Short sale payment named as "curtailment" is still fraud if not on HUD

Real Estate Agent with Alain Pinel BRE 01367196

“CURTAILMENT” short sale payment not on HUD is still fraud

On a short sale contract in Oakland, CA, I was told about payment out of escrow as CURTAILMENT which is defined as:

The act or process of reducing a company's operations in order to bring stability to the company. Curtailment usually occurs when the company has been experiencing unsustainable growth that it is unable to manage effectively. Tactics of curtailment include spinning off subsidiaries, laying off staff, and generally focusing the company's operations on the best products that it is able to create effectively. Curtailment is intended to improve efficiency and increase profits.

The first lien holder Wells Fargo gave approval with payoff of $6,000 towards 2nd

Second lien holder wants:

  • $6,000 from Wells Fargo
  • $3,000 additional payment to satisfy lien


Although the buyer may be willing to contribute the $3,000, his agent insists that this is

  1. Shown on the HUD closing/settlement statement as a contribution towards payoff of the Second lien
  2. Approved by the First lien holder


Listing agent refers to the additional payoff to the second lien holder as "curtailment" payment, and said this is not going to be on the HUD. Listing agent wants buyer to pay the $3,000. He says they’ve done this many times before, and that they don’t refer to the payment as a “contribution.”

Don’t do it!

Remember this news story? Big Banks Accused of Short Sale Fraud

And this video?

It’s FRAUD, whichever way one presents it, or by any other name. “Curtailment” indeed.

Also see: Short Sale Fraud: Three Scams to Avoid



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Jenny Durling
L.A. Property Solutions - Los Angeles, CA
For Los Angeles real estate help 213-215-4758

There are too many 'creative' agents out there for sure. I wouldn't do anything outside of the escrow process on a short sale - it's not worth it.

Jun 12, 2012 04:37 PM #1
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA


I had an agent give me a definition of fraud and then tell me that one must prove "fraud". Who wants to take that chance? And who has the energy? Best that we stay away from questionable tactics

Jun 12, 2012 05:18 PM #2
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Pacita Dimacali

Alameda/Contra Costa Counties CA
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