Loan Forgiven in the middle of a foreclosure???

[Catia]

I have had a pending foreclosure/sheriff sale on a 2nd home I own.

Edited to add this info:
This actually WAS my PRIMARY RESIDENCE, but I moved out as a condition of a sales agreement (home needed to be vacant as per sales agreement)--But the sale fell through AFTER I moved.
Technically it still is my primary residence because my homestead exclusion (tax purposes) is still listed on that house, but I will not be moving back in.

The process has been taking forever, and I was awaiting sheriff sale notice, as I was in foreclosure.

In the meantime, I have been trying to get my paperwork in order to file BK, and trying to come up with the $$ to pay a BK attorney.

No information has been sent to me by the mortgage company concerning the foreclosure since the 90 day period where I went into pre-foreclosure, back in March 2008.

This home is now vacant, as it was supposed to be foreclosed upon.

I have just been waiting for the sheriff sale date, as I cannot come up with the funds to bring mortgage current as the mortgage company REFUSED to any "work-out" agreement, harassed me mercilessly for months, with ridiculous charges and several huge fees--they even harassed me when my mortgage was actually curent...Not a very nice company to deal with.

House was slated for sale, but it fell through. Months later upon inquiring about a possible "short sale" back in April 2008, the mortgage company refused that option as well.

I DO drop by the property regularly to check things, and keep waiting for the sheriff sale notice to be posted...It is now August 2008, and I am antsy to move forward and get my life and BK in order...

Today, I logged onto the mortgage pymt site mortgage company states that my mortgage is "Paid in Full"--So I assume that the sheriff sale has been completed, even though I had not been contacted about it.

I decide to call the mortgage company to find out the details of the sheriff sale, so that I can update my own records and proceed with whatever I need to do.

This is what I am told:
Loan is in fact "Paid In Full".
A notation on my account dated 5/30/08 states VERBATIM:
"Insufficient equity to support recovery through REO. Approved for write off."

There has been no sheriff sale, nor is there a foreclosure process going on???

All of my escrow was used to pay taxes and homeowners insurance. Everything is current, I even checked with the county on this issue.

The man in the "Executive Services" dept told me that it appears the loan was in fact forgiven--but that he cannot send me any information directly, because they do not have an actual department with a human being that I can speak with. The dept that I need to contact is by FAX only.

I was told to FAX a dept called "Support Department", and request any details in writing, and to be specific about what details I want, and that this department has a maximun of 60 days by law to answer my inquiry. I was told to include my loan # and property address with my inquiry.

Now I am really FREAKED OUT, because this does not make sense to me, but I ask this question:

"Do I owe anything to bring mortgage current, is the home in foreclosure or was it sheriff saled?"

His reply:
"Not at this time as far as I can tell, it appears as if your loan was written off and totally forgiven", then he added "Please FAX your questions and they will be answered by the other dept as I have no other information available in my dept and since your loan is paid in full, my computer does not have info past the date it was noted paid in full"
He suggested I do so quickly...and to keep copies and to get my records in order, he himself was baffled that it was 'written off /forgiven"

Ummm---has anyone had a loan "forgiven" or "written off" in the middle of what was supposed to be a foreclosure and sheriff sale?

Is there a difference between being "written off" or "being forgiven"???

If the loan was in fact forgiven--
Does this in fact mean that the home is still mine???

I assume I will receive a 1099C for the loan amount if it was forgiven, and I am now trying to see if I am elligible for the new HR bill.--But I do not want to "get excited" before I get my documents from this mortgage company--

Suggestions on how to proceed???

And if this is a huge mistake--does this reset the clock for the foreclosure???
That is what I need to know really--based on the info they are currently giving me, I would assume if it IS a mistake on their part, that the whole process would need to start over from scratch. Meaning if they are intending to forclose, they'd need to begin notifying me of such, since they keep telling me I am "paid in full"...

OF COURSE I am praying this is NOT a HUGE mistake, but I just can't see them forgiving the entirety of the loan--I have never heard of such a thing.---
Anyone???
I am utterly clueless, and in shock.
Plus I might well be stuck with the house, and a huge tax bill (because it was a refinance-not a purchase money mortgage-unless they listed it as something other--which would make the loan fraudulaent in the 1st place--but in reviewing the original docs--there was lots of stuff that wasn't quite right--but I did not understand this at the time--it was a predatory loan).

[Catia]

I have been going through mounds of old unopened mail (bills)...
I found, dated 06/18/08, a loan statement that specifically states:

Thank You For Your Business!
Your loan is PAID IN FULL. This will be your last statement.

It also states serveral fee's and things they did--like a property inspection on 5/29/08--then declared the loan paid as of 5/30/08.

I am zeroed out (literally says $0.00) on all fees, including principal and interest. Even current pymt due, and outstanding late charges etc are zeroed.


I have about had a freakin coronary today.
I do need to get more info in writing from them, but so far, I do have this document, which must mean SOMETHING, but I have no idea what that 'something' is.

What is a "written off" mortgage???

Also-this is what I am wondering--does this reset the clock for foreclosure?
Meaning if they decide to foreclose--do they have to start over from scratch based on the info they are now giving me???

I am asking because IF I AM stuck with this house, and it is not going to foreclose anytime soon, I need to get someone in there before winter, as it is vacant. Last year cost me big $$ to keep gas/utilities on so the pipes wouildn't freeze and so that it did not 'appear' vacant.

I am considering renting it extremely cheap (like for the sake of taxes/homeowners insurance and utilities) to a relative, just to have someone in there if I am stuck with it. I couldn't ever rent it for what the mortgage was because it needs repairs, and the neighborhood got very dangerous quickly due to an immediate influx of section 8 housing.

I do understand I need to get the "lein release" if they did forgive the loan--but in the mean time--I do not want the place vandalized, nor vacant any longer (not a nice neighborhood).

I do understand what you mean about cloud on the title, but in the mean time I have rights to the property, and responsibilities just as I did before foreclosure right???

Even if the loan is NOT forgiven or 'written off'--this still buys me time to save for BK, right?
maybe keeps the clock ticking in my favor, as I wasn't able to file BK yet due to a possible preferential transfer.

What type of notification is the mortgage company supposed to give me? What type of documentation are they required to give by law???
I know there are laws for foreclosure proceedings--but what about a situation such as this?
Apparently this has been going on since 5/30/08.
This damn loan company does not even have a HUMAN BEING in the Support Department-The executive department actually told me this is those words...totally hokey if you ask me--If they can't keep a human being in a support department, how am I supposed to trust the paperwork they send to me???

does my thankyou letter mean anything???

[No Gravy]

Further proof that truth is stranger than fiction...and how do they have a "support department" with no humans there? lol!

I couldn't ever rent it for what the mortgage was because it needs repairs, and the neighborhood got very dangerous quickly due to an immediate influx of section 8 housing.

Ouch...

[Fazeloss]

What an interesting situation. How much money are we talking about here?
In my opinion, receiving a 1099c would be a good thing. While it does not guarantee a clear title, it is evidence that the lender wrote off the loan on their books. And paying the income taxes on the 1099c at probably 15 cents on the dollar is further proof that you paid off the lien. This sounds like a good deal in exchange for a home asset. This would also be your defense if the debt was later sold to a third party debt collector as either a secured or unsecured debt.

In your situation I would look forward to receiving a 1099c. It would be nice if the lender would give you a UCC lien release too. But at any rate, take whatever information you can get to your title office and pay for a new title insurance policy showing you own the property free & clear. The title office will make sure you have release of all liens before they issue you a new policy. If you cannot get clear title, hope that the lender doesn’t restart the foreclosure until your state SOL runs out, at least that way, you could live there forever for free. Just be sure all the property taxes, insurance and utilities get paid.

[AngelinaCatHub]

This is an amazing story. By all means you have to get a lien release of Mortgage. Even if you sell your house to a Section 8, half of something is better than all of nothing.

If you need to winterize your house, turn off your hot water heater, turn off your water main valve, open your hose bib, and get an air compressor. Blow the air through the farthest sink with only one faucet on, hot or cold, and do this for the opposite faucet so that you are blowing the water out of the house through the hose bib. Once you have done this, go to the highest point with some automobile anti freeze, and drain it into each side the hot and the cold until evidence of it come out of the hose bib. It doesn’t have to be much. Then use the air compressor again, and blow air again. Last of all, open all faucets, put some anti freeze down each sink, and into the toilets. Does not have to be much. This will winterize your house. The best thing would be rent it or sell it as you may get squatters or worse living in it. Hope this helps. ‘Hub

[Catia]

I spent time at the county office bldg and the county courthouse today, I work across the street...


Loan satisfaction papers were filed, 07/16/08 for the full amount of the loan, $58,500. Signed by the Vice President of the loan company, and notarized.

OF COURSE I paid for a CERTIFIED copy of this document.

Then I went to the prothonotary and did a lien and judgement search on the property---not a thing.

I was told by the dept of real estate that they cannot "rescind' a mortgage satisfaction paper, that they cannot re-mortgage my house if it was a mistake.

Are there any other docs I need to get my hands on???

I will be hit with a whammy of a 1099-C...scared of that--very scared. It was a cash out refi, and though i did use most of the $$ for home repairs, I may not be elligible for the HR mortgage forgiveness bill...

I am sure all of this sound like this great situation, but I can't afford it, and now I am stuck with the house, in a now ghetto-like neighborhood , and a huge tax bill is floating my way...

Weird how things work.
My breathing was shallow, and I felt like I was gonna pass out while I was getting these docs--I felt like I had done something wrong in some weird way.

Then I realized--I'm not getting anything for free, I'd have been better off with a foreclosure--

There's a little more to discuss-other details like "what now"---and How?
But um--YES--As far as I understand, and as far as the county recorder of deeds, the prothonotary, and the dept of real estate is concerned, my mortgage was satisfied.

I am forgiven??????? Bittersweet.
Wonder what the hit looks like on my credit report

[BnkrptcyLwyr]

Actually, it is a very real possibility that you could own the property free and clear. Here in Michigan some companies, rather than foreclosing on the property and having to take on the property and maintain it, are simply filing satisfaction of mortgages.

You must find out if the property actually went to sale.

If not (or even if they did), find out if they are treating the mortgage as forgiven. If the mortgage is forgiven, then ask them to file a satisfaction.

If not, get a letter from them saying the debt is forgiven.

So, even if they don't file the satisfaction, you can do a quiet title action to have the mortgage declared as satisfied.

[PoorGrammyinBK7]

Actually, it is a very real possibility that you could own the property free and clear. Here in Michigan some companies, rather than foreclosing on the property and having to take on the property and maintain it, are simply filing satisfaction of mortgages.

You must find out if the property actually went to sale.

If not (or even if they did), find out if they are treating the mortgage as forgiven. If the mortgage is forgiven, then ask them to file a satisfaction.

If not, get a letter from them saying the debt is forgiven.

So, even if they don't file the satisfaction, you can do a quiet title action to have the mortgage declared as satisfied.

Thats what I was going to say to the OP - that maybe she actually owns the house without the mtg - but thought, nah - thats just too good to be true...maybe it IS TRUE!!!! If so, thats great for you Catia! Even if you have to pay some taxes - still could be a good thing!

[BnkrptcyLwyr]

Thats what I was going to say to the OP - that maybe she actually owns the house without the mtg - but thought, nah - thats just too good to be true...maybe it IS TRUE!!!! If so, thats great for you Catia! Even if you have to pay some taxes - still could be a good thing!

Yep, make sure they actually declare it satisfied, and make sure that they mean it and that it's not a mistake.

For example, here in Michigan, if a satisfaction of mortgage is mistakenly entered, the lender will be able to get that mistake corrected (as well they should) provided that some other innocent third party is not thereby affected.

[Catia]

Fazeloss--Wise ideas you have my friend--I will soon be talking with the man who did my title search & insurance, and etc. I believe you are onto something for sure---thanks!


Above, this is what I was trying to explain I received when I went to the recorder of deeds and the real estate department of my county. I also went to the prothonotary and did a lein/judgement search on the property.

Here is info on the Document.

The paper I have before me, which is CERTIFIED by my county IS titled:
MORTGAGE SATISFACTION PIECE

It is detailed with my name, property address, date of mortgage, original mortgage debt, date of mortgage recording, office of recorder of deeds Book#, and page #, and short description of premise.

then there is a short paragraph.

The paragraph states VERBATIM:

"The undersigned hereby certifies that the debt secured by the above mentioned Mortgage has been fully paid or otherwise discharged and that upon the recording hereof said Mortgage shall be and is hereby fully and forever satisfied and discharged. In Witness whereof, the said Corporation has caused this instrument to be executed in its corporate name by ________________, it's Vice President and its authorized signer, This 03rd day of July in the year 2008______________________, LLC, as mortgage servicer
by_____________________(signature of vice pres)."

Then under this paragraph is the paragraph explaining the acknowledgement of notary info, and the witness, and the notary stamp info, where it took place (county and state), my loan number, loan company, service, and the corporate officer's recognition, then below is the notary stamp, and the notary's information, some barcodes, etc...


Even if it WAS a mistake, which I do not NOW believe was a mistake (Value of my house dropped from 74,000 to 26,000, and won't sell)--Also, there is question whether or not the Mortgage was in fact PROPERLY RECORDED in the 1st place--According to the county documents--the Mortgage was NOT properly recorded in the 1st place--something was not properly done at the ONSET--I was told that TECHNICALLY in court, if I were sued, they would have a problem because of this fact--it WASN'T PROPERLY RECORDED IN THE 1st place...iF IT IS NOT RECORDED EVEN IF THEY INTENDED TO DO SUCH--THIS IS A KILLER IN COURT....

The company was an Ameriquest owned company--essentially Ameriquest...

thoughts???

I DID back in the beginning of the year call the Mortgage Company and ask them for PROOF of Mortgage, and to forward me PROOF of recording the Mortgage when I was trying to find out who owned my loan, and I requested proof of who owned my loan as well-- I also requested a Payoff statement because it was slated to be sold (fell through). They refused to tell me anything...

I did this because of some things I read on this site--But I never gave it one more thought, I never received anything from my loan servicer pertaining to the recording, but they did send my payoff statement--I figured I'd get the info when I filed BK, because the Mortgage Service Company would be forced to disclose this info...

[BnkrptcyLwyr]

Ok, so you have a satisfaction of the mortgage, recorded in the register of deeds.

I would still call them up and simply ask for a letter confirming that they consider the loan as satisfied and that the satisfaction was not filed by mistake. It doesn't hurt to ask. If the property value dropped that much, then you should be ok, it likely wasn't a mistake then. But a simple call verifying that it was not should give you that extra peace of mind.

[itneverends]

Even if it WAS a mistake, which I do not NOW believe was a mistake (Value of my house dropped from 74,000 to 26,000, and won't sell)--...

Based on what you have said, I do not think it was a mistake. I htink they just look at your property and made a business decision to walk way as fast as they can. They do not want to be responsible for this property. If you just do the math, the house being worth only $26K gives them nothing to work with. They know what their holding cost will be during the foreclosure period and what the legal and disposal cost will be. It would probably cost them more than $26K to hold and sell the house even if it sells rather quickly. If it is in a poor neighborhood, they maybe holding onto it for sometime and 26K may not be the bottom here (if it sits empty it will probably be worth less rather quickly).

But I don't think they really did you any favor here. If you owed $60K, you are going to end up paying $12-$18K in tax on the forgiven amount, so now you have very little room for error instead of them. If the area is so bad that your house lost 2/3 of its value, I would just want to get out of it. Only now you can not just walk away because they washed their hands of it, beat you to the punch.

Not trying to be negative, if you can afford the taxes it may not be too bad. But if values are dropping that quickly, I would want out, renting in an area like that will not be fun either.

[BnkrptcyLwyr]

But I don't think they really did you any favor here. If you owed $60K, you are going to end up paying $12-$18K in tax on the forgiven amount, so now you have very little room for error instead of them. If the area is so bad that your house lost 2/3 of its value, I would just want to get out of it. Only now you can not just walk away because they washed their hands of it, beat you to the punch.

Not trying to be negative, if you can afford the taxes it may not be too bad. But if values are dropping that quickly, I would want out, renting in an area like that will not be fun either.

Need to point out something with the tax ramifications of forgiven debt income.

It is true that forgiven debt is income in the year in which the debt was actually forgiven. If the mortgage company actually forgives the debt, you will get a 1099-C (note, a 1099-A is NOT the form for forgiven debt - there's a difference between the two) and you will have to include the forgiven debt in your income and pay taxes! Ouch!

However, there are two ways that you can exclude the income from your gross income. One, if the debt is "forgiven" because the debt was discharged by way of bankruptcy. Two, if you were insolvent at the time the debt was forgiven. See 26 USC 108(a)(1)(A) & (B). http://www4.law.cornell.edu/uscode/26/108.html

So, talk to your tax guy and determine whether or not you have to include the income.

[Frogge]

Need to point out something with the tax ramifications of forgiven debt income.

It is true that forgiven debt is income in the year in which the debt was actually forgiven. If the mortgage company actually forgives the debt, you will get a 1099-C (note, a 1099-A is NOT the form for forgiven debt - there's a difference between the two) and you will have to include the forgiven debt in your income and pay taxes! Ouch!

However, there are two ways that you can exclude the income from your gross income. One, if the debt is "forgiven" because the debt was discharged by way of bankruptcy. Two, if you were insolvent at the time the debt was forgiven. See 26 USC 108(a)(1)(A) & (B). http://www4.law.cornell.edu/uscode/26/108.html

So, talk to your tax guy and determine whether or not you have to include the income.

Is this exclusion only applicable if the house is your primary residence at the time of the sale?

[BnkrptcyLwyr]

Is this exclusion only applicable if the house is your primary residence at the time of the sale?

The statute does not appear to limit the forgiveness of debt income in such a manner. I have attached a link to the statute in the prior post.