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Short Sales and Lying Lenders

Posted by 15789465 on

Many of you call me or write with complaints about loss mitigation departments and short sale negotiations.  I've heard of more than a dozen cases in which the negotiator tells the real estate agent that short sale approval is under review and they should have an answer soon.  A few days later, the borrower finds out their property has been sold on the courthouse steps! A recent (June 29, 2010) California case, Vissuet v. IndyMac Mortgage Services, holds that a borrower can sue the lender when this happens.  The United States District Court for the Southern District of California said,
  • "The Court has previously rejected OneWest's argument that the alleged oral contract is unenforceable because it violates the Statute of Frauds. As the Court previously explained, Section 1698 of the California Civil Code provides that a contract in writing may only be modified (1) in writing, (2) by an executed oral agreement, or (3) by an oral agreement supported by new consideration. CAL. CIV. CODE § 1698(a)-(c). The California Supreme Court has held that "if there exists sufficient consideration for an oral modification agreement, then full performance by the promisee alone would suffice to render the agreement 'executed' within the meaning of section 1698." Raedeke v. Gibraltar Sav. & Loan Ass'n, 10 Cal. 3d 665, 673, 111 Cal. Rptr. 693, 517 P.2d 1157 (1974) (concluding that the borrowers had a cognizable cause of action at law because they relied on the lender's promise to postpone the foreclosure sale if they obtained a solvent buyer). In this case, adequate consideration can be found in the form of Plaintiff's completion and submission of the loan modification application."
It is time we started holding these companies accountable for their empty promises, their false senses of security, and their lame excuses of, "But I didn't know some other department was going ahead with foreclosure." Yes, the borrower defaulted on their loan. No, that doesn't entitle the servicing company to treat them like  deadbeats with no rights except the right to end up as road kill. Let me know if you agree.

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3 comments

  • Yep, had two of those happen to me in May-June with legitimate, market-competitive CASH offers on the table, as evidenced by the list price they ultimately came to market with, once foreclosed by the lender/investor.
    Also, along with the Recovery Depts, the third-party attorneys appear contributory. As I understand it, they don’t get paid for a successful short-sale, only if they go through with the foreclosure. If that is the case, they are not aligned with the loss-mitigation process and wold have no motivation to cooperate…just to go full-speed ahead with the auction sale, and collect their check. My experience is they don’t WANT to talk to the borrower or their rep…they just “…don’t want to know,” it seemed. Perhaps ingorance is more than bliss…maybe it’s “indemnifiable.”

    Joe Savage on
  • After 90 days of delinquency, the lender will then evaluate whether to foreclose or not. Foreclosure does not automatically begin after 90 days of delinquency. The borrower is “in foreclosure” when the first notice runs in the newspaper. Yes, foreclosure occurs when the auction is held on the courthouse steps and the borrower’s “equity of redemption” is foreclosed. I will edit the post to clarify this. When I said the borrower learned that foreclosure had already taken place, I meant the foreclosure auction. Thanks for pointing out the ambiguity to me.

    deniselevans on
  • Please clear up my cloudiness. 

    Foreclosure begins at 90 days of not paying. The foreclosure process ends with a foreclosure sale (the auction). So when you say, “the borrower finds out their property has been foreclosed!” I assume that it actually went to auction? Or… were these cases were the short sale effort had begun before foreclosure had begun?
    Thanks in advance

    Steve Payne on

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