I have been working with a particular couple since a couple of weeks before the internship started. There are a number of clients that call Fairplay Realty-Elite as a result of an online search that brings up the company as a possible solution to their distressed real estate problems. Little does the consumer know that we aren’t solving their problems because it makes us feel all warm and fuzzy. Solving their problems means somebody paid us a substantial fee: either the bank, the investor, the homeowner, or the attorney that accepts the referral for litigation. This particular couple, lets call him “Walter,” and her “Melissa,” were like manna from heaven. They could have bypassed us and went straight to an attorney. It seems that Walter and Melissa have decided to call it quits on their 20+ year marriage and they’re hoping to get some assistance in resolving the real estate matter. Walter is the sole mortgagor on the home, yet he hasn’t lived in the house for 3 years. Melissa has lived in the house the last several years but she doesn’t want the home…too many bad memories. They share the long-term interest of maintaining a civil interaction for the benefits to their 16-year-old twin girls. Walter has sought our help so that he can give the house back to his bank under the terms of a “deed-in-lieu of foreclosure.” Under this arrangement, the homeowner voluntarily signs over the deed in order to avoid the foreclosure on their credit file. This house is an unusual because the homeowner actually has a small amount of equity they’re willing to grant to the lender. The challenge is that the bank is too busy to return their call. The uniqueness of the case is that although Melissa has had no interest in the financing on the property, and is not being foreclosed on, she does have an interest inherent in a community property state. This means that in the absence of a deed-in-lieu, she will show up in the county’s name search as having been foreclosed upon also, if the Walter just walks away from the property. Walter and Melissa would like to buy a replacement home in Melissa’s name so the girls lives will not be totally uprooted with a relocation. While Melissa can buy her own home outside of the subject property county, purchasing in the county would be a challenge because she could show up as having a deficiency judgment on a recent foreclosure when the title company conducts the obligatory judgment search for Melissa just prior to closing. While this could only happen if the lenders expenses consumed all the profit (and then some) prior to sale…anything is possible with today’s banking community.
What are we to do? Although Monolithic Bank (their mythical lender) has no incentive to refuse the deed-in-lieu, current policy dictates the bank takes no risk, and taking back property without the benefits mortgage insurance provides is not a common practice in this market. Jeff Potts has assured me that this is one deal we can push to a successful close through litigation…if the homeowners are willing to bare the cost? You just can’t make this stuff up!