Comment

Comment by Anna Mackey SDHS on December 18, 2009 at 6:58pm

Cathy, when the buyer contributes funds to the 2nd lien, it is always reflected on the final HUD. Since the 1st lien holder always requires a final HUD approval 24-72 hrs prior to closing, I don't see where the problem is?

Comment by Tracy Howard on December 18, 2009 at 4:40pm

Great information,Cathy. Thanks a bunch!!

Comment by Cathy McAlister on December 18, 2009 at 4:00pm

I realize I need to clarify a bit more. The majority of the situations involved payment of more funds to the 2nd lienholder than was allowed by the first and the 1st lender was unaware of that information until after close of escrow. Now, approval of that additional amount must go back through the first before you can close the transaction - at least that is the approach this company will be taking.

Comment by Cathy McAlister on December 18, 2009 at 3:53pm

From what I understand, (and I hope to obtain a copy of the letter which was issued this week), as it was read to me by a senior escrow officer here in California, it strictly related to FNMA payoffs, and it was the position that it violated FNMA guidelines. Until I see a copy of it, that is the most I can give you. But the fear and new internal requirements for closing at this company have just been toughened up dramatically. It created quite a challenge for our most recent closing.

Even with a BofA approval letter dated at Thanksgiving, and the fact that we were complying exactly with the terms of that letter - the approval letter had a comment that they must review the settlement statement within 72 hours prior to close of escrow. It took over a week to get the final approvals. The title company absolutely, positively would not close under any circumstances without the secondary approval letter. Period.

Moving buyer's money into a transaction to bridge the gap between the first and 2nd has been going on all over the nation. Over the last year we have moved into a position of much more transparency in these situations. The affidavits now being required in short sales make it clear that we should be observant of all changes and potential consequences. Our practice is primarily short sales and we are committed to staying with it. The need of the public is too great to ignore.

Comment by Kent Dills on December 18, 2009 at 2:05pm

Cathy, what was the legal justification for the judgement? It's obviously not clear or even something that would have been anticipated or the title companies wouldn't be doing this exact thing all across the country every day!

Comment by Lynn Pineda on December 18, 2009 at 1:55pm

Cathy, you're right heads up.

Comment by Cathy McAlister on December 18, 2009 at 1:41pm

Some of you may know that in my previous life I work for the title insurance/closing industry and I still have my contacts. I have heard that one of the two largest insurers is going to pay out over $1mil in a lost lawsuit over participating in the closing of certain short sale transactions. As I understand the information, these are FNMA loans, in which there was a discrepancy in the amount to settle the 2nds being above the amounts allowed from the first. The buyer's were coming in with the additional money to pay and it appeared on the final huds. Whether is was 2K to 5K or whatever, several lenders banded together to sue this title company. The judge ruled in the lenders behalf and the settlement is not only for the additional amounts paid - but the amounts remaining on the loans. I hope to have more information at a later time. We have been making sure to go back to any first lender for approval of additionally contributed funds - but this was not the case in many short sales over the last five years. Things are changing rapidly. Heads up.

Comment by Tracy Howard on December 14, 2009 at 5:06pm

Thanks, Steele and Bryant! That's what's got me worried -- more REOs. :)

Comment by Steele V. Propp on December 14, 2009 at 1:20pm

Word has it from several sources that the REO market is shifting potential inventory into next year. Starting the foreclosure process now would do that in most areas.

I am just hoping that they don't turn on the firehose with REOs.

Comment by Bryant Tutas on December 14, 2009 at 1:05pm

Tracy, Probably end of the year quotas. I have also received more short sale approvals over the last couple of weeks.

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