WendyStem

lender trying to illegally claim a deficiency judgment

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Hello all,

I'm new here but looking desperately for some help/advice (I also posted this in the credit forum--hope that's ok as far as procedures go! I apologize if it's not).

I went through a Michigan foreclosure which was completed 4 1/2 years ago through a sheriff's sale. Without my knowledge, my mortgage company is now reporting that I owe them $30,000 because the sale did not cover the mortgage amount. While I understand that there are deficiency judgements, I never received any kind of notice of legal proceedings. In addition, and this is the biggest issue, I paid mortgage insurance (PMI) for the life of the mortgage. Everything I've read about foreclosure law states that a deficiency judgment cannot be pursued of the borrower paid PMI. Does anyone know what the steps are for me to have this rectified? I will truly appreciate any information on this subject.

thanks!

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18 hours ago, WendyStem said:

Without my knowledge, my mortgage company is now reporting that I owe them $30,000 because the sale did not cover the mortgage amount.

Nothing in Federal law or MI law requires they notify you before reporting the deficiency balance to the credit bureaus.

18 hours ago, WendyStem said:

While I understand that there are deficiency judgements, I never received any kind of notice of legal proceedings.

Are they reporting a deficiency BALANCE or an actual judgment through the court?  There is a major difference.  If it is a judgment you would have to get all the documents in the court file especially the ones indicating how you were supposedly served with the lawsuit.

18 hours ago, WendyStem said:

In addition, and this is the biggest issue, I paid mortgage insurance (PMI) for the life of the mortgage. Everything I've read about foreclosure law states that a deficiency judgment cannot be pursued of the borrower paid PMI.

Unfortunately what you read is wrong or you didn't understand it. PMI insurance protects the lender not you and does not prevent them from reporting or collecting a deficiency balance in a recourse state like MI.  All PMI does is protect the lender for up to 80% of the maximum value of the home.  When many homes went under water when property values tanked it left many people in your situation.

18 hours ago, WendyStem said:

Does anyone know what the steps are for me to have this rectified?

Start with whether or not you were sued or they are just reporting it.  If you were sued and the service was not proper there is a slim chance to get the judgment vacated.  If you were properly served or they are simply reporting the debt there is not much legally you can do to force them to stop reporting.

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The above information is oversimplified and could be erroneous, depending on your circumstances.

First, was your foreclosure judicial or nonjudicial?  MI has both.  Also, even if it was nonjudicial, they would need to obtain a judgment for deficiency, so you can check with your court clerk and see if they ever did file a lawsuit there.  They could just be reporting a balance owed on your credit reports, but might not have done anything to pursue it.  If they do try to sue for that deficiency, MI law allows you to challenge their claim if two conditions exist--

1--if the lender also was the winning bidder for the house at the auction

2--if that lender paid significantly less in that auction than what market value for the house would be.

Also, in some states, the lender has the ability to collect on the PMI, then transfer over to the PMI company the right to pursue the homeowner for the deficiency.  Not sure if MI has that but could be worth looking into.  Another thing to check into, did the lender, when they declared default, ever file a PMI claim?  If they made you pay PMI premiums and then never used the insurance, you might have recourse there as well.

 

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