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Ute Ferdig - Greater Sacramento Area’s Blog

By Ute Ferdig - Atty. Negotiator | Broker in Newcastle, CA

Short Sale After Foreclosure - Part 2

This is a follow up to an earlier post 
http://www.trulia.com/blog/ute_ferdig__greater_sacramentoa/2011/08/short_sale_after_foreclosure

Problem with preliminary report:
Two days before our scheduled closing, I received the updated prelim.  Sadly, it did not show my sellers as the owners of the property.  Instead, it showed the servicer as the owner.  This is one of those moments when you just want to crawl in a hole and die.  How on earth can I straighten out this mess with less than 2 days before closing?  This was a new low on our roller coaster ride. I call my escrow officer and he tells me he is working with the title department.  Later that day, I am told that the prelim stands as is.  Now what?  Throw in the towel or keep fighting.  Well. giving up was not an option.  I send an e-mail to the rep at the trustee's office who had helped us in getting the trustee sale set aside.  Her response to me seems to suggest that this was a case of faulty interpretation.  I forward the e-mail communication with her to the escrow officer.  The next day, the trustee's office and title/escrow stick their heads together and work out the interpretation issue and a new updated prelim is issued now finally showing my sellers again as the owners of the property.  This gives new meaning to my motto "never give up, never surrender."

Sloppily written funding conditions:
The updated/corrected prelim became available around noon the day before closing and of course we still need the buyer's lender to approve the corrected prelim.  The buyer's loan agent tells me he won't know anything until the following the morning (the day of our scheduled closing).  Luckily, by then I had received extensions from both lenders, but the junior's extension is only good for 2 extra days (i.e., final deadline is July 29th).  Mid morning, the loan agent responds to my update request with "nothing yet."  I know then that we won't close that day.

Missing HUD approval:
Then, early afternoon, I get a call from the escrow officer telling me that he still has not received the approved HUD from the first lender.  He asked me if I had heard anything.  Of course I had not because I am typically not involved in getting the final HUD approved by the short sale lenders.  Around 4 p.m., the escrow officer informs me that he still has not received the approved HUD.  Well, of course, by then it would not have done us any good to have a HUD approved that shows a 7/27 settlement date.  I asked the escrow officer to update the HUD to show a 7/29 settlement date and resubmit it for approval.  Since my short sale approval was based on a HUD with a July 29th closing date, closing 2 days later than expected was not going to affect the numbers.

The next day, I got up at 3 a.m. to write our closer at the first lender an e-mail asking for help in getting the HUD approved (they are 3 hours ahead of us Californians).  The closer replies just before 6 a.m. saying that the HUD has been approved, but he does not send me a copy of the approved HUD, which means I don't know which HUD was approved (the one with the 7/27 settlement date or the one with the 7/29 date).  I sent an e-mail back asking for clarification and am advised that it was the 7/27 HUD that was approved and that we would of course need a new HUD reflecting the later closing.  I forward the 7/29 HUD that had already been submitted and ask for approval and that he send me a copy of the new approved HUD so that I could forward it to the escrow officer who could no longer access his secure e-mail account with this servicer because it had been locked (it only takes a couple of invalid password entries for it to lock and it's a pain to get it unlocked, especially when the negotiator is on vacation).  Shortly thereafter, the closer sent me an approved HUD with 7/29 settlement date.

Authenticity of HUD approval questioned
Just before 8 a.m., I receive an e-mail from the buyer's loan agent asking me how the lender knows that the HUD approval was indeed authorized by the servicer (The HUD just had a big "APPROVED" stamp at the top, but no signature).  Did they really think that I would forge a HUD approval?  Anyway, I did not have time to dwell on that.  I just forwarded the closer's e-mail from that morning which clearly stated in the body of the e-mail that the HUD had been approved.  If he had just forwarded the approved HUD to me in an attachment without saying "HUD approved" they could have questioned that the attachment was the approved HUD.  I don't think the loan agent really questioned my integrity.  He was trying to be proactive and anticipate any objections the underwriter might raise based on the experience that we had throughout this transaction.  They crossed every T and dotted every I more than once.  It was in many ways overkill and driven by fear that the investor would not buy the loan after the closing.  That's part of the climate that we are in right now.  Lenders are as paranoid as we are.  Apparently, the e-mail from the closer satisfied the lender as I did not hear any more about the approved HUD.  I even had the sellers sign the updated HUD just in case the lender should ask for it (although the escrow officer did not require it).  Although nobody had asked for a signed updated HUD from the junior lien holder, we requested it just to be safe and the negotiator e-mailed it to me promptly.  The buyer's agent and I also had the parties sign an addendum extending close of escrow until July 29th (again nobody had asked for it up until then, but we both felt that this was not the time to cut corners, which turned out to be a good thing - keep reading).

Closing:
At last, the wire was ordered shortly before 11 a.m. and we closed this escrow in the afternoon.  Once I received confirmation of closing around 2 p.m., I drove to the house to install the lockbox so that the buyer's agent could retrieve the key.  I entered the house and just about suffered a heart attack as the sellers still had quite a bit of personal belongings there and nobody was home.   After the initial shock, I composed myself quickly and I reminded myself how wonderful my sellers had been throughout the transaction and I had not reason to believe that we would not be able to solve this last little problem.  I called my clients and found out that they thought they had till the morning to get out.  The husband called his brother and a friend and the house was vacant in record time (I called the buyer's agent at 4:50 p.m. to inform her that she could pick up the key).  The little last minute excitement was just the icing on the cake.

Post Closing
The day after the closing, I received an e-mail from the closer asking me what I needed (it was in response to my e-mail asking for an approved HUD showing an authorized servicer signature - I had asked for it just in case the underwriter was not going to accept the closer's e-mail).  I informed the closer that I needed nothing and that the escrow had indeed closed.  I receive an e-mail back saying that he had the funds, but none of the required post closing documents and low and behold, he asks me for a contract addendum extending the close of escrow.  The escrow officer informed me that all the required documents had been faxed to the servicer the day before (except for the addendum because the addendum was not on the list of the required documents) and they resend the documents that morning.

It was just very glad that we had prepared the addendum and had the parties sign it the day before the closing (the buyers were out of town about 2 hours away in an area with no cell reception and the buyer's agent was able to get it signed - I could not have asked for a better buyer's agent and better buyers). This confirms that we can never drop our guard and must make sure that our contracts reflect what's going on.  Unfortunately, I see the opposite happening all too often in real life and I get strange reactions when I submit addenda that address the changes that occur throughout a transaction.

Finally, around 11 a.m., the closer confirms that he had everything and that the file had been closed.

Sleeping Beauty Wakes Up:
On Monday, August 1, 2011, I received an e-mail from the servicer's rep who had dropped the ball when we needed help in getting the trustee sale rescinded (see previous blog), which made it necessary to escalate the file to her manager.  Her message informed me that the short sale had closed and that she had forwarded the information to the investor to make sure the trustee sale was going to be rescinded.  I can't help but wonder where she has been while we were frantically working on setting aside the trustee sale so that we could close.  I had made it very clear to her that we needed it set aside before we could close and for her to tell me now that the short sale had closed 3 days earlier that she is making sure the investor will set aside the trustee sale is proof that she was asleep at the wheel and that escalating the file was the only way to get it done.  I guess I should be thankful that she stopped responding to our e-mails and phone calls as it was a clue to me that we had a problem.  Everything happens for a reason;  we just don't always know what the reason is when it happens.

 
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