need a payoff from property purchased at trustee sale

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need a payoff from property purchased at trustee sale

Rachel Zhang
Investor · Fremont, CA · Member since 2010 · 46 posts · 9 votes

Hello, 

We bought a property in CA at a trustee sale with an existing senior lien under the previous owner's name. Now my title company and are having difficulty in obtaining payoff amount. By standard, the serve company requires the lien holder's SS /loan # or authorization to release payofd. Even through I faxed over the trustee's deed upon sale, the reps won't understand or do not care, always give me the standard response. Shall I try different title company or have difficult strategy? By law, when i am on title, I am responsible for the lien, which should serves as an authorization. Right? are there any specific language in the mortgage or the law code to indicate such? The lien is delinquent, and I am offering to pay it off. where wont' they give to me? Talking to the rep at the serve company is like talking to a wall. They are not educated or do not care to be educated.  Thanks for your response.  Rachel

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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
11y

@Rachel Zhang  Be mindful that your desire to payoff the loan is not as motivating to the lender as you might assume. While the lender wants to be paid, they don't have systems in place to allow a successor-in-interest to waltz in and make a payoff. What is in place is lots of liability issues.

In two cases I bought subject to senior liens where the lien holders would not provide me with the lawfully required beneficiary statements (Civil Code 2943 et seq.).  In one case I made six separate demands, all 30 days apart.  The penalty in the civil code to the lender for not complying within 21 days is $300. That's not enough of a penalty to create an incentive for complying, especially compared to the liability to the lender of accidentally providing loan info to someone other than the borrower. So in those cases I got authorization to release docs signed by the borrowers.  I had to pay them though.  Since you bought at foreclosure sale, the borrower may or may not be willing to cooperate.  But it's worth a try and makes all the difference when working with the lender. You would have to find the borrower, explain the situation and arrange for payment in exchange for a signed authorization.

The other thing that worked was having the escrow officer use the lender/servicer's automated phone system.  If you have the borrower's SS# and loan #, that may be enough to generate the payoff demand.

If the senior lien goes into foreclosure (after the notice of default is filed), I find the foreclosing trustee services to be better (and faster) than the lender at dealing with successors-in-interest. It may be because they have more experience with payoffs from buyers at trustee's sale. It's not ideal because once a lender files the NOD there will be additional fees. But you're looking at additional legal fees anyway if you have to hire an attorney to help you get the payoff.

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  • Ron S.
    Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
    11y

    That is one of the most frustrating aspects of dealing with REO's...the ineptness of the senior lien holder. Your TDOS should be sufficient. I assume you've done all th regular stuff like asking for a supervisor. Sometimes, I've found that having my legal counsel engage the senior lien holder, elicits a faster response.

    One word of advice? Before opining on the education (or lack thereof of someone else) you may want to grammar check and spell check your own post.

    1Reply
  • Rachel Zhang
    OP
    Investor · Fremont, CA · Member since 2010 · 46 posts · 9 votes
    11y

    Ron, 

    Thanks for your advice and honesty. 

    The errors in grammar and spelling reflected my mind of the moment when the post was written, turbulent and out of focus.  Sorry about that.  Your point is well taken.  

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Rachel Zhang

      don't worry about your spelling and all I have almost 6 thousand post and I miss spell in each and every one of them mainly on purpose to piss the grammer police off.

    if you do not get anywhere this is the one time I would probably get an attorney to write the senior lender and make demands.

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  • Brian BurkePro Member
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    11y

    @Rachel Zhang you need to call back and ask to speak for a supervisor. Once you get to someone, get an email address or fax number and a mailing address and then send that person a letter. Here is a copy of the letter I use.  Attach a copy of your deed and a copy of the civil code sections I listed (which can be downloaded off the web).  

    I am not an attorney and this is not legal advice. Use this at your own risk.  The dollar amount of the fees may be different so be sure to look that up (it's been a few years since I researched that). By the way, it worked, I got what I wanted right away.  Good luck. 

    Copy/paste with names changed to protect the innocent:

    XXXXXXXX Bank

    ATTN Wendy (Customer Service supervisor)

    VIA FACSIMILE

    Wendy,

    Thank you for taking the time to speak with me regarding my request for information on the loan secured to property owned by my company. Per our conversation, I am enclosing additional proof of ownership to the property.

    Our company recently purchased the property located at 123 Main St, Anytown CA 12345. This property is encumbered by a first deed of trust in favor of XXXXXXXXX Bank as beneficiary. The original trustor is John A Doe, loan number is 1234567890.

    We purchased this property at a trustee's sale (foreclosure sale) held pursuant to a junior deed of trust, as evidenced by the enclosed Trustee's Deed Upon Sale. The enclosed deed serves as proof of our ownership of the property. I have also enclosed an LLC-1 form that was filed with the California Secretary of State. This form provides evidence of the principal officer of our company.

    This letter is to serve as a formal written request pursuant to §2943 of the California Civil Code. We are requesting the following information:

    1. The unpaid balance of the loan

    2. The amount of the periodic payments

    3. The date the note is due in whole or in part

    4. Information on tax/insurance impound account, if any, including tax and insurance payments made

    5. A copy of the note and deed of trust evidencing this loan

    I gather from our previous conversations that there may be a lack of clarity as to what information I am entitled to, how to prove my entitlement, and what I may be charged for the information I am requesting. For your convenience and reference, I have included with this fax the text of §2943 of the California Civil Code, and have highlighted some of the relevant passages within. The following is also a summary of the section:

    “A beneficiary shall, within 21 days of the receipt of a written demand by an entitled person…, prepare and deliver to the person demanding…a beneficiary statement” (CC §2943(b)(1)). A beneficiary statement includes by definition the information we have requested above (CC §2943(a)(2) et seq.).

    As purchasers of this property, we are entitled to this information upon presentation of proof of ownership. A copy of the deed shall constitute reasonable proof as to the identity of the successor in interest to the trustor (CC §2943(e)(3)). An Entitled Person includes the Trustor, “or his or her successor in interest in…the…property” (CC §2943(a)(4)).

    You discussed fees related to this request. The beneficiary may make a charge not to exceed thirty dollars ($30) for furnishing each required statement (CC §2943(e)(6)). The copy of the deed of trust “shall be furnished with the written statement at no additional charge” (CC §2943(e)(2)). Items 1 through 5 of my request comprise one statement (CC §2943(a)(2) (A) through (H)), thus the maximum fee allowable by law is $30.00.

    Please forward the requested information via fax to (888) 555-1212, or by US Mail to: PO Box 1234, Anytown, CA 12345. Please call me at (888) 555-2121 to confirm receipt of this fax, your intentions, and to make payment arrangements for the fee, if any. If I don’t hear from you by tomorrow (6/2/15) I will re-send this request through the mail, as required.

    Thank you for your time, attention, and courtesy in this regard.

    Sincerely,

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  • Account Closed
    Lender · Los Angeles, CA · Member since 2015 · 399 posts · 174 votes
    11y

    @Brian Burke

    Nice letter, but you don't ask for the payoff, I'm wondering why, that's what the OP needs.

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  • Brian BurkePro Member
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    11y

    @Account Closed, item #1 on the list "The unpaid balance of the loan" will typically prompt the lender to issue a report that shows the total due along with daily interest per diem, just like a response to a payoff demand issued by a title company.  You can ask for a payoff balance specifically too.  It'll likely result in the same information.

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  • Rachel Zhang
    OP
    Investor · Fremont, CA · Member since 2010 · 46 posts · 9 votes
    11y

    @ Brian Burke   

    Thank you so much for your generosity and your time to offer me such detailed help. And thanks to @Jay Hinrichs and @David C for your comments!  I will look into all of your suggestions and come up with a plan. Just hearing that you have been there helps me tremendously, realizing that I am not alone. I am grateful that I belong to such a high caliber of investors and I am grateful that we are all parts of the biggerpockets community.

    I know for sure that forced insurance, late payment penalty etc are all added to the pay off amount. What items can I ask (or at least try) to remove from payoff ? I have been trying to reach them for a while ...The original loan was with BofA, recently sold to Seterus. Usually what kind of discount does a bank sell it for?  Can I ask for a discount of the payoff? 

    @ Ron Scribner, this time, I do double check my spelling and grammar as best as I can before I send out. Feel free to be my critic :-) I know your kind intention and I strive to reach higher standard. 

    Thanks again. Rachel

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  • Brian BurkePro Member
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    11y

    @Rachel Zhang by acquiring the property at a trustee's sale, you have acquired the rights of the junior creditor.  The senior lender knows that they are at the top of the food chain and they'll have absolutely zero motivation to discount the note or waive accrued charges and penalties.  The only exception might be if the property is worth far less than the unpaid balance of the first lien, but if that's the case you have bigger problems. 

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    2Reply
  • Rachel Zhang
    OP
    Investor · Fremont, CA · Member since 2010 · 46 posts · 9 votes
    11y

    @Brian Burke  It makes sense. 

    But the Service company mistook me as the lien holder and called to see whether we should work something out. Clearly they have not get their acts together, Otherwise I would get the payoff easily.  Shall I play their game against them? Even through I just want to get the payoff and move on... 

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  • Brian BurkePro Member
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    11y

    By "work something out" they might mean "pay us the back payments so we don't foreclose you out". Not to be confused with cutting you a break...

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  • Ron S.
    Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
    11y

    At this point, you ARE the junior lien holder so, whatever method you need to employ to get them to give you the payoff should be fine.

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    11y

    Sorry, @Ron S. but @Rachel Zhang is not the junior lienholder.  She's the owner and that junior lien is wiped out.

    Rachel, hopefully you have some idea of the balance on that first loan.  They're not going to cut you a break because they can simply foreclose and either get paid off by a bidder at auction or get the property back.  They have no incentive to work with you unless you're willing to pay them the full amount they're owed.

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  • Ron S.
    Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
    11y

    For all intensts and purposes she is the junior lien holder. Yes, the junior lien holder was wiped out but she has the rights of the junior lien holder as far as a payoff is concerned and ability to gain relevant pertinent information on the senior lien.

    0Reply
  • Rachel Zhang
    OP
    Investor · Fremont, CA · Member since 2010 · 46 posts · 9 votes
    11y

    @ Jon Holdman and @ Ron Scribner, 

    Thanks for all your comments. 

    I agree with Jon, that I am the owner and the 2nd on longer exists, since I bought it out. 

    The new service company said that they got the TDOS, and my payoff request and will fax the info to me in 10 days. I knew that I bid the 2nd lien at that time, but I liked the idea of leverage.  In reality, the simpler the structure, the better.  

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    @Rachel Zhang  Be mindful that your desire to payoff the loan is not as motivating to the lender as you might assume. While the lender wants to be paid, they don't have systems in place to allow a successor-in-interest to waltz in and make a payoff. What is in place is lots of liability issues.

    In two cases I bought subject to senior liens where the lien holders would not provide me with the lawfully required beneficiary statements (Civil Code 2943 et seq.).  In one case I made six separate demands, all 30 days apart.  The penalty in the civil code to the lender for not complying within 21 days is $300. That's not enough of a penalty to create an incentive for complying, especially compared to the liability to the lender of accidentally providing loan info to someone other than the borrower. So in those cases I got authorization to release docs signed by the borrowers.  I had to pay them though.  Since you bought at foreclosure sale, the borrower may or may not be willing to cooperate.  But it's worth a try and makes all the difference when working with the lender. You would have to find the borrower, explain the situation and arrange for payment in exchange for a signed authorization.

    The other thing that worked was having the escrow officer use the lender/servicer's automated phone system.  If you have the borrower's SS# and loan #, that may be enough to generate the payoff demand.

    If the senior lien goes into foreclosure (after the notice of default is filed), I find the foreclosing trustee services to be better (and faster) than the lender at dealing with successors-in-interest. It may be because they have more experience with payoffs from buyers at trustee's sale. It's not ideal because once a lender files the NOD there will be additional fees. But you're looking at additional legal fees anyway if you have to hire an attorney to help you get the payoff.

    3Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Ron S.:

    For all intensts and purposes she is the junior lien holder. Yes, the junior lien holder was wiped out but she has the rights of the junior lien holder as far as a payoff is concerned and ability to gain relevant pertinent information on the senior lien.

    The way I understand it, the OP is the owner.  And as the owner she is a successor-in-interest, which is what matters per CA Civil Code. 

    2Reply
  • Ron S.
    Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
    11y

    Yea...that's what I said.

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Ron S.:

    Yea...that's what I said.

     Dude, you said the OP was the jr. lien holder.  She is not.  

    2Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    @Dion DePaoli Maybe Dion can comment on successor-in-interest payoff demands from the lender side of things.  While I'm sure he would never fail to respond to a properly executed, lawful request for loan statement or payoff......maybe he understands better why lenders are so difficult on this issue these days.  

    0Reply
  • Rachel Zhang
    OP
    Investor · Fremont, CA · Member since 2010 · 46 posts · 9 votes
    11y

    @ K. Marie Poe, 

    Thanks so much! That's a great question for lender. The people working in payoff dept. need more education on subject to payoff. 

    0Reply
  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    11y

    Well that is frustrating.  There is zero reason for this servicing company to be denying this request.  The updated servicing rules specifically extended to successor in interest for payoff demands.  The payoff statement must be issued within 7 days.  The servicer is required to have a system to identify a proper successor in interest.

    I am not a fan of the template letter above.  To much content and you are not entitled to all of it as a SII.  I would issue one more simple request to the servicer and properly identify yourself including a copy of the sheriff deed or CT, etc.  I would suggest stating that this correspondence is now a repeat and they in violation of the updated servicing rules from 2014 issued from CFPB.  State that if they do not respond within 7 days per the rule you will file a compliant with the CFPB.  You may also take up the issue that their previous failures to properly reply can not create a greater interest liability onto the payoff.  Use your best judgement here and choose your battle wisely as their counter argument would rest on when they did "properly identify" you as SII.  

    If they continue to fail to respond properly take the correspondence to the CFPB and register a compliant.  That is what they are there for. Good luck.

    2Reply
  • Ron S.
    Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
    11y

    @K. Marie, (Dude? Ok...). You fail to see my point. I said for all intents and purposes, she is the junior lien holder. "she has the rights of the junior lien holder as far as a payoff is concerned and ability to gain relevant pertinent information on the senior lien". You seriously want me to connect the dots for you? I'm confident you understand my point, reiterated before and again that an owner has payoff right, among others. A junior lien holder has payoff rights among others. For this purpose, she is tantamount to a junior lien holder.

    On another note, i'm not sure the SII rules with CFPB would apply to this situation, as those are primarily related to the death of an obligor. Do you have the section of the rules defining SII?

    This bulletin is related to death of obligor - CFPB Bulletin 2013-12

    I believe that the CFPB would be a good route to pursue should the OP not get anywhere with her efforts but, I'm just not sure SII rules would be of much benefit. She has state protections regarding her position that would apply better.

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  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    11y

    @Ron S.

    She is not a junior lien holder she holds a property interest subject to the senior lien.  That is what was purchased at the foreclosure auction which extinguished the lien.  There is a difference as you sort of imply with a limitation in rights to a lien holder to legal and a granting of equitable rights as an owner.  

    The CFPB expanded the rule language with clarifying ideas in November 2014 to specifically address these types of situations along with several other examples.  Moral of the story a payoff demand can not be unreasonably with held if a party can prove their interest in the real property which seems fairly evident in this case.  The new owner has a equitable right to redeem the property from any other liens.  

    CFPB is the authority on servicing rules and enforcement.  They are the ones to get involved if the servicer doesn't issue the payoff properly.  

    0Reply
  • Ron S.
    Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
    11y

    Excellent Dion. As previously requested, do you have that CFPB rule excerpt? Would love to see specifically what it is you state is governed by CFPB.

    I'll move on to another subject regarding the comparison to junior lien holder and owner.

    0Reply
  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    11y

    Ron, here you go.

    http://files.consumerfinance.gov/f/201411_cfpb_pro...

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