CAR I understand your point but I dont agree with what you say about “That is the point about being in the first position”
No that is incorrect. First position has nothing to do with that and the holder of the first mortgage is not in first position.
The taxman is. Why do you think the you get a nod from your lender if you do not pay taxes? Because they don’t want to lose the home to the taxman.
The lender holding the top position has the right to take as much as they want from the proceeds given the fact that anyone above them, (such as the taxman is paid) off. Now as you said, and sdr validated of course they are informed of any money transfering to subordinate lienholders no matter where the money comes from as it is in the final HUD which they authorize PRIOR to authorizing escrow to record the sale.
As far as some of these posts about bribes going to the sellers and loan officer/realtors selling the home and defrauding the banks, that may exist but for someone to state these are not very exceptional cases is incorrect. Furthermore most (but not all) realtors would be placing themselves in a SEVERE position of liability if they knew of direct money transfers and backdooring between buyers/sellers. Does it happen? Perhaps but nowhere near as much as some presuppose.
Anyways I know you are simply wishing for a more transparent system and in the end, the system is pretty darn transparent. It is however very frustrating and in some cases, yes, buyers will have to put forth extra money or be enterprising in some way to make themselves more competitive. In the end though it is all on the HUD.
I just want to reiterate again, the inherent “right” of a lienholder is really that they can choose to release a lien, or not release a lien. That is it. Now that lienholder (in making the decision to release a lien) may have specific guidelines such as knowing exactly where all proceeds go. This is why they demand an estimated HUD with the short sale package when making an initial evaluation. Then a final HUD before ultimately letting it go.
