The possessor of any collateral has obligations to fulfill to it's community. Banks such as Wells Fargo have found a loop hole in the system that allows lenders to possess a property in limbo and to accumulate bad tax and HOA debt in the owner of record's name. This practice has harmed consumer's credit and often caused the consumer to be sued repeatedly for a reoccurring problem. In addition the vacant property creates a community problem as it deteriorates due to lack of maintenance. This practice is often called "lender-walkaway" or "abandoned foreclosures".
When Wells Fargo takes possession of real estate property they provide letters of intent to foreclose to the owner of record. They then have the home inspected and change the locks. The owner can no longer enter the property, thus the bank has possession.
According to Wells Fargo's lawyers and debtors, after Wells Fargo takes possession they refuse to communicate with debtors directly and require them to hire an attorney for representation.
From the date of the letter from Wells Fargo informing the tenant that they intend to foreclose and that the collateral will be under the control and possession of the lender, owner-tenants feel that they are no longer obligated or responsible to the debts associated with the property since the collateral is not in their possession and it is perceived that they cannot live in, rent or sell the property.
Wells Fargo is among lenders that have left vacated properties in limbo for months and years. In many cases Wells Fargo filed a foreclosure and years later neglected to complete the court proceedings to foreclose leaving the financial obligations to the HOAs, taxes and insurance up to the debtor.
Likened to a repossession of a vehicle when the automobile is in the possession of the lender the owner of record would assume that the lender will provide any further maintenance such as oil, taxes, licensing and insurance. An owner can file a document informing the DMV that they no longer have possession so that it ensures that the current possessor takes on the liability.
Under real estate rules a bank can take possession by filing court documents to evict the tenant and change the locks, then neglect to transfer the property out of the name of the owner of record and allow tax, insurance, and HOA debts to accumulate unpaid indefinately. Tax and HOA debts run with the land which means that even if an owner files bankruptcy he can still be responsible for the payment of the tax and the HOA debts beyond a bankruptcy approval by a judge.
What lenders such as Wells Fargo and their lawyers aren't informing owners, but other lawyers will, whoever the property is registered to, that person can live in the property until the name is changed over to the new owner of record such as the lender. This does not mean that if a judge evicts the tenant due to deterioration of the property or that the property is in danger of destruction by the current owner that he can still reside in or on the property.
Home Owner's Associations can and do file lawsuits against whose name the property is in even if a bank has been in possession of the property during that time. The owner of record does get sued and garnished for the unpaid HOA dues even though the bank has indicated that the owner no longer has control of the property and who has respectfully vacated to abide by the foreclosure process.
Many homes that are in possession of Wells Fargo bank and other lenders, have been in control of the bank for 1-3 years without the lender completing the foreclosure process or marketing the property for sale. The properties just sit uninsured and vacant in the names of debtor and are often vandalized by criminals.
According to the 2011 Woodstalk Institute report, Left Behind: Troubled Foreclosed Properties and Servicer Accountability in Chicago, by researchers Geoff Smith an Sarah Dudah, debt servicers are walking away from properties. Properties in possession of lenders lack clear ownership because the bank stalls to file a foreclosure or has filed a foreclosure and it has not been completed for months or years, which confuses enforcement of local ordinances and debtors. Properties have been in limbo for extended periods implies that "the servicer has charged-off the mortgage and walked-away from the property", according to the report.
The debtors have no control over the property or changing the property out of their name into the lenders name. They cannot live in the property, sell it, or rent it out to someone who could potentially pay for the debts due because the lender has changed the locks on the registered owner, often more than once.
According to foreclosure lawyers, the locks are changed because the bank has to have access and need a key to inspect or sell the property. A posted sign on the door that states that access to the property is available by calling a particular phone number such as a real estate agent and a having a key lock box available should prevent lawful reasons to change the door locks.
Debtors in this situation often have surrendered their property because they were turned down for a loan modification by the lender or were sold an adjustable rate mortgage. Sometimes the problem resulted from credit card payment hikes and wage garnishments.
In the case of Jeff Blankenship of Ohio, he purchased a home for $50,000 with a payment of $600 which jumped to $1,300 three years later, according to his wife Illah Feilke. Blankenship had to surrender his home in 2010 after a failed negotiation with Wells Fargo.
Blankenship and Fielke filed bankruptcy after surrendering their home to prevent being sued for the debt of the home. In 2013 Illah Feilke received a notice from the county stating that they owed $3,000 in unpaid property taxes.
Lucky for Feilke and Blankenship they discovered in 2013 that under bankruptcy law the pair had a combined $43,250 bankruptcy home exemption which cancelled out Wells Fargo's $40,000 mortgage, it also reduced the second mortgage by $3,250. The final amount they owed was $6,750 plus the taxes past the date of the bankruptcy.
Because of the lack of clear communication from their lender or any legal authority they had no idea what their legal rights to the property are.
In another case Ms. Phil owned a rental property and had marketed the property for sale without luck and had stopped making payments after losing her job in winter 2010. 90 days later the property had been inspected by Wells Fargo to prepare for it to be sold to a new owner, but according to local real estate agents in Spring 2013 the property was never listed by the lender. The home was vandalized after Wells Fargo's inspection and change of locks in 2012 while vacant. In 2013 Wells Fargo finally filed a document with the county stating that it is in a holding position in foreclosure.
Local real estate agents commented that the lender typically auctions off these properties for ten percent of its value. The prior owner is sued for the difference between the loan amount and the amount the property is auctioned off for.
In a separate case Ms. Phil of Portland, Oregon, had to voluntarily surrender her primary residence to Wells Fargo on the basis that they refused to modify her mortgage loan because Wells Fargo sued her because she couldn't afford her Wells Fargo credit card payment hike of $500 per month after they increased the rate to 39.99 percent. The original credit card payment was $123 per month. Wells Fargo refused to negotiate the credit card payments or the apr then moved forward with a garnishment of her wages for $639 per month plus attorney fees. The original credit card debt was $4,300.
Ms. Phil's primary residence located in Portland, Oregon is completely remodeled and valued at $90,000. It has been in Wells Fargo's possession for 2 1/2 years so far and Wells Fargo has not made any payments to the HOA. The HOA has since filed lawsuits and requests for garnishments of Ms. Phil's wages to recover the combined $20,000 of unpaid HOA dues and attorney fees.
Wells Fargo has informed Ms. Phil that she will need to hire an attorney to be able to communicate with them about the properties. Ms. Phil has no ability to pay for attorney fees, similar to others in her predicament leaving her at the losing end of legal battles.
According to Ms. Phil, she has sent over 35 letters, many sent certified, and has had over 100 attempts of communication to Wells Fargo about the consequences of the credit card payment hike before being formally sued for the Wells Fargo credit card issue. The letters were jointly addressed to Wells Fargo Home Mortgage and the Credit Card divisions.
According to all of the debtors in these situations there should be laws in place that require a negotiation of the debt payment between the lender and the debtor that is reasonable and affordable or in the event that the payment is not reasonable that both parties agree to formally transfer the property to the lender within 60-90 days or market the property for sale over a period of one-year until it sells. With the transfer to the lender it would cause the possessor to assume all responsibility of accumulated taxes, HOAs and insurance payments. By requiring that the property be marketed for sale instead of auctioned it may garner a higher price that covers more of the mortgage debt owed.
Consumers that are sued for the balance of auctioned homes are asking why they should be financially liable for a thing-of-significant-value being sold at the lowest price by the lender. Lenders can and do sell homes worth tens of thousands of dollars for under $10,000 at auctions. This to many debtors who are at-risk of being sued for the difference is unfair, especially since there has been ample time to market the property for sale before the auction date. Debtors feel that if the lender feels competent about the decision to sell the property for ten percent of its value that the debtor should be given first right to take advantage of this savings.
According to the 2011 Woodstalk Institute report, Left Behind by researchers Geoff Smith an Sarah Dudah, negligent servicers should be held liable for the maintenance of lender-walkaway properties.
Maybe with an enforcement of this type of agreement lenders will aggressively attempt to negotiate with borrowers or aggressively market the properties rather than letting them sit and deteriorate for months and years.
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