B of A short sale with a twist

intervale

LoanSafe Member
Oct 19, 2007
6
0
0
metro boston
We have owned this property for years and have refinanced every so often. At least the two most recent title company searches missed a $300,000 mortgage lien on the property that Bank of America loaned $800,000 on thinking they were in 1st position. Now we find they were in fact in second position. The previous Countrywide mortgage apparently was also in second position but was paid off at closing and the $300,000 mortgage did not show in that title report. We did not realize the old investor "wrap around" lien was in fact a recorded mortgage. The investor had even forgoten. but it is there.

The sale price will be about $975,000.00 minus a 6% broker fee. That will leave $916,000 to pay off what turns out to be a first mortgage of $300.000 and B of A's $800,000 note plus about $80,000 in missed B of A payments. That leaves B of A with about $616,500 to cover their $880,000 total exposure. That's about $263,500 short.

After reading the other B of A stories what is likely to happen here.
 

pattona

LoanSafe Member
Sep 2, 2008
109
1
16
I think you need a good real estate lawyer first. You may have a claim against the title company. What state are you in?
 

pattona

LoanSafe Member
Sep 2, 2008
109
1
16
Well it's there for a reason.

What I don't understand is wasn't the underlying loan in the wrap-around paid off, when you refinanced? That is, how much did the investor get when you refi-ed. And how did he "forget" that he wrapped around another mortgage; typically you do that to make money on someone else's cheap loan!
 

intervale

LoanSafe Member
Oct 19, 2007
6
0
0
metro boston
Thank you for your help on this. It is a strange situation. The private lender had a piece of our land unrelated to the condo as primary equity and that property's value more than covered the loan at a 75% ltv or so. In addition there was a lien placed on all other real estate. I know when we sold a parking space condo the lien issue was raised at that time by the buyers attorney and we made a payment from the proceeds towards the loan balance. But in checking the files from the sale of a beach house a few years back the lien issue was never raised and may still exist for the new owners. So I'm going to get that corrected.

For whatever reason during the last two transactions neither closing attorney or title company raised an issue. I paid a bit less attention because it was within the familiy and the assett wasn't going anywhere. I always considered the lot of land to be what was mortgaged and the other properties having a lien in the event of a default on the private loan. Not that that makes sense and these things are going to be handled a lot more carefully now.

This only came up when I ran my own title search and confirmed the lien, certainly not hidden, and when reviewing it with my attorney we realized it was a mortgage and the private lender was in first position. As to the lenders' (also an attorney) surprise all I can think of is he handed it off to someone to possibly put something on the record and it ended up something different or he was remembering the lot not the condo.

The first title insurance policy covered the lender and owner. the next one several months later covered the lender. It's so odd that two examiners would miss such a simple thing that had been recorded only several years prior. Particularly when examiners are regularly running into old mortgages that have not had their discharges recorded.

It seems as though someone will be looking to the title insurance co's liability insurance. I just don't know who is will be responsible for pursuing them. It would seem to be the B of A.

I think you are right that he would have wanted to see something from the proceeds though each loan only provided small amounts of money. it was when things began to close in and we needed cash. However at 18% interest I doubt he minds a few more months interest.
 

pattona

LoanSafe Member
Sep 2, 2008
109
1
16
Intervale,

Just because you refi-ed, it doesn't negate your original owner's title policy, unless I'm missing the point.

You definitely need some legal assistance with this one, not only because of the level of sophistication of the transaction but also if this is going to affect other family members.

I wish you good luck.