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Ask CalAttorney2 Your Own Question
CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10244
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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I have a first lien mortgage on a house in San Antonio

Customer Question

I have a first lien for a mortgage on a house in San Antonio Texas. About 3 years ago I was no longer living in the house and could not continue making payments. About 6 months later, an HOA lien for HOA fees that I was not able to pay was sold to an individual who created a trust for the house for the HOA lien. I attempted to work with the guy who bought it to buy back the HOA lien and he pretended to work with me but didn't provide the information I needed to purchase back the lien, and my 6 month time elapsed so the house essentially became "owned" by him. I have been trying to push my lender (Ocwen) to foreclose on the house and they have been dragging their feet for the last two years while the HOA lien holder is getting a place to stay/rent for scott free. Now, Ocwen finally tried to foreclose on the house (lien) that I hold, and had a sale date for Nov 3rd, but it was cancelled because the HOA lien holder issues a TRO. From my research, the TRO is good for 14 days, during which time a hearing will be held as directed by Ocwen's legal dept. In speaking with an Ocwen rep today, he was saying that essentially what will happen is that the judge will determine that the HOA lien holder owns the house since they purchased the HOA lien about 2.5 years ago, and they will essentially own the house at no further cost to the HOA lien holder and Ocwen will be forced to charge off the lien, and has no other recourse at this point. What I would like to find out is is that true, is that how it will happen, and what will be the process from this point, and how long do these charge off's normally take if that is what will happen, and how long will it create a situation on my credit where I will not be able to purchase another house.
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

This is an unusual case.

The problem is really an issue between the individual that purchased the property at the HOA foreclosure and your lender (in your case OCWEN). The current issue should be focusing on whether or not the HOA gave proper notice of their foreclosure prior to sale.

If the HOA gave proper notice, and your lender simply failed to act, the HOA sale may be deemed as final and OCWEN will be forced to release any claim against the property.

If the HOA failed to give proper notice, the lender can argue that the sale should be set aside (or vacated) as being improper.

However, given the fact that the sale was over 2 years ago, the buyer (and perhaps the HOA if they are joined as a party by the lender - this is a strategy call they will need to make), can argue that the lender is "estopped" from bringing their action at this time (they waited too long - sometimes called "sleeping on your rights").

As far as you are concerned, in Texas a borrower can be held personally liable for a mortgage lien (even if the property is foreclosed on, or is sold for less than the mortgage price - called a "deficiency judgment"), however, the time limit for a mortgage lender bringing such a suit is 2 years after the foreclosure. (You would be past this deadline if there was a foreclosure).

Again, you are in an unusual position - there was no foreclosure, I would highly recommend hiring your own attorney (promptly) to get see when (or if) you should become involved in the current dispute, or if you should sit back and wait for the outcome of the fight between your lender and the HOA and their buyer. This is a strategy call - and really is a risk management decision you must make, I cannot help you make this particular decision on this forum, we are limited to providing you with a basic outline of the potential legal liabilities and issues.

Again, as I noted you are in a very unusual position, you have good arguments that your personal liability should be over (the property was lost over 2 years ago), but just because you have a good argument does not mean the same thing as you having no risk. This is a case where you really should hire local counsel (I don't know how much your mortgage was for, but hiring a lawyer for a consult and to help keep an eye on this case is likely to pale in comparison).

As far as your credit is concerned, a bad debt remains on your credit for 7 years. Depending on your loan program, you may even be able to get another loan for a home now. However, lending standards vary by each individual lender, and brokers and underwriters are looking at your entire financial package, so you really need to work with individual brokers and see what your total financial picture is. (With your current potential liability outstanding, this may not be the best time to look into buying - it would be unfortunate to purchase a new home and have a gigantic liability come through from a lender, an underwriter may be unwilling to extend credit until the current situation is resolved in any event).

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