Bank of America (BOA) says it will relax its policy on payoffs connected with short sales. Large banks have been demanding money for home equity lines and second mortgages that would otherwise be worthless if the short sale property went to foreclosure.
BOA has been among the least cooperative of all banks in agreeing to short sale payoff terms, demanding 10% of what the homeowners owed on the equity line balance or second mortgage before signing off on the short sale, which is necessary for the deal to go through. BOA spokesman Terry Francisco says the new policy is “less arbitrary, more rational.”
BOA’s new policy is to ask for 5% of the sale proceeds on the short sale, net of realty commissions, closing, and other costs. Some short sellers point to problems, though: The bank’s previous 10 percent policy meant they’d demand $20,000 on a $200, 000 equity line balance, but under their new policy it will cost the short seller $15,000 if the net proceeds are $300,000″ on a short sale, even though the economic value of their holding may in fact be zero. Says the Realty Times: “Bottom line for investors: If there’s a Bank of America second mortgage or credit line on the house you’re after in a short sale, work the new numbers. At least some of the time you might be surprised that the answer from the big bank is now ‘yes.'”