Trustee is employing real estate agent

[tdawg]

StartingOver08: I'm going to talk to my attorney on Monday. He's always gotten back to me quickly. I am freaking out about this less now that I consider what the downside is. From what I understand, I'd be able to live in my house rent and mortgage free for 3 months or 6 months or how ever long it takes to sell the house, and I wouldn't have to pay my car payment and they couldn't repossess for that long (or until they got a motion to lift the stay). And I would not own a house that is underwater anymore. I'll definitely post and let everyone know how this all turns out.

lalap123: I am in Washington state

[StartingOver08]

BTW, who services your mortgages? Indymac by any chance or OneWest? Just curious. There is another way the Trustee could make money in a short sale, especially if it is one of those lenders.

[tdawg]

BTW, who services your mortgages? Indymac by any chance or OneWest? Just curious. There is another way the Trustee could make money in a short sale, especially if it is one of those lenders.

Wells Fargo

[SleepWellNow]

tdawg - Your Trustee seems to be trying to pull the same thing as mentioined in my thread "Why won't the Trustee abandon..." The Trustee in my friends case wanted to take over the short sale that had already been approved and even demanded the short sale negotiator's contact info for the lender. When the agents involved balked, he flat out asked if ANYONE would give him some money...the seller, the buyer, or the agents. He said he would IMMEDIATELY release the property in exchange for the money. Of course, he said the money was to "benefit the estate" but we know who really stood to benefit. Since the seller has no money, the buyer and agents wouldn't give him any money, he is sitting on the property and letting it be foreclosed. I personally think he's playing "chicken" to see who will come up with some money to keep the house from foreclosing.

If what that attorney said at your 341 hearing is correct, this IS setting a terrible precedent. Any BK filer with an upside-down house would be an "asset" case with the "asset" being the money the lender is willing to pay.

If a Trustee will get paid for doing short sales, why ever abandon a property? No more "ride throughs". That would mean, if you file BK and are in an upside-down house (which many people are in the current real estate market), you lose your house, even if you are current. What a sweet deal for the Trustees. This will greatly cut down on their $60 Chapter 7 cases!

[StartingOver08]

Well, a complicating factor is that once the lender does foreclose then the mortgage insurance pays out $X to the lender. If the property is in the BK Estate, would the Trustee be entitled to the MI payout???? I don't know.

It just occured to me that in addition to "encouraging" one of the parties in a short sale transaction (buyer/seller/real estate agents) to come up with $$ to release (or abandon) the property, the big bucks are in the mortgage insurance payoff's made to the lenders upon foreclosure. I don't even know how to find out if the Trustee's are holding out for these payoff's. Maybe one of the attorney's or someone else knows how to find out. OP, maybe your attorney knows.

BTW, Wells Fargo put MI on just about everything they financed, no matter what the LTV was at the time. If your LTV was 80% or less, they put on lender paid MI. If it was more than 80%, the borrower ususally paid the MI.

[SleepWellNow]

You're right, this is pretty complicated. I'm thinking, if the lender has been granted a Motion for Relief of Stay and chooses to foreclose on the property, isn't the property no longer a part of the BK estate? Would a Trustee be able to collect on money (MI) received by the lender AFTER the foreclosure?

[OhioFiler]

I would think the lender is the purchaser and sole beneficiary of the mortgage insurance policy and as such the value of the policy can not be assigned to the property or the petitioner.

[StartingOver08]

I would think the lender is the purchaser and sole beneficiary of the mortgage insurance policy and as such the value of the policy can not be assigned to the property or the petitioner.

This sounds logical. However, who would have thought that the Trustee would hold up a short sale and demand a piece of the action from the parties involved (buyer/seller/real estate agents)?? I don't make any assumptions anymore when it comes to either the banks or the BK Trustee's and their creativity!

[HHM]

Let's separate the 2 scenarios

1. The OP has a home, current on the mortgages, doing a ride through, and has negative equity.
2. The other person that posted, the short sale was already in progress and the trustee was trying to take it over.

In both instances, what the trustee is trying to do is shady, but in scenario 2, probably okay. But in scenario 1; that needs to be fought. The trustee is trying to do an end-around the homestead exemption. Also, paying the trustee a "service" fee for selling the home seems inappropriate; the trustee is only supposed to marshal assets of the BK estate, not generate a sort of bribe for service scenario to get money.

Hopefully, your attorney will fight it. The first stop would be the U.S. Trustee because they oversee the Bankruptcy Trustees; but if the local US Trustee has signed off on this tactic, then it will need to go before the judge.

[tdawg]

Let's separate the 2 scenarios

1. The OP has a home, current on the mortgages, and doing a ride through
2. The other person that posted, the short sale was already in progress.

In both instances, what the trustee is trying to do is shady, but in scenario 2, probably okay. But in scenario 1; that needs to be fought. The trustee is trying to do an end-around the homestead exemption. Also, paying the trustee a "service" fee for selling the home seems in appropriate; the trustee is only supposed to marshal assets of the BK estate, not generate a sort of bribe for service scenario to get money.

Hopefully, your attorney will fight it. The first stop would be the U.S. Trustee because they oversee the Bankruptcy Trustees; but if the local US Trustee has signed off on this tactic, then it will need to go before the judge.

Thanks for clarifying. I felt like this thread was getting a little muddled. I'm really curious if my lawyer is going to want more money to fight this or if he'll do it for no extra pay. To clarify, on pacer, I have only seen things which relate to hiring the real estate agent, but nothing specifically stating that he has the authority to short sell the house. I am curious if he needs to get that.

Could the US Trustee tell the local trustee to knock it off? And I am starting to wonder if it is time to get ahold of my Senator(s) to see if they can help. A few years ago, I found that they were very helpful with a problem I had.

[HHM]

Yes, the US Trustee can tell the BK trustee to "knock it off".

It wouldn't hurt to write your local US Representative or Senator.

[tdawg]

I still haven't heard back from my lawyer (I emailed him on Monday afternoon). I'm going to give him a call tomorrow. I received my discharge today. I haven't seen anything further posted by the trustee and no one has contacted me. I'm hoping he's just going to decide to give up trying to get money out of my house that has negative equity. I'll keep everyone posted.

[Mensa1]

Tawg:

What I would do in your situation is to search other recent Bk cases on pacer that your Trustee handled and see if you find any similiar action of a real estate agent being employed to sell the property. I would take note of who the lender is, there may be a connection there that ALL WF props the Tr has an "in" with for short sales, or some other gimmick.

Also note who the re agent is, and see if any of those props got listed... and eventually sold. Or, if there was any othe resolution to this situation as an offset; funds offered vs. short sale. If you find any cases you might also make note of the who the debtors Atty was in those cases too, and if you find any pattern here possibly have your Atty call those Attys. You will likely have to do the legwork yourself here and it could be considerable research in terms of time, as well as a few $$$ in searching cases.

The approach by the Trustee seems highly irregular. Why wouldn't the Trustee seek to cram down unsecured creditors the same way in order to create equity..? The reason is it wouldn't be ethical due to conflict of interest. Why in the world would be be reducing WF's value of a perfectly good and performing mtg loan? Something isn't adding up here. I suppose that a creditor like WF could make it known to the US Trustee that they are open to short sales on unaffirmed props, even those under water. That is about the only case where I can see that something like this could/should come about, at the solicitation by the creditor themselves.

Interesting case. Have you heard anything back from Atty since last post?

The other thing to mention here is if they did list the house with re agent, they will have to go through you for showings. I wouldn NOT permit an agent who did not have my interest first, as in one who works for a Bk Trustee, to show my property when I was not present. RE Agents will hate this one. You would have to walk a fine line here since you couldn't unreasonably make the property unavailable, but you could reasonably say at times, "you can't show the house", without issue from the Trustee. I woudl say "NO key..... NO lockbox....... showings between these hours on these days, with a 24 hr advanced notice". You will find that there will be few showings, IMO.

[SMinGA]

Go thru your bankruptcy petition, and make sure your home is listed properly. Perhaps there was a typo or some other error where it looks like your home is worth more than the mortgage & the trustee thinks there is non-exempt equity. The state of WA has a $40,000 homestead exemption - so in order for the trustee to make a dime he must sell it for enough to pay the RE Agent & selling fees, pay off the mortgage, and pay you $40,000.

[tdawg]

Mensa: My lawyer has still not contacted me. In the past, he has always gotten back to me within a day or two. I wonder if this is because I'm discharged now?

SMinGA: If the trustee has to give me $40,000 when he sells the house, then I will do everything I can to help him sell it. I looked at my paperwork, and it looks pretty straightforward. My house is listed with a value of $395,000. On the schedule A, it lists the value at $395,000 and the secured claim as $398,697. On the schedule D, it lists the value as $395,000 and the "amount of claim without deducting value of collateral" as $398,697. But it lists the "Unsecured portion, if any" as $3697.00. I would think that should be $0 (or -$3697). That looks like a mistake. But I can't believe he would be going off of that to think he can get some money. In my statement of intentions, it says I will retain and pay. By the way, after I googled the trustee's name, I found out he's a real estate lawyer. By the way, I used the federal deductions because I had to exempt my tax return and some cash on hand. And my mortgage loan has insurance on it. I wonder if that's why the trustee's going after it? The contract he has filed with the real estate agent authorizes the real estate agent to list the house for $395,000 and submit offers for the house until May 31 and a commission of 6%. No one has contacted me yet regarding this, so I don't know how they could try to sell it that quickly. The house is probably worth $360,000 - I bought it in 2008 with 0 down for $395,000.