According to BofA DOJ Settlement

Servicer shall be required to extinguish a second lien owned by Servicer behind a successful short sale/deed-in-lieu conducted by a Participating Servicer (provided that any Participating Servicer other than the five largest servicers shall be given a reasonable amount of time, as determined by the Monitor, after their Start Date to make system changes necessary to participate in and implement this requirement) where the first lien is greater than 100% LTV and has a UPB at or below the Applicable Limits, until Servicer’s Consumer Relief Requirement credits are fulfilled. The first lien holder would pay to the second lien holder 8% of UPB, subject to a $2,000 floor and an $8,500 ceiling.

The second lien holder would then release the note or lien and waive the balance.

Mortgage $ 100000

1st Lien 80000

2nd Lien 20000

Demand for Payoff / Short Sale

Outstanding Balance

First Tranche [P] 60,000

Subordinate [P] 20 000

Bond accretion 20 000

 

Question Counsel ….

When you say “the second lien holder would then release the note or lien and waive the balance”, is that not already assumed in the deal structure at time of the bond maturity ?

 

(….)

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