WHAT IS A PROMISSORY NOTE

Promissory Note - A promissory note is essence what was signed when you first purchased your home.  It was a promise to pay.  However, in the case of  your mortgage the note you signed was secured by your home.  If you default in the payment of your mortgage, your home is the security for the lender that 1. you would continue to pay and or 2. if you stopped paying they would foreclose on your home and pay off the note you signed.

So what is the promissory note with relation to a Short Sale.  If a bank decides to settle the outstanding mortgage and approve the Short Sale the bank may request the existing home owner to sign an UNSECURED promissory note for the difference or an amount less than what is owed.

If the home owner is allowed to short sale the home and signs a promissory note, that note will be the home owners promise to pay that specified amount.  Banks can chose to do a combination of Short Sale, promissory note and the issuance of a 1099c for a portion of the loan.