Payments outside of settlement? Not in a short sale!

We have been warning our customers and anyone who asks that fooling around with a short sale payoff letter can be hazardous. Bob Hunt, a director of the National Association of Realtors, weighs in on the problem in Realty Times in a posting, "Undisclosed Short Sale Payments May Lead to Trouble."

He points to

"A recent memorandum from the legal department of the California Association of Realtors® (CAR) warns CAR members as follows: "'Undisclosed payments in short sale transactions, especially those paid outside of escrow, may violate the law, including RESPA, laws against loan fraud, and licensing laws.'"

For instance? The senior mortgagee authorizes a small payment to the junior mortgagee and the latter demands money be paid outside of the closing to obtain a release of the mortgage.

Why is the first mortgagee opposed to this? Because, if there's money to be had, the first mortgagee wants it. Let's face it, the lender has given its approval because of the money available at closing.

Remember, the lender must approve the proposed HUD-1 before closing. Once that's done, you are asking for trouble if it's not accurate when you get to closing. It may even constitute loan fraud on a Federal level if the lender is federally-related. So, our advice has been and will always be--- when dealing with a short sale, disclose, disclose and disclose again, in writing, and get approval to all changes to the HUD-1 before closing.

For your next title order or

if you have questions about what you see here,

contact Stephen M. Flatow

Vested Title Inc.

648 Newark Avenue,

P.O. Box 6453,

Jersey City, NJ 07306

Tel 201-656-9220 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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