Okay, so maybe the title is a stretch, but here’s what’s going on. A recent Wall Street Journal article highlighted a recent trend: homeowners are receiving notices from lenders that loans they thought were written off years ago are still there and need to be paid. After the great recession, many lender charged off loans secured by a deed of trust against the borrowers’ house. Now, you would think that “charging off” a loan would mean that the lender is walking away and will not come back. Not so fast.
What actually happens is that the “charge off” allows the lender to take a charge against its taxes, but it doesn’t nullify the loan. Instead, most of those loans were sold off to investors for pennies on the dollar. I like to call them “bottom feeders.”
In California, with limited exceptions, a deed of trust doesn’t go away. It’s still on the title to your home. So now that real estate values have rebounded, these loans are coming back from the dead!
But don’t worry, a competent bankruptcy attorney can provide you with options. I had a case recently where a client was contacted by a lender threatening foreclosure. We looked at the numbers and advised the client to file a chapter 13 bankruptcy. We provided for zero dollars to the lender because the deed of trust was still unsecured. That doesn’t always happen, but you won’t know what your options are unless you contact a competent bankruptcy attorney.
So give us a call and let us deal with those zombie mortgages!
Ralph Guenther