The past 10 days have been a roller-coaster with the house. Over the next several posts, that I'm naming The End is Near, I'll give a run-down of the events leading up today, and continue beyond until the end-date of September 9th.
Friday, August 5th:
I received an e-mail from the loss mitigator that an attorney in the firm thinks we should request mediation through the state's new mediation program
The mediation program went into effect the week previously. In a nutshell it means that homeowners in our state facing foreclosure have the right to mediation through the Department of Commerce to ensure that all parties are acting in good faith and treated fairly. This will hopefully reduce the number of homes that are seized in foreclosure by giving distressed homeowners a fair opportunity to negotiate alternatives such as loan modifications, short-sales, etc.
It's not free, but fairly inexpensive at $200 for each the homeowner and the bank, plus any attorney's costs if a homeowner chooses to be represented. Homeowners cannot request mediation directly; they must be referred to the program by an attorney or housing counselor based on specific criteria, but once referred, the foreclosure process has to stop until the mediation process is completed.
The bank is required to have a decision-maker at the mediation meeting in person or on the phone, so the biggest positive is that it will greatly reduce the run-around for homeowners that enter the process. If no agreement is reached, once the mediator has entered their report, the foreclosure can again be scheduled for 90 days.
If either party is found not to be negotiating in good faith, then the mediator will compile a report on that fact, but they cannot stop the foreclosure. It would be grounds for the other party to sue, however, and in some instances the bad-faith efforts could be reported to the state Attorney General to aid them in cracking down on fraudulent/illegal foreclosure-practices.
We contemplated long and hard (well, as long as we could, given the time-crunch) on if we should request mediation. The positive of forcing the bank to have a decision-maker readily available on the spot was very appealing, since they seem to take the cake on giving people the run-around. However, there were no guarantees that we would come to an agreement, and I strongly doubted that they would negotiate in good faith given the events of the last year.
We also felt that we would need to hire an attorney to represent us, taking it from a $200 deal to a couple grand, or more if the outcome warranted further legal action. At best we'd come away with an agreement allowing us to sell the house, but the buyers had been getting really anxious and were not giving us the impression they'd stick around through the process. More than likely, we'd commit the time, money, and energy just to be right back on the foreclosure track, only dragging it out by another four months or more.
Thursday, August 11th:
We declined the referral to the mediation program.
That same morning, we found out it was all moot, since we didn't qualify for the process anyway. Only homeowners living in the property in question are eligible, and since we moved out in January of this year we would have been rejected by the program.
About 10 minutes later, we received an e-mail from the loss mitigator that for the first time ever, the bank had called her! She has spent so many hours each week over the past year calling them, sitting in Muzak Hell, and getting the run-around on our behalf. Never had they called her. She knew right away something was up since they initiated contact by more than a general e-mail asking her to call customer service.
So, what brought the bank out of their shelter to initiate contact?
The wanted to let her, and us, know that they had approved the short sale! They needed to confirm her e-mail address so that they could send over the approval letter. We waited with baited breath, since an approval didn't mean no-strings-attached.
Mid-day, the loss mitigator called me to let me know she'd sent me the letter for review. As we read it over together on the phone, she indicated that it was unlike any approval letter she'd ever seen and she needed an attorney to go over it before talking with me anymore. It was clear that they were not requiring us to sign a promissory note for the deficiency, as we were told to expect based on the bank's previous approvals her firm had received for other clients. What was not clear was if they were forgiving the balance.
Late that afternoon, she contacted me again and let me know that in the end, she had every single attorney in the firm look at the letter, and they were split 50-50 on whether or not the approval released us from liability on the deficiency balance.
She attempted to discuss the ambiguous wording with the bank, but of course there was no one she could speak with that could help with giving more information or re-writing the letter. She also attempted to call Fannie Mae directly, but it was after hours there and would have to wait until the morning. She requested that I also try to contact them (Fannie) and see what information I could gather.
Friday, August 12th:
I spoke with a Fannie Mae representative directly early in the morning. He wouldn't speak to the specifics of our approval letter, only saying that it is always Fannie Mae's intention to leave the door open to seeking the deficiency within the laws of the state in which the property sits. He wouldn't or couldn't say what their plans are in our case.
I communicated this information to the loss mitigator and our realtor, and let them know we did not feel comfortable signing the letter as written. The state laws here mean that if the bank takes the house in a non-judicial foreclosure - which is the process they are using - they cannot seek a deficiency judgement except in cases of fraud. We've been nothing but open and honest, so we had nothing to worry about there.
Even so, we were deflated. We'd fought so long and hard to avoid a foreclosure, but here we were, having to decide between foreclosure or taking a deal the "might" open the doors to them suing us for the deficiency, an amount that they are saying is currently topping $160,000. That total is so inflated by their delays and stalling tactics it isn't funny, but even a more reasonable estimate of $140,000 (did I just call that reasonable????) would mean bankruptcy for us, dragging the turmoil of the past few years out well beyond another decade.
I let everyone know that was not an option for us.
Then....the loss mitigator, our realtor, and some of the attorneys at the loss mitigation firm came to us with some facts about the likelihood of Fannie Mae seeking the deficiency. First, in all the years this firm has practiced in our state- doing much more than loss mitigation, and very reputably - they have never seen Fannie Mae seek a deficiency judgement in our state. The laws here would make it an uphill battle for them, and they have chosen not to fight it, historically.
Additionally, the exact wording in the approval letter has legal precedence to indicate forgiveness of a debt. The term they used was "Discharge" - they even put it in bold type-face in the letter - and it is most commonly used in bankruptcy proceedings to indicate a debt has been resolved and nothing further is owing. Again, with the wording as it was, we were advised that it would be an uphill battle for them to get a judgement. If they chose to seek the judgement, state law gives them six years from the date of the short-sale to do so.
This left us with a really difficult decision: wave the white flag of surrender and take the foreclosure hit, or plow ahead with the short-sale, taking the risk that we might have to fight in the future against a judgement.
We asked for the weekend to decide.
