One of my friends at a title company forwarded this to me this week. It's an internal memo from their title underwriter about (more!) pitfalls of shortsales and what title companies are being warned about in short sales. Just wanted you to know!
RE: Short Sales
Dear Associates:
Approvals and/or instructions given by a lender for a "short sale" may include unacceptable instructions that make the transaction uninsurable. The following are examples of unacceptable conditions:
° "There are to be no transfers of property within 30 days of the closing of this transaction. Escrow instructions must contain a clause that if such a transaction takes place then the title/escrow company must notify Lender."
Problem: A title company closing a short sale would not know if the property was transferred again within 30 days after the short sale.
° "If the property was acquired by any means of fraud, Lender reserves the right to pursue any and all actions available to it to offset its losses. If it is determined that Seller(s) and/or Buyer(s) 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."
Problem: This condition may make the short sale voidable.
° "Lender requires full disclosure which includes all details of the transaction on both the Seller and Buyer side of the HUD1. If Lender finds full disclosure was not made at the time of the approval, the approval becomes null and void."
Problem: This condition may make the short sale voidable.
Read short sale approvals and instructions meticulously. Do not sign or accept instructions that contain any of the above, or similar, provisions if you are issuing a Stewart Title policy, unless the instructions are revised to remove the objectionable provisions.
If you have questions relating to this bulletin, please contact (name removed) Legal Services or your local underwriting personnel.
For on-line viewing of this and other bulletins, please log onto www.name removed
Note: Copy and distribute this bulletin to your escrow officers, title examiners, title officers, searchers and anyone else that you feel should know about it.
References
Bulletins Replaced:
None.
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