Bank of America - Short Sale Decline & Land Trust

I am an investor, not Realtor and buying a property which I have under contract and placed in a Land Trust. The Trustee is totally unrelated to the borrower.

I just received a Short Sale Decline Letter from Bank of America which states as follows:
“etc, etc. Unfortunately, at this time we are unable to assist with your request for
the following reason:

Decline – Non Arms length The Short sale transaction is no longer being reviewed because the buyer and seller are related. This is no longer an ?arms length? transaction, which is required for a short sale. If a new offer is rec… etc, etc will be reconsidered.”
How would you investors interpret B of As action and what response do you think would be appropriate. :help


I just happen to have a good friend in management at B of A who handles foreclosures and property disposition!

Any mortgage written by or managed by B of A was sold to / transfered to / insured by / owned by FNMA / Fannie May, the FNMA short sale guidelines say a buyer must be a real entity, must be capable of providing proof of funds or a mortgage lender pre-approval and must possess for tax purposes on a HUD 1, a social security number!

A land trust can not legally possess a social security number or an EIN number and can not qualify as such for a loan! A land trust is considered a transferable entity and under FNMA guidelines a property must be sold to a legal entity known to FNMA (Or there representatives) and non-transferable!

Now you can buy a short sale and use transactional funding to close the short sale from B of A (A) to you (B) and allow you to close to your end buyer (C) provided end buyer (C) uses conventional financing or cash or hard money as there are no seasoning requirements!

In a FNMA short sale the actual contracted buyer must be on the Hud 1 and in the closing documents and closing statements! What you were proposing to do was not arms length under FNMA guidelines!


Thank you “GoldRiver”. That was a very good explanation. I have a few follow up questions:

  1. What does the abbreviation "FNMA stand for? :rolleyes

It seems that this is a recent clause, as B of A has approved several SS where the buyer is a Trust. I guess, all those teaching from Ron Legrand, etc, MUST now be revisited as things & time have changed. :beer.

As the property is already in a Land Trust - do I.

A. Redo the Purchase & Sales contract to show the Seller (Alfred Hooper - Seller A who is the borrower) selling to (Miriam Albertson - Buyer B which is me)? The present contract shows “Alfred Hooper selling to 2342 Mable Drive Trust”
B. Remove the property from the Land Trust? OR
C. Do not show the Land Trust on any documents as buyer - HUD 1, Purchase & Sale contract,

I am trying to find a clean and proper way to do this transaction.

1. What does the abbreviation "FNMA stand for?

Fannie Mae (FNMA) - Federal National Mortgage Association, a federally chartered corporation that purchases mortgages and packages them to sell as securities.

Thank you. I have bookmarked that site.

I had this same exact thing happen to me because my last name is Kim and the seller’s last name was Kim. When we told B of A we weren’t related, they just made us write a letter. We had to get the letter signed and notarized. We finally uploaded this to the library in equator.

I am a very experienced and competent short sale, and systems. Here is my opinion that they do. The company is trying to get the property (not good), so that they low ball the lender and then a new lease for the tenant buyer.