Making Payments to Second Lien Holder Outside of Escrow In A Short Sale Is Illegal

I was contacted by one of the contributors to this story that ran today on CNBC (see link below).  What the story alleges; that second lien holders ask for cash payments out side of escrow, is true. I was involved in a transaction where Wells Fargo was the second lien holder and they wanted an extra $3,000 from the seller outside of escrow and didn’t want this to be disclosed to the first lien holder. 

In the middle of my transaction, a big story ran that accused Wells Fargo of doing this and immediately the $3000 payment had to be disclosed per the Bank’s change in policy.  Once the payment was disclosed, the first lien holder rejected the short sale unless the money was returned to the seller.  Eventually it was resolved and I think Wells Fargo has changed their policy since then, but it was a headache when we were in the midst of it.

Here’s the article:

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