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The cancelled foreclosure

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The cancelled foreclosure

In 2011, I took a mortgage out on a home for primary use. Due to job changes and financial struggles , I became delinquent on my mortgage. My mortgage lender worked with me for a while but eventually I got too far behind in payments and they started sending letters threatening foreclosure. Once those letters started coming, I decided to just let it go and move back in with my mother. Eventually my home was listed in the local sheriff sales , but month after month it would get pushed to the next sale and eventually my home stopped showing on the list. I hadn’t been to the home in over a year at this point and decided to go over to the home. There was a letter on the door about the sheriff sale but the date was 6 months prior. And on another door showed a letter from the bank saying no one was allowed there and the bank took over. After further research, I no longer found my house in any sheriff sale listings. And I called around to the courthouse and found that my name was still on the house deed. After going through the mail at this house, I found a letter from the bank stating they were “releasing the lien”. I also had a contact number for the banks attorney office. I dialed the number and spoke with someone in regards to my home. She explained the bank was no longer interested in moving forward with the foreclosure and basically walked away. And that the house was now “my problem” including property tax , utilities and insurance. Of course after I moved out, I stopped paying everything because in theory I thought the home was being sold at the sheriffs sale. After $4.6k in utilities I had to catch up and $1.8k in back property taxes, everything is caught up now. And the home does need work and was not worth what I owed, but it is livable. I got all utilities turned back on. Cleaned up the brush outside and have been living in it for the last 1.5 years , rent/mortgage free. I keep visiting the deed office and the only lien showing on it is from my utilities which are now paid, and the sheriffs office - but that was dated when the first sale was supposed to be and I’m assuming since the sheriff sale was cancelled, the lien will come off ? My question is : now what ? Has anyone ever heard of this happening ?
Message 1 of 8
7 REPLIES 7
New Contributor

Re: The cancelled foreclosure

That is quite possibly the luckiest thing I have ever heard! Just keep living in it and do not attempt to sell, use any money you would be paying in rent to fix the house up. If the bank truly gave up the house and released the Lien and mortgage that’s an amazing stroke of luck!
Message 2 of 8
New Visitor

Re: The cancelled foreclosure

It almost sounds too good to be true lol ! I do plan on continuing to live here as long as I can. And been trying to use that money for good use. Just wasn’t sure if Anybody has had this happen or even heard of. And I even saw on my credit report they updated it to 0 balance and it shows paid.
Message 3 of 8
Moderator Emeritus

Re: The cancelled foreclosure

If the lien is released, just keep a low profile and let the statute of limitations run out on the note???   They decided not to foreclose on you and they released the lien, so house is yours.  This is the most bizarre twist of fate but to me its just a blessing. 


Starting Score: 08/29/2011 TU 671 EQ 674
Current Score: TU 676 EQ 676 EX 676
Filed Chapter 13 on 06/01/2017 after job loss.

Goal: FHA Construction Loan

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Message 4 of 8
Moderator Emeritus

Re: The cancelled foreclosure


@webhopper wrote:

If the lien is released, just keep a low profile and let the statute of limitations run out on the note???   They decided not to foreclose on you and they released the lien, so house is yours.  This is the most bizarre twist of fate but to me its just a blessing. 


That's one way to deal with REO property that isn't moving I suppose.

 

Lenders were dribbling that out over time, and the timeline might make sense but just walking away sounds distinctly unlike banks generally.  That said a LOT of banks did update their policies with regards to foreclosures and loan modifications during this period, and it's possible that retroactively they looked at the actions and it would've been worked out in this case with a loan modification so they just dropped it.  Really, that might even be the sane cost-saving measure to do as those loan mods definitely took time / effort / money and if you're going to drop most/all of the loan as a result of the hardship issues why not just cut it loose?  If it's flagged as dead paper for whatever reason, don't bother just dump it and as the lawyer so rightfully stated make it someone else's problem.

 

Actually and just thought of this, I wonder if by the time they got to it the utilities and property tax were such that it would've taken someone high up in the organization to actually sign off on the money.  I didn't work in the asset recovery arms of any banks but pretty much every full financial institution I've been at had insanely low signing authortity for the vast majority of employees.  That always applied and created issues when we needed to quickly get something, recently I had a 5500 expense have to get signed off by the CIO who was one step removed from the bank president and that was pretty much the case across the board and getting access to that level on the lending side, yikes.

 

If you can share any info OP, like what what you roughly paid for the house and how much was left on the mortgage I'd be curious... I'm admittedly curious as to the lender but imo you shouldn't disclose that.  Was their a large decline in home prices in your area over the time period?  Where I'm at in Cali it's been up up up since 2011 till flatlining last year but depending where you are in theoretically PA that might be a different story there.

 

I will say that's an awfully nice problem to have Smiley Happy.




        
Message 5 of 8
New Visitor

Re: The cancelled foreclosure

The loan was for $99.5k and I believe the balance on the loan was 90k. And it was through a local bank. As far as home prices in the area , I would say they were declining a bit. It’s just a small town in south central pa.
Message 6 of 8
Valued Member

Re: The cancelled foreclosure

My advice would be to contact a real estate attorney.  Have the attorney review the status of things, including all documents and public records regarding this matter, and determine whether there is anything you need to do or should do to to perfect your ownership of the property.  It is too valuable to simply hope for the best.  Based on the limited information you have provided, it does appear likely to me, a non-attorney, that it is yours.  But the cost of a couple of hours of an attorney's time is trivial compared to the value of certainty.

 

I am aware of a mortgage lender in roughly the same time period, sending a letter to a severely delinquent borrower stating simply that if they signed the accompanying document, had it notarized and returned it by a particular date, their mortgage of $170,000+ would be completely forgiven, and it was.  There was nothing more to the process than that, the borrower never requested forgiveness or a modification or anything, other than signing the unsolicited document from the lender.  So it is not at all unheard of for the kind of stroke of good fortune you have received, to occur once in a while.

 

Congratulations, but get certainty and then make the best of it.





Personal Credit: | 5/21/2019 - $0 | 12/16/2019 - $32,300 |

Business Credit: | 5/21/2019 - $0 | 12/16/2019 - $70,000+ |
Message 7 of 8
Valued Member

Re: The cancelled foreclosure

You also need to talk to a tax accountant (which I would suggest doing after you talk to an attorney - the attorney is likely to help you with information that a tax accountant is going to need).  canceled debt is taxable as income by the IRS.  There are exceptions for debt used to purchase a primary residence, and for insolvency.  But you do have to file the appropriate tax forms for the appropriate year(s) to report the canceled debt and claim any exemption(s) from it being taxed, otherwise you could end up in very deep water (and debt) to the IRS.  The IRS has deadlines for filing these things; you can only go back so many years.  If you miss the deadline you might be at risk of having the canceled debt discovered (lenders are required to file 1099 reports to the IRS to let them know about canceled debt, so the IRS tends to find out eventually), and not being able to claim the exemption(s), and owing substantial back taxes with penalties and interest.

 

DO GET PROFESSIONAL ADVICE, ASAP!





Personal Credit: | 5/21/2019 - $0 | 12/16/2019 - $32,300 |

Business Credit: | 5/21/2019 - $0 | 12/16/2019 - $70,000+ |
Message 8 of 8
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