San Diego Short Sales & Promissory Notes

A promissory is a promise to pay a new unsecured note separate from the mortgage that is requested by the bank. It occurs in some instances on a San Diego short sale for the deficiency of the 2nd mortgage or HELOC, or when PMI Private Mortgage Insurance is involved. When the short sale package is submitted to PMI they are being asked to pay the claim early. They are under no obligation to pay the claim and often time stall the process waiting to see if the home goes into foreclosure. PMI isn’t required to pay a claim until the foreclosure has taken place, therefore there is no advantage to pay the claim early. The lender in almost every case will not approve the short sale without PMI agreeing to pay the claim. When the PMI company does agree to pay the claim early they often times ask the borrower to agree to contribute to a portion of the loss. This is even more prevalent when it’s clear the seller has assets. The amount the bank asks for is typically 10-50% of the deficient amount. The lender agrees to release the mortgage lien and allow your home to sell.

We work very hard to negotiate your San Diego short sale so there is not a promissory note, however depending on your situation it is not always possible. It is important to understand that if you have recourse debt and you later receive a Deficiency Judgment against you for all the lender’s losses, it may be worse than signing a promissory note. With a judgement future wages could be garnished, your credit will be stung all over again, a lien can be placed against any assets, and you will have to pay it at some point if you ever want to borrow money from a lending institution again.

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