Two Separate Huds
I am doing an ASC 1st and HFC 2nd. We have the first hud to ASC with a payout of $13,000 which is 10% of the loan and the HUD to HFC with $8,000.
A collegue told me on the second HUD I should only send in what HFC will get and not allow them to see what ASC is getting.
Have you done this?
Replies to This Discussion
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Permalink Reply by Stephanie Hart CA 310-930-2342 on
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Totally illegal... they just published an article about that in the Realtor mag... I will try to link it. It is considered bank fraud and the FBI is targeting short sale agents for exactly that. All banks need to know what is happening.. disclose, disclose, disclose... It is better to not close a deal than to end up with charges against you.http://http://www.onlinedigitalpubs.com/publication/?i=63766 page 19 talks directly about that...
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Permalink Reply by Smitty on
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Hi Stephanie,
The link doesn't work. Can you try again?
I'm not sure what is illegal about two separate HUDS. I have a lawyer prepare my HUDS so I guess I'm trying to clarify what is illegal. Is the fact that we are not telling the second lender what the first lender is getting the part that is illegal? Does the second lender have a right to know what the first is getting?
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great article... illegal may ahve been overstepping... unethical, yes:)
http://www.car.org/newsstand/crem/current-issue/ click on current issue go to page 19...
it states:
"Sometimes they’ll say, “Well, we need to only give the seller-side HUD to the
lender. They don’t need to know what the buyer is contributing toward the sale.” And I would argue that they do have a
right and a desire to see that. This manipulation of the HUDs and this kind of surreptitious activity around the title and
escrow are a huge red fl ag. Buyers are often asked to reduce their offer to a lower number, add a credit so
that the short sale negotiator can be paid, or the seller can have a little money to walk away or some money can be designated to- ward the subordinate lien holders, all without the senior lien holder being advised.
Outside of escrow, that’s another red flag."
Nothing happens outside of escrow in the
world of real estate, or it shouldn’t.
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realtor.pdf, 7.7 MB
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Permalink Reply by Joseph Alfe on
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This is not possible in a short sale. We cannot give buyer side info on prelim HUD's because at that stage, we do not have buyer side info. We do not get buyer info until they are CTC. We are also not responsible for buyer info, only seller info, which should be accurate or reasonable and customary. Buyer side info is disclosed to all parties with the final HUD at closing.
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BTW, Im an escrow state (CA) but when I was advised to do exactly what you are talking about... I told my escrow officer (who owns the company) and she said no WAY would they ever do 2 huds. That they could get into so much trouble for it for fraud. At the close of escrow you will most likely also be asked to sign a disc from banks (1TD) that usually has wording that says "no other money is being exchanged outside of the escrow that is not being represented on approved hud".
Smitty said:Hi Stephanie,
The link doesn't work. Can you try again?
I'm not sure what is illegal about two separate HUDS. I have a lawyer prepare my HUDS so I guess I'm trying to clarify what is illegal. Is the fact that we are not telling the second lender what the first lender is getting the part that is illegal? Does the second lender have a right to know what the first is getting?
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Stephanie, I don't think you are understanding what I'm asking.
We have two PRELIMINARY HUDS. We are showing the first lien holder that we want $13,000 to go to the second in hopes they will approve it. We have a second PRELIMINARY HUD (and marked as so) showing the second lender that we are asking the first to pay them $8000.
If the second lien holder demands more money, we MAY have an opportunity to get it from the first. When the FINAL HUD is generated, both amounts match and it's likely we've come to agreement with both lien holders what the second will get.
I read the article and showing the seller's side only I guess is what you are referring too. I don't believe it is illegal to show only the sellers side. My primary question is it ok to show just the amount the second lender is getting. I get that there are RED FLAGS and fraud, but a red flag doesn't mean there is fraud. My duty is to my seller, not either of the lenders. I want to ensure my property closes.
Now my question was, does the second lien holder have a right to know WHAT amount the first is getting for the sale? My collegue said she only shows the second what they are getting and that they don't need to know what the first is getting. I've never heard of this nor done it, so I'm trying to find out if others have.
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Ahhhh you are only submitting not getting final hud approval:) My escrow has to do so many huds during approval process often times the ones the 1st and 2nd have don't match. But they always do at approval and even my prelim-huds show what the 1st and 2nd are getting. I'd rather know up front if the 1st and 2nd are going to not agree to terms than at final approval 24 hours before close. On my last few deals the 1st wouldn't submit until I could show the 2nds approval (because I had previous approval from 1st for 3 months with no approval from 2nd). Then I even had one where the 2nd required seeing the approval from the 1st before final hud approval. Never know what they will ask for. I had one HUD blow up in my face at close that took 3 weeks to get both 1st and 2nd to agree to (buyers docs expired so did loan lock). I now make sure everyone knows what is happening constantly and ask "are we going to have to resubmit to get approval on this". Everyone has thier own style:)
Best of luck to you!
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Permalink Reply by Bryant Tutas on
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Smitty. I have never seen the value in submitting 2 different pre-lim HUDs. I prefer to lay out the deal as it truly is to both lenders and then negotiate the terms we need to get it closed. No tricks needed. Just hard negotiations.
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Permalink Reply by Elena Pavlova-Nott on
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I can understand why 2 HUDs were generated. I have approval from the 2nd where the buyer and I had to contribute to get. The 1st now will not approve because they see our contribution to the 2nd and don't want them to get more. Now I am stuck with 2nd approval and refusal from the 1st. Go figure!
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The only time it may be necessary is if you are dealing with a hardnosed 2nd lender who will tend to demand much more than what is reasonable. The strategy is that you show a large payoff to the second on the HUD going to the first, to "plant the seed" that they may need a bigger payoff. The second lender gets a HUD with a low payoff to do the same. Through negotiations you meet somewhere in the middle. This is less effective now with the new Govt guidelines. Even if its not a Govt loan, lenders tend to use these guidelines of how much to pay to a second.
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Permalink Reply by Thomas McCombs on
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Things are complicated enough without adding another layer of variable detail.
Once the final HUD come out, I can imagine all kinds of questions from one or both lenders about the differences between the preliminary HUD they saw earlier and the Final HUD they see now.
Check with your E&O carrier about this.
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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on
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Smitty,
By providing two different HUDs to two different lenders for the same transaction, you are deceiving both lenders. Further you are creating a worse situation for both the borrower and you. What happens when ASC (Wells) comes back to you and says - nope, only $3,000 to the 2nd and HFC comes back and says we want $11,000 at a minumum?
Now what do you do - "come clean" and tell both lenders you deceived them and now you want to do it right? Recovering your credibility will be difficult and the lenders may likely deny your short sale. You are very likely involved in Fraudulent Activity.
I strongly suggest you contact your E&O Carrier and your Attorney, this transaction (and you) will likely not be covered by your company's E&O Policy and will VERY LIKELY NEED your Attorney VERY SOON.
Thom Colby
Broker
Newport Beach CA
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