Man, you have to feel sorry for those poor people who were talked into 100% financing with adjustable rate mortgages they just can’t get out of.
It’s bad enough to try to sell when they are underwater on their mortgage, but to add insult to injury, they are now being squeezed by the junior lien holders in the short sale process.
It works something like this. Seller puts home on market and does a “short sale”. First lien holder bank agrees to market price, and makes a deal with the second lien holder bank to sign off on the deal in exchange for a small payoff (junior lien holder would make NOTHING if the first forecloses on property). After months and months of the short sale process, the final week comes to close escrow.
Surprise! The junior lien holder has sold his note to another investor. And guess what? The new investors wants more money then the previous deal. So now you’ve got three parties, the buyer, the seller and the first lender who are all counting on this transaction to close and you’ve got a deal in chaos.
It may be legal, but it’s certainly a shady way to make a buck. Sadly, I expect to see more and more short sale transactions held hostage by junior lien holders hoping to make a fast buck.