I had a new Short Sale experience this week. A prospective short sale client asked me about how the second lien on their property would be handled as part of the transaction. I, making an assumption, asked if both liens were with the same mortgage company. The seller responded that they were not, the second lien was held by his mother who had loaned the sellers money for repairs to the home and had filed a lien on the property with the county.
I'm not caught off guard often, but that was a new scenario for me. I said, let me check with your mortgage company and get back to you. So I called the mortgage company and learned that they would not pay anything to the second lienholder because they are related to the sellers. Their position was that since this had to be an "Arms Length" transaction, no payment could go to a family member. Period.
I was not terribly surprised by the mortgage company's answer, but I suppose I was kind of surprised that the homeowner's mother would go to the length of filing a lien against the property. It was not a large amount of money, but I guess that some families have a way of turning "Lean on Me" into "Lien on Me".