We quit claimed the property back to Citibank, now they threaten to sue us

[atvbutterfly]

Filed BK Oct '09, discharged Jan '10. Surrendered property in BK to Citi mortg, there was a small 2nd mortgage on the property. Neither of the Lenders filed or attended the 341, but a lien was placed by Citimortgage. Nothing from 2nd mortgage holder.

After discharge I was still getting bills for taxes & upkeep of this property that I surrendered. My atty told me to request a deed in lieu of foreclosure, but Citi (Recovery Dept) told me they won't do it. Citi told me they will NOT foreclose because the house has very little value for them, but I could so a short sale and pay citi, then the lien would be lifted and of course my name removed. I did not want to do that, so in May 2010 my atty. drew up a quit claim deed and we filed it to give the prop back to Citi.
Fast forward to Nov 2011, my attorney rcvs a letter from Citi's atty. stating if we don't expunge the quit claim deed they will sue us to have it removed. Citi doesn't want the property. (ha! they don't want the cost of upkeep/taxes etc.)

I am thinking of paying the back taxes and fixing up the property and renting it out, what is my exposure here? Is this a dumb thing to do? What can Citi do to us next? Is this a ploy to get us to take all the expenses till values go up, then they will foreclose? Anybody ever deal with this, what can be done? Should I just go to court and fight this suit? HELP! enough is enough already, I want this over.

[HHM]

Well, this is the first I have seen of this actually happening, but it was only a matter of time.

As I have been warning for years, simply quit claiming the property back to the mortgage lender/servicer is not going to hold up in court. A one sided quit claim is not a valid transfer.

As for what they can really do, not sure. I would think all they could do is get a court to declare the quit claim void and have it expunged, beyond that, not sure what other damages they could claim unless they were sued by an HOA or something along those lines.

[debee]

If it were me, I wouldn't throw good money after bad. There's no predicting what the lender will do. If you rent it, you'll have to pay tax on that income, and then you'll also get stuck with capital gains issues, depreciation recapture, etc down the road. You'd also have tenant hassle and potential issues with your lender if there's an assigment of rents clause in your loan docs.

If it were me, I would look into how mortgage liens are handled during tax deed sales in your state. If a deliquent tax auction would wipe out your mortgage lien, don't pay the taxes. Just let them accrue until your local authority auctions the house off to an investor.

[AngelinaCatHub]

Using their own paperwork to your lawyer, I would attempt to get a release of lien on the house if they do not wish to accept it. Pull the quit claim deed back, it probably won't cost a lot with their own paperwork stating that they will not accept the quit claim. Then do what you wish with this house. If renting, move back into the free house. Or sell it for a bit of profit. Sounds like a plan to me. 'Hub

[atvbutterfly]

Thanks Everyone for your replies, this so complicated, please try and answer these questions:
1. To AngelinaCatHub:
Because the mortgage was discharged in the BK, and Citi doesn't want the property, just how do I get them to release the lien, exactly what do I do? (my bk atty has drew up a affadavit to expunge the Q.C.D. so what else?

2.If they don't release the lein, could I sell this property for less than the owed amt. w /o Citi's approval? Like a short sale. Could they request the money,even though the mortgage was dischaged?

3. To: Debee:
I've heard how municipalities are getting caught with the cost of so many un-foreclosed properties that they hesitate to do auctions for "bad" properties that have been vandalized as this one has. Could the county fine me or come after me for the delinquent taxes and fees if I expunge this quit claim?

[debee]

I've heard how municipalities are getting caught with the cost of so many un-foreclosed properties that they hesitate to do auctions for "bad" properties that have been vandalized as this one has. Could the county fine me or come after me for the delinquent taxes and fees if I expunge this quit claim?

Property taxes attach to the land. They normally roll the associated fees into the minimum bid amount at the auction.

Michigan state law requires the county to hold two tax sale auctions per year once a property is in the third year of deliquency. All they want to recover is the tax & the associated fees for boarding the place up, etc. They will sell it for a song.

[atvbutterfly]

Thanks debee

[LadyInTheRed]

Thanks Everyone for your replies, this so complicated, please try and answer these questions:
1. To AngelinaCatHub:
Because the mortgage was discharged in the BK, and Citi doesn't want the property, just how do I get them to release the lien, exactly what do I do? (my bk atty has drew up a affadavit to expunge the Q.C.D. so what else?

Have your attorney tell them you will expunge the QCD if they will release the lien. But, I suspect they'll want you to include some cash in the deal.

2.If they don't release the lein, could I sell this property for less than the owed amt. w /o Citi's approval? Like a short sale. Could they request the money,even though the mortgage was dischaged?

You may be able sell the property without Citi's approval if you can find a buyer who will buy it with Citi's lien still attached. Not likely. The discharge released you from personal liability for the debt, but they still have a lien on the property. They probably prefer to wait for a tax sale and take whatever is left or they may plan to sell the lien. If you have some cash you can offer, they may take very little to remove the lien. But, make sure you have enough to pay the back taxes too.

[atvbutterfly]

Thanks Ladyinred!!

[HHM]

To answer your questions

1. No way to "force" them to release the lien (no one ever really contemplated a secured creditor not foreclosing, so there is no provision in any state statute of which I am aware to force the issue)
2. Nope, you cannot short sell without authorization from the lender to release the lien. The Mortgage Note and the Lien are different things, bankruptcy discharged the note (your personal obligation to pay the debt), but not the lien.
3. Since you already did the QCD, the municipality is not looking for you at the moment, but yes, since you are, currently, the legal owner of the property, if the municipality figures it out, they could come after you personally for property taxes that come due AFTER your bankruptcy filing date. However, the extent of personal liability and any penalties is a matter of state law.

[TBA]

This thread came at a great time. I was actually curious about this process. It is crazy to me that the banks will not accept a DIL or QCD to avoid the costs of foreclosure - then again - as demonstrated, the banks dont want the property anyway.

We are currently involved with two foreclosures (both debts discharged in our bk) - one commercial and one residential. The commercial property took over a year before they started proceedings and then the attorney they hired must have been retarded. The original sale date was scheduled for over a year ago (nov 2010) but the attorney for the bank failed to serve the tenants properly, and this case is still going on... I would add that there is no equity in the property.

The residential property has a heloc (as the first - investment property) with amsouth/regions - they filed the LP about the same time we were filing for bk, but now that case is stalled - They dont seem to want to own that property either. The value dropped rather dramatically on that property (we owe about 160k - its maybe worth 40 or 50k!!!).

My attorney told us that regions will not take a DIL, but i dont want the liability of the property anymore, so i was thinking about doing the QCD. Now it seems this isnt such a hot idea.

[tobee43]

This thread came at a great time. I was actually curious about this process. It is crazy to me that the banks will not accept a DIL or QCD to avoid the costs of foreclosure - then again - as demonstrated, the banks dont want the property anyway.

We are currently involved with two foreclosures (both debts discharged in our bk) - one commercial and one residential. The commercial property took over a year before they started proceedings and then the attorney they hired must have been retarded. The original sale date was scheduled for over a year ago (nov 2010) but the attorney for the bank failed to serve the tenants properly, and this case is still going on... I would add that there is no equity in the property.

The residential property has a heloc (as the first - investment property) with amsouth/regions - they filed the LP about the same time we were filing for bk, but now that case is stalled - They dont seem to want to own that property either. The value dropped rather dramatically on that property (we owe about 160k - its maybe worth 40 or 50k!!!).

My attorney told us that regions will not take a DIL, but i dont want the liability of the property anymore, so i was thinking about doing the QCD. Now it seems this isnt such a hot idea.

while it may not make much sence to us on this side of the fense why the banks will not simply accept them, loans via the VA, FHA and some others must go through the entire process required by those agentcies to recoup thier losses through the governement programs. an example of this is FHA must do it, or they cannot file a claim with the FHA even if there was PMI on the property.

as the other posters have mentioned, unfortunately one cannot force the hand of the bank to do anything about completeing your foreclosue and removing your names from the deed. we actually researched our state and the bank in that state which we have or had our property, has a 20 year statue of limitations to transfer a deed. so they can sit on it all of that time if that chose.

as previously mentioned DIL's QCD are worthless instruments if not signed by both parties involved. and, as HHM as pointed out, one cannot do a short sale unless it goes through the bank itself. i know some states are just being to have "real" short sales, like here in florida. however, it gets me when i hear people say they are going to do a short sale and don't have their bank on board, as the bank will not and does not have to accept any contract with less than the full amount owned to them, unless they have their stamp of approval on it. what a mess for many!

[TBA]

I do understand the FHA/VA thing as our bank with the SBA loan on our commercial property wouldnt negotiate with us at all. They had no incentive to work with as as they were going to get paid either way. I spent 6 months chasing after the "answer in two weeks" even going as high up as the VP of SBA lending (not at the branch level, at the corp level), before finally giving up on my chase. I remember telling my attorney how i wanted to tell my case to the judge and how we did everything we could, and feeling sad when he giggled at me. Now, i realize i am not the only one in that very same predicament, and that judge has heard my story more times over than he cares to...

It does still frustrate me though that these banks can go that long. 20 years?! That is crazy!!! I think they only have 5 or 6 in FLA depending on if its govt or not before you can SOL the lien. Not sure about the transfer of deed though (is that the same thing and we are just playing semantics?).

[atvbutterfly]

Thanks for all the info provided, this situation is very interesting to say the least. And our options minimal considering we can't force the Bank to free us of this property. It's such a shame cause I'd hoped with the bankruptcy I could get some relief. (well I did get some)

[tobee43]

I do understand the FHA/VA thing as our bank with the SBA loan on our commercial property wouldn't negotiate with us at all. They had no incentive to work with as as they were going to get paid either way. I spent 6 months chasing after the "answer in two weeks" even going as high up as the VP of SBA lending (not at the branch level, at the corp level), before finally giving up on my chase. I remember telling my attorney how i wanted to tell my case to the judge and how we did everything we could, and feeling sad when he giggled at me. Now, i realize i am not the only one in that very same predicament, and that judge has heard my story more times over than he cares to...

It does still frustrate me though that these banks can go that long. 20 years?! That is crazy!!! I think they only have 5 or 6 in FLA depending on if its govt or not before you can SOL the lien. Not sure about the transfer of deed though (is that the same thing and we are just playing semantics?).

when the house sells that's when the deed is transferred and that's when your names are removed. i don't know what the state limitations for fla are, we live here now. all i know unfortunately, is the 20 years is the time period the bank can chose to NOT transfer the deed into anyone's name, even their own, as the property would have to change "hands". in other words and you can see this many times on the foreclosure sites that the banks buy back the properties in foreclosure and then the deed transfer as well, which in turn, removes the old owners names off the instrument and creates a new deed, now with the "new" owners name on it. in that case it would be the bank.

in nj it makes no difference whether it was a government back loan. 20 years it is in our case shoot....we had a FHA with PMI a no brainier to collect their loss, after all the mortgage was insured RIGHT??? however, as i stated before, i even called the FHA and chase has never filed a claim as it MUST foreclose first before they can collection from the FHA and on the PMI. makes absolutely no sense at all why they wouldn't want to get their money back. i'm at the point now, that i think there must be something underlining here that i just don't know about. even after researching it as far as i could. it's just a dead end.

everyone talks about trying to get a new mortgage but must wait 2-3 years until after their old house which was included in their bk forecloses, so, for people like me, it is possible that it will NEVER go through that process, at least not in my lifetime.