Lender of Foreclosure is purposely withholding Payoff statement

10 Replies

I have a predicament and did a search, but could not find anything dealing with this particular situation.

I am purchasing a home in foreclosure from a friend and am buying it via a new first mortgage through a escrow company.  The issue is that the existing lender is purposely withholding the payoff statement (over a month now) so the home can not closed and be sold.  The home has a substantial amount of equity in it (Owes aprox $70k worth $150k) it would seem the lender would rather drag their feet to try to complete the foreclosure.   

I have been told that they can not by law withhold a payoff statement, so what can I do to get them to release it and help the sellers get left with nothing? 

Your help is greatly appreciated

Cheers!

James    

Immediately hire an attorney to help you out of this situation. As long as it is still a pre-foreclosure you should have every opportunity to negotiate a deal with the current owner.

Promotion
BiggerPockets
The one-stop-shop for REI
Find Local Home Improvement Pros!
Check out our network of trusted, local contractors for all of your home improvement projects.
Find a Contractor

@James Grasty That's perplexing why the lender is not providing a payoff. Is the lender a big bank or a private lender? If it's a big bank, it's probably more of a bureaucratic thing and they are sensitive to anything having to do with compliance.  Your escrow officer should not have a problem getting the payoff with the borrower's authorization. A lender is only entitled to what they are owed, including interest, advances, and recoverable fees related to the foreclosure. In this case, there is no advantage to foreclosing since this will sell at trustee sale and the borrower will be entitled to excess proceeds.

The lender absolutely needs to comply with an authorized request for a payoff, especially when it comes to owner occupied loans. I'm sure there are hefty penalties for refusing to comply. 

Yeah @Andy Mirza that is what I thought, escrow has been just sitting around waiting for them to send the pay off statement to close the deal since the beginning of June.  It is a smaller company that is in chapter 11 for the 2nd time in a just the last few years, so that may be part of the issue.  

They also may have sold the loan to another party, I am not clear on that but the escrow company acted like it took more digging than normal to find who had the loan and then of course order a payoff.  They have told me "they are waiting in line" for the payoff behind other parties, but I feel like it does not work like that. 

Anyways, I will be speaking to a lawyer about this to see if they can help put the screws on them

Cheers!

James    

Originally posted by @James Grasty:

Yeah @Andy Mirza that is what I thought, escrow has been just sitting around waiting for them to send the pay off statement to close the deal since the beginning of June.  It is a smaller company that is in chapter 11 for the 2nd time in a just the last few years, so that may be part of the issue.  

They also may have sold the loan to another party, I am not clear on that but the escrow company acted like it took more digging than normal to find who had the loan and then of course order a payoff.  They have told me "they are waiting in line" for the payoff behind other parties, but I feel like it does not work like that. 

Anyways, I will be speaking to a lawyer about this to see if they can help put the screws on them

Cheers!

James    

 It sounds like it’s a bureaucratic mess involving an incompetent servicer.  An attorney might help but they can be expensive. Unfortunately, when things like this happen and you’re going through several layers of people, you’re probably the best one to cut through the red tape and get the right people on the phone to sort out the situation. I’d suggest being the extremely squeaky wheel and call the responsible parties yourself until it gets handled. 

Originally posted by @Andy Mirza:
Originally posted by @James Grasty:

Yeah @Andy Mirza that is what I thought, escrow has been just sitting around waiting for them to send the pay off statement to close the deal since the beginning of June.  It is a smaller company that is in chapter 11 for the 2nd time in a just the last few years, so that may be part of the issue.  

They also may have sold the loan to another party, I am not clear on that but the escrow company acted like it took more digging than normal to find who had the loan and then of course order a payoff.  They have told me "they are waiting in line" for the payoff behind other parties, but I feel like it does not work like that. 

Anyways, I will be speaking to a lawyer about this to see if they can help put the screws on them

Cheers!

James    

 It sounds like it’s a bureaucratic mess involving an incompetent servicer.  An attorney might help but they can be expensive. Unfortunately, when things like this happen and you’re going through several layers of people, you’re probably the best one to cut through the red tape and get the right people on the phone to sort out the situation. I’d suggest being the extremely squeaky wheel and call the responsible parties yourself until it gets handled. 

is there a sale date ???  if there is simply go to the sale and buy it..  if there are no juniors the owner will get the overage and you will get the property.. rare is it than anyone can outbid someone at a sale when you know the property that well and really want it.

with that kind of equity it maybe in the sellers best interest to let it go to sale if your not paying anymore than whats owed or a little more.

you could put a second on it right now .. so that any overage coming off the deal would go to you.. that's an easy move if the seller is cooperative.. 

file a complaint with the CFPB. This is pretty cut and dry if its what you say it is. So is the complaint and remedy. They have seven days by federal rule.

(12 C.F.R. § 1026.35.) is the rule.

Originally posted by @Ron S.:

file a complaint with the CFPB. This is pretty cut and dry if its what you say it is. So is the complaint and remedy. They have seven days by federal rule.

(12 C.F.R. § 1026.35.) is the rule.

my other thought Ron is if there is an opening bid for the sherrif or trustees sale then that's your payoff..  

Originally posted by @Jay Hinrichs:
Originally posted by @Ron S.:

file a complaint with the CFPB. This is pretty cut and dry if its what you say it is. So is the complaint and remedy. They have seven days by federal rule.

(12 C.F.R. § 1026.35.) is the rule.

my other thought Ron is if there is an opening bid for the sherrif or trustees sale then that's your payoff..  

 Yeah...agreed. Good idea, if he's liquid to do it. Sounds like he was trying to obtain financing though. Could probably get a better deal that way if total debt was less than purchase price.

Hey thanks a lot for the info everyone, I will try to get the lender on the phone and threaten to file a complaint (Thanks @Ron S. ) and I have not come across any info on an auction date so I assume it is not that far along in the process and we may have more time than I think. 

I could buy it at auction if that comes up, I am not that liquid but know some hard money lenders I could tap if need be. 

Cheers!