After Foreclosure

[englishharbours]

Our home was returned to the bank at a Sheriff's Sale on 4/28. We had a first & 2nd mortgage with Litton Loan. We tried loan mod on our own, and it was declined as we "did not have enough income". We then retained an attorney to assist with a short sale. There were no offers and the attorney, who we paid an upfront fee of $500 to, disappeared into the wood work and will not respond to phone calls or emails. We then tried a deed in lieu and the bank would not accept.

Litton advises us that the 2nd was "written off". We understand that there is a possibility of a deficiency judgement on the first mortgage as this was stated in the foreclosure suit, however a representative at Litton also advises us that a 1099 will be issued. It is my understanding it is one or the other, not both. Is this true?

Also, if a DJ is issued, we will not be able to pay the difference. At this point, or before, should we contact another attorney to represent us in a bankruptcy, or can you advise otherwise?

Thank you for any help.

[Marshall Rosenbach Esq.]

I am not a tax lawyer so you should really consult with a CPA. However, to me it doesn't make sense that they would issue a 1099 AND pursue a deficiency judgment. Also, practically speaking, the bank first has to get the deficiency judgment and then it has to try to collect against you. I'm sure they have better things to do unless you have assets and you are collectible. I would ask the Litton representative if they are issuing a 1099, have they considered the debt (not just the mortgage) settled in full? If so, I'd want that documented so then you will know there can be no DJ.

[englishharbours]

Thanks very much, I appreciate your response!

[englishharbours]

Long story short, we had a 1st and 2nd mortgage with Litton Loan which has been foreclosed upon. The 2nd mortgage was "written off" and shows as such on our credit report. (The first mortgage was the foreclosure and the bank owns the property now). Today we received a notice of debt collection on the second mortgage from a collection agency pertaining to the second mortgage which was written off for over $36000. Obviously if we could have paid the mortgage we would not have foreclosed. Does anyone know the repercussions of this debt collection notice if we do not pay, or any other advice?

[englishharbours]

Please disregard, I will post under another topic; posted here in error.

[snapple candy]

english, didnt see where you started a new thread.
A real estate broker told me alot for first lien holders paying off the 2ndsss or shall i say negotiating a buy out so they wont have complicatiosn when they try to do short sales although that doesnt apply to you.
"Written off" doesnt mean that debt went away. they just wrote it off their books and sold to debt collector. Those guys can be ruthless too. If you have a regular job, watch out for wage garnishments and dont keep cash in a bank account. I also would cash paychecks at issuing bank...not thru your checking account. Might want to see a BK attorney or this will come back to haunt you.

[Calli09]

englishharbours, no expert here by no means, but it is my understanding that after a debt is written off by one company, then "sold" to another to recollect, so to speak, you have the right to write to them and ask them to send to you in writing "proof" that you actually owe the debt to them , and to stop any and all contact with you if they cannot! It is my understanding that most "secondary" debt co's you do this to will not send you proof you actually owe them, because you do not, and consequently, you will never hear from them again. These are predators, that purchase written off debts for pennys on the dollar, and make people think they still owe the debts. Also, if they call you at work you simply inform them that it is against your company's policy for them to call you at work, and to cease the calls. If they do not, you have a lawsuit.

[englishharbours]

Thank you both for your thoughts; I appreciate it! We have appointments with both a BK attorney and another referred by the FL Bar Association to cover all of our bases. I have also drafted a letter to the collection agency, disputing the debt, in accordance with the Debt Collection Act. The Litton Loan was "transferred" to Mountain Peaks Financial, and their sister company, same address, is LCS Financial. (It's amazing that they can transfer a loan when there is no longer a loan!). Both companies are claiming that we owe them the debt. Here is a transcript of my letter to both of them:

We have received your Debt Collection letter(s) dated 6/19/09 in the amount of $36514.57. We wish to dispute this debt in accordance with the Fair Debt Collection Practices Act as follows:

• This property was foreclosed upon on April 28, 2009. The property is now bank-owned and is currently for sale. As the property is currently for sale, an unknown sales price is pending, which may provide you with funds toward this debt.

• We do not agree with the amount owed. Please provide us with a complete accounting of the amount owed to Sterling National Mtg -the original note holder - & Litton Loan Servicing (the servicer that purchased the loan from Sterling) including all principal, interest, and miscellaneous fees that you are stating we owe.

• You have sent conflicting information and two Debt Collection letters; one from LCS and one from Mountain Peaks. The Mountain Peaks letter states that Litton Loan stopped accepting payments from us on 6-17-09. This is not correct. The property was sold to Litton on 4-28-09 through foreclosure.

• The LCS letter states that you represent Litton Loan in the collection of $32,893.84. The Mountain Peaks letter states that they have had the loan transferred to them and are also collecting $32,893.84. This represents a double collection and is not accurate as there was no loan to transfer after 4-28-09 due to the sale of the property to Litton Loan.

• Our credit reports indicate that this mortgage was written off. As the mortgage was written off by Litton Loan, this means that the debt was charged off and therefore can be claimed as a bad debt on Litton's tax return. If you are subsequently trying to collect on this amount, this represents tax fraud on the part of Litton.

• Litton Loan advised us that a 1099 will be issued. A collection proceeding, when a 1099 is being issued, is null and void. It is one or the other, not both.

Please provide us with an immediate and written response regarding the above. Also please be advised that the correct mailing address for correspondence with us is ********. You have addressed your letters to the property address, even though we notified Litton's attorney several times of the change.


I wrote this before I received a reply from Calli09, and if and when they come back to me I will address the fact that I do not owe the debt to them as the loan was already foreclosed upon in April and the loan was "transferred" in June. Whether I am right or wrong on some of these points, I don't know, but at the least it will take them some time to answer the letter and time for me to get with the attorney's.

Thoughts?