Realtors who do short sales, please be aware of your New Short Sale Approval Letter.

We have just been alerted to the fact that Countrywide has a new form of short sale approval letter, in which it now attempts to retain the right to invalidate a transaction for events which may have occurred at the loan’s inception or in our transaction.    This condition was found in paragraph 16 and read as follows:  

“If the property was acquired by any means of fraud, [lender’s name]   reserves the right to pursue any and all actions available to it to pursue any and all actions available to it to offset its losses.   If it is determined that Sellers and/or Buyers participated in any way to the fraud, this short sale will be void, and the Note and Security Instrument will remain in full force and effect.”

Title insurance cannot be issued to either the buyer or the buyer’s lender free and clear of the loan if the lender can assert after close of escrow that money is still due.    There is no workaround to this provision. 

If you receive a short sale approval letter with this condition, advise the Lender that the condition must be removed, in writing, or we cannot close.    If one lender has started inserting this into their short sale approval letter be assured additional lenders will follow suit.