Freddie Mac is "disqualifying" my buyer because they knew the loan payoff!

This is a short sale with BB&T as the servicer and Freddie Mac as the investor.  The issue on this file started out as a perceived arms length violation.  The borrower on the loan is deceased.  Her son is the executor.  The buyer and the son are very good friends and they share a house together.  BB&T thought they were boyfriend/ girlfriend and thus the transaction was not arms length.

Thinking that BB&T had some odd definition of an arms length transaction, I asked for a form with their definition of an arms length transaction.  I had to go through two supervisors before I finally received the affidavit!  Standard Arms Length Affidavit; no familial relationship, no business relationship, no shared business interests.  My buyer and seller met the requirement, so we had the form signed and sent it to BB&T.  BB&T sent it to Freddie Mac for approval.

This is where it gets really interesting.  I followed up with BB&T several days later to check on the status of the form and to see if the file had been reopened.  The supervisor at BB&T told me that Freddie Mac was disqualifying my buyer due to unfair knowledge!  They were turning away my buyer because she knew the payoff of the loan! 

Now this is rediculous to me.  Everyone who is looking at buying a house that is a short sale knows at the very least that their offer is less than the balance of the loan.  Most of the buyers I have worked with over the last two years know what the payoff is.  Maybe not down to the penny or dollar, but at least a rough idea.

I have sent an email to Freddie Mac through their borrower help email.  Is there anything else that I can do to escalate this?  It seems like such a ludicrous reason for a denial.  Any other input that would help get this file reviewed would be appreciated.  This is my first file with Freddie Mac.

Thank you.

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Well, I haven't heard such a bogus reason in a long time. I'm guessing that you don't have that in writing. I think Freddie is goofy - from time to time, I see them do things that hurt everyone - investor, buyer, seller, etc. all but the bank. But, that is absurd - like denying the deal because they know the national debt.

When I have run into really strange "reasons" from BofA in the past, chasing them down, I have found them to be lies because the bank doesn't want to have to defend their real reason. Maybe you have the same thing. Their database says that buyer/seller are related, therefore come up with anything that won't make anyone want to sue them to explain their algorithms for defining related, etc.

I would not waste time but get Freddie on the phone and make them tell you that this is their real guideline, etc. I think you'll find it is bull by the bank.

After many calls and getting pretty much nowhere with Freddie Mac, I started calling BB&T again.  First to get a written letter with the denial on it, then to get the real reason for the denial.  It turns out they are interpretting the transaction as an arms length violation because the buyer is listed on the death certificate of the borrower as the informant. 

Basically, the next of kin could not handle the funeral arrangements, etc, so he turned to a good friend, who is the buyer, and gave her authorization to handle all the arrangements.  For her good nature she was listed on the death certificate as the informant and thus the issues with the short sale. 

I still do not see how this is an arms length violation but I went through several supervisors at BB&T before they just shut me down saying that it is their interpretation that it is a violation and that it is in their best interests to protect the investor when reviewing a short sale. 

The buyer is taking the file to an attorney to see if she can pursue this any further.  Didn't know if anyone else might have some input or any way around this mess.

Thanks.

Which part of the FM addendum did they specifically say was a violation and why? "parties who are independent of one another, and unrelated by family, marriage or commercial enterprise, other than the purchase and sale of the mortgaged premises between the Buyer(s) and the Seller(s) that is the specific subject of the proposed Short Sale."

I have little regard for Freddie - they seem to be political pinheads looking for Fed handouts and ignoring their duties to their real investors the taxpayers. So, their uncaring lack of position is not a surprise, unfortunately.  They really should step up and tell the bank what they mean.

I suspect you have to go political on them. Go as high up in the bank as possible, let them know that you are going to the TV News to complain that BB&T does what it can to destroy short sales so that they will continue getting monthly maintenance money from the investors who don't bother to watch how the servicer is "protecting" their investment. That the bank is claiming that because this guy helped with the funeral, the bank contends that he is family or married to the dead person or conducting a commercial business with the dead. I think you'll need to focus on bringing to light that the bank is killing short sales out of greed while making up rules because the investor isn't watching them closely enough. And that they are using the kindness of this now buyer to punish him. And that they refuse to provide exactly how this is a conflict, etc.

I think you need to show how you are going to embarrass them and give them a public black eye. Then you are going to send the segment to Freddie, your (named) congressmen and ask them why they let the bank do these things to keep bad loans rather than maximize the money back to the investor the tax payer - just to continue getting their lucrative monthly maintenance money from the taxpayer-investor - forever.

Sorry that Freddie doesn't care - it's just another wrinkle in what is wrong with this economy.

Please let us know where this goes - sorry....

The real problem may have been that the property was not offered on the open market ..?  Sometimes they have funny ways of saying things.

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