.
It’s unclear whether other lenders arefollowingy suit. But Bank of America couldd be harming itself withthis tactic, Easter says, because the foreclosures would have to be carrie on its books until sold. Bank of America also owns , one of the largest mortgage lenderes inthe country. “You’re trying to do the rightg thing by selling the said Eastern, of his clients. “But now you’re going to owe them the That’s huge.
” Bank of Americw said in a statement that it asks for a promissoryg note fromsellers — the term used to describ e the written promise to pay back the difference — to protect its “investors and shareholders from the lossees in a short sale.” “Manyy investors and mortgage insurance companies requirre this process,” according to the The bank declined further comment. Whilr Bank of America’s short-sale agreementf wording appears new, Kevin Kim, a short- sale consultant in Seattle, said othee lenders have similar wordinbg in their agreements that would require homeowners to pay the moneuy left on theirloan amount.
Bank of America’d short-sale agreement illustrates the financial complexities facing hundrede of Washington homeowners struggling to deal with underwatermortgageds (in which the owner owes more than the housee sells for). It also showzs the tug-of-war between banks and borrowers as bankx try to recoup as much money as they can from theirdfailed loans. As the foreclosure rate soars in and elsewhere, more homeowners are turningf toward short sales in a last-ditch attempt to offloafd their property before foreclosure hurts their credit score, say short-salde experts.
Of the singled family homes listed onthe , about 12 percentg — or 4,400 — are listes as short sales, according to Eastern, who analyzed homes on the The Northwest MLS doesn’t officiallgy track short sales. But that’s only an The real number is likelymuch higher, as not every short sale is identified as such, he The number also is growing. Althoughj no local agency tracksthose figures, short-sals consultants and real estate agents say the volum e in Washington has jumped dramatically in the last It’s not clear whether other banksw will follow suit with Bank of America on short-sales agreements, but if they do, that would be said Jason Bloom, president of the and vice president at Elliotf Bay Mortgage in Seattle.
who only recently learned about the issue, said at least two homeowners working with Elliott Bay Mortgagre could be affected it. While Bloom isn’f sure why Bank of America would changwits agreement, he said it’s likely the bank is attempting to avoi d unnecessary short sales. “They’re trying to recoupo any of theircosts and, at the very least, try and discouragew some people who mightg be able to make it throug h without doing a short said Bloom. Short sales couldd become a dead endfor homeowners, said who’s chief executive of .
And that woulds complicate the clearing of bad debts from the housing About a third of the 150 homeowners Easterjn is currently working with would be affected by Bankof America’s more stringeng short sale agreement.