2nd lien holders under investigation
Regulators and law makers are currently investigating large bank 2nd lien holders illegally demanding money from real estate agents. In a short sale the 1st lien holder gets paid first and in many cases there are not enough funds left from the sale to pay the 2nd lien holder. The 2nd lien holder negotiates a fee with the 1st lien holder which could be as little as $1000. According to CNBC 2nd lien holders are separately demanding money from the seller and buyer’s agents. They are asking for money outside of escrow, off the settlement statement and away from the 1st lien holder which makes this fraudulent. If you are an agent be aware of this illegal practice.
On January 15th 2010 HUD Secretary Shaun Donovan announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.
A press release from HUD states
“In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.”
This waiver is good for one year and has the following conditions
1. All transactions must be arms length
2. Sales price cannot be more than 20% above the seller’s acquisition cost
3. Waiver will only apply to forward mortgages and does not apply to HECM (reverse mortgages)
