Legally paid in full vs. deficiency?

Question

I pulled this statement off of this forum: "Also, a little known fact, is the lender could actually report to the credit bureau's as the loan being paid for less or settled for less. If a lender reports the loan on your credit bureau as settled or satisfied, they will have a hardtime going after you for the deficiency. It is always a good idea to pull your credit report a month or two after you close".

My lender reported short sale as " Legally paid in full for less than full balance". Zero Balance.

Now they seek deficiency through collection agency. First collection agency folded, sent it to another, now we are demanding they validate debt. I dont believe Chase has the original promissory note from WAMU to enforce the deficiency. I sent bank a QWR to explain their actions.

Any help or comment?...Thanks.

Bill Gulley · Answer

Unless you were released from the amount at cliosing, depending on state law, you may well have a debt owing.

Saying "Paid in Full" would means the full balance was paid, saying "for less than full balance" is contradicting the first first three words and indicates to me a deficiency exists.

I suggest you get back with the lender and negoiate the unpaid balance. That should have been done before you closed as customary in a short sale.

Steven Miata · Answer

Kathy, as I mentioned, Chase reported to all 3 bureaus as Legally Paid in Full for less than full balance. Zero Balance. No Chargeoff. Never Late. Dispute resolved as per grantor.
This was, as you said, a WAMU takeover. Im even paying a note to the PMI company. Something stinks here. I sent Chase a qualified written request and should be hearing from them shortly because whenever I call, it goes over to recovery and they are the stupidist people Ive ever spoken with. they just refer me to the CA. First Oxford, sent them a DA letter, never responded and I guess they sent it back to Chase. Now PRS has it, my lawyer sent them a DV letter as well but he wants to go to court and it will cost me about $10,000. Has to be another way to find out who screwed up here and where my 1099C is?

Kathy Utiss · Answer

Usually a deficiency balance only happens when a bank has foreclosed on a home and there wasn't enough money received to satisfy the liens when the foreclosure sale happened.

Now if you did a settlement I'm not sure how they write it off their taxes. I've seen c/o non-performing accounts be given settlements w/no chance of a deficiency balance afterward. This makes no sense.

Now it should say that account has been settled in full for less than the full amount. There is a ding on the cbr but legally they shouldn't be coming after you. And the ding isn't as bad as leaving as a charge off on your cbr.

One way to rectify this if you did such a settlement I'd prepare a letter and send to their account paid in full office? Or maybe talk to someone that handles the paid accounts. Hopefully there will be someone with a head that knows what their doing.

Someone also has to place such accounts with the collection agency. I'd ask to talk to that person if paid accts isn't helpful. There are also people whose only job is to update the cbrs this may be a person to try and contact. Chase is the one to go after sense the problem was encountered upon paying off them.

Was this your own home or a rental? If on your primary home deficiency balance notes were not allowed for a cpl of yrs cause of what they've done.

You may of originated with Wamu and Chase took them over. You're right there's a good chance they don't have the promissory note. They will enforce fraud upon you and the courts if you try to stick up for yourself for the most part.

So pick your battles wisely. These are long overdrawn costly battles that can effect your livelihood in more ways than one. I called Chase's main number in Ny for u--212-270-6000...they claim the paid account dept number is 800-848-9136. Not sure if this is the number you have but may be worth the try. Attorneys are expensive and most are liars. Remember all judges usually were attorneys at one point in time as well.

Regardless of the facts they do what they want so I suggest staying out of their arena if you can.

Good Luck,

Kathy

Joel Owens · Answer

You made a mistake.When they used the word MAY it meant they will still decide how to proceed with the file after closing. Issue a 1099 or pursue a deficiency.

If you lived in the property and it was bought and sold after a certain they have to 1099 you.If you are talking about a second attached as well or a heloc then it is state specific.

These banks put may to to get sellers to go along with it.You have to get everything in writing BEFORE closing so that you can legally pursue them afterwords if they start any junk.

The problem is the deficiency debt has more than likely  been sold off more than once already.

You need a litigation real estate attorney to ramp up your efforts.

How big was the deficiency by the way??

Dustin Johns · Answer

Attorney is the first answer.

In my state,SC, deficiency is clearly stated. Maybe the big 3 have not reported yet?

We don't bid DF demanded cases until the 2nd sale. When the plaintiff/bank cannot raise their bid.

Steven Miata · Answer

Also, chase has not reported this short sale as a charge off to any of the 3 burueas. The loan shows closed with a zero balance.

So how do you use a credit report to fight a collection agency if this is the case?

Steven Miata · Answer

Problem is that they never issued 1099C. The approval letter, although not specifically stating there was a deficiency, only stated that it "May" constitute a forgiveness of debt.

They reported to all 3 companies in the manner I stated earlier and when I questioned the verbiage, they also reported "dispute resolved by grantor".

This would mean to me that they reviewed the report of Legally Paid in full and stuck with it even at a later date.

Chase refuses to talk to me telling me that I must contact CA. Originally assigned to Oxford but seems they folded after 6 months and could not validate debt. I believe it was sent back to Chase and now with PRS.

Maryann L. · Answer

If they reported it to the IRS - 1099'd you, then they should not be trying to collect on the deficiency as the debt was FORGIVEN.  The only way for a 1099 is generated is when there is a "forgiveness of debt"

I think you did EXACTLY what you should and pushed back.  Take your approval letter and go back to them and show them they are breaching the terms of the approval.  YOU ARE PAID IN FULL.

Contact an attorney as well.

Steven Miata · Answer

The approval letter never mentioned word deficiency. Stated that "terms of this agreement may constitute a forgiveness of debt. Chase will report any forgiveness of debt in accordance with IRS requirements".

Also, all 3 bureaus have reports of Paid as agreed, pays as agreed or legall paid in full for less than full balance.

According to an attorney, he tells me that Legally paid in full means exactly that. That the creditor has accepted less to settle the account.

Also, I signed PMI note to get deal closed yet one year later, a PMI claim has not even been submitted. Seems like something is fishy here.

Maryann L. · Answer

Steven, what did your approval letter say?

Legally paid in full vs. deficiency?

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