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!

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Permalink Reply by Bryant Tutas on July 3, 2011 at 5:03am

Toni. The $20,000 was an incentive from Chase. Regardless of the purchase price the seller would have received this money. It has nothing to do with the value of the property. When explaining short sales to buyers be careful not to mention that the seller can't receive any money because that ius just not true anymore. There are many short sale programs where the seller cam receive funds. And it's really none of the buyer's business.

 

But certainly the buyer seeing this on an approval letter could cause a problem. Remove it. Of course it will still show up on the HUD so maybe leaving it and dealing with the problem now is best.

 


Toni Campbell said:

If the seller is getting $20,000 back from the sale, is'nt that a proceed? The buyers I have worked with balk at having to pay anything additional over the asking price even after explaining the short sale process I can't imagine what they would do seeing that!

I just completed a short sale representing a buyer on a Wells Fargo condo short sale in which the approval letter contained pages for the seller and separate pages for the buyer which required them to sign. It stated that the buyer understood the seller was not making any money from the sale, neither party was related in any way, the lender was 1099'ing the seller, and included the sale price. It did have the original loan #'s but no ss# or private seller information. WF would not move forward until this document was signed by both parties. This was a cash deal so no other lender was involved.

With all that is out there it seems to be another defense to help against possible fraud.

 

Have a fantastic Independance Day!

Permalink Reply by Bryant Tutas on July 3, 2011 at 5:04am
Harry. You're cool. Just keep being you. It's my job to moderate :)

Harry Clay said:
Fair enough. I enjoy the discourse, & have been known to inject a small dose of levity into my posts, once or twice.
Permalink Reply by Travis Davies on July 3, 2011 at 5:05am

Agreed. Harry please dont take it personal by my comments. I am just sick to death of agents who ruin it for everyone else. As i just stated a minute ago, it is widely know Utah is at the top for fraud. I'm glad CA has passed some very important rules to protect all parties. I would imagine our UAR will be modifying our SS addendum shortly to address these issues. The attorney stressed the amount of phone calls they are getting from both sides on this issue is out of control. If the FBI is taking notice then it has got to be a pretty big problem. I'm sure its the same problem all over the country.

 

The most shocking part for me was the amount of agents who claim to be a professional and abide by our COE, State and Federal laws, but are willing to commit fraud at a moments notice and then lenders who dont care if it happens as long as they get the deal done. 

 

Permalink Reply by Vikki Deedrick on July 3, 2011 at 5:10am

As the buyer's agent for an investor who is buying multiple properties in my area I ask for the approval letter before I start scheduling inspections.  I've never had a listing agent question sending it to me, and I've never passed it on to the buyer.  There's really nothing in there he needs to know and he's paying cash so there's no lender involved.  As  the listing agent in similar transactions I let the buyer's agent know as soon as I have an approval letter.  I've never been asked for a copy, but I would send it if I were. 

 

If a person wanted to scour public records most of the information minus SS#'s is out there.  Mortgages are recorded, defaults and judgements are recorded.   On one transaction with this investor the Title company sent it to me with the closing documents, I didn't ask for it as I had already seen it.  Not sure why they sent it.

Permalink Reply by Julia Fishel on July 3, 2011 at 5:17am
One West (Indy Mac) is putting Seller contributions off the HUD and pays them to seller directly after closing.  ??  
Permalink Reply by Travis Davies on July 3, 2011 at 5:17am
no coffee for me. Heartburn is NOT worth it haha... If ive come across too worked up to you or anyone else I apologize. I have a hard time sitting back and watching people intentionally do things that affect us all. I just want our industry cleaned up a little before the next explosion (if it comes) :)
Permalink Reply by Ray Snook on July 3, 2011 at 5:25am
I am not sure what an agent achieves by faking an approval letter, it would soon become obvious that it isn't real when the property cannot close to contract because liens are not removed. If the real approval does come, as a buyers agent I would sure as heck want to know why a second one was issued! Are there really nutcases that do that? "Bombarded" with realtors faking letters????   I find that really hard to believe.  If that individual lender is getting bombarded with fake letters then the law of statistics indicates we have a HUGE problem with dishonest realtors committing fraudulent acts. Hogwash!
Permalink Reply by Thom Colby CA Brkr 888-391-5245 on July 3, 2011 at 5:27am

Julia -

 

Help me understand -

One West (Indy Mac) is putting Seller contributions off the HUD and pays them to seller directly after closing.  ??  
Is the Seller contributing or receiving funds from Indy ?  Your statement seems to contradict itself.
Also, if either seller is contributing or Indy is paying Seller - It MUST be on the HUD.  If not, I'd turn them in.



Julia Fishel said:

One West (Indy Mac) is putting Seller contributions off the HUD and pays them to seller directly after closing.  ??  
Permalink Reply by Julia Fishel on July 3, 2011 at 5:38am
Sorry about that.  Seller was going to be receiving funds from One West.  When I questioned it, it was explained to me that only buyer's or agents' contributions had to be shown on the HUD.  And I ran it by the Seller's attorney processing the file and and he said it was fine (and my broker).  Oh dear ... ?! 
Permalink Reply by Scott Korbin on July 3, 2011 at 5:48am
I didn't think that the agent was faking it, just mistakenly forwarding a conditional approval from a Lender without obtaining full investor approval. By an example, I received an approval recently "subject to final Title Search." I won't provide the approval to the Buyer's Agent until all the t's are crossed and i's are dotted, because as we know, until final approval. something may get in the way of the settlement or terms may change at the discretion of the investor.
Permalink Reply by Tni LeBlanc (805) 878-9879 on July 3, 2011 at 6:42am

I think that is a good summary of what to take from the discussion, Bryant.  And yes it is a good discussion for the site.  

 

Agents should be thinking about what they are disclosing -- it doesn't mean you will always get it right -- but it should be a thought that occasionally pops into your brain.  And, someone else made an excellent point that mortgage loan numbers are filed on public documents as well -- and yes they are.  Part of my reasoning in not wanting to provide the letter is because I don't want another lender getting into the transaction any further than they need to be.  

 

If the mortgage lender for the buyer is using the short sale approval letter as a way to detect fraud on the short sale I would be surprised.  I believe they are doing it for their own interest -- to make sure they are not wasting effort.  Yes, if they see a reason for suspicion they will probably report it.  But, most short sale lenders review estimated HUDs prior to close and final HUDs for this very same reason -- after all that is THEIR fiduciary duty -- and many are doing audits after the fact on these files.  I truly believe mortgage lenders are doing this in an attempt to limit risk on files that won't close.  And wouldn't it be great if we all could insulate ourselves from files that don't close?  Yes, but then it wouldn't be real estate, and it certainly wouldn't be real estate right now in the Sand States.  We have to accept risk in this industry, why don't they?  These files are tough enough to close without the buyer's lender trying to arm chair quarterback the short sale.

 

We should all be thinking about our clients privacy and what we are disclosing.  Personally, I've always thought sending over a copy of a deposit check was over the top, and no one thinks much of it in my local area.  You can do more damage more easily with a checking account number, name, address and phone number than a mortgage loan number.  A garden variety crook can go to town with all that info. 

 

I do have an issue with BofA asking buyers for the first five digits of their social security number.  The informal convention has always been to ask for the last four digits along with a name to identify people without requiring the whole number.  To the point that people are accustomed to handing out the last four digits of their SSN like candy and aren't very guarded about it at all.  Well, what do you have when you add the first five digits with the last four digits?  Well you have all nine digits.  Ridiculous.  But hey, I guess I think too much.  

 

And I can't tell you how many times I've been called "unprofessional" for refusing to submit to policies that violate the law, and in particular privacy.  When I hear that word I know we are getting somewhere.  The fact is most people are just doing what they are told or they are so exhausted by what the lenders are doing in short sale transactions that they are not taking the time and standing back to think about what they are doing.  Reading a post like this is a relief and confirmation to some and a wake up call to others.  Very appropriate discussion.

 


Bryant Tutas said:

I think what we have learned here thus far is:

  1. Be sure to remove SSNs
  2. I would also remove seller cash incentives
  3. Be sure your seller has authorized in writing that it's OK to release their approval.
  4. Only release it if it is requested.
  5. Be sure the seller has approved the short sale terms and conditions before doing anything with the approval letter.

Anything else?

 

Permalink Reply by Rita Legan CDPE (440) 227-4461 on July 3, 2011 at 6:58am
I run in to this all the time Travis. As you know that Short Sale Approval letter contains confidential information of the seller's. If there is no way around it, I have the seller sign off on this and then at closing submit this addendum only to the title company.

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