Rancho Cucamonga, CA Real Estate Broker: Credit Card Collection Agencies are Preventing Short Sale Closings

Credit Card Collection Agencies are Preventing Short Sale Closings

 

Many collection agencies have resorted to recording liens against the borrower’s property instead of the bank levy or wage garnishment option.  What I don’t understand is how these collectors think that a lien for an abstract of judgment is of any real value when these properties are hundreds of thousands of dollars underwater.  There is not a dime extra for anyone who is party to a short sale.  The first lender is agreeing to accept only half of the original loan balance to release their lien (typical example), the second lender receives no more than $6,000 to release their lien and in California even the property tax collector will agree to step aside by way of a partial lien release to enable the transaction to close.   So who gave these credit card collection agencies all the power to refuse negotiations and force these homes into foreclosure?

An abstract of judgment lien recorded against a property can be released through the use of a partial lien release which allows them to have the ability to collect from the debtor at any other time in the future by attaching itself to any other asset the borrower owns instead.  If the home goes to foreclosure because of their lack of cooperation they still have the legal right to collect on their judgment through a wage garnishment, bank levy or attaching to a subsequent real property the borrower owns.   Why hold up a short sale transaction that has ZERO ability for repayment of the debt when they have other options for recovery?   

Has this happened to any of you too?

Diane Wheatley, Broker

Real Estate Brokerage, Upland CA

 

(909) 815-4499 Direct Cell

CA DRE Broker Lic #01193694

 

 

Comment balloon 38 commentsDiane Wheatley • March 09 2012 12:22AM

Comments

Well, i'm not a lawyer and my guess:

it is unlikely a creditor will take your home to repay your credit card debts....not in California, at least.

Posted by Inna Ivchenko, Realtor® • Green • GRI • HAFA • PSC Calabasas CA (Barcode Properties) almost 7 years ago

Diane, Haven't run in to this one yet and I thought I'd seen them all. And to your question "Why hold up a short sale transaction that has ZERO ability for repayment of the debt when they have other options for recovery?" I have no idea. Why do they verbally assault people on the phone or leave threats on their voice mail? I have no idea why.

I'd like to hear what others have to say on this. Suggested.

Posted by Nancy Laswick, Your REALTOR® For The Valley Of The Sun (United Real Estate) almost 7 years ago

Dear Inna, It is unlikely that a credit card company will be repaid from the sale of short sale property but it is very likely that they will stand in the way of your home being sold if they do not release their lien.

Dear Nancy, Like you, I have absolutely no idea what the purpose in preventing a property from selling through a short sale transaction would serve when they have other remedies to their collection attempt.  I hope that this issue receives more attention and will be addressed accordingly.

I would love to hear others thoughts on this subject too.

Thanks for the feedback and have a great day!!

 

 

Posted by Diane Wheatley, Broker, SoCal Real Estate Expert (909) 815-4499 (Move Up Properties) almost 7 years ago

The short answer is because they can.  Collectors will use any method available to attempt to collect a debt whether it works or not is not the issue.  Thanks for bringing it to our attention, haven't seen it but will be on the look out.  Have a great weekend.

Posted by David A. Weaver, 24 years helping folks finance their dreams. (Peoples Bank & Trust Co.) almost 7 years ago

Diane, if the cc company doesn't want to release the lien, then that could stop the short sale. The mortgage lienholder will not pay any borrower's personal liens. Most likely the borrower would have to negotiate with the cc company. This is why I always ask homeonwers if they have any judgments on their property. They would know because the cc company would have sued them first. Unsecured debt collectors can be vile.

Posted by Pamela Seley, Residential Real Estate Agent serving SW RivCo CA (West Coast Realty Division) almost 7 years ago

Judgements on title work is nothing new (short sale or not), it happens and needs to be resolved by many possible ways,  (some clients already have proof a judgement is satified and it's the county recorder that needs written proof provided to remove it) others are beyond our scope so we refer clients for appropriate legal intervention  ....that's why regardless of what the seller "says" - pre-lim title work is essential for any listing to know in advance any obstacles to deal with or refer out for resolution.

Posted by Jeff&Grace Safrin, SpousesSellingHousesTM (F.C.Tucker 1st Team Real Estate) almost 7 years ago

Diane, I've never heard this one. All this time I thought that credit cards were "unsecured" lines of credit. Doesn't that mean they can't "secure" themselves to real property? Strange.

Posted by Eric Michael, Metro Detroit Real Estate Professional 734.564.1519 (Remerica Integrity, Realtors®, Northville, MI) almost 7 years ago

Diane, I take the position that the consumer that is looking to add their credit cards to the overall loss of their home probably tanked their cards on purpose as the only way of attaining cash.  The credit cards don't need to be nice, they fronted the money!  Either pay them or they have the right to ruin our lives.  This is America, don't forget.

Posted by Glenn Freezman (Family Abstract, Inc.) almost 7 years ago

It has recently happened to me on a short sale listing I had but it didn't matter here. In AZ, we have homestead protections so title said they didn't have to do anything with it and there is nothing the creditor could do to prevent the sale.

Posted by Tonia Vickery (RE/MAX Desert Showcase) almost 7 years ago

This is the first I have heard of this.  I thought credit card debt was mostly unsecured debt, unless it was an originated line of credit secured by a mortgage.  I would think that a bank would need to have a court award the attachment of that debt to any real property. 

Posted by Myrl Jeffcoat, Greater Sacramento Real Estate Agent (GreatWest Realty) almost 7 years ago

Wooah that's some scarey stuff...I can't ever imagine that happening. We will never be able to close on short sales if this starts becoming the norm...SMH.

Posted by Cheryl Thomson REALTOR Army Ret, Associate Broker in Northern Virginia ( United Real Estate (703.216.5635) cheryltee47@gmail.com) almost 7 years ago

Oh yeah... 

Just had to contend with this one on closing a short sale property last month!

Preliminary title report showed three liens, jumped high over all three hurdles - only to trip up a few days before closing on our San Francisco North Panhandle Short Sale listing this year...

Like a mine under water, this lien NEVER appeared on the preliminary title or the subsequent preliminary title report issued for the buyer - but lo and behold - the SELLERS went into the title/escrow company to sign final documents and after running their Social Security Number it came up!!!  I am always polite to my escrow officers, but even this one taxed little old me!

It was scramble time as the lien for $4,200 came up, the attorney whose name it was filed under was difficult to find and the entire bill had to either be negotiated or paid before closing in 3 days.  Thank goodness we had cooperative sellers who could find some cash!

Another 11th hour and 55th minute story which gave yours truly a few more grey hairs alongside with my business partner, Oliver Burgelman.  

We got a wonderful commendation from our sellers regarding this transaction for our professionalism and attentiveness to detail... All I can say is; "Thank goodness it's DONE!"

Posted by Michael Ackerman, CRS, Short Sale & Foreclosure Resource, e-Pro almost 7 years ago

Oh yeah...

Just had to contend with this one on closing a short sale property last month!

Preliminary title report showed three liens, jumped high over all three hurdles - only to trip up a few days before closing on our San Francisco North Panhandle Short Sale listing this year...

Like a mine under water, this lien NEVER appeared on the preliminary title or the subsequent preliminary title report issued for the buyer - but lo and behold - the SELLERS went into the title/escrow company to sign final documents and after running their Social Security Number it came up!!! I am always polite to my escrow officers, but even this one taxed little old me!

It was scramble time as the lien for $4,200 came up, the attorney whose name it was filed under was difficult to find and the entire bill had to either be negotiated or paid before closing in 3 days. Thank goodness we had cooperative sellers who could find some cash!

Another 11th hour and 55th minute story which gave yours truly a few more grey hairs alongside with my business partner, Oliver Burgelman.

We got a wonderful commendation from our sellers regarding this transaction for our professionalism and attentiveness to detail... All I can say is; "Thank goodness it's DONE!"

Posted by Michael Ackerman, CRS, Top Producer, 19+ Years Experience! (Zephyr Real Estate) almost 7 years ago

Haven't heard of this one.  The question is why isn't the seller paying the card? If they are in a situation where they can't pay their monthly debt they need to talk to a bankruptcy attorney.  We all have to start paying our bills or take the proper course of action. 

Posted by Jo Olson, HOMEFRONT Realty @ LAKE Roosevelt - Stevens County (HOMEFRONT Realty) almost 7 years ago

Wow Diane, this has never happened to me. This is crazy.

Posted by Dominique Britton, Experience the Difference in Real Estate Services (GoHomeToAtlanta.com Realty LLC - 678.250.5022) almost 7 years ago

Wow I have not seen this one yet. Bank liens yes. Taxes yes. But not credit cards.

Posted by Erica Ramus, MRE, Schuylkill County PA Real Estate (Erica Ramus - Ramus Realty Group - Pottsville, PA ) almost 7 years ago

Did the credit card company get a judgement in court and hence allowed a lien on the property?

Posted by 1 ~Judi & Don Barrett & Chassy Eastep - Integrity, BS Ed, Integrity Real Estate Services -IDABEL OK (Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745) almost 7 years ago

Unbelievable, what's next to kill a Short Sale ???? I'll have to now check the status of the cards in my Seller's wallet ???

Posted by Michael J. Perry, Lancaster, PA Relo Specialist (KW Elite ) almost 7 years ago

Hi Diane - I have not yet read about this particular issue in any of the major US newspapers I regularly review.

Posted by FN LN almost 7 years ago

Thanks for this informative post.. I have to say that I had not heard of this before.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) almost 7 years ago

Short sales seem like total nightmares to me and I am so thankful that there are people that have the patience to take care them for these families in need. Thank you for what you do. You deserve a RAISE!!

Posted by Joni Bailey, Your Huntsville / Lake Livingston Area REALTOR® (Berkshire Hathaway Home Services - Anderson Properties) almost 7 years ago

Thank you.  I've read through all of your comments.  To answer some questions, the lien is a result of an unsecured credit card that went unpaid.  The collection company for the debt obtained a judgment against my homeowner and the method of collection was to place a lien on the property.

Other credit card companies also obtained default judgments but chose to levy their bank account for collection which depleted their savings in the amount of $9,000. 

It is a case of the homeowner ignoring past due debt until it is almost too late - like right now.  These outstanding debts have nearly doubled their balances since the date that payments ceased in 2008. 

My primary disgruntlement with all of this is the fact that a credit card collection company will file a lien against an underwater property in hopes of preventing the sale just because "they can".  Even if they agree on a settlement, how will I know that this creditor will cooperate with releasing the lien necessary for title to record?  It makes no difference to them how they collect.  They do not HAVE TO release this lien even if they say they will. 

I'm going to do whatever I can to get their commitment to release the lien in writing upon an agreeable settlement but the balance continues to go up with every attempt to negotiate.  I have NO leverage.  How does anyone deal with that?

Posted by Diane Wheatley, Broker, SoCal Real Estate Expert (909) 815-4499 (Move Up Properties) almost 7 years ago

Diane, your homeowners may need to consult with an attorney. That's way out of control if the balance keeps going up wtih every attempt. Wish you the best of luck,

Posted by Pamela Seley, Residential Real Estate Agent serving SW RivCo CA (West Coast Realty Division) almost 7 years ago

These actions will simply send more short sale buyers to bankruptcy court.  The consumer can only be pushed so far and then they just throw their hands up and say "I give up". 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) almost 7 years ago

Hi Diane,  In a lot of cases collection agencies realize that they probably won't collect from an outstanding lien.  Their motivation is to disrupt the process enough to be heard.  They buy the bad paper for pennies on the dollar knowing they will never collect on many.  So if they achieve some success through a lien it's a win for them.

Posted by Ron Cooks, Texas Real Estate, Ft Hood/Killeen Homes for Sale (The Real Estate Marketplace) almost 7 years ago

Just went through this back in December.  The seller's husband died without a will so the children all had to sign off on the deed. As a result, 2 of the kids had credit card judgments show up on the title and the debt had to be paid before short sale could close. They got paid and the sale closed.  Whew!

Posted by Charita Cadenhead, Serving Jefferson and Shelby Counties (Alabama) (Keller Williams Realty) almost 7 years ago

If I was a credit card company. . I would be doing it too. As much as I hate saying this becase I do short sales all the time.

Posted by Fernando Herboso - Broker for Maxus Realty Group, 301-246-0001 Serving Maryland, DC and Northern VA (Maxus Realty Group - Broker 301-246-0001) almost 7 years ago

It really has nothing to do with holding up a short sale. They are owed money and have rights. If one is to be able to cloud title then so be it. Just like any other lien, judgment or cloud it needs to be paid or removed.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) almost 7 years ago

Diane, I haven't seen it over here, but I can see why they would do it.  If they could tie a property up I guess they figure they can squeeze a few bucks out of a distressed homeowner.  The sad thing is that the distressed homeowner is just that, distressed.

Posted by Mike Cooper, Your Winchester, VA Real Estate Sales Pro (Cornerstone Business Group Inc) almost 7 years ago

Diane, this is a new one on me. I have not heard of this before. Maybe they figure it is the last resort for getting their money.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA almost 7 years ago

The collector doesn't make money, but at least they will have the satisfaction that they halted the short sale and caused the foreclosure.

Posted by Nogui Aramburo, Real Estate Professional in the Raleigh Area (Linda Craft & Team, REALTORS®) almost 7 years ago

Diane:

Yikes! One more roadblock in the way of a short sale.  I haven't see this action yes, but I can imagine the frustration sellers and their agents must feel.

Posted by Evelyn Kennedy, Alameda, Real Estate, Alameda, CA (Alain Pinel Realtors) almost 7 years ago

Thanks everyone!   I just read each and every post.  The bottom line is that you are all correct in your responses.  The lien comes from a debt that is/was owed and the collection company has every right to exercise their options, as difficult as that may be for the Realtor.  No way around that except for bankruptcy, but that won't happen before the short sale closes. 

Title is telling me that as long as I can get a letter of acceptance that a settlement has been reached and money has exchanged hands they will record the sale and lift the lien.  I believe that we won't need to produce a court document stating "satisfaction of debt paid" before escrow can close.  At least that is one less burden.  But this should show all of us how imperative it is to obtain an SI statement (statement of identity) from the homeowner at the time we take the listing.  This way we will have ample time to remedy any cloud affecting title.

Short sale drama continues.....

Posted by Diane Wheatley, Broker, SoCal Real Estate Expert (909) 815-4499 (Move Up Properties) almost 7 years ago

THis board is realtors so I get the anger but you need to step out of your shoes and into the shoes of the credit card comapny or collection agency. As others hav enoted, they buy debt for pennies on the dollar hoping to eventually collect a few more pennies on every dollar. It's PURELY about the money. They don't care about your short sale nor should they. The seller owes them money and they want to get paid. Experience dictates that putting pressure on debtors often turns up money that the debtors have repeatedly said isn't there. Anyone who's been in real estate has seen the same thing - buyer or seller says bottom line and when push comes to shove, looky here, we can find a thousand here or there. Or more.

If the short sale goes belly up they are out very little - they were going to get the judgement anyway as a matter of course. Recording a judgment lien costs them nothing and I'm guessing often turns up a few dollars.

Frankly, seems like smart business to me.

Posted by Anon almost 7 years ago

Interesting...hadn't heard of this before but I can't say I'm surprised.

Posted by Justin Dibbs, REALTOR® - Ashburn Virginia Homes for Sale (Pearson Smith Realty) almost 7 years ago

I represent buyers on a transaction with cc liens.  There is also an IRS lien.  No jr lien holders can receive anything from the bank if there is an IRS lien.  The idea here is simple and I am surprised no one has mentioned this.  The cc collection companies extort agent's commissions.  If the seller truly has no money the only money in the deal is the commissions.  So that is what is happening to the listing agent and myself.  We are being blackmailed/extorted for our hard earned money to pay someone else's debt.  If we do not agree like someone else mentioned - the collectors don't care - the one's hurt are the buyers and the agents.  It's sick and a 3rd party debt holder should not be allowed to prevent the successful close of a short sale.   The debt was not secured by the property - it is not taxes - it is personal deb.  Isn't that what unsecured means?   I'm now getting to pay for someone else's credit card debt just to close the sale for my buyers.   This is just wrong on many levels.   Oh and I forgot to mention - like several others noted one of these came up at the last moment.  The one giving us the worst time told the listing agent in the beginning that they would release the lien to come back when everything was approved and they'd do the paperwork.  It was part of their strategy - she went back and guess what?  No way they will release the lien without money and lots of it - no 10 or 20% - they want the bulk of it.  And now they know they have us in the corner.  So beware of that tactic.

Posted by Nita Baranowski, Remax over 6 years ago

Dear Nita, You are right on the money with your post.  When the transaction is all said and done, that is just what I had to do in order to make the deal close.  I paid the entire judgment from my commission.  My seller was too embarrassed to allow me to ask the other agent for a contribution.  She said that she would just assume let the home go to foreclosure if I said anything considering this is the neighborhood that she lived in for several years.  So I kept it to myself and took in the pants. 

It is amazing how much power these credit card companies and debt collection agencies have as a hungry participant lurking from the sidelines.  Unless some legislation is introduced, this will only get worse as the unsecured creditors begin to stake their claim in our national debt crisis. 

Posted by Diane Wheatley, Broker, SoCal Real Estate Expert (909) 815-4499 (Move Up Properties) over 6 years ago

Just happened to us here in upstate NY.  CC company via Midland Funding palce lien on my wifes home title.  We are trying to sell it, had a purchase offer, then out of nowhere find a lien was placed on abstract.  never served, never notified.  totally blind sided.  Had a purchase offer on home, buyer called it off.  Called midland, amount on abstract was 6k, they said nope, they need 8k.  Greedy Pigs.  I decided to rent the house, they can kiss my ass!  Lucky for us we have some extra cash, but its not going to those pigs!  They should get real jobs and contribute to society.

Posted by Fred about 6 years ago

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