Lender Position
Once the lender starts a foreclosure, they
have elected their remedy. The most common foreclosure is by advertisement where the lender elects to forgive the deficiency.
In a short sale negotiation with this lender, you have a strong chance that they will accept the short sale and will waive
the deficiency since they won't get the deficiency anyway if you do not go forward with the short sale and the lender completes
the foreclosure. If you have more than one mortgage on your property you will need the approval of all of the lenders.
The lenders who are behind the first mortgage are in a different position than the the holder of the first mortgage.
Generally, the first mortgage holder will start the foreclosure. The subsequent mortgage holders have an opportunity
to redeem if the borrower does not stop the foreclosure. If there is no equity, the subsequent mortgage holders have
no incentive to redeem and will instead have to rely on their other remedy - suing the borrower for the default on the promissory
note. As a result, the negotiation with these lenders to get short sale approval is much more difficult. Unlike
the first mortgage holder, they have not elected their remedy and waived their right to go after the deficiency because they
have not commenced a foreclosure by advertisement. In order to negotiate with the subsequent lenders you must really
understand lender/borrower rights. The negotiation involves the lenders ability to collect from the borrower.
It is unlikely that the subsequent lenders will simply write off the debt but they may re-negotiate the debt if you can show
them the problems they will have in collecting from the borrower. The borrower has to be prepared to provide these lenders
with the documentation showing their complete financial situation. You cannot assume that the lender understands Minnesota
law so you have to educate the lender as to what assets they can or cannot go after if they obtain a judgment or is protected
if the borrower goes through bankruptcy.