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Husband Only on Loan, Wife Sued by PMI

Discussion in 'Stop Foreclosure and Tell Us Your Story' started by ForeclosedInVegas, Jul 23, 2009.

  1. ForeclosedInVegas

    ForeclosedInVegas LoanSafe Member

    Love this website! I'm hoping to find some more information about PMI subrogation in NV (A Community property State).

    I purchased a house in Vegas in 2003. The loan was in my name only, but I added my Wife's name to the deed. The mortgage company didn't complain or ask for a guarantee from her.

    I made some bad descisions to help my family by taking out a 2nd on the house (in my name only again). Then I lost my job in Apr 2008. Before I found another job, the foreclosure proceedings had started. I tried for a short sale, but the market in Vegas was so bad, I didn't get it sold before the sheriff's sale. We moved to an apartment.

    Both the 1st and 2nd are serviced by CitiMortgage. I thought (incorrectly) that the 1st was taken care of by the Foreclosure sale, so I made a deal with the 2nd to pay 1/2 of the outstanding balance. I'd since found a job and was on track to have the 2nd paid off by EOY 2010. I was hoping to avoid bankruptcy. Great, right?

    Nope. Both my wife and I are being sued by Mortgage Guarantee Insurance Corporation, which paid a deficiency claim of $60K on the 1st. I understand them suing me, but my wife? Prior to the foreclosure sale, we'd done a quit-claim to remove her name from the house.

    The Causes of action on the suit that apply to my wife are unjust enrichment and quantum meruit. They are trying to claim that - since she received a benefit from the house, she's liable for 1/2 of the deficiency.

    At this point, I'm prepared to have the judgments against me or to file bankruptcy. However, My wife's credit shouldn't be affected by this. I'm trying to find some nevada law that would protect her. It's my belief that Mortgage Guarantee is grasping at straws to get money from anywhere. They are soooo desparate, they offered a 20% settlement right out of the gate. Wow.

    Anyone know of a Statute that would prevent Mortgage Guarantee from suing my wife for a debt she didn't sign for? It seems like this would set a very dangerous precident - allowing one spouse to obligate the other without knowledge, etc...
  2. faith

    faith LoanSafe Member

    Hello and welcome to this forum,
    The only "insured" in a PMI contract is the lender; they get paid off in the event of default on the part of the borrower. It's more like a bonding and surety contract, which most people don't really understand either, it really just an extension of credit, and so is PMI to a great extent. In the end game, the borrower is responsible for any balance remaining on the mortgage loan, including any court costs/attorney fees, etc. incurred on the part of the mortgage company.

    Even though your wife's ssn is not on the loan but if you put her name on the deed, and if she is married to you, it is still a conjugal property, and that's how lenders and PMI company's sees it.. The Law dictionary defines conjugal rights as "The rights of married persons which include "the enjoyment of association, sympathy, confidence, domestic happiness, the comforts of dwelling together in the same habitation, eating meals at the same table, and profiting by the joint property rights, as well as the intimacies of domestic relations."

    Nevada is not listed as a non recourse state:

    .Anti-Deficiency / Non-Recourse States
    Alaska
    Arizona
    California
    Connecticut
    Florida
    Idaho
    Minnesota
    North Carolina
    North Dakota
    Texas
    Utah
    Washington


    In a non-recourse mortgage state, borrowers are not held personally liable for more than the home’s value at the time that the loan is repaid. The lender may recoup some of its loss through foreclosure. However, the lender may not sue the borrower for additional funds. If the foreclosure sale does not generate enough money to satisfy the loan, the lender must accept the loss.

    Each non-recourse state has its own anti-deficiency statutes that prohibit lenders from seeking judgments. In a few cases, anti-deficiency statues do allow lenders to collect a limited amount of money from the borrower (such as the difference between the debt and the fair market value of the property).

    Note that in some states (such as California) non-recourse laws apply only to “purchase money” loans (i.e. original home loans that are used to purchase property). Almost all HELOCs and home equity loans are considered recourse loans and lenders for these loans may sue borrowers to recoup loss. (Except in some cases where the second mortgage lender forces the foreclosure. See: HELOC Foreclosures). There has been some speculation that mortgage refinances do not constitute “purchase money” loans. However, there have been no cases to determine this issue one way or the other.

    HOWEVER, NEVADA HAS A ONE ACTION RULE,.

    In some states, lenders are only permitted a single lawsuit to collect mortgage debt. This plays out differently depending on the state’s laws. In New York, for example, a lender must choose between the actions of foreclosing on the property or suing to collect the debt.

    The following states have some type of one action statute:

    California
    Idaho
    Montana
    Nevada
    New York
    Utah<!-- google_ad_section_end -->

    THE ONE ACTION RULE:
    In ffice:smarttags" /><?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com[​IMG]<ST1:place w:st="on">California</ST1:place></st1:State>, a mortgage lender can only take one action against you: A non-judicial foreclosure, or a judicial foreclosure. A non-judicial foreclosure is just like the PURCHASE MONEY RULE, a lender can only sell the property to pay the loan. If the sale does not pay the mortgage, the foreclosing lender cannot get the unpaid balance from you. However, the lender can get the balance from you in a judicial foreclosure. The good news is judicial foreclosures are too uncertain and costly for lenders that they are almost non-existent. BUT, (pay attention, this is important) if a lender’s security interest is wiped out by a senior mortgage foreclosure, the junior lender can obtain a deficiency judgment for their unpaid balance because they have not had their ONE ACTION against you yet (subject to the PURCHASE MONEY rule of course). This situation is very common these days for that second mortgage you used to remodel the kitchen and bathroom.ffice:eek:ffice" /><O:p></O:p>

    It's really important that you reach a settlement with the creditor immediately. If they are asking you to settle with them for 20%, why not make a counter offer to settle it at 10%, payable in 30 years and no interest, a letter stating they will not pursue anymore deficiency judgment against you and they will report it as paid as SETTLED.

    It is for your best interest that you seek a REAL ESTATE ATTORNEY WITH EXPERIENCED IN FORECLOSURE, BANKRUPTCY LAWS, maybe try NACA for a pro bono lawyer. Or you may search the attorney's in this forum and ask for a free consultation. Make sure you search the Nevada BAR Association to see if the lawyer is license to practice law.

    Hope this helps.

    God bless and take care.
  3. racoon

    racoon LoanSafe Member

    Foreclosed in Vegas,
    I'm sorry to hear of your situation. I understand firsthand what you are going up against.

    Just curious, what did you decide to do? We were also sued by MGIC (I live in LV as well) We had to file a BK. Our deficiency was over 120K. We are almost through our BK.
  4. ForeclosedInVegas

    ForeclosedInVegas LoanSafe Member

    Racoon - MGIC wasn't cooperative in providing documents. This whole thing was too much for my marriage - we got divorced. I understand my ex is trying to get out of the suit as there are no longer any "community" assets - only my debt on the house. I'm sure I'll have to file BK, as I am still unemployed. Now I'm a tripple-threat: Single, Broke and Unemployed lol. I guess the benefit is that I'm judgement-proof.
  5. rookie

    rookie LoanSafe Member

    I would file bankruptcy, and when you do, you will have the 2nd stripped also.

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