Thursday, November 3, 2011

Hypocrisy of Freddie Mac and Lenders in Short Sales

It never seems to get any easier. Short sales have become increasingly more difficult. Wells Fargo for example, has included addenda that require an investor buyer to hold a property for 90 days prior to reselling. This mandate comes from the investor on the note (Freddie Mac). Here is the hypocrisy: Freddie Mac is not the government as many people believe. However, the government (and taxpayers) have a relationship with Freddie Mac and own a sizable chunk of the company.
Several states have enacted legislation or already have legislation that prohibits such restrictions. I am going to blog about the topic of the legal implications of the restrictions in another blog because it is a lengthy discussion. There is little question that addenda are getting more restrictive on buyers. There are legal, contractual problems with this and there are also title issues as well. Regardless, lenders are including the restrictions in the approvals.
Yesterday, I had a conference call with Freddie Mac, the lender (servicer), the buyer and the closing attorney. The closing attorney (who of course is neutral in the transaction and does not takes sides) indicated the Freddie Mac that there 90 day restriction on sale violates North Carolina law. Freddie Mac responded, “We do not care. Unless the affidavits are signed as is, we will not approve the sale”. So a quasi-federal governmental agency does not care about state law and it wants what it wants even though there are legal and title issues in their policy. Despite such behavior, there are many in the real estate industry that believe that the federal government is a solution to the sagging real estate market.
I have a solution to this situation and it works for now, but we should not have to go through this. Real estate agents should not be required to execute affidavits that are not legally supportable and which put them at a litigious risk. In one recent transaction, the real estate agent felt so strongly that he should not sign the affidavit that he withdrew from the transaction.
We all have to stand up to this because the lenders and their investors are making more and more restrictions on transactions. The ultimate hypocrisy is that they do not even have standing to assert these restrictions, but that argument is reserved for another day and another blog.

Paddy Deighan, Esq

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