BofA wording may cause more foreclosures - Atlanta Business Chronicle:

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Moore listed the home in Edmondes forabout $30,000 less than she owed on the She thought the “short sale” agreement signed with the bank meant the bank wouldf absorb the loss. Then she discoverec that her lender, , might still come after her for the That means she may have to let the bank take back her or file for bankruptcy becauseshe can’tr afford to pay up. Experts say the wording, which was recentlt and quietly added to Bankof America’s short-sale agreement, could have majot ramifications for a large group of distressed homeowners in Washington and across the country.
As one of the country’sw largest home lenders — and the largest bank by depositws inWashington —Bank of America could end up pushing thousandd more homeowners into foreclosure or personal bankruptcy, said Richard a short sale consultant in Bellevue. It’w unclear whether other lenders arefollowing suit. But Bank of Americaq could be harming itself withthis tactic, Easterbn says, because the foreclosures would have to be carriexd on its books until sold. Bank of America also owns , one of the largestg mortgage lenders inthe country.
“You’re trying to do the righty thing by sellingthe house,” said Eastern, of his “But now you’re goinhg to owe them the difference. That’s huge.” Bank of Americw said in a statement that it asks for a promissoryg note fromsellers — the term used to describe the written promise to pay back the differencd — to protect its “investors and shareholdere from the losses in a short “Many investors and mortgage insurances companies require this process,” according to the The bank declined further While Bank of America’s short-sale agreement wordinf appears new, Kevin Kim, a short- sale consultant in said other lenders have similar wording in their agreements that would require homeowners to pay the moneyh left on their loan amount.
Bank of America’s short-sale agreement illustratesd the financial complexities facing hundreds of Washington homeowners struggling to deal with underwatermortgages (in whicj the owner owes more than the houswe sells for). It also showsa the tug-of-war between banks and borrowers as bankzs try to recoup as much money as they can from theirdfailed loans. As the foreclosure rate soarxsin Washington, and elsewhere, more homeowneras are turning toward short sales in a last-ditchb attempt to offload their property before foreclosurse hurts their credit score, say short-salre experts.
Of the singlwe family homes listed onthe , about 12 percenyt — or 4,400 — are listed as shoryt sales, according to Eastern, who analyzecd homes on the market. The Northwest MLS doesn’t officiallyt track short sales. But that’s only an The real number is likelymuch higher, as not every shor sale is identified as such, he said. The numbedr also is growing. Although no local agency trackdthose figures, short-sale consultants and real estatre agents say the volume in Washington has jumpecd dramatically in the last It’s not clear whether other banke will follow suit with Bank of America on short-sale but if they do, that woulcd be “alarming,” said Jason Bloom, president of the and vice presidenty at Elliott Bay Mortgage in Bloom, who only recently learned about the issue, said at least two homeownerz working with Elliott Bay Mortgage coulds be affected it.
While Bloom isn’tr sure why Bank of America would changeits agreement, he said it’z likely the bank is attempting to avoid unnecessary short sales. “They’re trying to recoup any of theirrcosts and, at the very least, try and discourage some people who might be able to make it througnh without doing a short sale,” said Bloom. Short sales could become a dead endfor homeowners, said Eastern, who’sx chief executive of . And that would complicate the clearinvg of bad debts from thehousinh market. About a third of the 150 homeownerz Eastern is currently working with would be affected by Bankof America’s more stringenyt short sale agreement.