Prior to releasing any funds to a subordinate lienholder, the servicer must obtain written commitment from the subordinate lienholder that it will
release the borrower from all claims and liability relating to the subordinate lien in exchange for receiving the agreed-upon payoff amount,
waive all rights to seek a deficiency judgment against the borrower, and
not require a cash contribution in addition to any funds provided by Fannie Mae as a condition for releasing its lien and releasing the borrower from personal liability.
If the subordinate lienholder chooses to release its lien to allow the short sale to close, but does not agree to release the borrower from liability on the note, it cannot receive a payment from Fannie Mae. Regardless of whether payment is made to a subordinate lienholder, the servicer must obtain written commitment from the subordinate lienholder(s) to release the lien(s).
The servicer must require the closing law firm or settlement agent to either
confirm that they are in receipt of the written commitment from subordinate lienholder(s) to release the lien(s), or
request that a copy of the written commitment provided by the subordinate lienholder be sent to the servicer with the settlement statement which is provided in advance of the closing.
For more information please see: D2-3.3-01, Fannie Mae Short Sale