HUD is requesting partial claim after closing on my house in 2015

HUD is requesting partial claim after closing on my house in 2015

Member since 2018 · 7 posts · 1 vote

Hi. My name is Sandra DeJesus. I think I need an attorney. I closed on my house in North Carolina in July of 2015. About 3 months ago I received a letter from HUD letting me know that I owed them $20,000. I did not know anything about this. The attorneys for the buyer and the title insurance company apparently did not do their work because they did not find this debt before closing but they found a stupid lien on my house for a water softener. I reached out to them letting them know that this was their error not mine. They first said they were going to contact the title insurance company then they said they were going to file a claim against the title company. Then they came back and told me I had to pay this debt. They admitted to their error but they're not doing anything about it. I need to know if i need a lawyer. I don't know anything about real estate. Please help me. Thanks.

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Tom GimerBusiness Member

DMV · Member since 2017 · 3k+ posts · 3k+ votes

8y

Closer's error or not, that doesn't change the fact that money was borrowed and is still owed. At the end of the day, after claims are made, attorney demands, lawsuits, E&O insurance, etc... the one responsible for payment will be the person who borrowed the money and didn't pay it back. Subrogation.

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
8y
Not an attorney, but familiar with short sales. This is certainly odd. First, the title insurance protects the Buyer, not the seller. You need to know Exactly what this debt is for. It’s doubtful you had a hud/fha insured loan for $20k (with accumulated fees, penalties,etc) that they missed. If you know, was the first mtg an fha loan? Was there a second mtg? I believe all fha loans, as the vast majority of other loans, included a release/forgiveness for the unpaid debt. Any claim you may have will be against the errors and omissions insurance of the closing agent/attorney that closed your sale, not the title insurance. You need to know What Exactly this $20k bill is for, then work backward from there. Also, find a copy of the short sale Approval Letter from your lender and read it again, thoroughly.
1 Reply
Sandra DeJesus
OP
Member since 2018 · 7 posts · 1 vote
8y
It was not a short sale. The $20,000 was when I refinanced and did HARP with Wells Fargo twice.
0 Reply
Sandra DeJesus
OP
Member since 2018 · 7 posts · 1 vote
8y
I had an FHA loan with Wells Fargo and I didnot have a secong mortgage.
0 Reply
Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
8y
Because the "2nd" is not addressed with monthly payments, transactions with a prior HARP are huge problems. The lien is there, it just hasn't been being paid. It's there in the title report if you look closely enough. This often comes as a huge surprise very late in the process of a sale.
Sure, the title company may have screwed up (they may have even listened to the borrower assuring them no, I don't have a 2nd) but ultimately the debt is for the original borrower to pay.
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Brett Goldsmith
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
8y
Partial claims are placed on property's after a borrower receives a modification through a FHA modification program. It's a silent 2nd that does not accrue interest. Sounds like title may of made a mistake by allowing this to close and not paying off the partial claim...
If the transaction was short because of the partial claim amount owed then you would of needed to short the 1st and if approved they would of paid the partial claim amount in full.
2 Reply
Sandra DeJesus
OP
Member since 2018 · 7 posts · 1 vote
8y
It was not a short sale. Is the closing attorneys in error and should they do something to rectify my situation.
0 Reply
Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
8y
Was the July 2015 transaction a purchase or refi? Is the $20K from a loan you took out? Your first post sounds like a purchase, but this statement "The $20,000 was when I refinanced and did HARP with Wells Fargo twice." makes it sound like a refi.
If it was a refi, was this $20K an existing debt of yours that was not caught and paid off on the refi? Was is secured by the property? Odd that a title company would miss that, but not impossible. Did you miss it too in reviewing the paperwork? Its still your debt, though, and it would now be the first mortgage and your new loan would be a second. I can see why the new lender would want that paid off immediately.
If this was a purchase, was this your debt or something that was attached to the property. If its someone else' debt attached to a property you bought then this is exactly the sort of thing title insurance protects against. You should file a claim against the title company. If it was your debt, its probably your's to pay off.
Title insurance has two variants. An "owner's title policy" is purchased (typically) by the seller for benefit of the buyer. It protects against claims that would affect the buyer's ownership. A "lender's title policy" is typically purchased by the borrower for benefit of the lender. Same basic idea. It protects the lenders security (i.e., the property) against claims which would reduce the value of their collateral.
1 Reply
Brett Goldsmith
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
8y
@Sandra DeJesus I understand that it was not a short sale. You did a loan modification i'm assuming not a refinance and you received a partial claim. The transaction should not of closed within this being paid if that was the case.
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
8y
Closer's error or not, that doesn't change the fact that money was borrowed and is still owed. At the end of the day, after claims are made, attorney demands, lawsuits, E&O insurance, etc... the one responsible for payment will be the person who borrowed the money and didn't pay it back. Subrogation.
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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
8y
Did you do a loan mod on this house after you bought it in July 2015 and that's what created the HUD partial claim? Or was that loan mod on a previous house that you sold at the same time you bought this house? Or are you really saying you sold this house in July 2015, it had the HUD partial claim from a mod you did before that and the partial claim didn't get paid off during the sale?
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
8y
@Sandra DeJesus
Ah, the infamous HARP "silent second". Yes, it is your debt to pay, the title co. just didn't catch it, and deduct it from your proceeds.
1 Reply
Sandra DeJesus
OP
Member since 2018 · 7 posts · 1 vote
8y
I sold my house in July 2015 not purchased.
0 Reply
Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
8y
Ah, so you sold it, but didn't pay off this HUD partial claim. Did you not notice it was missing when they sent you the good faith HUD form? The title company certainly should have found it, but you knew about it, too. I don't think you should waste any money on an attorney. Its a legitimate claim against you. The fact it was missed at closing doesn't mean it just goes away, or that anyone involved will pay it for you. If you don't have the cash and have no way to get it quickly I'd focus on sorting out a payment plan with HUD, if they allow that.
0 Reply
Sandra DeJesus
OP
Member since 2018 · 7 posts · 1 vote
8y
Thx
0 Reply
Paula Donald
Member since 2018 · 1 post · 0 votes
7y
Hi, we are supposed to close December 11 on sell of home was given payout from Finance company but then later was reminded we had subordinate mortgage, loan mod with cascade. We thought it was being added to loan with cascade but now are reminded that we have 2nd loan 77k with HUD. My dad had died, my husband lost his job, Cascade said we could do this to keep home and we thought would be added to loan. We signed paperwork should have read and had it explained better. What can we do now? We cannot pay this 77k. Help
Can we do this: Title insurance has two variants. An "owner's title policy" is purchased (typically) by the seller for benefit of the buyer. It protects against claims that would affect the buyer's ownership. A "lender's title policy" is typically purchased by the borrower for benefit of the lender. Same basic idea. It protects the lenders security (i.e., the property) against claims which would reduce the value of their collateral.
0 Reply
Joycelyn Bennett
Member since 2020 · 1 post · 2 votes
4y

@Sandra DeJesus I feel your pain and I do hope you sorted it out. I learned how to fix mine after searching for a solution, getting two different attorneys, but none could help so I figured it out. If you still need help, reach out to me. There is another way!
2 Reply
Rosel Deluna
Member since 2024 · 1 post · 1 vote
2y
Quote from @Joycelyn Bennett:

@Sandra DeJesus I feel your pain and I do hope you sorted it out. I learned how to fix mine after searching for a solution, getting two different attorneys, but none could help so I figured it out. If you still need help, reach out to me. There is another way!

1 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Sandra DeJesus
To answer your question he’s a
You should get an attorney.
Unfortunately it’s very probable you will be responsible for this unless there is a statute of limitations in your state which could come into play. That’s why you need an attorney
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Jerome Simmons
Member since 2023 · 2 posts · 0 votes
2y
Quote from @Joycelyn Bennett:

@Sandra DeJesus I feel your pain and I do hope you sorted it out. I learned how to fix mine after searching for a solution, getting two different attorneys, but none could help so I figured it out. If you still need help, reach out to me. There is another way!

0 Reply
Jerome Simmons
Member since 2023 · 2 posts · 0 votes
2y
Hi @Joycelyn Bennett, I am in a similar situation as you. Could you please share some insights that helped you? Thank you!
0 Reply
Minna Reid
Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
2y
Quote from @Jerome Simmons:

Hi @Joycelyn Bennett, I am in a similar situation as you. Could you please share some insights that helped you? Thank you!

These silent seconds are called HUD partial claims. If you do a forbearance or loan workout with FHA, you likely have one. You would have signed a promissory note as well as having a lien placed. The problem is HUD has been very sloppy especially over the last few years to record these, so often unless the homeowner remembers them , they bypass closing. Unfortunately, even without a lien, HUD can still collect as you signed a promissory note. Partial claims were not terribly common prior to COVID. Over the last 4 years HUD has written at least a million of these for loan workouts. They are pushing them actually. The only way to modify a loan to a lower payment during a time of rising rates is to move a bunch of principal to the back of the loan. I frequently speak with folks who are finding out that:
A: They have a partial claim
B: The partial claim amount is astronomically higher than expected
C: HUD failed to record their lien (not as common as A and B) and then was forced to pursue the homeowner after a sale
Since FHA has been basically pushing everyone they can into a loan mod per "Covid mortgage rescue" plans, these will be an ongoing issue for many years to come. Also, since they have written so many more in recent years than ever before (historically speaking) the problem will only escalate as more and more homeowners come to realize all their equity disappeared into these when they go to sell.
FHA is still pushing Covid workouts actually, and currently have extended them through April 2025. They will probably extend again. The partial claim issues have only just begun .
0 Reply
Nideshia Singleton
Member since 2024 · 1 post · 0 votes
1y
Quote from @Joycelyn Bennett:

@Sandra DeJesus I feel your pain and I do hope you sorted it out. I learned how to fix mine after searching for a solution, getting two different attorneys, but none could help so I figured it out. If you still need help, reach out to me. There is another way!

Please help me! I need to figure out what to do. When I did a loan modification in 2016 my mortgage company told me that it would just go on the back end of my loan. Me being desperate just signed everything. I am going to closing to sell my house next week and the buyers closing lawyer informed me their is a partial HUD mortgage on my home in the amount of $35,000 which is way more than I owed when I did my loan modification. I only owed about $3000. What can I do? This will take all the proceeds I was getting from the sell of my house. So now I'm about to be homeless and broke.
0 Reply
Minna Reid
Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
1y
Quote from @Nideshia Singleton:

Quote from @Joycelyn Bennett:

@Sandra DeJesus I feel your pain and I do hope you sorted it out. I learned how to fix mine after searching for a solution, getting two different attorneys, but none could help so I figured it out. If you still need help, reach out to me. There is another way!

Please help me! I need to figure out what to do. When I did a loan modification in 2016 my mortgage company told me that it would just go on the back end of my loan. Me being desperate just signed everything. I am going to closing to sell my house next week and the buyers closing lawyer informed me their is a partial HUD mortgage on my home in the amount of $35,000 which is way more than I owed when I did my loan modification. I only owed about $3000. What can I do? This will take all the proceeds I was getting from the sell of my house. So now I'm about to be homeless and broke.

This is so common. The partial claims are always way more than people expect and usually leave them upside down. Unless you want to stay in the home or pay the difference out of pocket, you should pursue a short sale. FHA is currently streamlining everyone through short sales. Easiest time in history to do a short sale.
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