1st in Foreclosure - Negotiating short sale - 2nd wont budge

[Tama Montgomery]

I have a client that is trying to sell a property that has already rec'd a NOD from the 1st lienholder - no sale date yet but expected around July 3rd. We are in California. We have rec'd a GOOD offer at $650k but it is short of paying off the 1st owed $695k. 1st lien wants a release of lien from the 2nd lienholder (owed another $160k) to proceed with the short sale - 2nd lien wants to negotiate terms of the sale including agent commission and demanding a new HUD specifying their payoff which MUST come from the buyer (not the seller). They are refusing to provide the release of lien letter and holding up the short sale process with the 1st. We may likely lose the buyer and the house to foreclosure if the stale mate doesn't end soon. I don't understand the benefit of the 2nd lienholder stalling this transaction? Can they foreclose before the 1st while they are still considering a short sale even though they have not yet filed an NOD? And even if they did, aren't they still subject to a large 1st lien that probably would not sell on the court house steps? What am I missing? 1st is with WAMU, 2nd is with Ocwen. Thank you