I have a HAFA approved SS through Wells Fargo, loan was formerly Wachovia, we are preparing for closing in a couple of weeks, and my seller calls me this morning to inform me Wells Fargo called her on Friday to inform her that they decided to approve them for a loan modification instead, even though they were denied 6 months ago on a loan modification.

I called this morning and Yup, WF has indeed approved my sellers for a loan modification and their new loan docs will be sent via overnight this week for them to review the figures for their new loan terms. I asked them if there have been changes and was informed WF has made some calculation changes to some of their loans that they had previuosly denied for loan modifications and they are trying to go back and offer the loan modifications prior to the short sale closing escrow or the homes being sold at auction.


So, we will wait for the package to arrive and go over the terms of the new loan to see if it make sense for them to accept the new loan modification or move forward with the short sale. This is a certainly a first for me, anyone else have this happen?

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wow - aren't they under contract to sell? what happens then, can they be sued by the buyer? is there a contingency to let them out if they get a loan mod - so many questions arise in this scenario, i am interested to know the outcome if the possibility is that we see more and more of this

Yes, and we have delivered them the Arizona signed approval notice, we have a zipform now that contractually delivers the acceptable terms of the short sale and the seller willing to move forward.

I had a long conversation with a WF rep last week abotu one of my current transactions.  Borrowers who have applied for LOan Mods - either denied or still in process are being given "another look".  Wells is now allowing BOTH Loan Mod and Short Sale requests to proceed in parallel and whichever gets approved first elimnates the other. 

Here's my thought  - Once they (WF) have the final estimated HUD on the short sale, it makes it easy to understand how much they can modify the loan and minimize their loss.  Let's say their net proceeds will be $200,000 on a short sale - why not Modify the Loan to $200,000 and continue to earn interest on that loan rather than losing the principal and the interest because the buyer is likely going with another bank...?

I think this is going to be our new world in 2012.

Well in my case, the seller has already delivered the signed approval notice along with the lender approval letter, if the seller cancels the short sale they will likely be in a specific performance issue because of our new real estate form ties them legally to the transaction that they accept the terms and are willing to close escrow. Which happened by the way on Friday right before Wells Fargo called my sellers with the news.

WOW - that's a "problem".....  Does Wells know there could be damages? I would make sure Wells is absolutely clear about where the seller is with the short sale.  What if Wells revokes the short sale approval?


Yeah, I am going to call them back since all of this just happened Friday. But once a short sale has been approved they can't pull the approval.

Is it something specific to Arizona that a lender cannot revoke their approval?  I've seen it happen in CA.

The Lender can always revoke their approval - right up until the time of close.  They are not a party to our contract - their letter is a debt settlement.   On the approval letters it even says it is not the final approval - that comes at close when they approve the final HUD.

What if the seller does not want to do the modification at this point?  Maybe they want to go ahead and sell the property - do they have a choice?  I wonder if we need to add additional wording when we send out out notification t the buyer ?

Debbie, once the seller has delivered the Arizona Approval Notice to the buyer along with the signed lender approval letter, they are legally obligated to perform.

If I had not delivered to the buyer already their approval notice, the sellers would have had the choice to do the modification, but they are in jeopardy of a specific performance claim if they do not perform. If Wells would have contacted my sellers on Thursday instead of late afternoon on Friday, they would have had a choice, now it's too late.

As far as the lender retracting the short sale approval notice, if the terms are met at close of escrow as outlined in their demand notice, they cannot legally withdraw an approval. This doesn't mean they wont try but it is not within their legal ability to do so. This is according to many fine RE Attorney's in Arizona and I know alot of them.


I think you are right that some more language needs to be added to our new approval notice form. I think Thom is right I think we are going to see more issues present themselves in our short sale market this year.

Tamilyn - Are you on both sides of this transaction?  Nothing implied, just curious for my own knowledge.  This is really going to be interesting across the USA so thank goodness we have this forum and others to share our end results!


Best of luck.....

No, I represent the seller only. Yes, I agree thank goodness we have this forum to share the challanges that come up.

A quick update my seller's are moving forward with the short sale, they do not want any further legal issues that may arise if they do not perform on the contract. At this point, they feel their lender should have helped them out of this mess 6 months ago when they really needed help.


They are correct and I think that's the next thing the lenders need to figure out quickly.  If they are going to offer a Loan Mod - offer it before it goes on the market.  I've had a few recently where the sellers tried and tried for a Loan Mod only to be denied.  Then, once we submitted the Agent Authorization and preliminary docs for a short sale - suddenly a Loan Mod was very attractive to the lender.........


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