Keep in mind one thing, liens are different than promissory notes. The lien against the property must be released in order to convey clear title to the buyer and the only person that can release the lien is the lienholder by granting a satisfaction. The promissory note is the debt instrument that you signed at closing and is what obligates you to pay the bank. The bank can release their lien but retain their right to have your fiance pay them.
Wells Fargo shouldn't be a player if they don't have a properly filed lien against the property. You can sell without their permission, but there is still a contract that says you have to pay them. You can choose to deal with that however you like but ultimately they have no say in the short sale if what you say about their lien rights is true. Citi does have a right to approve or deny the short sale based on what you have stated so you will need to work with them.
Keep in mind that with deficiency judgements the note holder has the life of the note to call the note due (if you had a 30 year mortgage and you paid for 5 years - they would have 25 years to call the note due). From the date they call the note due there is a 6 year statute of limitations. Ultimately they aren't likely to chase him right away as they know that if they push him now bankruptcy would be a very tempting option, however they could wait a good many years until he is back on his feet and then hit him with a judgement.
In MN, the secondary promissory notes (Wells and Citi) are not extinguished in a foreclosure. Sadly I am going to have to disagree with Matt here.
There are too many variables to be able to give a complete answer here. You really need to talk to an experienced attorney in this matter. I refer all of my short sale and foreclosure clients to Steve Nash. You can check him out at his website at: http://www.nash-law.com
Coldwell Banker Burnet
licensed MN Broker