HUD Foreclosure Title Problems
Okay,
I'm supposed to close on a HUD Foreclosed property next week and the Title co. just discovered that there is a lien of over $7000 from the HOA company. Apparently, the lien is from two years of lates, Attorney fees and code violations of the previous owner. HUD is refusing to pay the full amount saying that it is only responsible for charges in the prior six months to the Foreclosure (which come to $500). The HOA company is refusing to release the lien and we might not be able to close 'cos the Title co. won't issue title insurance given the current conditions.
Now HUD is saying that if we do not close when we were supposed to next week (even if it's due to this problem that is no fault of ours), I would not be entitled to receive my earnest money back because I wrote the contract as an Investor.
Is any one familiar with this sort of situation? What are my options? Is HUD right about the six month rule? Also, the property is only 2 years old and I don't understand how the previous owner could have racked up over $7000 in less than 20 months. The HOA dues are only $155 a year.
Any help would be appreciated. This property is in CO and we have about four days to closing.
Thanks,
JS.
Smithj2
Item 2 on the contract sounds like it could help you in my opinion but you need a lawyer to be sure. As JohnMichael said you could be throwing good money after bad.
Find out from HUDs settlement agent who represents HUD at the settlement table if selling HUDs with title issues is standard proceedure in Colorado. Ask them what they would do to solve this. If this is the way HUDs are sold in your area, you may be out of luck.
One last thing..Believe this if you will..I would tell my buyers, "don't worry about the title, you can't get a better title than from the US Government, plus you have title insurance to back it up."
THis is probably a question for someone like Edmeyer that knows the ins and outs of notes.
ONe could buy a defaulting second at a discount, foreclose, and assume the 1st without qualifying. I tried to get James Smiths office to comment on it but they have not called me back.
OK I heard something from James Smith last week on seconds. He stated that there were federal regulations in place that allow the holder of a defaulting second mortgage to assume the first mortgage without qualifying.... Is this so?
If so it does open up a whole new world for notes
Randall
signman007
I will need more details on this to answer this properly - I am easy to reach! I have no interest in providing financial help but can provide some strategies that may guide you into helping your self.
Some times simple questions get into one heck of a tennis match around here volley to the left and volley to the right and nothing in the center.
Are you the one facing foreclosure? If so will need a lot of details to help you on this.
I do ask that some things need to be posted on the forum so that others may learn but not the vary personal items.
Take care,
Quote:
On 2005-01-28 23:15, signman007 wrote:
So, JohnMichael,
This all started by me asking about what will happen to the first mortgage if it is current at the time of the court ordered sale of the 2nd. I thought it was a simple question. I guess what I am asking is: What rights does the holder of the 2nd have to the property as long as the first is current. I am living in the house with my wife and 3 kids, and was trying to find out a little info before meeting with the real estate atty here. Thanks for the great info you have already provided :-D , and I look forward to hearing what you say about this issue with the first.
[addsig]
So, JohnMichael,
This all started by me asking about what will happen to the first mortgage if it is current at the time of the court ordered sale of the 2nd. I thought it was a simple question. I guess what I am asking is: What rights does the holder of the 2nd have to the property as long as the first is current. I am living in the house with my wife and 3 kids, and was trying to find out a little info before meeting with the real estate atty here. Thanks for the great info you have already provided :-D , and I look forward to hearing what you say about this issue with the first.
Signman007,
If the second forecloses, whoever wins the bid will own the house. Foreclosure is different than buying a second note. After the foreclosure there is no second note and the new owner will assume the first.
When you mention the March 8 sale date, I am assuming that it is the private investor who is foreclosing. There should be a period of time when the second can be brought current without having to pay off the principal. This varies from state to state. In CA (another planet) you can bring a note current almost up until the sale takes place. You might want to check on FL laws or perhaps a TCI member can shed some light on this.
So, no ifs ands or buts, they take my house.
The Philadelphia branch of HUD may have a different policy than HUD in the Colorado area. My experience is that HUD gives a good insurable title. I used to trust them and would buy houses without title insurance to save a few bucks. Then I became a salesman specializing in HUDs and other repos and found out that once in a while the title had problems. HUDs lawyers, I found made mistakes. At a HUD sales meeting HUD said to get title insurance because if HUD missed something on the title and you went to sell the house years later, it might delay your sale. HUD would make good on the title; it would just take time. If the delay in settlement is a title problem, they should not charge any extension fee. HUD should cancel the deal and refund the deposit or allow you to wait and settle when the title is clear. You need to talk to someone at HUD. Government workers are all powerful; they do not have to make money, and they have jobs for life. Calling your Senators or Congressman's office can help. They have staff members who will contact HUD to find their side of the story. When the right person finds out about how unfair HUD has been to you, you will get your money back. I could tell you stories....lets just say if we ever have socialized medicine I pray I never get sick. Let me know what happens.
I am not concerned with WHO can assume/purchase the 1st if the second forecloses, what I need to know specifically is this: Does WHOEVER buys out the 2nd have the right to AUTOMATICALLY foreclose the 1st, or do they have to wait to see if I go into default on the first? Can they take my house if I am current on the first, or just get a lien and wait for me to sell the house to collect, or can they foreclose the paid up 1st and kick me and my family out? Please refer to the orginal post for more detail if needed.
Signman007
If you let it go long enough they may consider a short sale bascially depends on a number of things. This is a settlement for less than what you originally owed.
Yes they can foreclose , they pay off the 1st in that situation, talk to them about a payoff 1st, they may settle for less unless there is enough equity to get all their money back without any problems.
To JohnMichael
I looked over the HUD property dispositon contract 9548 (1/99) and I must say I could not find anything that promises good title. D.2. states "seller may rescind this contract and return all or a portion of Purchaser's earnest money deposit under the following conditions: Seller is unable or unwilling to remove valid objections to the title prior to closing." Nothing in the contract protects the buyer as to title that I could find. My advice was wrong. Fortunately, the Philadelphia HUD office has been merciful in their dealings with buyers. I wonder what would happen to a private party if they kept earnest money deposits when they tried to sell property with clouded title. I have sold a lot of HUDs, 78 in my best year in 1993 at full commission with no split. My experience is limited to eastern Pa but I am sure eastern Pa HUD sellers will back up what I have said. I found this web site when I did a Google search about how to buy at sheriff sale. I should read and learn, but sometimes I can't help myself and spout off.
rewardrisk
Outstanding! Research is the key to being successful as an investor.
[addsig]
Rewardrisk and Johnmichael,
I also went over the contract and did not find anywhere that it promised clean title. However, it does say that Seller may return all or part of the earnest money if " seller is unwilling or unable to remove valid objections clouding title at closing". In this case, the seller is unwilling to remove the valid objections. They were aware of the liens (I was not, which I agree is my fault) and should have factored that before agreeing to a purchase price.
As individuals and investors, we do not have the luxury of changing a price or changing our minds after accepting a contract (without consequences, that is), why should the government not be held to similar standards. I agree with rewardrisk and others that say that HUD should return my deposit or they should clear the title and allow me to buy the property as agreed. With the title issues, I can't even secure lending 'cos the investor won't loan without title insurance.
If HUD backs away from the deal, I will most certainly go after them for my "financial losses". Best case, I will at lease get my earnest deposit back and reduce the amount of loss on this deal.
I think Johnmichael is right that I have no case against the HOA. Afterall, they do have a lien and whether or not I believe it is valid is besides the point.
Maybe if I'm patient enough, they might even turn around and fix the title.
Who knows??
Thanks for all input, it has been very helpful and enlightening.
JS.
I don't know what the law is in CO, but here in maryland the bank/hud is responsible from the foreclosure forward on HOA docs. The HOA can go after the previous owner and sue them for dues prior to the foreclosure. The Condo Association are whatever is due from whenever.
Hope this helps.
Miss Helen,
I believe that is HUD's stand as well. they are claiming responsibility only from the foreclosure forward but I believe the HOA is trying to play a fast one and get some quick profits. I mean, this is a HOA that takes care of common areas only (dues are $155 a year) and have a lien of over $7000 for a two year old property. I think this is ridiculous but I have no idea where to turn to get the HOA to play ball. HUD does not seem to care whether the deal; goes thru or not. They have simply stated their position and are not willing to budge.
Others, Item (2) on the sales contract I signed with HUD states .."The Secretary of HUD (Seller) agrees to sell the property at the price and terms set fort h herein, and to prepare a deed containing a covenant which warrants against the acts of the seller and all claiming by, through or under him. Title will be taken in ...".
Does anyone know exactly what the above paragraph means? I want to read it as clean title but am not sure. Ideas?
Thanks,
JS
Ok, I just talked to EMC and they are telling me that in order to delay the foreclosure 2 weeks we will have to incur an additional 3-5 thousand dollars in fees and penalties??!?!? Does that sound out of whack on a $45,000 first mortgage? Thats rediculous! Someone let me know if they have seen this.
Thanks,
Gerry
Great reply loon
Look folks you can keep dancing around this all you want, you can keep asking until you get the answer you are looking for! Nevertheless, the facts are the facts!
AS IS is actually what it means AS IS! In title and structure!
Mistakes were made, cut the losses and get on to the next deal!
[addsig]
I agree that mistakes were made, I have learnt a lesson here: As an investor, I should check on possible liens before making an offer.
However, this is not a case of dancing around the issue to get an answer that I want. This is trying to get varying opinions and see what experiences different investors have had with similar situations to get ideas on how best to handle this.
If I put something up for sale, it means that I have the right to sell it. Let's say for example that I wasn't an investor. I was just an average Joe off the street trying to buy a home to live in. Are we saying that HUD would say, "Sorry, either buy with clouded title, or walk away and we keep your earnest money". If we follow that train of thought, then theoretically HUD could continue putting the home up for sale and keeping earnest deposits till the outstanding mortgage is paid off (Not realistic, I know).
My point: I believe any court of law would uphold the view that an Earnest deposit is paid to protect the seller against non performance of the buyer, not non-performance of the seller.
Bottom line: I am not going to let my earnest money and extension fees go without a fight. I can prove that I was ready to close on the agreed date. What I need now, is people who have been down this road before and what their experiences were.
Thanks,
JS.
smithj2
The fact is if you believe you have a case, seek legal council.
My opinion you will be putting more good money after bad. If you have a good case then your attorney will handle it on a contingency.
You have become emotional about this issue, this is indicated by the post in your favor, and your replies to said post.
What you believe and what the terms of the contract state vary - the legal system will make a call based upon the terms of the contract.
Stop chasing after ghost - contact the lien holder seek after a settlement - if 7k makes this a bad deal you offered to much.
I have been around the block once or twice, have been investing in real estate since the 70's and have dealt with this before.
If you where ready to close why all the extensions?
In addition, I will end this with one simply statement - Choose your battles wisely!
[addsig]
I faxed in an Authorization to Release Information along with a request for a ss package and a payoff letter on the cover sheet on Mon. 24th. Have left 2 voice mails with who I was told was the person to talk to in loss mittigation with no response as of Fri. morning. Am going to call again this morning and thell them that unless WE can work out an arrangement , that I know for a fact that the owner will be filing BK.
Let me know what happens with your extension. Thanks.
JD
This sounds like an issue between HUD and the foreclosing lender. If HUD can not give good insurable title then they must give you your deposit back, investor or no investor. If the company who contracts out the sale of HUDs will not help, call HUD directly, get the name of the responsible party at HUD and tell them you will write to your US Senator and Congressman telling them of the unfair situation. A phone call would be good too. Government people do not like elected officials investigating. In the 80's I bought HUDs for cash without title insurance; now that I have sold 100s of them I always spend the extra money as some have bad titles. Sometimes it takes HUD months to clear up a title; I wait and it pays off.
For those who read this post to the end like me (and sadly for the buyer, but my point is not to insult) here's another bit of advice...this HOA lien was surely recorded. It could have been found for zero $$ simply by checking recorded documents at the courthouse. Many Recorders will even give the info over the phone. No attorney initiated title search or title insurance required.
Though there are some title defects that a full-on title search or insurance will uncover that you and I may not be able to find, most are right there in the courthouse waiting for us to find them, and adjust our investing accordingly. I'm lucky; HUD and USDA and other foreclosures I've bought have never had a lien I didn't know about beforehend.
I am amazed at the post indicating or implying that you get a clear title because HUD has to. Have we been in a box somewhere folks?
These kind of comments make me wonder if some of the posters have ever done a deal.
This is not a hard thing folks read the purchase agreement.
Let's see under the HUD Single Family Foreclosure Act
The statutory language providing for notice of default and foreclosure sale says nothing about payment of prior liens. It does state that the notice can provide "any other appropriate terms of sale or information, as the Secretary may determine." Title is transferred subject to any prior liens, and the sale proceeds are not used to pay them. The statute is unclear as to whether it envisions some other method of application of payment. Perforce, the statute is also unclear as to whether the term "prior liens" would include judgment liens, statutory liens, equitable liens, or mortgage liens (accelerated or unaccelerated).
Research HUD Single Family Foreclosure Act and the Federal Foreclosure Act and you will be on your game a little better as an investor.
This all said and done, I suppose I will go back to my imaginary world of investing, imaginary knowledge and imaginary laws!
One other thing smithj2 if you fail to complete this transaction read your contract and see what recourse HUD has.
Good luck to you all on this one.
[addsig]
Try contacting someone from property disposition at HUD. Some HUD workers are helpful; some will tell you to get lost and buy something from someone else other than HUD if you don't like it. Unlike government workers, elected officials do have to answer to the public on election day. Senator Spector's office of Pa have been very helpful to me when I have had problems with HUD. The reason I found this web page, and why I like this TCI site, is I am trying to figure out how to buy foreclosures before HUD gets 'em. Once HUD gets the foreclosures they restrict investor purchases. HUD in recent years have used private companies to sell the houses; they keep switching companies. Every time they switch companies, it takes months to get up to speed. HUD did a good job selling directly to the public. How can paying a middleman to sell HUD homes save the tax payer or buyer money? In Pa, this latest company (the fourth I think) Hooks Van Holm has been a disaster. After much delay, they are selling houses although at a very slow pace. If you can't sell now in this white hot market you will never sell. Unless they change, Hooks Van Holm won't last.
I will go with the advise you got from rewadrisk, I will get in touch with the hud agent handling the paper work, they are supposed to give a clean title, I had a problem with them once and I stuck to my guns and I got my money back from them.you can not put a property on the market with a bad title and give people two to three days to bid on the property and say that is fair.
As the purchaser, it is your responsibility to be clear on your purchase and what you are purchasing.
You should have done your own title search, but you know this know.
A title search is the true method to be sure you really have a great deal.
HUD has no obligation to clear all liens and they have no obligation to disclose and defect on title or the property.
This is what the term as is means in the business.
What in the world are you going to sue the HOA for? It was your responsibility to inspect your property both the physical and the title.
I know you are frustrated but you are just going to have to face the situation on this one and go on to the next deal or chase after something you will not win.
Try negotiating with the HOA for a settlement.
[addsig]
Quote:
M, you lose your 5%.
On 2005-01-27 12:53, Invstr73 wrote:
As I understand, in Florida the high bidder at the sale is required to pay 5% CASH down by 4pm that day and there is NO assuming of ANY mortgages. Then the high bidder must obtain your OWN financing, cash, whatever to pay off the difference.
No, no, no. You are required to pay your 5% immediately after winning the bid. You then have till 4PM to pay the balance of your bid plus any recording fees. If you do not pay the balance by 4
[quote]
On 2005-01-28 00:09, GeneralSnafu wrote:
Quote:
On 2005-01-27 21:11, Invstr73 wrote:
P.S. No, the first does not have to be in default for the second to proceed with a foreclosure of his loan..
The question was not weather or not 2nd can proceed on the foreclosure on 2nd, but rather if 2nd can foreclose on the 1st that is not in default.
Here is the answer:
The 1st does not have to be in default for the second to proceed with a foreclosure on the 2nd. The 2nd cannot proceed on the foreclosure on the 1st.
Looks like we have lost our minds - what makes you think you can force a lender in 1st position to allow you to assume a loan just because you purchased a 2nd!
Give me break - Think folks!
In Florida, mortgages must be foreclosed by filing a lawsuit in court. As in any lawsuit, the borrower must be served with notice of the lawsuit and must be given an opportunity to appear and defend his or her rights. The lender will try to show that the borrower is in default, and that foreclosure is therefore necessary under Florida equity law. Florida is unusual in that the legislature has passed very few statues regulating foreclosures. Most of the law on the subject of foreclosures in Florida is found scattered in dozens of cases. The basic statue, chapter 702.01 reads as follows:
All mortgages shall be foreclosed in equity. In a mortgage foreclosure action, the court shall server for separate trial all counterclaims against the foreclosing mortgage. The foreclosure claim shall, if tried be tried to the court without a jury.
Counterclaims by a borrower may be tried to a jury, but they must be tried separately from the main foreclosure lawsuit.
In Florida because the lawsuit to foreclose on a borrower is a suit in equity, it is impossible to obtain an injunction to stop what is, in essence, a court ordered sale. In addition, the court can order the sale at a low price. A sale can be set aside if there is an error in the procedure to foreclose; however, it cannot be set aside due to the low sale price. The court order commanding foreclosure will specify how the foreclosure must take place, and the foreclosure must take place on those terms.
After the sale takes place, the sale terms must be confirmed by the court that ordered the sale. If the terms of the sale order are met, title in the buyer’s name can become complete by filing a certificate of title. At the discretion of the court, junior lien holders can redeem the property, up to the time of the confirmation of the sale. The equity of redemption is cut off when the sale is confirmed, but it exists prior to that time, which means the borrower, can save the property from foreclosure by coming up with the money before confirmation.
A separate action for a deficiency must be filed within four years after the foreclosure sale.
You will not find any federal or state that law that forces a lender to allow one to assume a 1st mortgage just because they purchased a 2nd mortgage.
Florida Constitution http://www.leg.state.fl.us/Statutes/index.cfm?Mode=Constitution&Submenu=3&Tab=statutes
Florida State Code http://www.leg.state.fl.us/statutes/index.cfm?Mode=ViewStatutes&Submenu=1
Florida Administrative Code http://election.dos.state.fl.us/fac/index.shtml
Florida Banking Statutes and Rules http://www.dbf.state.fl.us/banking.html
Florida Rules of Civil Procedure http://phonl.com/fl_law/rules/frcp/
Supreme Court of Florida Opinions. Opinions since 1995. http://www.findlaw.com/11stategov/fl/flca.html
Supreme Court of Florida Opinions Decisions since September 1995. http://www.law.ufl.edu/opinions/supreme/
Supreme Court of Florida Opinions and Briefs From Florida State University College of Law. http://www.law.fsu.edu/library/flsupct/index.html
Opinions of the Florida Supreme Court From the University of Florida College of Law. http://www.law.ufl.edu/opinions/supreme/
State Case Law http://www.flcourts.org/sct/sctdocs/index.html
Posters of questions, make sure that you verify facts before assuming a poster knows what they are talking about.
Forums are to be used as a tool, but not all tools are the correct one. Think my friends and verify the facts.
Good luck.
[addsig]
JohnMichael,
Thanks for your comment. Are you saying that I am simply out of luck and there is nothing I can do. So HUD has no obligation to settle these liens and give me clear title even if they have been aware of these liens for a while.
My question to you then is how does one go about purchasing a HUD property in order to avoid problems like these? I am now out of pocket my Earnest money and two extension fees already.
Any thoughts or similar experiences??? Someone suggested that I sue the HOA Company for my losses but I have no idea if that is a good idea or not.
Rewardrisk, you mentioned that it sometimes took you months to close on your HUD properties, how did you stay on that long? Did you just keep filing extensions and paying for them? Or did you ask for forbearance from HUD.
Thanks in advance.
JS.
smithj2,
You just learned a valuable lesson. So many investors assume a title is clear just because It's a HUD, VA or any other REO's.
All learn from this, the devil is in the details, if you do not do a title search your self before you place a property under contract you will assume HOA and tax lines unless your contract calls for a clear title clause.
Please read and understand what you are signing and understand what you are buying folks!
You have two options purchase the property or loose your earnest money and possible other cost they can sue you for breach of contract.
I am so sorry this has happened to you, it is not the norm with HUD but it is sold as is and the title clearance is limited.
[addsig]
So JohnMichael,
Since you seem to understand Florida foreclosure law, can you explain in simple terms, what happens, after someone buys a 2nd at a foreclosure auction. Do they become the owner? Can they payoff the 1st? If not what exactly happens?
you folks are not helping the "signman"...he wants to know, yes or no, can the highest bidder on a junior lien have the right to foreclose on him and his !st, and thereby remove him from his property.
answer....yes
InTheHunt,
You are correct and I apologize for the error. The redemption period is simply a period of time after the sale that "the court reviews the sale to ensure a fair price has been paid." Basically, this period of time allows parties to object to the sale on the basis that proper procedures were not followed or collusion existed between the bidders, for example. This period is usually 10 days, after which the Certificate of Sale is filed and title passes, if the sale is confirmed. If the sale is not confirmed, another sale is ordered. (Reference F.S. Chapter 702)
The best way to find out who to talk to from HUD about this matter is by contacting HUDs settlement agent. Your title company will give you that information if you do not have it. The original lender will have to pay for the balance owed on this property if HUD will not pay. They will have to work it out; but they can not expect you to buy a property with an uninsurable title. I just hope they do not cancel the deal only to sell it months from now for a higher price, after the debts are paid. It happened to me. Good Luck.
Just so I can learn something. How many transactions has ANYONE done such as Edmeyer has described? "Assuming a 1st without qualifying"
I would like to hear of ANYONE who could now share their own experience with assuming the 1st mtg and how they did not have to qualify.
Tim
rehabber,
Please check carefully who is asking questions and who is answering.
[quote]
On 2005-01-28 13:24, reinatalie wrote:
Quote:
On 2005-01-28 00:09, GeneralSnafu wrote:
Quote:
On 2005-01-27 21:11, Invstr73 wrote:
P.S. No, the first does not have to be in default for the second to proceed with a foreclosure of his loan..
The question was not weather or not 2nd can proceed on the foreclosure on 2nd, but rather if 2nd can foreclose on the 1st that is not in default.
Here is the answer:
The 1st does not have to be in default for the second to proceed with a foreclosure on the 2nd. The 2nd cannot proceed on the foreclosure on the 1st.
IIRC, that was not the original question. You were the one who confused the issue in your post at 01:21 on 01-27-2005. You implied that he was doing the right things to keep from losing his house (to the holder of the 2nd) by keeping his 1st current. As we both know, if the 1st was current or not, had absolutely nothing to do with the ability of the 2nd to foreclose. I hope this clears this up, once and for all.