Getting Short Sales Approved

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Archive for category Short Sale Fraud

Expounding on short sale fraud……

Feb 4

Posted by Terry Osburn in Short Sale Fraud | No Comments

Rule of thumb on short sales-All contributions from any sources MUST be on HUD, MUST be approved by 1st lender…….The 1st lender clearly states on their short sale approval letter the terms and how much the 2nd can receive from short sale.

When the 2nd comes back and says they need more than what the first will allow and to not to tell the 1st what you are doing or discuss it with them and send in payment separate with no reporting or paper trail to escrow to NOTATE on the HUD for the 1st approval  and specifically states DO NOT include on the HUD that is Fraud plain and simple.

The key is to look at what the 1st will allow the 2nd to receive in TOTAL….Many times the first will state they will give x amount of the total allowed  and the rest can be from any other sources including the seller, buyer and agents. It cannot exceed the amount they have allowed in their short sale approval letter and all funds as to whom they are from must be demonstrated on the HUD for review from the First lender.

Further in the State of California, it is a one action state. If both loans are from the same lender, as I understand it and I am NOT an attorney, the 2nd lien holder, if  the first foreclosed. the 2nd lien even if recourse loan would lose its ability to come back after judgment because the same bank was responsible for both loans making it a single action……Always Have you homeowner check with real estate tax attorney prior to making any decisions.  There would still be tax consequences etc.

Short Sale Fraud: Extra Cash to 2nd Lienholders

Jan 19

Posted by Greg Fielding in Short Sale Fraud | 3 Comments

375486_f520There is lots of chatter out there right now about short sale fraud by 2nd lien holders, thanks to Diana Olick of CNBC.

She reports:

In order for a short sale with two loans to happen, the second lien holder has to drop the lien.If they don’t, and there’s no short sale, the home goes to foreclosure and the first lien holder gets the house because second liens are subordinated debt to the primary loan.

In short, the second lien holder gets nothing. In order to get the second lien holder to drop the lien, the first lien holder generally negotiates some partial payment to the second lien holder. The second lien holder doesn’t have to agree, but more and more are doing so.

That’s all legal.

But here’s what’s not legal and what’s apparently happening quite often recently. Since many second lien holders are getting very little, they are now allegedly requesting money on the side from either real estate agents or the buyers in the short sale. When I say “on the side,” I mean in cash, off the HUD settlement statements, so the first lien holder doesn’t see it.

This is absolutely illegal and it happens frequently. The problem for agents and sellers caught in the middle is that there is no one to report the crime to. And, if you choose not to cooperate, banks may deny the short sale.

Though I can’t substantiate the claim, I have heard a horror-story that there has been an instance where the first bank found out about the illegal payoff and was able to negate the sale of the property after the fact. Then, they sued everyone. I have no idea if this actually happened…but there’s no reason to think that bad things like this can’t happen.

Lately, I’ve seen second lien holders demand that the Buyers cough up extra money. (probably in cases where the Sellers don’t have it)

So, my question for all of you is: What are we doing when we’re caught in the middle? Are Sellers or Buyers caving in even though they know it’s illegal? For you agents…have you given up commission to the second lenders? That’s huge fraud…what are your brokers advising?

Most importantly, how can we stop this?

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