Bank error in my Subordination Agreement

topiOctober 31, 2008

This sounds like a typical story at the beginning, IÂm in Georgia and earlier this year I fell behind in my home loan payments. The bank is unwilling to modify the loan. The only way for me to have the loan reinstated is by coming up with the cash to pay for all of the missed payments.

What happened next was unexpected. I received an innocuous letter from a lawyer at the bank saying that in the Subordination Agreement the bank had mistakenly used an erroneous date and also a wrong property in the recording information for the Security Deed which describes the security interest.

They ask that I sign 3 different forms and send them back in a prepaid envelope. The first is an Acknowledgement of Service paper, the second is a Complaint for Reformation, Declaratory Judgment, and Equitable Relief paper and the third is a Consent Order between myself and the Bank.

Should I just sign these papers and return them to the Bank because this a typical bank error that has no bearing on me? Any thoughts would be helpful.

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lucy

And you're being asked to sign documents that have no bearing on you? Why? Do you understand what any of them are about, what the terms mean, whether or not in fact (as opposed to what you might have been told by the bank) they really will have no bearing on you? "Innocuous"? I would run not walk to an RE lawyer or someone more qualified to explain those things to you before you even think about signing anything. Never, ever sign something you're not absolutely clear about, and especially not if you're already in a negative position re the institution that wants you to 'just' sign incomprehensible stuff.

    Bookmark   October 31, 2008 at 10:42PM
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housekeeping

I would check the data out before signing anything.

You wrote:
"....saying that in the Subordination Agreement the bank had mistakenly used an erroneous date and also a wrong property in the recording information for the Security Deed which describes the security interest." (bold addedd)

An easy way to see if that is on the up and up is to go to clerk's office where deeds are registered and see if the original of the subordination agreement docs have the wrong date and address.

If not, someone may be trying to scam you and you would be wise to seek some counsel. Do you have a local housing agency that's working on mortgage issues? Perhaps they know about a wide-spread scam that's going on in your area.

At the very least go to the bank and ask questions there before you sign anything that just comes in the mail.

You would be wise to talk to a real estate lawyer, too.

I hope Tricia sees this as she may be more familiar with these sorts of situations. (I'd keep bumping this, or even start a new thread that calls her attention. She is very helpful -and very generous with her expertise - and certainly knows her way around mortgages!)

HTH,

Molly

    Bookmark   October 31, 2008 at 11:18PM
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triciae

"They ask that I sign 3 different forms and send them back in a prepaid envelope. The first is an Acknowledgement of Service paper, the second is a Complaint for Reformation, Declaratory Judgment, and Equitable Relief paper and the third is a Consent Order between myself and the Bank."

Normally, at your original closing, most banks require you to sign an agreement that if there is an error in any of the closing documentation you agree to sign corrected documentation. It's usually a separate sheet of paper.

In this situation, frankly, I wouldn't sign the documents.

You are in default on your mortgage & I'm assuming the bank is treatening foreclosure. They are in a bit of an awkard situation. They, apparently, have a mortgage on the wrong property.

I am not familar with Georgia real estate law; but they are in a real difficult situation. First of all, they are exposed to any intervening liens such as a second mortgage on the property. That lien would in essence be a first mortgage & then the bank would have to get them to subordinate. Also, the bank cannot start a foreclosure action without a mortgage on the correct property.

In addition, if you do not sign the papers the mortagee is going to have to go through extensive Court action seeking equitable relief. At the very least, you are in a position to delay any bank foreclosure action by months.

If I were in this situation & couldn't make up the back payments...I would simply write the attorney who sent the documents & explain that I am in default & trying to work-out a modification/forebearance on my mortgage. Tell the attorney, "I will be glad to cooperate with you if the bank will assist me with a work-out".

I'm assuming you are willing to add the back payments into the loan's principal & begin payments under the terms of the note. If this is the case, note that in your letter to the attorney. At this point, it is more than worth a try & if you get a threatening phone call or letter from the attorney I would definitely get your own counsel.

When the bank closed your original mortgage they, probably, obtained a mortgagee's title insurance policy. This means that the title insurance company & the attorney who closed the loan have some exposure, at this point. They may very well have a strong vested interest in assisting you with any work-out rather than take the chance of having a claim on their insurance policy from the bank.

Good Luck! Let me know what happens!!

/tricia

    Bookmark   November 1, 2008 at 10:40AM
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brickeyee

Lawyer up.

Banks have a funny way of being willing (forced) to deal with attorneys that they do not extend to peons.

It would likely be worth the money if you have any equity in the house.

    Bookmark   November 1, 2008 at 11:16AM
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sweet_tea

DO NOT SIGN THESE!!!!!!!!!!!!!!!!!!!!!

I have read recently there are many instances where the bank is unable to foreclose due to errors in paperwork (such as yours) that was done when the loan closed or when the load was sold to another mortgage company, which is common. Due to these errors, the bank cannot foreclose because they cannot prove that they own the loan, and other similar situations.

If you sign these, then they can foreclose much easier. If you do NOT sign, then it could be costly for them to foreclose if they have to do other steps, or possibly they cannot foreclose at all, or if they do foreclose, there is a risk that you can fight it and win (because of the paperwork errors), so they might be wanting to avoid this risk (to them), and that is why they want you to sign.

You need to research and find some free legal aid ASAP that will assist you in this area. There is more and more free info and web sites regarding foreclosures and assistance for folks in your situation. Take advantage of this. You might have a technicality that forces the lender to possibly negotiate with you for something that will allow you to keep your home, versus being sure to be booted out.

This is actually good news for you, most likely, but do NOT SIGN.

    Bookmark   November 1, 2008 at 1:08PM
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