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Does a charge off create a lien release?

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Mike Luzzo

Real Estate Consultant from Florida

Nov 02 '08, 09:53 PM


Quick question:

Doing a short sale:

A 2nd lender has charged off the mortgage on a subordinate lien position. Does that release the lien?

Thanks


Edited Jun 26 2010, 06:17


Dave P.

Real Estate Consultant from

Nov 02 '08, 11:12 PM


Define "charged off". That is a term that means different things to different people.

The real answer lies in a short sale approval letter from the lender. The letter will normally specifically state the method and matter of resolution by the lender.


Edited Jun 26 2010, 06:17


Mike Luzzo

Real Estate Consultant from Florida

Nov 02 '08, 11:42 PM


david - thanks - I understand your answer - its just that we found out about the charge off when we started to negotiate with the second.


Edited Jun 26 2010, 06:17


Scott Hubbard

Rehabber from Tucson, Arizona

Nov 04 '08, 05:43 AM


Originally posted by Mike Luzzo:
Quick question:

Doing a short sale:

A 2nd lender has charged off the mortgage on a subordinate lien position. Does that release the lien?

Thanks


I worked for a lender and when a charge-off was made, it left several options for our bank. After the loan has aged ( gone unpaid) to a predetermined point, lenders policy is to write-off the receivable and recategorize it into bad debt and expense it as a loss. From here, they have several options:

1) Collect the debt or settle for an amount less than what is owed. Generally, this option is used prior to the charge-off.

2) Sell the bad debt to a recovery service (collections company) for pennies on the dollar. This is the most likely scenario. Any negotiations will be handled through the new debt holder.

3) File civil action. If they like their chances they may choose to file a civil suit to pursue a judgement against you. This is usually unlikely since they chose not to pursue foreclosure.

4) Not pursue anything. Unlikely as some schmuck will likely pay something for the bad debt.


As for the lien release, technically speaking, you need them to release the lien in writing. A Charge-off does not qualify as a release.

In my opinion, the 2nd option is most likely. I would call your lender to see if there is anyone in their collections department who can give you some insight. If they have not already sold it, you might get them to settle for a lien release. Plus, by negotiating with the lender directly, you'll avoid a harrassing call from Guido the Killer Pimp!

Good luck!


Edited Jun 26 2010, 06:18 by Scott Hubbard


Mike Luzzo

Real Estate Consultant from Florida

Nov 04 '08, 06:22 PM


Scott, Thank you for your reply.

Mike Luzzo


Edited Jun 26 2010, 06:18


Lee Common

Real Estate Investor from San Antonio, Texas

Nov 08 '08, 12:40 AM


deficiency judgment?

1099-C?

Who can tell me about these?

:cap:


Edited Jun 26 2010, 06:20


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