Buyers Lender Demanding FULL Short Sale Approval Letter
So it seems to be a growing trend now that a buyers lender is demanding to see the lenders full blown short sale approval letter, not just the cover page with all the terms. In the past i have always taken the approval letter and removed the SS# and Loan# for obvious reasons. I got a call yesterday from a buyers lender demanding to see all the pages of the approval letter, that clearly have no information that they would need. They told me that they are getting bombarded with Realtors who are faking short sale approval letters to keep buyers around or maybe to buy themselves some time until they get a real approval.
I'm calling our legal hotline tomorrow when its open, but i wanted to see if anyone had ran into problems with this lately? I would hope the NAR would weigh in on the issue. Seems as though we as Realtors are opening ourselves up to all kinds of legal problems if we start giving out anything a buyers lender demands just because we have scumbags ruining it for the rest of us.
Thanks!
Replies to This Discussion
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Permalink Reply by Sally K. & David L. Hanson on
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Our attorney has written a "non disclosure letter" that we give to demanding lenders FIRST...they sign and then and only then do we surrender the approval letter. What the lender needs is clear title,,,,and that is all that they are entitled to...good luck !
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Permalink Reply by Sherry Pyszczynski on -
I just had a listing agent refuse to give me the approval letter. He said it was none of our business and was the private business of the seller. I insisted that it was part of our transaction since our contract was written as being subject to third party approval. He agreed that since he would not give us the approval, they would be willing to sign an addendum to remove the clause that the contract was subject to third party approval.
I just found out why the big stink.
The person that signed the purchase agreement is not the owner of record of the house. The signature looks very similar to the one that is on the sellers disclosure statement, but is actually that of a LLC.
It turns out - the person that agreed to sell us the house is not the current owner at all, but a LLC that is buying the house from the buyer and is planning on selling it to my clients. After all of this, the first short sale is not even approved.
My clients still want the house. I think this is very misleading. It took me a full afternoon to figure out the deal on this. From here on out, I will write into the contract that we will get a copy of the short sale approval letter w/in 24 hours of it being received by the seller.
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Permalink Reply by Julia Fishel on
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Travis & Travis, I had the same situation this year. I whited out my seller's loan information and social security # as I was concerned for his privacy. However, that letter also said that the buyer was getting $12,000 back at close. Buyer's lender had a fit, demanded the letter, so I got seller's permission to release it. And we did. And buyer backed out because he was upset about the $12,000. What fried me most about the situation was the Buyer's agent's lender's reaction to receiving the letter without a SS#. . Looking back I realize it was the $12,000 in the letter - not the fact that I had whited out the SS # - that had the guy so upset. I suspect though will never know that he had a lot to do with souring the buyer's mood (the agent was in over her head and was mentally checked out).
So I found another buyer, went through the process again, got yet another approval, but this time Seller said I wasn't allowed to give the buyer the approval letter unless his SS# AND the $12,000 were whited out because this time he was he didn't want the 2nd buyer to walk away also.
So I like BT's idea, though I have my doubts that those BA's that are acting as transaction agents should even have the right to know all of the info or if acting as single agents, the right to withhold it. What a big mess this can become and I don't know the answer.And while thiss doesn't seem like a popular position here, I still say the buyer's social security # and any cash back at close aren't the buyer's business if the seller doesn't want it to be.
Very curious to say what the legal hotline guys say on this one.
P.S. The 2nd time around I was transaction agent on both sides. My brain hurts.
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Permalink Reply by Tni LeBlanc (805) 878-9879 on
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Interesting question. I had a problem with this issue once. The letter just had too much in it -- I didn't even want to redact it -- and as I remember it -- they weren't going to accept a redacted letter anyway. I fought the battle with the buyer's lender and ultimately I would only deliver the letter to escrow. Escrow wrote a letter on letterhead certifying that they had the short sale approval letter in hand. The lender insisted they would not accept it, but I demanded that they run the issue past their legal department. Next thing you know -- they accepted the escrow letter.
I read a comment about lenders saying agents are faking approval letters. Is this really happening? I understand that some lenders are refusing to begin on a loan app until short sale approvals are in hand. They've been burned by too many that don't ultimately get approved and closed.
If the letter has nothing personal in it, my opinion is no big deal. But, each one is different. Ultimately though, it seems these lenders are demanding private information so that they don't risk wasted processing time. They have only their own interest at heart in the request -- not even the buyer's interest -- so I don't give it to them when they ask. They want to insulate themselves from the risks of the market, (risks that are present due in large part to their own inefficiencies in processing short sales), yet they want to benefit from the market by lending. It's always the same story, and it's an old story, and I'm tired of hearing it.
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Permalink Reply by Scott Korbin on
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I can understand a problem arising from Brokers conveying "lender approval" , a closing package being drawn, and then later discovering that the investor changed the approval conditions or denied the approval. It's costly to process loans that have to be underwritten or closed multiple times.
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Permalink Reply by ElizabethWeintraub00697006LyonRE on
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I hand over the letter too. In fact, most of the time I send it directly to the buyer's lender because I don't want to wait on or rely on the buyer's agent to do it.
That problem, BB, with the cash-back on Chase, I might have told that buyer to cancel and we'll sell to somebody else who isn't so clueless and greedy. It should make no difference whatsoever how much the seller receives if the buyer is happy with the purchase. Buyers who want to renegotiate after short sale approval make me want to grab a butcher's knife, knee them in the gut to the ground and stab them over and over until blood sprays everywhere. LOL. I'm sure you can relate. Hahaha.
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Elizabeth - You are a true breath of fresh air. Thanks, I needed that. Julia
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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on
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Sherry - This is exactly why the banks are requiring these approval letters, etc. This is likely fraud - especially if the short-selling lender knew about it - they would not approve it. If someone can buy the property and immediately flip it for more befroe the ink is dry, then the bank is getting shorted more than they should be. Be careful, I know here in Southern CA, the District Attorneys, at the request of the lenders, are investigating this activity.
Best of luck,
Sherry Pyszczynski said:I just had a listing agent refuse to give me the approval letter. He said it was none of our business and was the private business of the seller. I insisted that it was part of our transaction since our contract was written as being subject to third party approval. He agreed that since he would not give us the approval, they would be willing to sign an addendum to remove the clause that the contract was subject to third party approval.
I just found out why the big stink.
The person that signed the purchase agreement is not the owner of record of the house. The signature looks very similar to the one that is on the sellers disclosure statement, but is actually that of a LLC.
It turns out - the person that agreed to sell us the house is not the current owner at all, but a LLC that is buying the house from the buyer and is planning on selling it to my clients. After all of this, the first short sale is not even approved.
My clients still want the house. I think this is very misleading. It took me a full afternoon to figure out the deal on this. From here on out, I will write into the contract that we will get a copy of the short sale approval letter w/in 24 hours of it being received by the seller.
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Permalink Reply by Travis Davies on
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I find it really really interesting there are so many professionals who think that giving away someones personal information is not a big deal. Isnt our job to protect our clients at ALL times? Why in the hell would you send a letter with someones SS# to anyone who does not have their authorization?
Do you think that they are going to be in financial distress their whole lives? Do you think that their SS# is going to somehow change when they are back on their feet in a couple years or maybe that document you just openly sent across the internet is going to disappear now?
How would you feel if you had to go through with a short sale and your agent passed around your personal information to everyone only to find out a few years later when you were ready to buy another house that you had thousands of dollars in loans that are in your name, created out of fraud, because they had all your personal information. Wouldnt you be a little mad and want to kill someone? What if by chance they caught the individual and in their possession was all your personal information right there on that short sale approval letter from a few years earlier. Would you smell lawsuit?
Shame on you who choose this......
We as Realtors have a code of ethics for a reason. lots, if not most of these rules were created directly from past issues where someone was stupid and careless or intentionally got involved in bad behavior. If we ever expect the general public to give us the respect we deserve, so we arent fighting for our commission, this type of careless behavior has got to stop. Is a commission check really worth risk we willingly engage in?
Back to my original discussion, I spoke to one of our attorney's and he said that the issue of lenders demanding full approval letters has exploded the past few months. He did acknowledge that they are getting lots of inquiries on both sides of this issue.
His advice was very simple. DONT disclose ANYTHING without the buyers permission period. He said they are hearing of all kind of fraud regarding this at an explosive rate and the FBI is taking note. If the buyers lender will not fund on the loan without having all the buyers personal information then I guess its up to us individually, to either respect our clients information and maybe refer them to an attorney, or we simply send the information over the lender as the lender requests and risk our license.
I am truly ashamed to think of so many Realtors faking or modifying approval letters they already have from previous deals in attempt to make a deal work. I truly hope that individuals who blatantly engage in this type of behavior get punished to the fullest extent of the law.....
It will be really interesting to see how the NAR, Federal Government and the Lenders weigh in on this.
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When the mortgage lender and the short sale lender are the same entity, the hilarity of their insistence is not lost on me. I guess they think that they might lose the file in space or Equator, mis-directed it to their own 3rd party HAFA processing department for the 5th time, or find the file otherwise indisposed for an indeterminate period of time. On those files, I guess they do not trust that THEY will be able to process the file.
Now, some lenders will stop processing a mortgage file if the seller's short sale approval expires (while you are requesting an extension) and then on the other end, short sale lenders hand you approvals and extensions sometimes days before they expire. What they are doing is slowly ruining this industry. Hello.
It's laughable to me that they don't want to process loans too early on short sales because of what amounts to a well founded suspicion of poor processing on the short sale end. So many short sales fail because of extended wait times for buyers. How many people want to put their personal and financial life on freeze frame for nine months in order to buy a home? A big part of why short sales fail is because they are processed too slowly -- and who is responsible for that?
Scott Korbin said:I can understand a problem arising from Brokers conveying "lender approval" , a closing package being drawn, and then later discovering that the investor changed the approval conditions or denied the approval. It's costly to process loans that have to be underwritten or closed multiple times.
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Looks like, sounds like, and smells like the "F" word to me.
Thom Colby Newport Beach CA said:
Sherry - This is exactly why the banks are requiring these approval letters, etc. This is likely fraud - especially if the short-selling lender knew about it - they would not approve it. If someone can buy the property and immediately flip it for more befroe the ink is dry, then the bank is getting shorted more than they should be. Be careful, I know here in Southern CA, the District Attorneys, at the request of the lenders, are investigating this activity.
Best of luck,
Sherry Pyszczynski said:I just had a listing agent refuse to give me the approval letter. He said it was none of our business and was the private business of the seller. I insisted that it was part of our transaction since our contract was written as being subject to third party approval. He agreed that since he would not give us the approval, they would be willing to sign an addendum to remove the clause that the contract was subject to third party approval.
I just found out why the big stink.
The person that signed the purchase agreement is not the owner of record of the house. The signature looks very similar to the one that is on the sellers disclosure statement, but is actually that of a LLC.
It turns out - the person that agreed to sell us the house is not the current owner at all, but a LLC that is buying the house from the buyer and is planning on selling it to my clients. After all of this, the first short sale is not even approved.
My clients still want the house. I think this is very misleading. It took me a full afternoon to figure out the deal on this. From here on out, I will write into the contract that we will get a copy of the short sale approval letter w/in 24 hours of it being received by the seller.
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Permalink Reply by Cal Yoder on
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I believe you meant to use seller in many of the places you referred to buyer or sharing the buyer info. Or am I misreading your intent?
Travis Davies said:I find it really really interesting there are so many professionals who think that giving away someones personal information is not a big deal. Isnt our job to protect our clients at ALL times? Why in the hell would you send a letter with someones SS# to anyone who does not have their authorization?
Do you think that they are going to be in financial distress their whole lives? Do you think that their SS# is going to somehow change when they are back on their feet in a couple years or maybe that document you just openly sent across the internet is going to disappear now?
How would you feel if you had to go through with a short sale and your agent passed around your personal information to everyone only to find out a few years later when you were ready to buy another house that you had thousands of dollars in loans that are in your name, created out of fraud, because they had all your personal information. Wouldnt you be a little mad and want to kill someone? What if by chance they caught the individual and in their possession was all your personal information right there on that short sale approval letter from a few years earlier. Would you smell lawsuit?
Shame on you who choose this......
We as Realtors have a code of ethics for a reason. lots, if not most of these rules were created directly from past issues where someone was stupid and careless or intentionally got involved in bad behavior. If we ever expect the general public to give us the respect we deserve, so we arent fighting for our commission, this type of careless behavior has got to stop. Is a commission check really worth risk we willingly engage in?
Back to my original discussion, I spoke to one of our attorney's and he said that the issue of lenders demanding full approval letters has exploded the past few months. He did acknowledge that they are getting lots of inquiries on both sides of this issue.
His advice was very simple. DONT disclose ANYTHING without the buyers permission period. He said they are hearing of all kind of fraud regarding this at an explosive rate and the FBI is taking note. If the buyers lender will not fund on the loan without having all the buyers personal information then I guess its up to us individually, to either respect our clients information and maybe refer them to an attorney, or we simply send the information over the lender as the lender requests and risk our license.
I am truly ashamed to think of so many Realtors faking or modifying approval letters they already have from previous deals in attempt to make a deal work. I truly hope that individuals who blatantly engage in this type of behavior get punished to the fullest extent of the law.....
It will be really interesting to see how the NAR, Federal Government and the Lenders weigh in on this.
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