Comments on: Are Undisclosed Second Mortgage Short Sale Payments Illegal?

By: Laura Morton

Laura Morton — Tue, 22 Jun 2010 03:01:59 +0000

I would think that if you disclose all details of the transaction, it is legal. But if you do not disclose, it makes it illegal.

By: Eric

Eric — Wed, 26 May 2010 04:06:34 +0000

I’m a Nevada Attorney with an LL.M. in Real Property Development. As for putting the extra payment on the buyer’s side of the HUD, that is a violation because if the buyer paid it—it is part of the proceeds of the sale, which must be reflected accurately and as dictated by the 1st mortgage.

However,—a true ‘seller contribution’ to the 2nd is not “proceeds from the sale,” and, therefore, the 1st mortgage has no right to dictate or complain about the arrangement.

The payoff to the 2nd should be listed on the HUD with two line items: the first should say “payoff to 2nd from sale Proceeds — $3,000″ the second line should say “Seller’s separate non-proceeds contribution to 2nd — $5,000,” etc.

Mind this: It is illegal if the proceeds come from the Buyer because it would be proceeds from the sale, which the 1st must agree to and which must be reflected as part of the sales price. But it can’t be illegal if it is a true “seller contribution” from separate funds because the 1st mortgage only has the ‘real property’ as collateral—not the seller’s personal bank account!

Please pass this information around because the confusion and controversy over this issue is entirely unwarranted—as the simple logic above proves.

By: Rich

Rich — Thu, 20 May 2010 18:23:52 +0000

All attorneys are not “created” equal. So are you suggesting those ambiguous deal squashers are born. I agree that if the 1st is going to dictate a position that the 2nd will not tolerate then the seller should be able to do what they can to avoid the foreclosure. We always put the extra in the 100′s on the buyers side, assuming the buyer is wiling to pay if of course, and tell the 1st. So far they have not retracted their approvals. A another award winning nuance from our “friends” at BOA is no seller concessions unless it is an FHA or VA buyer.

By: Steve Passmore

Steve Passmore — Thu, 20 May 2010 16:07:32 +0000

Bob & Chris:
Very good info. Our title company attorney told us long ago that it was fine to give the 2nd more money and we could do it a couple different ways. One was to put the extra money on the buyers side of the HUD. The other was to simply make two HUD’s, since technically we had two different deals and two different closings. The first HUD went to the first mtg. co. with what they allowed, and we closed on that deal. The next HUD went to the second, showing what was paid to the first, but the FULL amount they wanted on this HUD. Over time we’ve just put it on the buyers side to make life a bit simpler.

By: Bob Lachance

Bob Lachance — Thu, 20 May 2010 14:50:48 +0000

Bill,

They would have to be HAFA eligible. To find out if one of your sellers are cut and past this link: http://www.realtor.org/government_affairs/short_sales_hafa

By: Bill Galaska

Bill Galaska — Thu, 20 May 2010 14:29:55 +0000

Just a question:

How do I pursue a short sale so the seller gets the $1500 and get them fully released from the debt?

Thanks!