The answer is, maybe. Before April of this year, this would have been put in the “myth” category. We have handled many files in which the Seller continued making their payments throughout the short sale. However, back in April we had two BOA files and a Wells Fargo file rejected in one week because the seller was not 31 days late. What did that tell me? Fannie Mae and Freddie Mac have a new rule. You now must be 31 days late with a Fannie Mae or Freddie Mac Loan.
Why would the seller want to continue to make payments anyway? For their credit score. They don’t want to have any “lates” on their credit report which would cause their credit score to drop substantially.
What if it is not a Fannie Mae or Freddie Mac loan? Well at this point we have not seen any other Investors requiring the seller to be 31 days late but don’t be surprised if they follow suit sometime down the road.