Have you seen the changes made to the required Freddie Mac Short Sale Addendum? They’ve recently added three “agents/parties”; seller’s agent, buyer’s agent, and escrow closing agent. All three are required signatories to the addendum.
Previously the buyer and seller had to acknowledge and agree to things like;
- it’s an arm’s length transaction,
- there are no agreements that haven’t been disclosed,
- misrepresentation may subject the parties to civil and/or criminal liability,
- there is no appraisal fraud, flipping or straw buying.
Now the real estate agents and escrow agents are also ‘acknowledging and agreeing’ to these conditions. In addition, there is a new paragraph that creates huge liability issues for the parties that sign this addendum;
13. Each signatory agrees to indemnify the Servicer and Freddie Mac for any and all loss resulting from any negligent or intentional misrepresentation made in the affidavit including, but not limited to, repayment of the amount of the reduced payoff of the Mortgage.
“Negligent or intentional misrepresentations made in the affidavit”…. What does that mean? Or better yet, who has seen these affidavits? Earlier in the addendum it states that “‘the Servicer and the Investor are relying on statements made in the affidavits as consideration for the reduction of the payoff amount.” These statements are made by the seller, but who has seen these affidavits? Has the buyer, buyer’s agent or escrow closing agent been given a copy of the statements and the documentation to verify that the seller’s statements are true? Probably not. So how can they “indemnify the Servicer and Freddie Mac for any and all loss” based on a seller’s statement that they haven’t seen or have no knowledge of?
Oops – I probably should have started with…
I’m not an attorney. I do not play an attorney on TV. This is not legal advice. My broker advice is to advise your clients to get legal advice concerning this document.
My advice to John Hall agents being asked to sign this form as a buyer’s agent is to “Just Say No!” Don’t be surprised if you find more and more title companies declining to sign also.
Phil, thanks to you and Jim for getting the word out on this one.
You’re welcome Dru. I’m a little surprised I was unable to find more about it around the web.
The Freddie Mac BS is just another example of the Obama regime talking out of both sides of their mouthes. On the one side they say they are helping solve the housing dilema and on the other side putting up more obstacles!!!!
Obstacles in deed. I like Jim’s quote at the office meeting, “Freddie Mac must have thought short sales were going too smoothly.”
This is very significant. Thank you for putting it front and center. In some short sales with Wells Fargo and FHA related sales, we have been asked to confirm and sign that the buyer was not related with the seller. However, in this situation, that is pushing it beyond the limit of acceptable. We now become a party to the transaction and the target of legal liabilities.
My question then, is will they allow the transaction to close if you refuse to sign?
I’ve seen Yes and No. Same answer though if the Title Company refuses to sign.
I’m closing a short sale with BofA and after all the work on the world that implies a short sale, 5 days before closing the file I got hit with this addendum. I check with Freddiemac and they said they do not owe the note for this property , I called BofA and they said they will probable own it later, and that I need it to sign it. my broker is telling me not to sign it. BofA told me “you don’t sign it, we close the file right now”. This is a real dilema I worked 4 months to get this short sale approval and 5 days from closing I get this Addendum that they are obligating me to sign, well not only that, but taking in consideration that I’m making $2,500 on this transaction VS as the paragraph # 13 says if something happends that seller didn’t disclose to me or them, and they find out and sue me; I will be responisble in this case to repay $ 107,000. Do the math, is that worth it?
Here’s an update worth sharing. Saturday I was on a panel @ the Arizona State Escrow Association meeting in Flagstaff. A prior panel was made up of Escrow Company Attorneys and they were discussing various Escrow legal issues, so I decided to ask them about Freddie Macs Short Sale Addendum and whether they thought their Escrow/Title people should be signing it. The answer to the Escrow folks in the room was “Just say NO!” They agreed with me that it’s a bad idea to indemnify the servicer and the lender for the sellers statements. They said to modify the form and resubmit. Great idea that I needed to share with everyone.