Bank of America Possibly Cancelling Loan Settlement Negotiations?

Is Bank of America really cancelling short sales?

We just received this news from the BPE Law Group. This could be devastating for short sales! We will keep you updated on any more news concerning this!

What is SB 458?

SB 458 extends the protections of SB 931 (2010), to ensure that any lender that agrees to a short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans.

Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.

From BPE Law Group

In the wake of passage of SB458, lenders are struggling with how to respond.  We’ve had 2 separate clients today tell us that BofA has stated they are cancelling all loan settlement negotiations.  Since these concerned 2nd loan liability, this may mean that BofA will be killing all short sales in which they are involved as a junior lender.  What is unclear is whether they are extending this to ALL short sale negotiations regardless of whether they are in first or junior position.

Needless to say, this will be devastating to short sales since BofA is involved in so many. It will be worse if other lenders follow their lead.  Perhaps this is a strategic move to create a backlash in the market to force the legislature to amend or even kill SB458.