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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33569
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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My bank told me that they are second mortgage lien on my house

Customer Question

My bank told me that they are second mortgage lien on my house when it came to finalizing my modification, so they could not do the modification unless they were in first position. I done a full preliminary title search and it showed that the property Deed of Trust is fully re-conveyance to me and my wife. No 1st,no 2nd Lien, no mortgage Lien at all. So, since we were in a chapter 13 at the time and our bank told us they were 2nd mortgage Lien holder we file a chapter 7 and filed them as an unsecured debt. "By the way, we also have a Declared Homestead filed with the County Court since we purchase the home". We have on file also, the bank stating they were 2nd lien holder and they missed the trustee dead line to file any action for monetary claim. What legal advice would one give us? What do we do now? Do we sell or do we keep the home? Do we get a loan on the home or can we? We just don't know what to do at this point! Is this good or bad?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Tina replied 1 year ago.

Hello and welcome.

My name is XXXXX XXXXX my goal is to provide you with excellent service today. I am sorry to hear of your difficult situation. Before I can give you an accurate answer to your question, please provide the following additional information:

How long ago did you file for bankruptcy protection? The first lien-holder is not asserting an interest on your property? Do you wish to remain in the home or sell it?

I look forward to assisting you as soon as I have received this information. Thank you.

Customer: replied 1 year ago.


Hi Tina, thank you for your assistance.


 


I filed my chapter 7 on May 10 2013, I received a letter from the Trustee in the case has filed a "Report of No Distribution, "stating, there are no funds available from the estate for distribution to creditors. Last Day to file an objection: 5/11/2013. We are not sure what the first lien holder is doing. Please follow me on this. I only have a first lien holder on my home but my first have said they are second lien holder and another bank is first lien holder on my home. However, the fact of the matter is according to the title company and the court county recording office there are no lien mortgage companies on my property or liens at all. It does not even show the last 2 mortgage companies that was listed on my property. If we can remain in the home without any repercussions we would love to stay in our home. However, we did receive a letter from the bank asking for a certain amount of dollars but we thought it strange because they were not asking for the full house amount.

Expert:  Tina replied 1 year ago.
I see. It sounds as though there may be a number of errors involved here, probably by the lender, but I believe you would be better served by an attorney with more bankruptcy law experience than I have.

I am going to opt out of your question and open this up for other professionals to get their opinion, preferably with real estate law and bankruptcy law experience. You do not have to stay online for the question to be active, or rate this question yet as it would then discourage others from answering. Should a professional pick it up, you should be alerted via email and/or SMS (text message) unless you actively disable these features.

There is no need for you to reply at this time as this may "lock" your question back to me, thus inadvertently delaying a response from someone else.

My apologies for any inconvenience and Good Luck.

Expert:  socrateaser replied 1 year ago.
Hello,

Different contributor here. Your question probably should have been posted in the Bankruptcy Law category. Please permit me to assist.

If, as you say, there are no recorded liens against your property, as of the date of the filing of your bankruptcy, then the lender's purported mortgage would be an unsecured debt. And, if your bankruptcy was discharged with no distribution, that is what is known in the bankruptcy biz as a "no asset case." This means that as a matter of law all unsecured debts are discharged entirely, and that would include any unrecorded mortgages as of the date of the filing of the bankruptcy petition.

In short, based on your description of facts, you own your home free and clear, and the lender has no recourse against you, because the mortgages are discharged as unsecured debt.

Now, there is a possibility that the lender could contact the bankruptcy trustee and explain what has occurred. The trustee would likely ask the court to reopen the bankruptcy case and set aside the discharge order, because you would suddenly have a valuable asset that could be liquidated by the trustee to satisfy your unsecured creditors, one of whom is the bank.

Whether or not the bank will do this is unknown. But, at the moment, you appear to be free of your debts and the sole owner of your home. You may want to think about selling the property and moving to a jurisdiction with a large homestead exemption (e.g., Florida), where you could protect the proceeds of sale from a potential attack by the bank.

Hope this helps.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33569
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

Question, because the original mortgage company never filed with the Court County Recorders Office nor the Title Company and has been shut down by the Federal Housing Administration’s, and now taken over by another bank. Since the bank said they could not do my modification because they where 2nd lien position and another bank listed as 1st lien position which clearly does not exist. I have this note on file with NACA. The Title company has told me the Deed of Trust shows re-conveyance to husband and wife only no mortgage liens and that because the mortgage company did not file that they would not be able to produce the original Deed of Trust. Can the bank still try to liquidate by the trustee to satisfy the unsecured creditors, one of whom is the bank. Can they try and foreclose my home? If I sell the home I do I sell the home with the bank showing me owing on the home?

Expert:  socrateaser replied 1 year ago.
If there is a lien, then the bank can foreclose -- otherwise not. If you obtained a formal title report on the property, and the title company states that there are no current liens, then you can probably trust that report, because title companies don't make mistakes. You could also purchase a new title insurance policy based upon the report so as to guarantee your interest in the property, in the event that the title company is in error.

The problem that I see here is that if you listed your property as having secured loans in your bankruptcy, and it now turns out that those loans are unsecured, then the bankruptcy court could decide that the discharge was made based upon erroneous information and that the case should be reopened. If this were to occur, either because the bank or the trustee files a motion to reopen and set aside the discharge, then the bankruptcy trustee would be able to sell the property to pay your unsecured debts -- two of which would be the mortgages. The result would be that you would lose the property by a completely different rout, but you would still lose the property.

Now, if your property is located in a state jurisdiction that has a high homestead exemption, sufficient to cover the value of the property (e.g., TX, FL, OK), then there would be no point to reopening the bankruptcy, because your property would be exempt and the bank would be "out of luck." But, otherwise, you could lose the property, if the bankruptcy is reopened.

Hope this helps.
Customer: replied 1 year ago.

We listed the property as unsecured debit, based on the information the mortgage company had given us and NACA, stating they were listed as 2nd position and another company as 1st position. However, our Declared Homestead pretty much covers what equity is in the home and the Trustee was made aware of this matter and given a copy of the Homestead Declaration at the proceedings of the Chapter 7. I was also told because the Trustee would have a big interest in this case if there was a matter of value of the property because there is a certain percentage that the Trustee would have an interest in the sell of the property. But if not then it would probably come down to setting a date for the creditors file an objection. So,I where do I purchase a new title insurance policy? I am pretty safe here? What happens when the property value begins to go up in the future?

Expert:  socrateaser replied 1 year ago.
If your homestead covers your equity, then the trustee won't reopen, and that's why the case was discharged in the first place. If there are no liens recorded on the property, then you are free -- you don't need to do anything else.

The fact that the property value may increase in the future is irrelevant, because there are no recorded liens, and the underlying loans are discharged.

If you want to be absolutely certain that there are no liens recorded, then contact a local title company (e.g., First American Title, Chicago Title, Fidelity Title, etc.), and they will tell you what they need to issue a policy that will cover you if a deed of trust suddenly appears from nowhere.

Best wishes.

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