Short sale collection agency issues

[Dan C.]

I am checking to see if anyone else has had this issue and if so how it was resolved, good or bad.

I have had a short sale under contract to purchase for 2 years in Vegas. Last month I finally got the approval from the primary mortgage holder for the sale. Over the last 2 years the 2nd mortgage holder had given approval many times and waited patiently for the first to approve.Now that the first has approved the sale, the 2nd, Ocwen, wrote off the debt and sent it to a collection agency.The collection agency will not budge on their payoff amount demands which is 3x higher than Ocwen would have accepted, and the primary mortgage will not meet those demands.Is there anything that I can do to get this deal completed, or is it just dead?Is there someone that I can bring in to the deal that would help the collection agency to see that if the property is foreclosed they will get nothing and should agree to the current terms?

[Chris Simmons]

Wow.  2 years.  And to have it come to this.  Wow.

Your only real leverage with collateral holders is the potential loss of collateral or at least their claim to any of it's value.  Unless the first is actively foreclosing and the second is about to get wiped out, they have nothing to lose by holding the collateral ransom.  

While risky, you should have looked into buying the second mortgage from ocwen for the short sale amount you negotiated.  You could then step into their shoes with a claim to the collateral and force the foreclosure as the second lien holder.  Are you sure that the collection agency got the collateral rights when they bought the debt?  

Curious if you could do similar and simply buy the note from the first...same dollar amount.  that way, you are the first creditor, stepping into the shoes of the bank with rights against the borrower and could then foreclose and wipe out the second.  Agree in advance to waive claims against the bank and the borrower and obtain a mutual hold harmless.  

I'm up for any other ideas.