I’m witness to some odd occurrences with several of my clients, especially those associated with Bank of America. Some clients were in foreclosure, but their trustee sales were cancelled and never rescheduled. Or, the client makes partial payments for a year, gets turned down for a loan modification, and then B of A starts foreclosure proceeds. Or, the client attempts a loan modification over and over with no approval but once they list their home as a short sale they receive paperwork for a trial loan modification. Or, the client has been discharged from bankruptcy with no attempt by the lender to begin foreclosure.
This is happening all around us and I have a handful of clients experiencing one of these situations. One particular client recently discharged nearly $400,000 in mortgage debt with two lenders. The first is with Wells Fargo and the second is a HELOC with Chase, formerly WAMU. Neither lender has pursued foreclosure of the home as title remains in my client’s name as legal owner of record.
Two other clients have mortgages with Bank of America. Both clients attempted a loan modification and both failed. When we listed their homes as short sales earlier this year both sellers were desperately close to their scheduled foreclosure dates. We immediately began our rescue mission to postpone the sale dates in order to complete the short sale purchase transactions. One sale date was not postponed and went to sale the week prior. The other sale date was successfully postponed for 30 days. But don’t go away.
The property that went to sale was not sold to a third party or reverted back to the beneficiary. The trustee indicated that the sale was “cancelled”. Bank of America’s records showed that the property was foreclosed on. But when I questioned the bank about what the trustee had told me they did not have an answer. I asked the bank how I could upload a short sale offer on the property. I couldn’t because it was in foreclosure. After several weeks the file was released from foreclosure by the lender. Now, many months later, no sale date is scheduled and it remains “cancelled”.
A similar situation occurred with the other property. We were receiving systematic postponement dates every 30 days until the third month. On the third month we called for a postponement and were told that the sale was “cancelled”. Again, many months later, no sale date is scheduled and it remains “cancelled”.
With two out of the three properties currently vacant, the question is, now what? Is it possible for a homeowner to simply “walk away” with no threat of future liability?
I spoke with a real estate attorney who says that until the bank forecloses or the property transfers title through a short sale or deed in lieu, the seller remains responsible for the property taxes, insurance, security and condition of the property.
A bankruptcy attorney told me that my client who was recently discharged from the debt through bankruptcy technically didn’t own the property anymore and should drop the insurance and not concern himself with the status of the property anymore. However, I didn’t feel comfortable with this information. I consulted yet another bankruptcy attorney who stated that until the bank forecloses, my clients are still named as legal owner of record and therefore remain responsible for the taxes, insurance, security and condition of the property.
So it seems I’m in some sort of legal limbo here. As it has become clear to me that banks are “walking away” from their right to foreclosure, does that place the financial responsibilities squarely on the shoulders of the homeowner when the homeowner has walked away believing that the foreclosure sale has already occurred?
I receive letters and emails nearly every day from individuals who have moved out of their homes because it was in foreclosure only to learn months later that the lender never foreclosed. It looks like no one is addressing this “bank walk away” issue and now I’m receiving questions about the relevance of “vacancy insurance”.
If you have been approached with the need for “vacancy insurance” by your lender or are being sued for negligence associated with your vacant home, please share your story with me. I’m very interested in this latest aspect of today’s housing crisis and how to best resolve it, if possible.
****DIANE WHEATLEY IS NOT A LICENSED ATTORNEY. THIS INFORMATION IS COMPRISED OF HER OPINIONS, OBSERVATIONS AND INTERPRETATIONS AND IS NOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE. PLEASE CONSULT WITH AN ATTORNEY BEFORE RELYING ON OR TAKING ANY ACTION BASED ON THE INFORMATION PROVIDED HERE.****