Here is a great article in the Wall Street Journal explaining the issues when there are 2 lenders involved with a short sale:
This is one of the biggest challenges when doing a short sale. The lenders need to learn to work together. No one benefits if the house goes into foreclosure instead of a successful short sale. One possible solution in this situation is for the buyer to contribute the difference if the seller is unable to. But we have also had experiences where the 1st lien holder will not allow this and then you are at a standstill between the two lenders.
Steve Capen & Associates - Keller Williams Realty