Two Separate Huds
I am doing an ASC 1st and HFC 2nd. We have the first hud to ASC with a payout of $13,000 which is 10% of the loan and the HUD to HFC with $8,000.
A collegue told me on the second HUD I should only send in what HFC will get and not allow them to see what ASC is getting.
Have you done this?
Replies to This Discussion
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Permalink Reply by Kimberley Kelly on
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What a great exchange once again. I had not even heard of two HUD's. My Escrow officer would never even go there with me and we do lots of Shorts. I just figure, you put it out there so they both know. If the deal will NOT go forward, then it will not..same as any sale. Don't hide anything just to get a sale..no,no,no...
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Permalink Reply by Rod Herman on
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I agree with the comments so far. I think that submitting two different HUDs even initially is crossing over that fraud line. It's essentially the same as someone who submits one tax return to the IRS and then gives a doctored-up version to their lender. When you give 2 different HUDs, you're intentionally giving inaccurate information to both lenders, which in my book is fraud. And if you don't keep them straight and inadvertently send the wrong one to the wrong lender, then what happens? Not only do you end up with egg on your face, but you might also be inviting a visit from the FBI.
I give both lenders the same est HUD from the get-go and negotiate up or down with each lender from there.
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Permalink Reply by Jesse D. Moore on
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I think I understand you question and I think that you have to show the second what the first is getting just to show the second where the money is going at all. Otherwise they're going to wonder why they aren't getting more.
As for everyone that's trying to put the fear of God in you about doing two HUDs, I think you're doing the right thing. You are in the preliminary stages, and you're trying to get the 1st and 2nd to agree to a number. What's wrong with telling the first that you're giving the second 10% and telling the second that they're only getting $3,000, knowing that the 1st will counter down and the 2nd will counter up? As long as those funds go to either the 1st or the 2nd and to no other party, and as long as the final HUD reflects the same thing to both lenders, there is nothing wrong with the practice, and it will speed up the timeframe tremendously and gives you a better chance of keeping a buyer.
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Permalink Reply by ElizabethWeintraub00697006LyonRE on
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Ah, I see what you're getting at. Yes, this is OK. In fact, I have used the same technique. I send one HUD to the first lender asking them to pay more than I show to the second lender. I send a second HUD to the second lender showing them getting less. Then I negotiate between the two banks to bring them to a happy settlement somewhere (hopefully) in the middle. When the final HUD is issued, it's the same HUD to both banks. It's done all the time.
Elizabeth Weintraub
Sacramento Short Sale Agent
Broker-Associate #00697006
Lyon Real Estate
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Permalink Reply by Michael Schneider on
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Yes, Jesse and Smitty, agreed.
If I am dealing with two parties in a negotiation, I can can say to one: Please give me $13,000, and to the other, Please accept $8000. Or, similary: Would you pay $13,000, and to the other, Would you accept $8000.
Nothing wrong with this whatsoever, in my opinion.
It may be preferable in some circumstances, depending on the parties, to say: Would each of you agree to $10,000?
I have specific Investors where, based on prior experience, I may ask for consideration from the 1st that exceeds my initial offer to the 2nd, prior to closing. If someone wants to suggest this is illegal or fraud or unethical, do please identify for us the statute that supports this.
I have no obligation, legal or ethical, to disclose full information about my conversations with one party to the other party. To suggest this would probably preclude each of us from vitually every meaning conversation involving three parties, and probably violate confidentiality agreements underlying most relationships.
Next, someone will be saying: You can't call the 2nd, unless you conference in the1st. It's unethical!
I think some of you are confusing the notion of a closing settlement sheet under RESPA, used to fully reflect the transaction, versus a statement made to a creditor to establish terms for release of a lien prior to a closing. Just because that statement may be made on a HUD1 form does not make it subject to RESPA, in my non-attorney opinion.
If my negotiator goes in with a disclose, disclose, disclose approach in all circumstances, I think I would not want that person negotiating on my behalf.
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Permalink Reply by Vanessa Calhoun on
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I think a lot of people are missing the point that the two HUDs are PRELIMINARY and not FINAL. Very seldom have my preliminary HUD on a single lien deal has exactly matched the final HUD. IMO, I think a lot of people are misinterpreting to whom the fiduciary duty is due.
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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on
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RESPA
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A very lively discussion and I can see the desire to provide 2 HUDs from a negotiating standpoint. However, let's not forget what a HUD is and who its prepared by. The reason a lender asks for a HUD rather than an agent-prepared net sheet is because it wants to see all terms of the accepted offer as represented by the neutral 3rd party -- the escrow officer. The lender wants to see the true picture of what they're being asked to do: with full documentation to support it.
That's why they ask to see bank statements, pay stubs, tax returns, etc. They want to see who's paying what, who owes what and who's getting what. Do you only give them part of the bank statements or leave out pertinent pages of a tax return so as not to weaken your negotiating your position? I hope not. So then why would you ask your escrow officer to willfully provide 2 different versions of the estimated closing statement when in truth only one scenario really exists in your mind.
The 2 lenders don't talk with each other. You are their conduit to receiving truthful and accurate information so they can make their decisions. If you willfully manipulate the numbers without letting each party of interest know what you're doing, to me that smells like fraud.
In my opinion, it's far better to provide the same scenario to both lenders and then act as the intermediary by negotiating up or down with each of them independently. If your initial HUD shows the 1st getting $200,000 and the 2nd getting $5,000, true the 1st might only offer $3,000 and yes, the 2nd might want $12,000. But you negotiate from there and try to provide financially convincing arguments why the numbers on your HUD makes the most sense to each lender. Or you later amend the HUD and provide copies to both lenders as part of the negotiation process. That way everything's above-board with both lenders. AND, you're not asking your escrow officer to be a party to a potentially fraudulent activity.
At least that's my take. I'd love to hear from a legal mind, for there definitely seems to be plenty of debate on this issue, even in my own office.
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The approach that Elizabeth is describing is just fine, in my opinion.
This aspect of the process is debt settlement or restructuring, not real estate sales, not property conveyance.
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Permalink Reply by Andy Morris on
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Stephanie,
I wasn't able to view the article you sited.
In negotiations there is no accepted hud. It is one thing to have two different huds at close. But when all you have is an estimate and all a hud represents is the details of an offer... and you are making one offer to a the first mortgage and a different to the 2nd... Then there is nothing wrong with sending the first lender different hud at the offer submissoin and negotiation stages. When you are falsifying huds. Or misrepresenting something in a hud. Then this is deceptive and wrong. When you are sending a final hud and representing it as such that is not fully representative of a transactiont then that is wrong. Multiple short sale lenders should eventually agree one hud before a short sale closes and that HUD should represent all parts of the transaction including anything being brought to the table by the buyer.
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Permalink Reply by The Negotiator on
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I like it and do it every time because it puts you in a position of strength. I would have started HFC with 3k, however.
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We are deceiving the banks? HA! I'm sure you totally agree and understand the banks not telling us the TRUE BPO value they have on record. The banks lie and deceive us ALL DAY LONG!
Thom Colby said:
Smitty,
By providing two different HUDs to two different lenders for the same transaction, you are deceiving both lenders. Further you are creating a worse situation for both the borrower and you. What happens when ASC (Wells) comes back to you and says - nope, only $3,000 to the 2nd and HFC comes back and says we want $11,000 at a minumum?
Now what do you do - "come clean" and tell both lenders you deceived them and now you want to do it right? Recovering your credibility will be difficult and the lenders may likely deny your short sale. You are very likely involved in Fraudulent Activity.
I strongly suggest you contact your E&O Carrier and your Attorney, this transaction (and you) will likely not be covered by your company's E&O Policy and will VERY LIKELY NEED your Attorney VERY SOON.
Thom Colby
Broker
Newport Beach CA
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