I am a student at Harris Real Estate University, I got this video from one of their blog post I thought it may help anyone working on a short sale or even thinking of doing one.
This practice has been going on for years. It's good to see the media is starting the recognize this is illegal and say something. The second lien holders force you to go with the deal they put on the table or walk.
When you're doing a short sale the second will try to get you to pay outside the HUD. Any amount is illegal but no one has been challenging them on this for fear of loosing the short sale. I don't believe in paying the 2nd anything over what the 1st agreed to on the HUD. They get nothing if the house goes to the court steps.
When the second lender wants a kickback tell them NO. If you don't you may find yourself paying for that house for years to come. The short sale is designed to get you out of the home and save your credit. Not tack on a bill for you to pay for the 4 to 5 years. It's a game you have to know the rules to win.