Can a mortgage company approve a short sale, then go through with a foreclosure anyway without notifying the home owner?

Asked by Susanne, Haysville, KS Thu Nov 3, 2011

My short sale was approved and I had two offers on the house prior to approval. The mortgage company stated they had canceled the foreclosure sale, but did not notify the law firm handling the foreclosure until the day AFTER the sale. The law firm then notified the highest bidder that it had been canceled. Once the mortgage company found out that the bid was higher than the short sale offer, they changed their mind and decided to go with foreclosure. I had been approved for the short sale AND had a buyer. I followed their guidelines. Can they do this?

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Frank Diaz’s answer
Frank Diaz, Agent, Honolulu, HI
Thu Nov 3, 2011
Hi Susanne,

Unfortunately, yes. I just saw a situation where a homeowner was approved for a loan modification. They sent paperwork several times and kept getting the run around. Finally they were told everything was complete and the decision was imminent. On a Friday afternoon, they were told it had been denied (no reason given except that "the investor didn't approve it) and the home went to sale in 3 days on Monday. Foreclosure sale was done for about 1/3 less than what the home was worth.
They wrote letters to the President of the mortgage company, BBB, Chamber of Commerce, State Attorney General, and a few other places. 3 months later the sale was canceled. The law firm handling it works for the mortgage company, NOT you, so keep that in mind.

Frank Diaz
East Oahu Realty
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