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Copyright © 1999 Seattle Times Company

Posted at 08:39 p.m. PDT; Sunday, July 4, 1999

Real Estate

 

Owners default on payments, now want to halt foreclosure

Q: We stopped making house payments six months ago, and the bank is doing foreclosure proceedings now. What can we do to get out of foreclosure?

A: For starters, contact your bank and see what it advises; sometimes borrowers can negotiate a "work out," allowing them to make higher than usual payments until they catch up. If that isn't helpful, an attorney can tell you if there's something in your particular case that might give you some leeway.

Otherwise, here's what West Seattle attorney Stuart Carson, with Sharon A. Best & Associates, says usually happens in a nonjudicial foreclosure; knowing where you are in the process can help you understand your possible options.

Usually after several months of missed payments, the lender will send you a notice of default, warning that if you don't make good all late payments, plus any extra costs involved, it will foreclose. After that, the lender can't sell your house for six months. "This gives the person who owes the money a lot of time to make good," Carson notes. In fact, you can pay up anytime until 11 days before your home is scheduled to be sold off. In the remaining days after that 11-day deadline, your only option through your lender is to pay the mortgage in full.

Carson says there are two other options you might consider. First is refinancing in order to pay off your old mortgage. However, "this might be difficult because lenders will look askance at that." The second is selling your home. Carson says this may be your best move for two reasons. The home likely will fetch more than it would at a foreclosure sale, and thus there's the possibility that you could pay off your lender and still have money left. And most importantly, it stops foreclosure, thus limiting damage to your credit rating.

 

Q: Although the seller didn't disclose them on Form 17 when we bought our house last fall, we've discovered serious problems. The seller has moved to Montana. Can I take him to small claims court here?

A: You may be able to (for up to $2,500), but it won't be simple. For starters, state law doesn't require the seller to know about the home's problems. However if he does, he must tell you. Your burden: to convince a judge the seller knowingly misrepresented the facts and that the misrepresentation cost you a specific dollar amount. If the judge doesn't consider the case appropriate for small claims, she can refer you to a higher court.

But before that, you'll have to pay a third party to deliver a trial notice to the seller; just sending a certified letter may not be good enough, says court supervisor Helen Grayson.

If the seller doesn't appear at trial, there's no guarantee the judge will issue you a default judgment. But say you do get one. Next is collecting. Seattle attorney Craig Fielden, with Stoel Rives, says the best scenario would be if the seller still has assets in Washington. Fielden says various search firms will research that for a fee. If the seller's assets are all in Montana, you can still sue in small claims here. But in order to collect in Montana, you must take the judgment there and register it at the courthouse nearest the seller. This is called "domesticating the judgment." There will be a fee. Then if the seller doesn't willingly pay up, you must follow Montana law in your pursuit of his assets.

 

Q: I paid off my home mortgage loan last November. To this day I've not received any documentation from the bank or county confirming my legal ownership of this house. Can you please explain what happens when you pay off a mortgage loan?

A: Let's first explain ownership. When you buy a home, you actually own it from the start, and ownership is recorded by the county in your name. At the same time, your lender is on record as having an interest in the property, which it can exercise through a lien if you fail to pay.

When a home is paid off, the lender does what's called a full reconveyance, explains Scott Turner, first vice president and Seattle loan servicing manager for Washington Mutual Bank. In simple terms, this is the mechanism by which the lender acknowledges that the loan has been fully repaid and releases any claim to the property. After the lender completes its work internally, it submits documents to the county recorder's office, which records the release and reconveyance. It's this recording that makes it official that the house is yours solely; whether or not you get paperwork confirming this is up to your lender. "Most customers feel they need something back in their hands (to make it official), and that's not the case," Turner says.

If you want to make absolutely certain the property is all yours, he suggests you confirm it with the county recorder's office.