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Collection Agency Coming After Me After Short Sale!!!


stevemia
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Closed on an investment short sale in Fl in 3/10. Bank would not offer letter of non-deficiency but my atty & realtor both spoke with bank and they assured there would be no deficiency.

I agreed to sign a note with the PMI company on closing as well.

Bank reported to credit bureaus:" LEGALLY PAID IN FULL FOR LESS THAN FULL BALANCE OWED".

My attorney made me handwrite a statement on the bottom of the acceptance letter: "I am accepting this short sale with the intention that no deficiency judgement will be pursued." and I signed it. The short sale letter was accepted by the bank and they never mentioned that it would be a problem.

Now, Im getting calls from a collection company. Called bank and they told me they assigned it for recovery to them. I never received a demand from the bank, though. I called PMI company and they told me that they reimbursed bank 25%. Bank wrote off the entire amount though. PMI company told me that these collectors are attempting to get whatever they can and that as long as the bank hasn't demanded the proceeds directly, that I should disregard.

My lawyer made up a Debt Validation letter for me to send the collection agency, Oxford Management. He seems to feel that the bank accepted my terms in an unconventional manner as well by not rejecting my handwritten statement on acceptance. He also says that Chase approval letter never mentioned fact that they could or would pursue deficiency and that since this now an unsecured loan, that they will not get a nickel from me. He will work the case if they attempt a judgement but he feels again that they are attempting to intimidate me.

Please give me feedback as I am a bundle of nerves now that this has happened. Thanks!

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  • 5 months later...

We too had this happen 4 years later by Chase. Agreeing to the terms of the short sale. No mention of defiency balance oweing. Yet we have had two collection agencies try & collect. Sent them a DV letter from our attorny - never heard anything back. its been since Jan 2011.

Ours was a HELOC reviewing the doc's no mention of being anon secured loan only state Home equity Loan Mortgage. Nothing in it about being unsecured at all.

Good Luck!

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  • 2 weeks later...
  • 2 weeks later...

Could anyone shed some light as to what is the benefit of having a credit report that shows an item and then it is either ignored or not legally a responsible report?

If a lender reports "Legally Paid in Full for Less than Full Balance", Closed Account, Zero Balance, No Charge-Off, Never late., Pays as agreed...and then they turn it over to a collection agency, where do you start to determine what is legal and what is not?

Can they simply report this Legally Paid in Full and then later on turn it to collection ?

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You should know that what is reported to a CRA has no legal standing except in FCRA/FDCPA cases. The "misreporting" is a result of the list of reporting codes the CRA has - they obviously have none for "short sale with deficiency". The "paid in full" part is obviously (in their mind) applying to the lien only, not the debt.

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"In their mind"????

What does that mean? In my mind I owe nothing. Legally paid in full cannot refer to only one segment of a mortgage.

I still believe that they reported this correctly and possibly coded it incorrectly or one department at Chase does not speak to the other.

How can they seek deficiency in full before collecting from PMI company, yet I am paying PMI company a note?

I called PMI company, they cannot even understand how Chase can be seeking anything at all from me without first submitted claim. They have no idea why the claim has not been submitted either yet they tell me they send reports to Chase monthly regarding the fact that it is past the 60 day window to submit a PMI claim.

I say something is fishy here.

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  • 1 month later...

Hi, I am very sorry to hear about your case.

I just did the closing on my short-sale with Chase last week. It was confirmed to me verbally from the lender and from my lawyer that there will be no deficiency judgment. After reading your post, I called the lender again and she confirmed to me again that in her system my loan is as 'no deficiency' loan.

But the only written confirmation I have from them is in the approval letter and it states: “...we will accept a minimum of $XXXX to settle your account and release the lien(s) on the above-referenced Property.” Is this sufficient for me to protect myself from future obligations?

What did you approval letter say please?

Is there anything else I can still do now? It's very important to me that there will be no collection agency after me later.

Thanks a million.

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Hi, I am very sorry to hear about your case.

I just did the closing on my short-sale with Chase last week. It was confirmed to me verbally from the lender and from my lawyer that there will be no deficiency judgment. After reading your post, I called the lender again and she confirmed to me again that in her system my loan is as 'no deficiency' loan.

But the only written confirmation I have from them is in the approval letter and it states: “...we will accept a minimum of $XXXX to settle your account and release the lien(s) on the above-referenced Property.” Is this sufficient for me to protect myself from future obligations?

What did you approval letter say please?

Is there anything else I can still do now? It's very important to me that there will be no collection agency after me later.

Thanks a million.

There are essentially two parts to the release in a short sale. There is the release of lien against the property which your letter states your lien will be released. And then there is the release of payment of the balance of the debt, which is separate from the release of lien. The letter would have to also specify that the lender is releasing the borrower from any deficiency in order to cover both aspects: the lien and the loan. (BTW, the lien is also called the 'mortgage' that is what ties your loan to the property.)

When the short sale letter of approval is provided by the servicer, it may address one or both of those componets. In order for the property to actually sell, the lien has to be released from the property in order to deliver clear title. So when you get your approval it will state that the lien will be released under certain conditions and it names the conditions. Normal conditions include: the amount of the net proceeds due to the lender, the date due, the fact that the terms and parties to the sale can't change, and if there is a note to be signed by the seller or cash brought to closing to satisfy the MI company. Once the lien is released, then the property can be sold. However, the actual balance of the note then becomes unsecured and the lender come after you for the deficiency. If the MI co has paid out on your behalf, they can come after you too for what you owe them.

Many approval letters only address the release of lien from the property. If the letter does not specifically state that the borrower is released from the deficiency, then the lender can come after the borrower after the sale. In Fl, the lender has 5 yrs to come after the borrower for the deficiency (from the date of the event - short sale closing/foreclosure sale etc). Check your state's statutes to know how long they have in your state, it varies.

Part of the reason the bank asks for all of your financials when approving the short sale is two fold: to see if you truly have a hardship as determined by the servicer, the investor and the MI company where applicable; and to know where you keep all of your assets so they can decide which people they will persue after the closing.

Chase accepted your proceeds with your condition in writing once they accepted the closing proceeds. That document had to have been turned over to Chase at the time of your short sale closing (its a normal condition). Hopefully you have a copy of that document to show your agreement with Chase. I'm not an attorney, but it certainly sounds like you have a written binding agreement that was modified by you, accepted by Chase and now they have violated the agreement. What did your attorney say about it?

Edited by Denita
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We had the approval letter from Chase for 2 weeks and only 1/2 hour before the closing the lawyer sent an addendum (requesting waiver) to the title agent for the closing. We added this addendum, signed all documents, paid the money and left. The lawyer wrote me:

"The closing documents, as you describe, will more likely than not go through the title company, not through us, although we will certainly review all the documents to make sure that your interests are protected and that the deal you negotiated is reflected in the subject agreements. You are in good shape. Everything is going as planned."

It was not until a week later, when I wanted to confirm with the lawyer that everything was ok, of course he confirmed with me that my case was all done and closed. I still requested about the 'waiver of deficiency' in writing and this is when the lawyer realized we don't have any.

In the addendum he requested a statement for the lender to write and also "please make the following adjustments and generate the appropriate Addendum /Disclosure for the Waiver of Deficiency Judgment for all parties review so as this approved short sale can take place."

Now at this point when the lawyer realized we didn't have the Disclosure from the lender he started to blame the Title agent and wanted from me to send him a threatening email. He said that the title company failed to accomplish the goals of the transaction, including obtaining the written waiver of the right to seek a deficiency judgment, and we should immediately put the title company, bank and short sale buyer on notice that we seek to rescind the transaction!

When I explained that his company told me we were good to close and his assistant who was negotiating the whole case was in contact with the title agent. They were suppose to review my case before closing for my protection, right? The lawyer said he would send the letter to the lender.

Until today he did not, so I asked my husband to go and see him.

Now the lawyer wants to withdraw from representing me, because someone has showed up at his office, even thought I sent him an email giving full authorization to my husband in regards to this case.

WHAT CAN I DO IN THIS CASE PLEASE?

How can I obtain the 'Deficiency Waiver' in writing from the lender still? I called the lender and they said they will not send me anything in writing, just confirmed me verbally that my loan was a no-deficiency loan.

Is there any type of a letter I can send to the lender requesting them to signed as agreed per addendum at the closing? I am so lost and as you can see, once my lawyer realized that they mis-represented me he wants to drop my case!!!

THANK YOU A MILLION FOR ANY SUGGESTIONS.

I am just so desperate.

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The post above clarifies your situation. The attorney can not just add an addendum to the bank approval letter and call it done without the bank specifically approving it - that's not how it works. The approval letter from Chase that you received details exactly what you will get in exchange for the sale. You already closed so your leverage (such that it was) is diminished.

I take back my earlier statement about you having a good attorney because what he did is not accepted practice in short sale negotiations at all. I am also surprised that he did not close the sale - as most of the real estate attorney short sale negotiators also have a closing department or a title company that works with them to close it.

At this stage, it is probably in your best interest to get a good attorney. Stay away from the first attorney. Make sure you get one that knows what they are doing and one that is a litigator. You may have damages that you can bring against your first attorney, but you would need to have a good attorney review your entire file to give you proper advice, including advising you on all of the available options.

You have another option too - you could file bankruptcy. Filing BK is not to be taken lightly, but it is an option for those that have deficiencies and no release from the lender. You don't have to do it right away...you can wait to see if the lender actually does come after you. And of course, you would need to research it first, find out the details, see if it is something that will help you in the long run - or hurt you more. Weigh out your options between the deficiency and the BK.

Part of the decision would involve your total financial situation, the size of the deficiency, will they take a reduced payoff (most will) etc. Don't panic. Do your research and interview several attorney's.

Edited by Denita
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