January 1, 2012 has come and gone and yet Freddie Mac servicers are still using the obsolete and highly objectionable Short Sale Affidavit. I have been keeping Active Rain readers up to date on developments regarding the infamous Short Sale Affidavit – see SHORT SALE ARMS LENGTH AFFIDAVIT MAJOR REVISION NEGOTIATED TODAY, and STAND-OFF WITH FREDDIE MAC OVER SHORT SALE ADDENDUM - ALTA GETS INVOLVED, and Freddie Mac Short Sale Addendum - Item #13 - I DON'T THINK SO!!
Today I received an email from Bank of America demanding that the attached documents be signed WITHOUT ANY CHANGES. The problem is that the Freddie Mac Short Sale Affidavit that was attached was without the required changes for short sales approved beginning January 1, 2012. The significant problem with the Freddie Mac Short Sale Affidavit was that it required all of the persons signing the affidavit to indemnify Freddie Mac for any false statements made by any of the other parties. Title agents, real estate agents and real estate brokers, and short sale facilitators (whatever that means) were all on the hook, along with the buyer and seller. Since there was really no exchange of knowledge between many of the parties, this indemnification to the lender by potentially everyone did not sit well with anyone who bothered to read the document and think about the financial exposure signing it would bring.
The changes are expressed in Freddie Mac Bulletin 2011-23 where it says on page 3:
We are updating Chapter B65 to provide additional guidance with respect to Freddie Mac’s short payoff requirements. Specifically, we are:
■ Providing that short sale negotiation fees must not be deducted from the proceeds of the sale or charged to the Borrower
■ Clarifying that all amounts paid to any party in connection with the short payoff transaction, including payments made to holders of other liens on the Mortgaged Premises, must be accurately reflected on the HUD-1 Settlement Statement and the amount and recipient of the payments must be clearly identified
■ Allowing a Borrower to receive a payment upon the sale of the Mortgaged Premises only if the payment is offered by the Servicer, approved by Freddie Mac, and reflected on the HUD-1 Settlement Statement
■ Revising our short sale affidavit requirements to clarify that statements made in the affidavit are made to the best of each signatory’s knowledge and belief and that each signatory is liable for his or her negligent or intentional misrepresentations, but not those of other signatories to the affidavit.
We are also providing other additional guidance with respect to the short sale affidavit, including the information that must be included in the affidavit.
The above changes are effective for short payoffs approved pursuant to Chapter B65 on and after January 1, 2012. However, Servicers are encouraged to incorporate these changes immediately.
The new form must contain the new language that the statements are “made to the best of each signatory’s knowledge and belief,” and that each signatory is only liable for its own negligence or lies – but not those of the other (potential rascals) signing the affidavit. Ok, it does not say just that – but that is what it means.
Can you imagine that in the past you may have been guaranteeing the truth of people you did not ever meet or speak to? Incredible but true!
Before signing any Freddie Mac Short Sale Affidavit – or for that matter since most lenders or servicers have adopted the same guidelines and created their own similar affidavit – be sure the mandated changes are incorporated into the document. Apparently the lenders / servicers don’t care about holding you liable – after all, THEY are not signing the form!
Copyright 2012 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com .
See our easy to understand articles at: