August 6th, 2011 at 11:40 pm
Specifically, and as you are undoubtedly aware, there are many short sales that were in the process of approval at the time SB 458 passed, but which have not yet actually closed. In many of those cases, the bank’s approval was conditioned upon the seller bringing in money to close the deal or signing a promissory note in the bank’s favor. Of course, in deals covered by SB 458, such additional contributions are not allowed. So, how should those deals be handled now? We are hearing from escrow that many agents are telling them to ignore the extra money or note requirement, and just close the deal without it. Our escrow officers are specifically being told that, since the law prohibits the collection of these monies, no discussion with the bank is necessary. Rather, we can just close and the bank will not be allowed to pursue the seller for any more money.
While this position may ultimately be right, please be aware that this is not how we should proceed. Rather, the bank should be contacted and a new approval letter and HUD should be received. We cannot ignore the lender and assume they will do the right thing. And, we cannot assume the bank knows the law and risk having a lawsuit, even a bad one, filed against our client. So contact the negotiator on your short sales and make sure they understand how SB 458 changes things for them. When you get a new approval and HUD with no extra money or note on it, you can proceed to close your escrow without any risk to your seller. Of course, that is always our goal.
As always, feel free to contact us with any questions you may have.
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