Lenders and that whole "Arm's Length" thing ...

I feel like I've learned a lot since joining this site and am amazed by how much good knowledge is available for free.  Now I have a question of my own ... I'm working with a local lender (Colombo Bank) who has said that they don't care who buys the short sale as long as they get their money.  My seller's son wanted to buy the house at the outset of the listing but I told him it wouldn't be allowed (just because that's what my instinct told me).  Turns out my seller spoke with the negotiator today and told me that they would allow the son to buy the house ... now my question ... has anyone heard of a situation where this would be allowed by the buyer's lender?  It seems like a lost cause to me but I thought I would at least ask ... any help is most appreciated!

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Permalink Reply by Bryant Tutas on October 30, 2011 at 12:25am

xxx

Permalink Reply by SE Davis on October 30, 2011 at 2:00am

The interpretative definition of Arms Length is mortgage servicer, lender, PMI-MIP and investor dependent.

You can ask this question to several parties on separate transactions and get a different but correct answer from any one of them.

 

Permalink Reply by Melba Diaz on October 30, 2011 at 6:18am

good am,,

 

did not catched your name,,   but my suggestion to you is that you make sure and call CHASE again and ask them yourself and le tthem know that your seller just informed you that it was okay for the son to buy the home.   You will be surprise of how they really work..   it they say yes,, Please let me know.    We all have family members that want to buy the Short Sales from each other, right?   I will call CHASE myself on Monday..   Make sure and cover your self, it's not worth loosing your lic or getting your seller(s)  or buyers into a law sue,  right? An Arms Length Transaction should be what it is. Always confirm and get a second opinion. good luck to you.

 

 

Permalink Reply by Mike Mondy on October 30, 2011 at 12:17pm

I'm not sure what you're talking about Melba but thanks for participating in the conversation.  Please feel free to call Chase ... I will not because I am not dealing with them.  Thanks for the advice but my license is safe.

Permalink Reply by Rodney Mason on October 30, 2011 at 2:40pm

It will really depend on the type of financing the borrower is obtaining.  For an FHA mortgage, HUD refers to non-arms length as "Identity of Interest".  In a primary residence purchase, the maximum LTV is 85%.  There are only a few instances where exceptions to this are allowed to go to maximum financing of 96.5%. 

Any transaction where the buyer and seller are related will cause an extra level of quality control review as well.  There is a lot of potential for fraud in this area.

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