Has anyone dealt with a problem like this? We were close to getting an approval, then it came to light the seller had rented the property for 18 months and at least for about a year or so, not sent the money to the bank. Instead of the expected approval we got this:

As your creditor, we have reviewed the information you provided in consideration of a loss mitigation solution for your mortgage loan. Unfortunately, we regret that there are no options available for you at this time. The reasons for our decision are listed below:

Borrower rented property for longer than 18 months.

Borrower's reason for initially vacating property was not due to a hardship.

Borrower collected rent money, did not forward said money to mortgage company.

In addition, the agent was directed by HUD to sent the following:

"If the mortgagor has accepted rent money, and did not forward the rent

money to Flagstar, HUD will pursue legal action against the mortgager as

this is considered theft of a federal debt the mortgagor owes.  HUD takes

issues such as these, very seriously."

     In his hardship letter my seller details how a realtor sold him on the "perfect" home assuring him she would have no problem selling his. Didn't happen and he finally quit making payments, leading to the FC issues. He's now in some deep water and I'm considering sending the following to see if anything can yet be done: (Sorry for the length of this post. Just looks like a big rock to me and client)

    To FS agent:      If you will render me you patience, I would like to propose the following as a solution to the issue at hand.

         As he delineated in his hardship letter, this issue did not come about by any malicious or criminal intent or activity but wayward advice by licensed agents. Mistakes have been made, for which solutions are now being sought.

        I have seen many a judge order financial situations to another room with an arbitrator to work out settlements amenable to all. Of the time the house was rented, only the last 8 months, when payments were stopped were payments continued to Mr. ___s account by the property management company.

              If those can be recovered at the closing by a contribution from ___, can the file be reopened as a settlement offer? I have counseled with Pacifidebt, a debt settlement firm that deals with such debt management issues large and small. They indicated an interest in setting up an account with Mr. ___ to resolve any residual amounts not immediately available in cash, setting up a disbursement account in lieu of garnishments. Please provide your counsel on the matter. (I have not sent this yet. Just trying not to throw in the towel)

         If anybody here with SSSSs has a word of wisdom on this one please send it...