A short sale is when a property is sold for less than the outstanding mortgage balance. To qualify a property for short-sale treatment, a homeowner must file paperwork with the mortgage lender. One form in the thick packet handed to homeowners is the authorization to release information, or ARI. Also known as a third party authorization, the form allows the lender to share certain information about you, your home and your mortgage with interested third parties.
The purpose of the ARI is to protect lenders from a lawsuit if they disclose the kind of confidential information needed to arrange a short sale. The information required for a short sale is commonly supplied to a lender by the seller’s listing agent. However, banks and listing agents cannot exchange information about the seller without a signed ARI in place. ARIs do not confer permanent permission to the lender regarding information exchange; they usually have an end date coinciding with the closing or termination of the short sale, a date certain, or by written request of the borrower.
The ARI is a simple form. It lists the name of the lender, property, loan number, listing agent, seller’s attorney and any other authorized individuals. The form explicitly states that the borrower is signing it freely and has the right to revoke it at any time. Banks also tend to add language absolving them of any responsibility should one of the designees provide misinformation or omit information. Large banks like Bank of America allow borrowers to submit forms like the ARI with electronic signatures. The federal government's Home Affordable Foreclosure Alternatives (HAFA) program contains an ARI that requires a physical signature.
While most ARIs contain a clause that allows them to share any required information, they often provide an explicit list of shareable data items. This list typically includes the terms of the short sale, the loan balance and payoff information on the mortgage, any facts regarding bankruptcy status of the borrower, information to market the property, information about repair expenses and arrangements for closing the sale. The means of conveyance can also be enumerated, including telephone, in-person, fax, email or regular mail.
Limited Third Party Authorization
The limited third party authorization form is a cousin of the ARI specifically used to allow information sharing between multiple lien holders. This handles the transaction when the senior lender must negotiate a settlement with one or more junior lenders. Junior lenders require some compensation to keep them out of the court system seeking redress, even if their liens are completely unsecured. The limited authorization is tailored to handle this particular contingency, should secondary lien holders exist.
- "Real Estate Short Sales 2010 Step by Step": Loren K. Keim
- "The Short Sale": Mark Galbraith
- Brand X Pictures/Brand X Pictures/Getty Images