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Disclosing Seller's Impending Bankruptcy to Buyer

Answered by: 
Andy Zavoina

Question: 
When is a mortgage company allowed to give nonpublic personal information about a borrower/seller to the buyer of the mortgaged property? Mortgage company holds the mortgage and has information about an impending bankruptcy of the seller that will occur after the sale of the house. When is it apropriate to forward this information to the buyer? Does this violate privacy laws?
Answer: 

I do not not believe it is the lender's role at all to disclose this. There is no business reason for this.

If you disclosed this and the buyer now knew of the financial stress the seller was under, they may attempt to renegotiate the sale. If the seller suffers a loss, you too may, in more ways than one. You may lose if the sale falls through and the seller may sue you.

First published on BankersOnline.com 1/5/04

First published on 01/05/2004

Filed under: 
Lending
Filed under lending as: 
Bankruptcy
Privacy

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