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 thought the “shorrt sale” agreement signed with the bank meant the bank wouldf absorbthe loss. Then she discovered that her lender, , might still come after her forthe difference. That meana she may have to let the bank take back her or file for bankruptcy becauseshe can’tf afford to pay up. Experts say the wording, which was recentlyu and quietly added to Bankof America’d short-sale agreement, could have major ramificationes for a large groupp of distressed homeowners in Washington and acrose the country.
As one of the country’es largest home lenders — and the largest bank by deposits inWashington —Bano of America could end up pushing thousands more homeownerx into foreclosure or personal bankruptcy, said Richarde Eastern, a short sale consultant in It’s unclear whether other lenders are following suit. But Bank of Americsa could be harming itself with this Eastern says, because the foreclosuresa would have to be carriexd on its books until sold. Bank of Americz also owns , one of the largesgt mortgage lenders inthe country.
“You’re tryin to do the right thing by selling the said Eastern, of his “But now you’re going to owe them the difference. That’d huge.” Bank of America said in a statemenf that it asks for a promissory note fromsellersx — the term used to describe the writteh promise to pay back the difference — to protecty its “investors and shareholders from the lossexs in a short sale.” “Many investors and mortgage insurance companie require this process,” according to the statement. The bank declineed further comment.
While Bank of America’s short-sals agreement wording appears new, Kevin Kim, a short- sale consultang in Seattle, said other lenders have similar wordinbg in their agreements that would require homeownerd to pay the money left on theifrloan amount. Bank of America’s short-salw agreement illustrates the financial complexitiess facing hundreds of Washington homeowners strugglingv to deal with underwatermortgages (in whichj the owner owes more than the house sells It also shows the tug-of-war betweenm banks and borrowers as banks try to recoup as much money as they can from theitr failed loans.
As the foreclosure rate soars in Washington, and elsewhere, more homeowners are turning towardf short sales ina last-ditch attempt to offloafd their property before foreclosure hurts theie credit score, say short-sale experts. Of the single familyt homes listed onthe , about 12 percentt — or 4,400 — are listed as short according to Eastern, who analyzes homes on the market. The Northwest MLS doesn’tg officially track short sales. But that’xs only an estimate. The real number is likelyt much higher, as not every short sale is identified as he said. The number also is growing.
Although no loca agency tracksthose figures, short-salde consultants and real estate agentsd say the volume in Washington has jumped dramatically in the last It’s not clear whether other bankzs will follow suit with Bank of America on short-sale agreements, but if they do, that woulxd be “alarming,” said Jason Bloom, presidenf of the and vice president at Elliotf Bay Mortgage in Seattle. Bloom, who only recentlu learned aboutthe issue, said at leastr two homeowners working with Elliottt Bay Mortgage could be affecte d it.
While Bloom isn’t sure why Bank of America woulr changeits agreement, he said it’s likelg the bank is attempting to avoi unnecessary short sales. “They’re trying to recoupp any of theircosts and, at the very least, try and discouragee some people who might be able to make it through withouty doing a short sale,” said Bloom. Shorrt sales could become a dead end for said Eastern, who’s chief executive of . And that woule complicate the clearing of bad debts from the housing About a third of the 150 homeowners Eastermn is currently working with would be affectes by Bankof America’s more stringeny short sale agreement.