Replies to This Discussion

Permalink Reply by SE Davis on April 25, 2013 at 2:04am

Mariana;

If I understand correctly, Five Lakes is a collection agent for Chase.

It may be improper or even illegal for Chase or Five Lakes to be attempting to collect on a BK7 discharged debt.

1. Did your homeowner client dispute this debt in writing with Five Lakes as “invalid”? That usually gets the debt sent back to the original creditor Chase.
2. Did you confirm the name of the second Mortgage sub lien lender that was actually listed and discharged in the BK-7 back in August 2009? Very possibly, it was not Chase and that is the reason they may have erroneously transferred that file to Five Lakes.

My experience and understanding is that a lender may accept the 1^st mortgage disbursement offer in a post BK7 short sale transaction however they are prohibited from negotiating (collecting) on a debt previously discharged in BK court. Chase recognizes this and I have closed many Chase BK7 short sale debts with virtually no difficulty whatsoever.

They have to take the $15,000 or they get ZERO post foreclosure. I believe that negotiating for $35,000 may be illegal and a violation of the BK court guidelines and rules for discharged debts.

Forget the QWR that does not apply to 2^nd mortgage liens. After you confirm more details of this debts listing in the BK court filing write a comprehensive OCC complaint signed by the homeowner and send that to the OCC, Chase Executive Office, Chase BK department and Five Lakes at the same time. An SEC complaint for collection agents may be appropriate too.

Then camp out on the phone until you get someone to realize that they have made an error transferring it to Five Lakes in the first place and expedite an approval of the $15,000.

This is workable however you are running out of time. Stop wasting your time trying to comply with Five Lakes illegal demand. Jam the $15,000 down their throat by contacting “authoritative powers above this predatory collection agent”!

 

Permalink Reply by SE Davis on April 25, 2013 at 2:24am

I just confirmed with a BK Lawyer.

Chase and Five Lakes CANNOT engage in collection activities on this BK-7 discharged debt. He stated that Chase can be sanctioned for the mere act of even transferring it to a third party collection agent.

Chase can accept the first mortgages disbursement “offer” for $15,000 FOR lien release however demanding a higher dollar amount contribution is the same as “engaging in illegal collection activities” on an invalid and unqualified debt, which he claims, is a clear violation of federal bankruptcy guidelines.  

I am sure people will disagree but I have never had a problem with a scenario like this and I believe that most top 10 national lenders agree with this opinion.

I believe that Chase DOES NOT know that this debt was previously discharged in a bankruptcy and that they improperly transferred it to Five Lakes.

Chase simply has made a mistake that Mariana you should have had corrected months ago.

Permalink Reply by joe beauchamp on April 25, 2013 at 5:54am

An investor is not required to do a short sale and can demand that the buyer wear a pink tutu and all documents be signed in crayon, if they so desire - so if they say no outside contribution, they can. On the other hand, if said debt is paid prior to closing, it has nothing to do with the closing - simply someone paying off a debt.

I doubt that they would go along with a P.O.C.You could try that.

Some people do things like put payment into escrow to be paid to the 2nd after closing for an approval from the 2nd to close. That is getting into a grey area. Before you puff up and call that mortgage fraud, consider, for instance, that it should be illegal for the 1st (or any random person) to dictate that a person is not allowed to pay his legal debt to a 2nd. The debt is legal, he owes it, how can someone else demand he not pay it? The BK makes that argument even messier.

So far as the heloc is concerned, it is still using the property as collateral. They are not going after the homeowner's now discharged debt, they are simply holding the sale hostage to get money. All legal. But then legal doesn't seem to matter. HSBC can launder money for terrorists, gun runners and drug cartels but that is OK because, as our gov't says, they are too big to have to bother with our laws. Big banks can do what they want in this country.

Permalink Reply by Mariana Molina on April 25, 2013 at 5:38pm

Thank you for your input - I have reached out to the Executive office of Chase and Five Lakes Agency they both claim the debt is discharged however they still have a vested interest on the property and they have every right to collect on the balance of $150,000.  I have reached out to an attorney to help me and send a letter.  Again appreciate the responses.

Permalink Reply by SE Davis on April 26, 2013 at 1:24am

It is all about legal interpretation and opinion. Those differences in legal opinion validated only in a courtroom and lenders know that BK7 borrowers usually cannot afford to litigate.

What I have seen also is that some BK attorneys not taking the extra step voiding the sub lien security interest during their BK proceeding. The Note (debt) discharged and the security interest ignored. If the borrower client does not inform their counsel of their intent to short sale then this occurs quite frequently. Debtors don’t know and BK firms don’t care.

Joe B. is right these sub lien holders are notorious for holding transactions hostage. I have also experienced lenders playing hardball when sub lien default balances exceed $100,000. Additionally a third party collection agent creates two parties attempting to profit from the transaction. It is very rare that a discharged mortgage note legally transfers this interest to a third party. Joe B. is right again about these banks and lenders ignoring laws with cover from national politicians.

I still think you have a good argument to get them to accept the $15,000 (10%).

Using a carefully crafted letter challenging their position with their security interest vaporized post foreclosure and that they accept the $15,000. With a re-submission and supporting documents:

1)      An updated Prelim HUD1 showing the $15,000 and matching the projected closing date with adjusted per diems

2)      trustee sale date document showing the new imminent sheriffs sale date

3)      The first mortgage short sale approval circling the language prohibiting any more than the $15,000 disbursed to sub lien holder that prevents other parties from participating financially.

I would submit this to both Chase and Five Lakes at the same time.

Good luck with it Marianna