Wells Fargo requires 2nd lien holder (Third Federal) to waive deficiency & they refuse!

Fannie Mae's new streamlined process yielded us a quick approval on the first lien w/Wells Fargo:  no cash contribution, no promissory note, & waived deficiency.  Wells Fargo/Fannie is requiring the same approval conditions from 2nd lien holder, Third Federal, who refuses.  Third Federal will approve short sale but only w/a promissory note; will not waive deficiency.  Our buyer can close any day but neither lender will budge on their requirements.  Any input would be much appreciated...Thank you!

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Fannie Mae has admitted to playing dirty - adding 20% to BPO's then they foreclose and offer the property as REO - with a real **bonus** for the buyer - the buyer doesn't need to get an appraisal to then buy the property with a new Fannie Mae loan (at **only** 20% ABOVE market value). Sweet people, eh? Surprised that they streamline short sales by getting them killed?

The only thing I can think of is to settle with the 2nd then go with the short sale - no more 2nd. Other than that, you have a federal bailout scum outfit with no oversight. How do you fight that?

Darlene,

If the money going towards the 2nd doesn't come from Wells Fargo/Fannie Mae, then the 2nd is not required per FNMA's guidelines to waive the deficiency.

At least that's the way I read it.

 Subordinate Lien Payments 

If the subordinate lienholder will not release its lien for $6,000 (or a lesser amount if there are other subordinate lienholders), can the borrower or another party contribute to the lien release payment? 

If the subordinate lienholder is accepting the $6,000 (or a lesser amount if the $6,000 is being divided among more than one lienholder) in exchange for a release of its lien, it must not require or accept additional funds from the borrower, real estate agent(s), buyer, or other party to the short sale transaction. When funds are offered from the short sale proceeds to satisfy a subordinate lien, the intent is to obtain a complete settlement of the lien using those funds alone. 

Correct, I didn't mention the 6k offered to the 2nd in exchange for the lien release w/no other contribution & waiver of deficiency.  Third Federal feels that the borrower has the ability to repay (despite very high debt ratio and no savings), but will not disclose their 'internal guidelines'/calculations for making that determination. We are submitting updated numbers/statements since priors were from nearly 60 days ago; anyone have a contact at Third Federal for a higher level review??  Thank you!

I have run up against this issue now twice in the past six months.  Most recently with BMO Harris who has about 20,000 second lien positions behind FNMA/FHLMC here in Illinois (so this will be a big problem soon...):

The FNMA and FHLMC guidelines condition the allocation of sales proceeds to junior lienholders on the junior lienholder waiving the deficiency.  If the junior refuses to waive the deficiency the short sale cannot proceed with FNMA or FHLMC

-UNLESS-

The junior waives the requirement of payment from the proceeds.  In other words, if the junior takes $0 proceeds, then they can take any promissory note/deficiency/principal reduction payment they would like and FNMA/FHLMC have nothing to say on the issue.  This was confirmed by Wells and Fannie Mae regional counsel

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