While this definition obviously does not tell the whole story or the legal process issues, it is correct in a broader sense.
For example, the overall intent is to avoid foreclosure and the fees attendant thereto; but, the Agreement between the borrower and the lender does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, which is known as the "deficiency." Extinquishing the remaining balance must be clearly stipulated in any acceptance.
Lenders in particular have been increasingly affected by fraudulent practices on the part of various types of companies. Many state banking departments and certain federal agencies have come out with notices for lenders to be aware of schemes and scams to defraud.
One of the most recent such notices comes from the California Department of Real Estate (DRE). This state agency has been consistently proactive in many areas in the fulfillment of its mission of consumer protection, advocacy, and licensing enforcement.
Therefore, we are providing the DRE's recent notice, entitled
We think the notice is useful as a means to better understand the scope of fraudulent practices involving short sales.
Also issued by the DRE is a letter to lenders from Jeff Davi, California Real Estate Commissioner, entitled
Virtually all incidents of short sale fraud involve the knowing failure to disclose material information to the short sale lender. As a result, lenders are approving sales based on false or omitted information.
If you have any questions about this matter,
Visit Library for Issuances
Short Sale Fraud Warning For Lenders, Servicers, GSEs, and Other Mortgage Owners and Investors (referred to collectively as "Lenders" and individually as "Lender"), A Time for Collaboration and Cooperation, DRE California
Short Sale Fraud Alert September, 2010, Update to DRE Issued Consumer and Industry Alert(s) Regarding Short Sales Fraud, and Related Issues, DRE California, September 2010
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