Is it legal? If not, who's liable?

General Real Estate Investing
1

I had a foreclosure 2 years ago which was sold by the bank and to my knowledge I do not owe the bank any money.

Last week, I refinanced to get cash on my current home and my mortgage broker gave me my new mortgage note and advised me I do not have to make a payment until May 1st. They were supposed to give a check for 20k this week but now they are telling me they need proof from ME that the foreclosure from 2 years ago was satisfied before they release the check.

Here are my questions:

  1. If the bank is requesting that information now, does that imply that the title company failed to do a proper title search?

  2. Based on the papers I signed at the closing, the title company did not find any liens. If it turns out that they failed to find something that I must now pay for a liens or balance from the title search, are they liable in any way?

  3. Was it legal to close on the property without providing the bank with all the necessary information. Is the broker liable also?

  4. Because they failed to payoff my current mortgage, I have been assessed a late fee for failing to pay by the 16th of this month. Shouldn’t they be required to pay for any additional fees I may be assessed?

2

Proof of foreclosure being “final” with no deficiency judgment against you is a rational question on the part of the bank. A deficiency judgment results from any shortfall between the loan balance you owed and the proceeds that the bank collected from the sale of the property. The bank’s inquiry is justified. To your questions:

  1. A title search has nothing to do with your credit, which would include outstanding judgments. Your credit report and the county courthouse (probably Clerk of Courts) are where you’d look to see if a deficiency judgment exists. Such judgments are illegal in a few states.

  2. If there’s an actual lien, they might be liable, depending on the scope of the policy & contract. Even if they are liable, they are probably not liable to you because the contract is probably with the bank, not you.

  3. Very, very unlikely.

  4. Depends on whether the closing was “final” or contingent on certain items…the latter is much more likely.

The bank wants proof that the foreclosure released you from any obligation on the prior loan. This is rational. That information should not be hard to find. Instead of looking for people to sue, you can probably find the answer to the question at the courthouse or via brief consultation with a lawyer. Then you probably will get the payout. I highly doubt whether wrangling over the late fees is worth the time or money involved.

John Hyre