We are trying to close a short sale where the buyer is paying extra money to the 2nd lender. The lender making the loan will not send docs to title until the First Lender (Suntrust) either changes their approval letter to acknowledge the exact payment going to the 2nd lender from the buyer or signs and has notarized a document outlining the details of this payment from the buyer.

Suntrust says they will not sign the document but will sign and approve the HUD1. The lender making the loan will not accept just a signed HUD1. They have said that Fannie Mae recently came out with a new Guideline saying they will not buy any loans where the buyer is paying money to the 2nd lender. This payment will be documented on the HUD1 showing it is coming from the buyer.

I welcome any input on this issue.