The term “dysfunctional” might be an understatement with regard to our mortgage market in recent years.
And despite claims that things are turning around, cases like what happened recently in Deltona continue to illustrate that problems continue to be profound and widespread. It involves the short sale of an underwater condo that the bank then tried to pull the rug out from under the already-closed deal.
Our Miami foreclosure lawyers know that one recourse we have in a situation like this is to file a suit for breach of contract. A bank can’t approve a deal one day, have you sign off on it, pay the fees, and then later say it’s invalid.
That doesn’t stop them from trying to do it, however, because the fact is that short sales are not lucrative for the banks. It requires the bank to accept a lower selling price than the outstanding amount owed. Therefore, it behooves these financial giants to delay and deny as often as possible. They didn’t get away with it in this particular incident, but there are certainly times when they do.
This case was actually profiled by The New York Times, which frankly may have provided some incentive for the bank to resolve the issue.
Here’s what happened:
A New York woman purchased a condo in Florida in 2007 for $250,000. She even put down a 20 percent down payment. The idea was that it would be an investment rental property. That loan was then sold to Fannie Mae. When the market collapsed, there was a glut of homes on the market, and she couldn’t find anyone to rent the property. Inevitably, she fell behind on payments.
She tried to work with the bank to negotiate a loan modification, but the bank refused to budge.
Then she attempted a different tactic: She requested a short sale. In February, she sent all the necessary documents to the bank for the request. In turn, she was approved. The bank would accept $72,000. The bank indicated that it and its investors (i.e., Fannie Mae) would agree to the payoff and further would waive their right to collect any outstanding debt after the completion of the sale. This was so long as the sale was approved by the end of March. All the homeowner had to do was pay $1,000 to facilitate the deal.
She did. The sale went through at the beginning of March. The new homeowners moved in.
But then, the bank sent a subsequent note saying it rejected a number of the terms of the agreement. It returned her money. Te same day, it sent another letter approving the deal.
The homeowner sent over a revised document and paid more money. Then the bank wrote back saying the deal had been approved and asking her to re-send the money she had just sent. More money was wired to the bank. But then the bank wrote back and said the deal had been denied, per Fannie Mae. The bank said it might reconsider if the buyer was willing to pay more. It also said she would be responsible for the outstanding balance.
Remember, the home had already changed hands and the new ownership had already been recorded.
Her foreclosure defense attorney filed a breach of contract lawsuit, asking the court to declare the earlier terms of the deal accepted. Fannie Mae later said it had no involvement in the transaction, as per policy, it leaves those decisions up to the banks.
After several media inquiries, the bank agreed to simply settle the matter, indicating that the homeowner had satisfied her end of the bargain and agreeing to cover her legal costs.
This case was particularly nightmarish, but the fact of the matter is, banks will fight you on short sales and really any other deal that may include terms favorable to you. Make sure you are able to negotiate from a position of strength.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991.
A Condo Was Sold, Until It Wasn’t, Sept. 15, 2012, By Gretchen Morgenson, The New York Times
More Blog Entries:
Wrongful Foreclosure Can Have Devastating Results, Sept. 14, 2012, Miami Foreclosure Lawyer Blog