Home sold after 2014 MOD - need advice

twills

LoanSafe Member
Sep 8, 2010
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Hello! Hoping someone can offer advice or guidance before my anxiety sends me into cardiac arrest!

Family of 5, hubs is a State Trooper and I'm a public school teacher. In 2014, while I was a Stay at home Mom, we got behind on our mortgage (small home, purchased for $105,000 in 2008). It was a FHA loan and we modified with a partial claim with HUD and remained current on the loan. My husband got relocated with the patrol and we sold the home this past July. Apparently the title company missed or dismissed the lien, and we closed without issues.

Now HUD has made contact, understandably, and want payment. We do not have the means to pay the lump sum of $28,000 in full, and they have offered a 3 year payment plan of $800 a month, which is out of our means, as well.

What are our options? We own a large home with an $1800 mortgage, two car payments, kids in braces, etc. Really worried about this!

Any advice is GREATLY appreciated and welcome!
 

OneHugeMess

LoanSafe Member
May 30, 2016
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If you personally ask me (keep in mind, I'm not a lawyer) but this is a more of a problem for the Title Company that insure the Title and improperly released the 2nd Lien from HUD.

If you ask me... I would cease all contact with HUD. And *maybe* consult a real estate attorney. I would not offer to go into the repayment program, or pay off the amount - unless it was substantially reduced. But, even so, I do not truly believe this is your responsibility or fault.

Out of curiosity, what state did all of this happen in? Maybe there is something or a law that you can cite. Also - if it came to it, how would you feel about bankruptcy (way down the line)?
 

twills

LoanSafe Member
Sep 8, 2010
3
0
1
If you personally ask me (keep in mind, I'm not a lawyer) but this is a more of a problem for the Title Company that insure the Title and improperly released the 2nd Lien from HUD.

If you ask me... I would cease all contact with HUD. And *maybe* consult a real estate attorney. I would not offer to go into the repayment program, or pay off the amount - unless it was substantially reduced. But, even so, I do not truly believe this is your responsibility or fault.

Out of curiosity, what state did all of this happen in? Maybe there is something or a law that you can cite. Also - if it came to it, how would you feel about bankruptcy (way down the line)?
Thank you so much for your reply. The Title Company reached out to me because they received the same letter, but my understanding is that they are insured to protect the home buyer, not the seller, so I really have no idea what they can do.

The State we are in is Kansas.
 

OneHugeMess

LoanSafe Member
May 30, 2016
549
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Here's a question for you. Did the Bank that serviced your mortgage, send you a copy of the original note that you signed, clearly marked "Satisified" or "Canceled"? Did that same bank record a "satisfaction of mortgage" or "deed of trust"? Do you still have the original paperwork from the bank with the payoff amount?

As I said, I would cease all contact and refuse to provide any financials to them, or any other collection agency. But, in my mind... the servicer of the loan gave you a payoff amount, and a title insurer (purchased to protect the new homebuyers) guaranteed "marketable" & "warrantable" Title, and... the closing attorneys allow this sale to go through.

I do know for a fact, that in some states, such as California, there are laws where lenders & home loan servicers, cannot go after borrowers for amounts not collected before a closing.

There used to be a huge problem, with certain kinds of Portfolio Mortgages that contained "Prepayment Penalties". The banks would say, instead of paying 8.5% -- we will give you an 8% Mortgage, in exchange for a prepayment penalty fee if you refinance or sell the home in the first three years of the loan. But... a lot of the banks had horrible software or had acquired other banks (as well as their loans) and in error, didn't collect the fees from the borrowers. I remember reading a decision, that basically said, that these amounts were uncollectable. But this was a common problem - and maybe you can find more on a Search Engine.

It sounds as though in your case, that the Closing Attorney or Title Agent, signed an unauthorized satisfaction of mortgage or lien release, and improperly allowed a sale to go through. Can you explain to me, how that would be your fault? This is something to consult the attorneys I think on.
 

just_me

LoanSafe Member
Sep 14, 2015
603
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I would have to concur with Wanda and OHM. It looks like HUD's records are not so SMART. From that article there were just as many duplicates as there were missing accounts. Regardless of that, *someone* approved this sale amount and closed on it. I think *had you known* the sale amount was deficient you would have had opportunity to incorporate partial claim of 28k into the sales price. I could have sworn at one point in time, these (Hud partial liens) were forgivable debt to the homeowner. Plus, as these things go, there is title insurance that typically cures these 'errors.' Let them figure it out. Technically this may be viewed as a short sale. HUD's lien goes with the house not with you. You have nothing more to give.

Don't be afraid to hire a lawyer to wrap it up or recuse yourself from any claims. Some have free consults. Or... you can make legal requests on your own but that is not for the feint of heart. It just depends on what you have more of, time or money. If you talk to them, have a purpose and download a call recorder app for a personal record of the call(s) first. This helps take notes on actions, requests, and agreements which may have legal bearing later. Make call logs with dates and name of party you talked to. You may want to direct them to the Title Insurer for assistance because this is a claim related to the sale closing. Maybe this will be simple. I don't know much about dealing with HUD CSRs but I would not trust the Servicer or any collections type calls, don't admit to the debt. (debt shouldn't follow u - lien should go with the house) If this starts (hourly calls), write them a letter and legally request they stop calling you. Good luck. Give us an update on this in the future and let us know how it turns out.
 
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just_me

LoanSafe Member
Sep 14, 2015
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Also, the Title Agent and related closing attorney are not your friends. Try not to become a scape goat for them. Don't expect anyone to be trustworthy or ethical when it comes down to it. (Why are they getting collections sent to them anyway? This may be FDCPA harrasment claim.) If the closing was bad then threaten to undo the sale to cure the deficiency in lieu of paying the alleged claim if needed. (This is a bluff. No one wants that.)
 
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just_me

LoanSafe Member
Sep 14, 2015
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I did a little research, it looks like the first lienholder takes second place to a partial lien per terms of HUD agreements/modification approval. In order to pay off less than due, the first is liable for the short sale. They are ones who get paid less, not HUD. Sorry got late and don't have link, but this goes back to the servicer who gave payoff quote.