DANGER of Short Sale Financial Info to Lender?

[omniskye]

hi, i made a decision to start a short sale with my investment property. the property currently has a 1st and HELOC with Wells Fargo and has negative equity of almost $100k.

as i was going down the checklist of financial information i am to supply to the realtor, i started getting a little uncomfortable about sharing the financial information with the lender.

this is my plan: attempt to get a short sale with all debt forgiven for the HELOC of $97k. if they agree to a short sale, but still hold me accountable for the HELOC amount of $97k - then i will walk away and let it proceed towards a foreclosure. (i assume the 1st mortgage is forgiven as purchase money.)

however, if i honestly supply financial information to the lender during the short sale process, am i in greater danger of the lender going after me post-foreclosure. because now they have more information regarding my income, savings accounts, other property, other assets, 1040 taxes, etc????? OR does the post-foreclosure "departments" treat this independently and won't have access to these documents?

any help is appreciated. thank you in advance!

[The Professor]

You have clearly stated the catch-22 situation that borrowers who the potential of post-foreclosure liability face. Having participated on the lender side of short sales in past market downturns I can tell you what specific issues your lender is concerned about.

1. Insuring that the transaction doesn't involve some sort of creative method to get you, as the seller, any cash out of the deal. In other words they don't want the buyer paying you outside of escrow for personal property at an inflated sales price.

2. That as a key motivating factor, they are not giving up much because you couldn't pay a deficiency judgment if they got one because any collection attempt would simply force you into a Chapter 7 bankruptcy. This can be verified through the ordering of a credit report and an asset search.

Don't assume that you can get away with anything. When I played the role of being on the other side of the table, I often laughed about the ineffective processes borrowers went through in an attempt to mislead me.

Daniel