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TJ, Esq.
TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 9586
Experience:  Licensed to Practice Law
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what happens to the loans with GMAC, now that they filed bankruptcy?

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what happens to the loans with GMAC, now that they filed bankruptcy? do you know what they did with loans that foreclosed just prior to them filing for bankruptcy and before they were able to sell the home or assign it? Do they just write it off? or what did they do? or what were/are their options? could they transfer the loan since they filed bankruptcy? how could I find out if my loan was in their bankruptcy? I didn't see it in their lengthy list of names but they said because it was i think over 1,000 pages, they said they did not include everything in the online version of their bankruptcy
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  TJ, Esq. replied 1 year ago.
Hello and thank you for allowing me the opportunity to assist you.

Q: what happens to the loans with GMAC, now that they filed bankruptcy?
A: The performing loans are considered assets, and they would likely be kept by GMAC while it attempts to restructure itself. Or, if liquidation is necessary, then the loans could be sold to other lenders.

Q: do you know what they did with loans that foreclosed just prior to them filing for bankruptcy and before they were able to sell the home or assign it?
A: More than likely, GMAC did nothing with those loans. The foreclosures would still be valid and it would be business as usual so far as the homeowners are concerned.

Q: Do they just write it off? or what did they do? or what were/are their options? could they transfer the loan since they filed bankruptcy?
A: As stated above, the loans are assets. They would not be written off merely because GMAC filed for bankruptcy. They could be kept or sold ... but unfortunately there is no realistic scenario where the homeowner will no longer be responsible for paying his/her mortgage.

Q: how could I find out if my loan was in their bankruptcy?
A: I'm not sure what you mean here, though as I mentioned above, the loans would be assets, and assets would be listed as such in the bankruptcy filing. However, since GMAC likely has more mortgages than can be listed, they probably list the portfolio as a whole in its bankruptcy filing. As such, your individual mortgage would not likely be listed in the bankruptcy schedules.

Does that answer your question? Let me know if you need clarification, and please remember to rate me positively so that I receive credit for my efforts.

Thank you and good luck!
Customer: replied 1 year ago.
Im not referring to the home buyer being responsible, I'm just trying to figure out what they mean when they say, "your loan doesn't exist anymore." how is that possible for a loan to simply not exist anymore besides it being paid off by the homebuyer. For example a defaulted loan, what avenues can be taken for a loan to simply "not exist anymore?"
Expert:  TJ, Esq. replied 1 year ago.
Hi again.

Who said that "your loan doesn't exist anymore"? Under what circumstances were you given that information?
Customer: replied 1 year ago.
the lender said it didn't exist anymore. Above says:
Q: do you know what they did with loans that foreclosed just prior to them filing for bankruptcy and before they were able to sell the home or assign it?
A: More than likely, GMAC did nothing with those loans. The foreclosures would still be valid and it would be business as usual so far as the homeowners are concerned.
I know it would be business as usual for the homeowner, I am just wondering what you mean by, "more than likely, GMAC did nothing with those loans." When the home forecloses does the lender's title insurance pay them or how do they get paid when you hear people say, "the lender was the high bidder at the auction." Why would the lender bid on it, if they actually already "own" it? I just am trying to understand a few things in addition to a possible solution. It is more profitable for the lender to foreclose because they get paid by ? the amount they lose that is owed to them. I am wondering if whatever entity (govt, HARP, or TARP, insurance of some sort...?) pays them the loan amount could pay them less and let the homeowner pick up the rest in an affordable loan. But there must be some law (I'd love to look it up if you know it), that says they must foreclose in order to get the compensation they get.
However, I was told by the lender that my loan doesn't exist anymore.
Expert:  TJ, Esq. replied 1 year ago.
Hi again.

Q: I am just wondering what you mean by, "more than likely, GMAC did nothing with those loans."
A: I meant that GMAC did nothing unusual with regard to the loans. What you quoted from my answer was in response to your question, "do you know what they did with loans," which implied that you expected something to happen that was not business as usual. GMAC is still servicing the loans as always, and customers are expected to pay as always. If you were told that "your loan doesn't exist anymore," then I would assume that to be wrong. I can't think of any reason that your loan would no longer exist. Even if it were sold, it would exist and be serviced by a different lender.

Q: When the home forecloses does the lender's title insurance pay them or how do they get paid when you hear people say, "the lender was the high bidder at the auction." Why would the lender bid on it, if they actually already "own" it?
A: The lender does not already own the house ... the homeowner owns the house. The lender merely has a secured interest (i.e., the Deed of Trust). In a foreclosure sale, the lender is required to make a bid and buy the property if nobody else does. If the lender buys back the house, then it won't get paid until it sells the property. Title insurance would certainly not pay the lender. Title insurance generally only insures against problems relating to the title. For example, if there were a judgment lien already on the property prior to the closing of the mortgage, and it was not discovered due to the closing agent's negligence, then the title insurance company would likely need to pay the lender for any loss.

Q: It is more profitable for the lender to foreclose because they get paid by ? the amount they lose that is owed to them.
A: I can't even invent a scenario where a foreclosure would be more profitable than if the loan were being repaid according to the terms by the borrower. In order to foreclose, the lender has to pay thousands in legal fees, and the property is going to sell for less than what the lender originally gave to the borrower. The best case scenario for the lender is that it breaks even, and that is rare. Moreover, even if it breaks even, it's still losing out on the future interest that it would have received had the borrower continued paying on time.

Q: I am wondering if whatever entity (govt, HARP, or TARP, insurance of some sort...?) pays them the loan amount could pay them less and let the homeowner pick up the rest in an affordable loan.
A: Unfortunately, I think that you have the wrong impression. The lenders are losing big time (and have lost big time). Generally speaking, nobody is reimbursing them for losses from bad loans. That's why so many lenders have gone out of business in the past few years. In a minority of cases, a lender may have mortgage insurance, which insures that the mortgage will be paid. But that is rare, and mortgage insurance companies have also gone out of business because of the housing crash, so even in the rare event that the mortgage is insured, it does not mean that the lender will be paid.
Customer: replied 1 year ago.
I can't invent a scenario either, but the lenders/servicers not only have invented a scenario but have and are living it. They wouldn't accept a deed in lieu or a short sale in 2007 when the equity was higher and it could have just been assigned to them. Then they conveniently lose your modification packet 12 times over 3 years. My mom always said, "actions speak louder than words." Well, their actions have proven over 8 million times that it is more profitable to foreclose than to just get the deed signed over to them or to do a shortsale. And all the banks that are out of business? Well those CEO's and whomever they paid off are out galavanting on yachts and vacations and sittin on millions of dollars somewhere. The only ones that lost were those low on the totem pole,the customer service people, etc. and oh yes, the ones that got caught. But I think these lenders/servicers are like fish to the govt. or whoever would be in charge of holding them to laws and once they are caught, they are thrown back in to the sea....free...to cheat you...and me. No disrespect (as I respect you and your words of wisdom immensely), but come on, you really think they are not profiting from these foreclosures? I think it's the taxpayers and our debt that is suffering the foreclosure but certainly not the banks/lenders/servicers and somehow the govt too must be profiting being that they arent changing the laws that have so many obvious possibilities of benefitting everyone from mortgagor to mortgagee and beyond.
Expert:  TJ, Esq. replied 1 year ago.
Hi again.

Q: They wouldn't accept a deed in lieu or a short sale in 2007 when the equity was higher and it could have just been assigned to them. Then they conveniently lose your modification packet 12 times over 3 years. My mom always said, "actions speak louder than words." Well, their actions have proven over 8 million times that it is more profitable to foreclose than to just get the deed signed over to them or to do a short sale.
A: I understand your frustration, and it's hard to rationalize the lender's conduct at times. But I think that you're mixing several ideas. For example, earlier I wrote that "I can't even invent a scenario where a foreclosure would be more profitable than if the loan were being repaid according to the terms by the borrower." I was comparing foreclosure to repayment. In response, you're comparing foreclosure to short sale and deed in lieu, which is totally different. All three options (foreclosure, deeds in lieu, short sale) are money losers for the lenders. Sometimes one option may be better than another, but the lender loses with any of the three. In general, I believe that deeds in lieu and short sales have not been used more often simply because the lenders were ill-equipped to deal with the number of borrowers requesting those options. As for modification, that is largely a waste of time for both parties. The stats show that most people who default under the original terms of their loan default again under modified terms.

Q: No disrespect (as I respect you and your words of wisdom immensely), but come on, you really think they are not profiting from these foreclosures?
A: Here is a typical scenario: Lender loans $500,000 to borrower to buy a house. The market value of the house drops to $300,000 and the borrower stops paying the mortgage. The lender forecloses, buys the property for $275,000 at the auction, and eventually sells it for $300,000. That's a $200,000 loss, and it doesn't even take into account the $10,000 the lender spent on attorney's fees and costs in order to foreclose. How is the lender profiting? The only way the lender could profit would be if it could sell the property for over $500,000 after the foreclosure. If the lender could do that, then there wouldn't be a foreclosure in the first place, because the borrower who can't pay his mortgage would have sold it himself when he found that he could not afford his mortgage. The reason for the foreclosure is because his house was upside down when he stopped paying. You probably already know that, but based on your earlier posts you seemed to be under the impression that the government or somebody else was reimbursing the lenders for any loss. By and large, there is nobody doing that. Indeed, if the lenders weren't taking the losses, then why did GMAC file for bankruptcy, which is the topic of your original question?

In any event, we've now moved far beyond your original question. I hope that I've answered your questions and I wish you luck in going forward. I will appreciate your positive feedback. Thank you!
TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 9586
Experience: Licensed to Practice Law
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