ASC reopened Short sale file but 1st lien started foreclosure... HELP

I sent a post about the negligence of American Servicing Co for a short sale my friend was going thru… at any rate - the 1st lien holder and the buyer had to pull out b/c ASC neglected to do their job- last week the 1st lien holder, Homecomings Financial, started the foreclosure process b/c ASC did not approve in time. HF sent a letter from their atty referencing that she has 30 days to sispute the validity of the debt.
1 questions: SHould she send in a debt validation letter in response to the atty?

2nd issue: ASC called the buyers agent to offer their apology for their neglgeience with the file and asked if they were still open to buy the prop. Now HF is disgusted with ASC and only wantsto offer $500.00 on the deal. The buyer still wants the prop but now HF has this whatever vibe about the deal.

The sale date is August… has anyone had this scenario and how did you seek recourse from the 1st and 2nd or just the bank inb general. One investor noted that she should call Banking & Finance for ASC’s negligence on the paperwork. ASC only resonse was it got lost in the shuffle and we had no idea it was pending. Keep in mind there “claimed” -logged phone calls everyday for about 2 months.

Shouhd the seller contact B&F now or wait to see what ASC and HF will do with the file now?