Lender Says They Need lien release from 2nd BEFORE they will negotiate short sale -HELP

Currently working an FHA short sale with Wells Fargo in 1st position and 5/3rd bank in 2nd. I'm being told by Wells...over and over again, that they need a lien release from the 2nd Before they will go forward with the short sale.  They keep insisting that this is an FHA requirement to process a short sale. I have never heard of this before and the lender in 2nd isn't thru working the short sale process. Wells has had this file since February and we aren't getting anywhere - I've escalated to a manger at Wells but no results.  Anyone have any advice?

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Replies to This Discussion

Permalink Reply by Celeste ODea on May 17, 2013 at 5:29pm

Keep working on the 2nd till you get an approval letter, then submit it to the 1st and the file will move quicker and more smoothly.  If you know what the 2nd will accept as a payoff, it needs to be on the HUD-1 when you submit it to the 1st.  All liens do have to be released on FHA short sales before you can get the ATP (Approval to Participate).  Is the 2nd an equity loan?  I have an FHA short sale with 12 liens and they all have to be Released and Recorded!!  

Permalink Reply by Shawn Wilkinson on May 18, 2013 at 3:21am

It's definitely not a requirement. Sometimes the processors get confused. What they need is a pay-off statement showing the balance and a letter stating the the lien is being negotiated. FHA doesn't care about the other liens or how they are paid, they offer $2500 and that is it. 

Permalink Reply by Kevin - Greenville, SC on May 18, 2013 at 6:31am

  1. Condition of Title

All properties sold under the PFS Program must have marketable title. Prior to execution of Form HUD-90045 (Approval to Participate) the mortgagee must obtain a title search or preliminary report verifying that the title is not impaired with un-resolvable title problems or with junior liens that cannot be discharged as permitted by HUD. If the mortgagee determines that these issues can be resolved, the mortgagor may be accepted into the PFS Program and resolution of said issues may be pursued while the property is being marketed.

Source: Mortgagee Letter 2008-43

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