Fishing for a Deal

Tuesday, August 1, 2017

Fishing for a Deal

The Sun Dries Out Underwater Mortgage

Gabriel Borges, CVLS Staff Attorney

Mr. and Mrs. C. were determined to save their home from foreclosure despite the fact that it was seriously underwater. They’d applied for a loan modification several times but were always denied because of insufficient documentation. It didn’t help that they did not speak English. Finally, the judge in their foreclosure case put them into the Cook County Foreclosure Mediation Program where, ultimately, they were lucky enough to get CVLS staff attorney Gabriel Borges. Working with Gabe, the clients applied to the SUN Initiative, which purchases underwater property as a short sale, then loans the homeowner money to purchase the property back from SUN at a price above its appraised value. When it works, the remaining balance owed to the bank from the short sale is forgiven and the homeowner keeps his home.

It didn’t work. The bank refused to let the property go for anything less than the $115,000 appraisal value, more than SUN was willing to pay. So, with financial help from his sons, Mr. C applied for another loan modification. Seven months later, the bank said no.

But Gabe noticed the bank’s denial had the wrong income for his client. He submitted another loan modification to clarify the income. The bank corrected the income and said no.

By now, the appraisal value of the home had dropped to $80,000, so Gabe had his client reapply to SUN. This time, SUN offered the bank $77,000 and the bank said maybe but insisted on soliciting for other offers through an auction. Tick tock.

Eventually, the bank agreed to accept SUN’s offer but set a very short date for the closing—too short for the paperwork to be ready. For a while, the bank’s investor balked at postponing the closing date. Eventually, the investor agreed, but then, at the pre-closing inspection, SUN discovered that the furnace didn’t work and Mr. C had to scramble to get an estimate for its replacement or repair.

Finally, the stars aligned and Mr. and Mrs.C. closed, both on the short sale and the buy-back.

Home saved. Whew.