[Dovecot] Proxying LMTP - Auth PASS lookup failed

[Edward Carraro]

I'm trying to configure my proxy/director server, which proxies
imap/pop/managesieve correctly already, to proxy LMTP to my backend message
store server (dovecot+postfix already configured there)

This is what I have so far:

10-auth.conf
using auth-static.conf.ext instead of auth-ldap.conf.ext (switching to this
made proxying imap/pop/managesieve work)

10-director.conf
protocol lmtp {
  auth_socket_path = /usr/local/var/run/dovecot/director-userdb
}

10-master.conf (changed user from vmail to dovecot as it was giving
permission denied error before -- on the backend dovecot server this is
still 'vmail')
  unix_listener auth-userdb {
    mode = 0600
    user = dovecot
  }

20-lmtp.conf
lmtp_proxy = yes

auth-static.conf.ext
passdb {
  driver = static
  args = proxy=y nopassword=y
}

my dovecot logs show:
auth: Debug: password(user at dev.domain.com): passdb doesn't support
credential lookups
lmtp(1261): Error: user user at dev.domain.com: Auth PASS lookup failed

postfix show:
[private/dovecot-lmtp] said: 451 4.3.0 <user at dev.domain.com> Temporary user
lookup failure (in reply to RCPT TO command)

Any ideas? Something missing/incorrect?

Thanks!