HUD partial claim - short sale

[Ari Bauer]

I was hoping someone could help me out with a deal I'm working on.

I'm negotiating a short sale on a property with three liens, a 1st mortgage, 2nd and a HUD partial claim.

I've reached agreements with the 1st mortgage for a short payoff with the HUD claim recording the total amount owed.

The second lien had originally agreed to a payoff of 2k (about 5% of what they're owed). All went well until I sent the 2nd a preliminary Hud1 and they saw that the HUD claim (which was recorded in 3rd position) was receiving 6x the amount that the second was receiving.

At that point, the 2nd stated that they wanted to know why the HUD claim ( which is in 3rd position) was receiving more then they are.

As far as I understand it, even though the HUD claim was recorded 3rd, they still have a higher claim because of the subrogation.

I had an attorney draft a letter to the 2nd lien holder explaining this, however they are still saying that the hold a higher position then the HUD claim and as such won't agree to the Hud claim receiving that amount.

Does anyone who has dealt with a deal like this have any suggestions as to what I can do to help the 2nd understand that the HUD claim is in a higher position then them?

Thanks