Need help or insight to what happens after these steps have been taking
Bank files complaint on house 3/2007
Owner moves out
Owner files bankruptcy 7_2009
Motion of Stay filed by bank 8_2009
Relief of Stay Granted 9_2009 to bank
Bankruptcy discharged 11_2009
Owner Quit Claims deed to a second party 3_2014 (owner cant buy house because his name is still on the old house)
Bank send letter to foreclose 7_2014 7 years after complain was filed and the deed in no longer in his name and the debt has been discharged in Chapt 7 Bankruptcy.
Any one know how the rest of the story plays out?? The bank can forclosure on their "lien" if perfected (questionable through assignments) but can't get Title (Deed) without proving they have a superior lien?
You are in the ballpark with your understanding Jack. Just a couple of tweaks.
The Borrower conveying title in March 2014 would not really do much to avoid foreclosure. The mortgage or deed of trust would be superior to that event, so the Mortgagee could simply foreclose those interest's granted. Any event post mortgage recording is subject to having interests and rights terminated by the mortgage's foreclosure since they are inferior to the mortgage.
The BK assumptions here may be a bit off. Really one should pull those papers out and review for what really happened. That said, if a relief was granted, chances are that mortgage debt was not actually discharged. So, borrower may still be on the hook for deficiency, depending on state, and the entire balance still due.
So, it plays out as a simple foreclosure. Mortgagee has filed, within the complaint all know parties will be named so Borrower and new QCD owner and perhaps some unknown tenants, etc. Any other junior interests including liens or interests will also be named. I am not sure where subject property is located or if proceeding is judicial or non-judicial, so for each it's own in prevailing manner.
Foreclosure is the process of extinguishing the right of redemption granted to all junior parties. Foreclosure is not or does not give any immediate right to title to any party for the property including the Mortgagee. It does preserve a right of redemption to all junior or inferior parties to the foreclosing party's interests. So upon the completion of the process, the property will be sent to sheriff sale and auctioned off. The Mortgagee can set a bid price which if met or exceed the Mortgagee takes the cash but still may reserve rights (state dependent) to deficiency. In the event the auction does not give way to a bid equal to or exceeding the Mortgagee's minimal bid, then title will be issued from the county to the Mortgagee upon the expiration of any post sale redemption period, if any.
While over the last couple of years a fair amount of attention has been paid to verify the parties involved in the chain of assignments, more recently courts have relaxed a bit on these matters paying more attention to possession. That is not to say that ownership or standing can not be challenged, it just means that those challenges are proving less and less likely to do much if the Mortgagee can evidence their standing by having possession of the original note. Obviously, details always matter in such cases.
In the example above, I would not bet too much that the borrower will step forward and challenge much as it looks like they tried to dump the property. The party who joined title in the QCD could bring a challenge but most likely they will simply be afforded their legal right of redemption and will not likely be able to stay the action or overturn a ruling to the same.
So, I would say, stay tuned, sounds like this property will be at auction sooner or later depending on local process and timelines.
Thanks for the response. I believe you have explained most of the process but I just want to add a few things.
Property is in Mass Non-Judicial
Original borrower's debt was discharged in the Chapter 7.
QCD signed over to new party after bankruptcy discharge.
The original borrower received a letter to foreclose 7/14 which stated he is not responsible for any indebtedness.
So this is what I don't understand if the bank forecloses does that render of the current QCD invalid? Does the bank have to sue to get quiet title. Who has the superior position and how does either party get clear title.
Sorry for the ramble just trying to figure it out.
Nothing infringes on the seniority of the Mortgage in this case example. If the borrower did manage to get their mortgage debt discharged in their plan, that only eliminates the borrower's personal liability to the debt. Nothing more. The Mortgage or Deed of Trust still stands. The discharge in BK only means the Mortgagee can not pursue the borrower for deficiency for funds not recovered via sale. The Mortgagee still retains (never really lost or had fear of losing) a right to foreclose and the Mortgage seniority in title is set at the time of recording. So any event post the original mortgage recording is junior, including in this case the QCD.
The Mortgagee (bank) does not have to sue to get quiet title nor is quiet title even in play here. Once a Mortgage, always a Mortgage, so no QT at large here. The Mortgagee simply forecloses out all know parties that have interest in title right now. So who ever received the QCD is about to loose their interests in the foreclosure of the mortgage we are discussing, subject to their right of redemption. That's it. End of story.
The person or entity who took title from the owner through the QCD will be afforded through law the right to pay all balances due to the Mortgagee and retain title to the property. If they do not exercise that right within the window of time, their right will cease. Since in MA the security instrument can be either a Deed of Trust or a Mortgage, the instrument will dictate which process is followed which has an effect on the time frame for redemption.
Just to say it one more time to be completely clear. The Buyer who took the property through a Quit Claim Deed here is about to loose his entire investment (if he paid for it) into the real property. The buyer has no recourse against the Mortgagee for any funds lost either in purchase of the property from the prior Owner/Borrower nor any capital injected into the property. Title to the real property at the time of conveyance was not clear, it was encumbered by this Mortgage. There "might" be recourse on against the Seller/Borrower but that is a civil suit nightmare I imagine.
The options the QCD Buyer would have is (1) redeem in full at the time it is allowed or (2) go bid at the sheriff auction and try and win the property or (3) buy the property once it is listed by it's new owner either the third party buyer from auction of the Mortgagee (as REO) if nobody won the bid at auction.
Jack, I hope you are not the guy who purchased this property with the QCD.
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