Disclosure of Letter of Lender’s Consent

Posted by on Jul 10, 2012 in Memos | Comments Off on Disclosure of Letter of Lender’s Consent

 Rules of Confidentiality Related to Disclosure of Terms of Letter of Lender’s Consent by Listing Broker or Law Firm Negotiating Short Sale

ISSUE:  MAY A LISTING BROKER OR LAW FIRM NEGOTIATING A SHORT SALE DISCLOSE THE TERMS OF THE LETTER(S) OF LENDER’S CONSENT ISSUED BY SELLER’S LENDER(S)  WITHOUT THE CONSENT OF SELLER?

 

ANSWER:  NO

 

FACTS:  Many lenders for buyers have been insisting that they receive copies of the Letter(s) of Lender’s Consent (the “Letters”) as a condition for approving a buyer’s loan, and those buyer’s lenders have been insistent that either the Listing Broker provide the letter(s) or that the law firm negotiating the short sale provide the Letters.

 

BROKER RESPONSIBILITY:  The Real Estate Brokerage Relationship Act (“REBRA”) provides as follows regarding the definition of “Confidential Information” and the duty of the Listing Broker to the Seller regarding the disclosure of Confidential Information:

 

RCW 18.86.010 (6) defines Confidential Information as “information from or concerning a principal of a licensee that:

  1. Was acquired by the licensee during the course of an agency relationship with the principal;
  2. The principal reasonably expects to be kept confidential;
  3. The principal has not disclosed or authorized to be disclosed to third parties;
  4. Would, if disclosed, operate to the detriment of the principal; and
  5. The principal personally would not be obligated to disclose to the other party.”

 

Letters outline the terms of the lender acceptable to it to release the lien and/or the debt of the Seller, including;

1. Monetary contributions expected of the Seller;

2. Minimum payoff amounts due the lender(s) as part of the settlement;

3.  Items not approved by the Lender(s), such as HOA delinquent dues,    special assessments, utilities;

4.  Amount of seller closing costs approved, including commissions and seller contributions to buyer;

5.  How the lender(s) will report the short sale to credit reporting agencies.

Items 1 through 4 may involve matters which will be ultimately negotiated with the Buyer, and therefore, if disclosed to the Buyer without the Seller’s consent would be detrimental to the Seller’s negotiating position; item 5 relates to Seller’s credit which is an item the Seller reasonably expects would not be disclosed to the Buyer.  Therefore, Letter are Confidential Information, and the Listing Broker may not divulge the terms of the Letters without the approval of the Seller, and for the Listing Agent’s protection, it is recommended that approval be obtained in writing.

The following articles are published for informational purposes and not for the purposes of providing legal advice. Please contact Galvin Realty Law Group at 425.248.2163 for a consultation about your specific needs and circumstances.