Signing Short Sale Affidavits a Violation of P-35
This week TDI Commissioner Eleanor Kitzman issued an order confirming that the short sale affidavits settlement agents are sometimes being asked to sign are a violation of P-35. You may view the Commissioner's order on this issue on page three here
The order, dated March 19, 2012, states that, "Requiring title agents to execute short sale affidavits violates P-35 as written. Short sale affidavits seek assurances beyond the expected scope of title agents' knowledge."
At the hearing, TLTA member Janet Minke, Alliant National Title Insurance Company, testified about this matter and submitted a sample of a short sale affidavit on the record with TDI, which you may view here.
It's important to note that an official form has never been promulgated by Freddie Mac, so the forms and terms may vary from lender to lender.
In 2010, Freddie Mac started requiring all of the parties involved in a short sale transaction to sign an affidavit attesting that it is a true arms-length transaction and provide an indemnity in a case of mortgage fraud if there is a loss suffered because of a negligent or intentional misrepresentation made by the closing agent.
TLTA has been working on this issue for more than a year, and at the February 28 title insurance rule hearing, several TLTA witnesses testified about the lack of a title agent's ability to have knowledge of the items they were being asked to swear to.
TLTA is planning education around this issue, so please stay tuned for updates. If you have any questions, please contact TLTA at 512.472.6593.