Archive for month July, 2009

Do Your Clients Get Deficiency Notes?

Thursday, July 2nd, 2009

A couple of days ago, I was talking with one3 of my colleagues about Short Sales.  I was astonished when my colleague told me the story of one of her clients in Woodstock, GA.  The client had a first mortgage and a line of credit with one of the banks that was saved from collapse by being bought out during the crisis.  During the Short Sale process, the second lien holder said that the only way the Short Sale could happen was if the client signed a deficiency note – because when they signed the papers for the line of credit, they signed two types of notes: one against the house, the other was a Personal Note.  Since the lender had the Personal Note, they felt they had the right to have a deficiency note signed by the home owner, or otherwise the Short Sale would not happen.

The client decided to sign the deficiency note.  Three months later, and life has moved on.  They now live in a different state.  Their son won a scholarship to go to college, and their life was taking a positive turn.

Last week, they found out that their bank accounts had been frozen.  They had left their checking and savings accounts with that same bank that had required the deficiency note.  The bank froze their accounts and took all the salary earned by the husband – and did not stop there.  The son who was going to college also had his account with that bank, and had received his scholarship payment as well.  But since he was a cosigner for them…..  The bank took all the scholarship money as well.

How far can a bank go with a deficiency note?  Far enough to ruin the life of a student waiting to start his college career, certainly, and without a moment’s troubled conscience. 

This story has helped me fight even harder every day for my clients, and to NEVER accept a deficiency note in any of my transactions.  If you end up agreeing to one on behalf of your clients, at least tell them to make sure they don’t have any other accounts with that bank – or any of its tangled siblings as the banks buy each other out.

Please share your good and bad experiences with me – we can learn from each other.