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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Can I do a reconveyance of deed of trust outside of my loan

Resolved Question:

Can I do a reconveyance of deed of trust outside of my loan servicing company?

I loaned $68K to a borrower secured by a first trust deed, and the loan is managed by loan service.

The loan servicing company went bankrupt, but before they did, the borrower repaid me the full amount 68K, less 1K for a reserve fund.

The Borrower told me to have the loan servicing company do the reconveyance, but now they are in bankruptcy and the trustee isn't returning my calls.

Meanwhile, the borrower wants me to do a full reconveyance, but he shorted me 1K.

Can I go outside the bankruptcy trustee and do a partial reconveyance myself? It's been 45 days already.


This is in the State of Washington
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 4 years ago.

Hi JACustomer,

Your last sentence was cut-off.

1) What is your last sentence?

2) Is any money owed to the loan servicing company?

Customer: replied 4 years ago.
Problem is the borrower wants me to do the reconveyance, not the loan service provider, and says he is going to sue me for triple damages for not reconveying the deed of trust. I told the borrower that his instructions were for the loan servicing company to do the reconveyance and that he should at least allow me to contact the loan servicing provider regarding the reconveyance since that is what he asked me to do. Now the bankruptcy trustee for the loan servicing company is not returning my calls, and the borrower is threatening to sue for his damages of not having a clear title. The bankruptcy attorney appointed by the court who represents the court appointed attorney is very helpful and suggested that I wait on the trustee to give me direction, but again, he is only acting for the trustee of the loan company. I on the other hand have three options. I can do a partial reconveyance for the amount that the borrower paid me direct. I can wait for the trustee to give their instructions, or I can issue a full reconveyance. But I'm concerned because if I do a reconveyance, then the trustee is going to possibly say, it was their loan,and I had no right to do a reconveyance? Or the borrower could say, I paid you, and you damaged me? The loan per the Recorded Title shows me, as a single man in Pierce County Washington in c/o the loan servicing company that collects the loan payments.

The loan servicing company supposedly is holding 1K of reserve funds paid by the borrower. The borrower does not owe anything else to the loan company, and has otherwise paid me directly outside of the loan servicing company.

The borrower did this so they could get a new loan on the property.
Expert:  cfortunato replied 4 years ago.

The automatic stay that goes into affect as soon as a Bankruptcy is filed does not apply to any property that the debtor does not own. Bankruptcy Stat. 362(a).

Since the loan servicing company does not own the property in question, there is no reason that you cannot proceed to do a re-conveyance (either full or partial) on your own, without waiting for the trustee's approval.

However, if you have a contractual obligation to pay the loan servicing company to do the re-conveyance, the trustee will be able to enforce that obligation, which means the cost to re-convey would have to be paid to the loan servicing company even though you are the one who did it.


I think this is what you wanted to know. If not, please let me know.
Thank you.
Customer: replied 4 years ago.
Yes, this is by far what I wanted. Thank you very much.
It's already been 45 days so the borrower technically can bring a cause of action against me for triple damages in the State of Washington. Is there anything that I can bring up to show that I acted in good faith or to waive damages? The borrower gave me the instructions to have the loan servicing company do the reconveyance, and being unfamiliar with the process, just expected that the loan servcing company would do this, so I didn't know I was suppose to do this. And then, do you know if there is anything wrong with me giving the borrower a partial reconveyance instead of a full reconveyance, and then wait for the loan servicing company for the remaining funds of 1K before I give the borrower a full reconveyance? Thank you, XXXXX XXXXX response was mostly what I needed! Great Job!
Customer: replied 4 years ago.
Also, the borrower told me when he sent the payoff less the 1K, that he wanted the loan servicing company to do the reconveyance. Would this qualify me to be exempt from any legal obligation for me to do the reconveyance myself, since that is what the borrower asked me to do? In this case, would I have the option of specifically following the borrower's instructions and requiring the borrower to wait until the loan servicing company perform the reconveyance, even though they are in bankruptcy?
Customer: replied 4 years ago.
Also, can I legally just give the borrower a partial reconveyance for the 67K when the loan was for 68K and the borrower supposedly has already paid the other 1K to the loan servicing company.
The loan servicing company is currently in bankruptcy, so chances are the borrower will have wait for several more months for the bankruptcy hearings to be finished before he would then be entitled to have a full reconveyance?
Expert:  cfortunato replied 4 years ago.

If the loan servicing company cannot do the re-conveyance soon because of the Bankruptcy, you will have to do it - even though the borrower asked that the loan servicing company do it - because the borrower was not aware of the Bankruptcy when he asked that the loan servicing company process the re-conveyance.

If the borrower still owes you $1,000, then he is entitled to a partial re-conveyance only.

Customer: replied 4 years ago.
Is there a time period in which I am required in the State of Washington to do a reconveyance, once the funds have been partially satisfied, in Pierce County? Since it's already been 45 days, have I already caused a legal infraction to this borrower? He told me to go through the loan service company, so I'm hoping that I would be forgiven by the law as an exemption? But I will send off the partial reconveyance today! Thanks for your big help!
Expert:  cfortunato replied 4 years ago.
Being primarily a Bankruptcy Law expert, I do not know the answer to that question, which you can ask in the Real Estate Law section.
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