Short Sale Approved, Now BOA stating Final HUD has to change, SBA not allowing it to change


I have a client with a first mortgage through BOA and the 2nd through SBA. The preliminary HUD was finally approved by both banks. 

We are now suppose to close on Oct. 1st, 2013 and BOA said they will not approve the final HUD, even though nothing has changed from the Preliminary HUD. 

SBA required us to have "Pay Down" versus "Pay OFF" for their $2500 credit. This was initially approved with BOA on the preliminary HUD. 

Now, BOA says HUD will not pay on "Pay Downs" and it must state "Pay Off" 

Neither bank will give in.

Has anyone had this happen, and found a solution?

Please Advise!

Thank You!

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This is exactly what BofA said:

P.S Line 506 cannot state “pay down” , it has to show “payoff” – HUD will not pay towards a revolving account or make a partial payment towards a creditor. The item has to be an actual lien on title.

We will also need an updated payoff for SBA

This is exactly what SBA said in response to that: (although some of her words are mistaken):

The HUD must state pay down we will not approve the HUD to show pay down if the HUD shows pay down we would consider this a HAFA Loan  and SBA does not Release its lien on HAFA loans.  By the HUD stating pay off this would stop all of SBA’s collection and SBA will not stop collection on the borrower.  I’m sorry but in order for the HUD to be approved and for SBA to release its lien the HUD must show pay down.

We've been working since Jan to get this approved, we finally got it approved the end of Aug (we had one of the worst negotiators I have ever encountered) and now just before closing we get this news. 

Any suggestions would be greatly appreciated!

Thank You!

I did a short sale with Wells Fargo & theSBA. It was actually a short sale on a commercial property, but they also had a lien on the borrowers principal residence. Just a thought....would they accept the verbiage of $2,500 for a lien release (releasing the lien on this specific property only?). Worst case the buyer able to contribute $2,500 toward the SBA lien release, and show the lien release fee on the buyers side of the HUD and no contribution from B of A ? Just thinking of the top of my head. Good Luck. Let us know what happens.

Thanks for the information Laura.

HUD will not allow for Lien Releases, it is on their disallowable list. However, I did see on the approved side "Outstanding Partial Claim Amount" I asked the title company to change the wording on the HUD to this, and see if I can get both banks to approve it.

This is not truly a outstanding partial claim amount, but at this point anything is worth a try. Our closing coordinator from BofA is not even responding to us....I'm just asking her for advice on how we can close, and she will not return voicemails or emails. 

I called escalations and they were not helpful either. Sellers have moved out and come 10/1 buyers have no where to go. I asked the person on escalations what he would do if he was me....he said to leave the closing coordinator another voicemail, like that's worked before. 

Very frustrating. 

 It was a bad joke on my part , so I deleted it . 

Boys, boys, boys, I'm stressed out enough, no arguing allowed :)

After countless hours of fighting, BofA finally accepted "Lien Release" and we were able to close the property. Thank goodness! 

Just in… Revised ML 2013-23 via ML 2013-24


Implementation of the “PFS Participation Requirement” section stipulated in Mortgagee Letter (ML) 2013-23 has been delayed until further notice. PFS participation requirements denoted in ML 2008-43, 2002-13, and 2000-05 remain in effect.

All other provisions included in ML 2013-23 remain in effect.


 Delayed Implementation of “PFS Participation Requirement” Section included in Mortgagee Letter 2013-23, Updated Pre-Foreclosure Sale (PFS) and Deed in Lieu (DIL) of Foreclosure Requirements


Get this out to all of the servicers you’re working with RE FHA PFS transactions


We did it…

G-II Varrato II


Director Community Outreach (Veterans Association of Real Estate Professionals) VAREP



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