“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.”Should we receive a letter with such a provision, we are not authorized by our underwriters to close the transaction unless the letter is amended in writing to remove the offending provision.
This post was updated to answer additional questions from several agents.
What does this mean for you, the agent?
Unfortunately, we will not know if a short sale transaction will be impacted by such a restriction until we get the short sale approval letter from the lender. Nor have the lenders made it entirely clear what type of fraud they are talking about. What this update means for agents is that we will be reviewing short sale approval letters more closely, and if the letter contains restricting language like this, we will ask the lender to remove the language. If they refuse, we cannot close the transaction and issue title insurance.
Please do not hestitate to contact us with any additional questions or concerns.