Property Lien question
Has anyone ever experienced a lien on a property, an unpaid second loan that has passed the statute of limitations, a "Zombie Loan"? In this particular situation, the homeowner obtained an 80/20 loan in 2005, stopped payment on the second loan in 2009 just after modifying the first loan in 2008. Recently the homeowner has received correspondence from a collector about the debt, but the letter specifically says that due to the statute of limitations they can't legally enforce a lawsuit. However, there is still a lien on the property (through a mortgage company that no longer exists - WMC Mortgage) so they can't refi their existing loan. Any suggestions?
Generally issues on title that are hanging like this can be resolved using a quiet title suit. I had a client with a 100+ year old telegraph easement and a separate water flume easement from long defunct companies that went bankrupt during the great depression which were removed this way. @Chris Seveney @Martin Saenz or some of the other note investor types can confirm or explain if there are other issues at play here.
@Kim Frantum Every bank has a successor. WMC Mortgage's loans were sold to multiple entities... most to Litton Loan Servicing, some to Option One and some to GE Money Bank. Ocwen now services Litton's loans. That's where I would start.
That 2nd likely matures in 2035 and won't expire for a period of years after that and if that's the case it's a lien that needs to be paid and released in connection with a sale or refinance.
Thanks for the reply, Tom. Apparently, the second loan was a balloon due in 2022. They are hoping the quiet title is the way to go. They tried doing a refi last year and the lender would not do anything until the lien was off the title. They did not offer to pay with a refi as an option.
I believe they bought the house on the high side in 2005. Young couple with little knowledge of the process, just wanted to get in the house. Fortunately, they were able to keep the house when everything went crazy in 2008, but now it's coming back to haunt them.
Quote from @Matt Devincenzo:
Generally issues on title that are hanging like this can be resolved using a quiet title suit. I had a client with a 100+ year old telegraph easement and a separate water flume easement from long defunct companies that went bankrupt during the great depression which were removed this way. @Chris Seveney @Martin Saenz or some of the other note investor types can confirm or explain if there are other issues at play here.
Thanks, Matt. Hoping a quiet title is the way to go on this one. Do you happen to know if the process is fairly smooth and quick?
Quote from @Kim Frantum:
Thanks for the reply, Tom. Apparently, the second loan was a balloon due in 2022. They are hoping the quiet title is the way to go. They tried doing a refi last year and the lender would not do anything until the lien was off the title. They did not offer to pay with a refi as an option.
I believe they bought the house on the high side in 2005. Young couple with little knowledge of the process, just wanted to get in the house. Fortunately, they were able to keep the house when everything went crazy in 2008, but now it's coming back to haunt them.
Ah... well they should give the issue serious thought. That lien will eventually expire as a matter of law. If they file a QT action they will need to bring in whoever the current noteholder/beneficiary of the deed of trust is as a defendant. They might be waking a sleeping creditor... imagine the current balance of a loan that hasn't been paid for 13+ years.
Hey @Kim Frantum they probably need to find out if the collector is legit. Ask them what kind of payoff they need to make the lien go away. They might be asking for 10% of the actual payoff.
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@Kim Frantum
What state. In many states there are SOL issues especially if loan was charged off and not sending statements.
Quote from @Chris Seveney:
@Kim Frantum
What state. In many states there are SOL issues especially if loan was charged off and not sending statements.
Hi Chris. They are located in Michigan.
Quote from @Kim Frantum:
Has anyone ever experienced a lien on a property, an unpaid second loan that has passed the statute of limitations, a "Zombie Loan"? In this particular situation, the homeowner obtained an 80/20 loan in 2005, stopped payment on the second loan in 2009 just after modifying the first loan in 2008. Recently the homeowner has received correspondence from a collector about the debt, but the letter specifically says that due to the statute of limitations they can't legally enforce a lawsuit. However, there is still a lien on the property (through a mortgage company that no longer exists - WMC Mortgage) so they can't refi their existing loan. Any suggestions?
When I see legal issues, like this, my first question is 'what does your legal professional say?' So that's where I'll start.
Certainly, you seem well versed in MI laws. Does MI section 600.5803 apply? Is this your/their basis for invoking the statute of limitations?
I would suggest legal representation. You need someone well versed in MI lien theory and MI case law.