Bank sends bill after foreclosure

October 9th, 2009, 1:00 am · 9 Comments · posted by Mathew Padilla

Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…

Q. The bank (my first lender was WaMu/Chase) took acquisition of my property on 08/19/2008. WaMu sent me a statement at the end of the year for my taxes, and it showed the home was foreclosed on. They have never sent me anything in the mail or contacted me since. The lender (Ocwen) on my second mortgage has continued to send me monthly statements, but never called. I finally called them to find out why they are sending me statements and of course my loan has increased since then. Ocwen claims I still owe the money and was not aware of the foreclosure. I had tried working with them regarding a short sale when I first vacated the property, and so did my realtor, but they wouldn’t approve anything or accept anything and that was the end of it, (or so I thought). I need to know if I do owe them the money. Do they and will they always have the right to come after me for the money?

A. The issue of legal liability for mortgage debts is very complicated. It varies from state to state and on the type of debt and when it was incurred. You will have to get the answer to your question from an attorney. Before you spend money for that, send papers relative to the foreclosure to Ocwen. If the loan amount is small and they finally see the fact of the foreclosure then they might just let it drop. Worth a try.

Q. We currently have a 1st mortgage on our home in Mission Viejo with a remaining balance of $414,000, interest of 6%, and payment of $3,654. It matures in 10/33. We also have a 2nd mortgage for $148,000, which is interest-only for 10 years and has a rate of prime -0.5%. We are a two-income family and want to start thinking of my retiring and becoming a one-income family. To do this we feel it is necessary to reduce our monthly mortgage payment. We are considering refinancing the 1st with a 15-year fixed-rate mortgage of 4.75%. The second would stay in place. The other option we are considering is paying an additional $1,000 per month towards the principal of the loan over the next 2 to 3 years to try and pay it off sooner. Which would be the better option? Or is there a better option we haven’t considered?

A. I like to have clients like you who think ahead. Your current rate is high enough so that you ought to refinance regardless. But you have some conflicting objectives here. The first one that occurs to me is that you want to reduce your mortgage payment but you say you want a 15-year loan. That has a higher payment. Your current payment is probably around $2,500 and going to a 15-year loan means a payment increase to $3,220. Can you afford that on one income?

If that’s uncomfortable you can still refinance to a 30-year loan at less than 5% and that makes economic sense also. Then, while you are still working, you can throw your entire net paycheck at the 2nd and make it go away much more quickly. You can also get an idea about what it would be like living on just one income.

I am a big believer in 15-year loans because they eliminate debt more quickly, a worthy objective. But we have just refinanced a few clients who owe a fraction of what they owed 10 years ago when we got them a 15-year loan. But now they still have that big payment with lower income. We are putting them back into 30-year loans.

That’s it. If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question. Johnson will answer up to three questions each week, so keep checking back for a response.

Read prior questions and answers by clicking on the headlines below…

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glow22 says:

October 9, 2009 at 9:50 am

If that 2nd was not a purchase money loan the chances are they can continue to come after you for it regardless of the foreclosure.

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Liar Loan says:

October 9, 2009 at 1:27 pm

That’s correct. However, they may be willing to make a settlement for pennies on the dollar, much the way a credit card company would. Call their customer service and tell them you want to make an escalated complaint to the president of the company. That should get you in touch with a customer complaint advocate (every servicer has them). They are generally much more knowledgable than the average customer service rep. Also, once a complaint reaches that level the servicer is bound by strict reporting and regulatory requirements, so they are much more likely to try to resolve the issue. Good luck.

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Anon says:

October 9, 2009 at 3:33 pm

My FC was 11/08, and the 2nd with Chase has pursued me relentlessly ever since. As far as “pennies” on the dollar… I offered them $5k, they would not settle for less than $10 (25% of the bal). I don’t have 10.

It’s been a month since that conversation, and I’m nervously waiting for the next shoe to drop. I know they won’t give up and I expect a judgment is in the works or something. Sux, since I lost my job.

I haven’t heard of many others being pursued like this… Everyone thinks they just walked away. Wonder why I’m one of the few they chose to harass?

Outsider says:

October 9, 2009 at 8:03 pm

Anon,

Don’t think its just you. Can’t find the article now, but read something last week that most short sales are having that debt sold to collections. I don’t think there is a big free ride like everyone is saying about walking away. Dude across the street said he gets constantly harassed over 80k difference on his short sale. You could always claim BK to get them off your back.

Planet Reality says:

October 9, 2009 at 10:08 pm

It surely is interesting how folks think they can just foreclose and walk away clean. Hopefully you saved the money during your rent free year to offset the cost of the 25% interest rate you’ll be paying on everything you buy for the next 5-7yrs. That’s if you can get credit.

mav says:

October 10, 2009 at 9:41 am

obviously banks will eventually try to collect or sell the debt to a collection agency….if they haven’t done so already they will….. you thought you could borrow money for a down payment or take out a HELOC to party without some ramification?

mav says:

October 10, 2009 at 9:46 am

in addition the debtor will have a difficult time getting many jobs as major companies tend to look down upon people with poor credit scores for good paying jobs….. for obvious reasons….

…… todays version of debtors prison looks like this:
- more difficult to get a job
- collection agencies and taxes on debt not repaid

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lookoutdownbelow says:

October 11, 2009 at 8:11 am

I’ve been hearing and reading about the first question as well.
It seems like the second holder lien position are coming after the homeowners for debt collections.
The debt collectors actually purchase the loans for pennies on the dollar and go after the homeowner.
The interesting thing about this is that even if the borrower tells the collection company that they will file bankruptcy, the courts may not have a choice to wipe out that lien.
Why?
Because in a majority (I believe all or at least 99%) of these cases, the borrowers used stated income to get thse loans, and we all know how honest it is to state income that you did not have to get the loan.

In essence, the court will not (cannot) let you out of an agreement that you lied in the first place to get into.

Noman Land says:

October 12, 2009 at 1:24 pm

to:Q. We currently have a 1st mortgage on our home in Mission Viejo with.. blha, blah, blah…
read a book called “missed fortune 101″… otherwise keep making the dumb moves you are thinking about doing now… neither one of those options you are considering is a winner…

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