We quit claimed the property back to Citibank, now they threaten to sue us

[tobee43]

Thanks for all the info provided, this situation is very interesting to say the least. And our options minimal considering we can't force the Bank to free us of this property. It's such a shame cause I'd hoped with the bankruptcy I could get some relief. (well I did get some)

i think eventually the banks are going to have to address this problem. if there are millions of us that are in the same position and there is so much housing inventory in this country, well, something has to give one would hope.

personally, i can't imagine moving 10 years forward from today if one applies for a mortgage and has been perfect in re-establishing one's credit, would be denied a new mortgage because a bank refused to foreclose from a surrendered property 10 years earlier. although many may argue the point, we will see, because only time will truly answer this question. let's hope it gets better!

[markinva]

Great Forum and resource for everyone! OK - So I'm going to surrender a house in March, at the next 341 mtg. The first mortgage is less than the value of the house but the second mortgage, from a different lender, is not. Are there any differences in Surrendering vs quit claiming? I am also concerned that the lender(s) will hit me with a deficiency but I do not at all understand how they can do this while I am in a (100%, 5 year) Chap 13 plan. Delays in transfer of the deed is also a great concern, due to liability for Real Estate tax and Property insurance. Anyone with similar circumstances?

[tobee43]

yes, surrendering your house is just that, you are surrendering back to the bank.

if you bank agrees do a warranty deed, not a quitclaim deed, that would far better for you. now as far as any deficiency, if you live in a deficiency state and you have bk before 2012 the amount of the deficiency is covered under the mortgage forgiveness debt relief act.

if you didn't reaffirm and do the pay and stay for the next few years i would just check with your atty. you're petition will be filled out with what your intentions are surrendered, affirm, or other etc. and by the time of your 341 all that information is already in the trustee's hands.

if you get 1099 for the deficiency you just attach a 982 to your tax form and your bk filing should be enough to prove you were insolvent at the time.

[DeadManCrawling]

Sorry I am late to the thread, but we have been considering a different, but similar tactic.

Our house has been sitting vacant for almost 4 years now. Not good in Florida.

We have received a Lis Pendens, nothing more.

I have been considering a QCD, as well, with BoA, but with a different goal.

If they threaten to sue us for not expunging, I am tempted to invoke the "Doctrine of Unclean Hands" in court and see where the chips fall.

Basically, Unclean Hands means you cannot sue someone frivolously, or with intent to not follow through. If they decline the QCD, it sure seems the doctrine should apply. If, in fact, Unclean Hands was a victory for the debtor, the court would have the power to void the lien and even sanction the lender for monetary damages.

It seems like a workable idea except:

In discussing with my attorney, he thought we SHOULD prevail, according to very basic tenets of the law.

However, he thought we would FAIL because 99% of judges would see the can of worms they were opening up, and back away quickly from the legal merits and dwell mostly on the issues of moral risk and the larger issue of how in the world we would ever, as a nation, clean up this mess, if he ruled in our favor, and against the bank.

I am still tempted, though, and might well give it a shot, too.

Best wishes,

-dmc

[tobee43]

Sorry I am late to the thread, but we have been considering a different, but similar tactic.

Our house has been sitting vacant for almost 4 years now. Not good in Florida.

We have received a Lis Pendens, nothing more.

I have been considering a QCD, as well, with BoA, but with a different goal.

If they threaten to sue us for not expunging, I am tempted to invoke the "Doctrine of Unclean Hands" in court and see where the chips fall.

Basically, Unclean Hands means you cannot sue someone frivolously, or with intent to not follow through. If they decline the QCD, it sure seems the doctrine should apply. If, in fact, Unclean Hands was a victory for the debtor, the court would have the power to void the lien and even sanction the lender for monetary damages.

It seems like a workable idea except:

In discussing with my attorney, he thought we SHOULD prevail, according to very basic tenets of the law.

However, he thought we would FAIL because 99% of judges would see the can of worms they were opening up, and back away quickly from the legal merits and dwell mostly on the issues of moral risk and the larger issue of how in the world we would ever, as a nation, clean up this mess, if he ruled in our favor, and against the bank.

I am still tempted, though, and might well give it a shot, too.

Best wishes,

-dmc

i certainly would be interested to hear the outcome. haaaa..."Doctrine of Unclean Hands" good one!

something's going to have to give, at some point, there is simply to many houses sitting empty, or those that are paying and staying. i'm hard pressed to believe some movement will not happen soon by the banks, since we, personally, are left with very few cloices as recourse or resolve.

[nohoneymoney]

If they threaten to sue us for not expunging,
-dmc

Ok I got "Lis Pendens" but I don't understand what is meant by "expunging" in the statement above? We have a significant number of rental properties. If the banks/investors don't want to modify the liens to make the properties profitable, then they can have them back. In the extreme we may need alternate methods to get the titles out of our names. Thanks

[justbroke]

I'm so sorry I missed this thread. This is exactly the kind of issue I "expected" when QCing a property back to the lender.

The real kicker is this. Have your attorney read the In Re Pratt. This is a case where the lender -- albeit on a car -- wouldn't release the title without paying, but also refused to repossess! The court found this to be nothing more than extortion to get the Pratts to pay the car off.

Interesting indeed.

[DeadManCrawling]

I used a term someone else did, "expunged".

Basically, the bank is threatening to sue the borrower, if the borrower will not cancel the QCD, in essence returning the housing maintenance and expense to teh borrower's responsibility.

JB, thanks for the link. I am going to read it tomorrow and give this another thought.

[despritfreya]

Don’t be too enthused by In re Pratt 462 F.3d 14 (1st Cir. 2006). Other than one unreported decision out of Ky (by a Judge who simply did not care since it was his last decision before retiring - and, instead of telling the lender to take the property he Ordered the property sold by the Trustee - don’t know if that ever happened) I know of no decisions that forces a lender to take back property.

See:

In re Ames, 447 B.R. 680 (Bankr.Mass., 2011)

The debtor maintains that his interest in the unit terminated on January 2, 2011, when he declared his intention to surrender it, and that any subsequent fees and assessments are dischargeable. To support his argument the debtor cites Pratt v. GMAC (In re Pratt)in which the First Circuit Court of Appeals held that a debtor is not required to take any affirmative action to effectuate the surrender of secured property beyond merely making the collateral available to the secured creditor. The debtor argues that by stating his intention to surrender the condominium unit and making it available to the Trust and his mortgage lender, he effectively surrendered his legal, equitable and possessory interest in the property within the meaning of Bankruptcy Code § 523(a)(16), rendering any subsequent condominium fees and assessments dischargeable.

Pratt does not go where the debtor attempts to take it. In Pratt the First Circuit was called upon to determine how a debtor carried out his or her duty to surrender collateral pursuant to Bankruptcy Code § 521(a)(2). Neither Pratt nor § 521(a)(2) has anything to say about title, whether legal or equitable, to the collateral. As the First Circuit observed: the most sensible connotation of “surrender” in the present context is that the debtor agreed to make the collateral available to the secured creditor—viz., to cede his possessory rights in the collateral—within 30 days of the filing of the notice of intention to surrender possession of the collateral. Pratt, 462 F.3d at 18–19. Thus, the First Circuit held that when a debtor surrenders collateral pursuant to Bankruptcy Code § 521(a)(2)(B), he relinquishes only his possessory interest in the property. Section 523(a)(16), on the other hand, deals with more than mere possessory interest and provides that if a debtor retains either a legal or equitable ownership interest in a condominium unit, any postpetition fees and assessments remain nondischargeable.

The debtor in this case has failed to identify any authority suggesting a connection between the surrender provisions of Bankruptcy Code § 521(a)(2) and the exception to discharge established by § 523(a)(16). The fact that the debtor stated the intent to surrender the condominium unit in accordance with § 521(a)(2)(A) and has acted on that intent in accordance with § 521(a)(2)(B) does not alter his status as the title holder of the unit and thus postpetition condominium fees and assessments arising while he remains the record owner of the unit are not dischargeable under § 523(a)(16).

See also:

In Re Cormier, 434 B.R. 222 (Bankr.Mass., 2010) - I have not checked the history of the case to see if there was an issue after the stay was lifted but I find it interesting that the Judge did not answer the all important question as to whether or not the lender can be forced to exercise its right to take title to the property.

In their Brief, the Debtors say that, since September 2009, they “have spent $105.29 on utility expenses for the [Property],” “have incurred $218.79 in unpaid charges,” and have “maintained in force property and liability insurance” on the Property. The Debtors further state that there is one tenant residing the property who has not paid the $700 rent since September 2009. In the Debtors' Brief and at the Hearing, counsel for the Debtors argued that the Debtors have committed all of their net income after expenses to the Plan and have experienced unexpected car repair and dental expenses that have consumed all of their other discretionary income. As such, the Debtors maintain that they can no longer afford to insure and preserve the Property, nor can they afford to file or prosecute a summary process action to evict the non-paying tenant.
The Debtors want American to take responsibility for the Property's expenses so they can devote all of their disposable income toward the Plan. . .

American objects to the Debtors' Motion as an attempt by the Debtors to “impose a duty upon [American] for insuring and maintaining the Property,” to “ignore their duties as owners of the Property,” and “to shirk their responsibilities onto [American] because they can no longer an afford an investment property.” American also claims that the Debtors are seeking a “windfall” by having American shoulder the burden of evicting any tenants and paying for insurance and maintenance. In fact, argues American, the Debtor's Motion is unnecessary because American does accept the Debtors' proposed surrender of the Property through the Plan, although it objects to being compelled to take immediate possession of the Property.. . . Here, American says, the Debtors remain the owners under Massachusetts law and American cannot be compelled to take possession and assume responsibility for maintaining and preserving the Property.

The Court finds no authority under Massachusetts law or the Bankruptcy Code to compel American to take immediate title to or possession of the Property proposed to be surrendered pursuant to the Debtors' pre-confirmation Chapter 13 Plan. Nor can the Court sanction the procedure by which the Debtors seek reimbursement of their claimed administrative expenses or deduction of those expenses from their disposable income currently used to fund the Plan. Accordingly, the Debtors' Motion must be denied. However, in order that American may proceed with its rights under the mortgage and non-bankruptcy law, and in keeping with the Debtors' assent to the lifting of the automatic stay, the Motion for Relief will be granted. Orders in conformity with this memorandum shall issue forthwith.

____________________

Des.

[justbroke]

Des, I agree that you can't force a creditor to exercise its right, but I think Pratt was special. Maybe it was that the Judge was retiring, but I would have expected GMAC to appeal. In the end, I would hope we can get to someplace with all these "in limbo" properties.

I also think in Pratt that the Appeals Court only reversed the denying the motion to find GMAC in violation of the stay. I don't think the appeals court forced GMAC to do anything. Or did something else happen in the case on remand?

[HHM]

Doctrine of unclean hands does not result in what you think and does not work the way you think. Even if this was a proper application of that doctrine (which it isn't) the most you could conceivably get in this context is the case dismissed, but they could simply refile. Most likely, it will simply wake them up and they will proceed with the foreclosure.

Realize, Unclean hands is an affirmative defense, but it is almost exclusively applied as a defense to an "equitable" remedy. Foreclosure is a statutory remedy. For example, in a typical contract dispute, the plaintiff will allege, among other things, that the defendant was "unjustly enriched". (e.g. defendant borrowed X amount, and didn't pay it back, in addition to being a breach of contract, the defendant got a benefit at the plaintiffs expense, hence, unjustly enriched). Unjust enrichment does not appear in any law or contract, it is a question of fairness; as such, it is an equitable claim (as opposed to a contractual or statutory claim). The defendant could raise Unclean Hands as a defense to the Unjust Enrichment (e.g. the plaintiff stopped accepting payments and returned payments even though the defendant was not in default at the time).

Let me ask you this...is there a second mortgage on the house; if yes, I think your argument is significantly weaker on forcing the QCD issue. The bank would have a good faith basis for refusing a DIL, the existence of a 2nd mortgage. Also, unclean hands works both ways, doing a unilateral QCD is not a proper action in the first place, I think you are dead in the water.

In any event, keep in mind, judges, in general, are not keen on voiding liens; there is only ONE reported case where it happened and there was far more problems going on in that case than a simple refusal to foreclose.

There is a difference between having a cause of action (unclean hands, breach of contract) and having a remedy. This is why good attorneys work backwards when presented with a situation. Coming up with a good faith cause of action is the easy part...coming up with a remedy, and having that remedy be worth it is the HARD part. In another context, this is why so few attorneys do FDCPA and FCRA litigation, the remedy available is not worth the investment of time and energy since you can generally achieve a result for the client another way (e.g. bankruptcy gets the person out of debt and stops the creditor harassment, in the end, that is all the persons really wants; they don't generally want to be involved in 2 years+ of protracted litigation).

[tobee43]

HHM: Realize, Unclean hands is an affirmative defense, but it is almost exclusively applied as a defense to an "equitable" remedy

i know, yet not necessarily, but the mere thought of the suggestion of someone implicating a bank in today's climate under the doctrine, and maybe really not that far off, it still makes me chuckle!

it brings me to this, and i knew i read it somewhere along the way, which in fact was written in reference with the behavior of those dealing directly and applied to debt crisis we were and are facing back in july when asking the basic question....( and this is not necessarily my personal opinion or view on the subject matter, just a position that can be taken under these circumstances).

How should the government prioritize paying the bills:


Applying the Doctrine of Unclean Hands to the Debt Limitation

It appears increasingly likely that our Democratic leadership is facing two profoundly unappealing choices regarding the looming debt limitation – hang tough and be unable to pay the bills, or compromise away fundamental Democratic programs and principles. How to handle this? Is there a way to hang tough that puts the pain of restricted federal spending where it belongs?


Let us review the legal doctrine of unclean hands as stated in this position. (i'm putting this in for those not familiar)

Unclean hands… is an equitable defense in which the defendant argues that the plaintiff is not entitled to obtain an equitable remedy on account of the fact that the plaintiff is acting unethically or has acted in bad faith with respect to the subject of the complaint—that is, with "unclean hands"…
Equitable remedies are generally remedies other than the payment of damages. This would include such remedies as obtaining an injunction, or requiring specific performance of a contract. (sounds like the banks to me!!! but that's just me!)


For example, suppose a businessman borrows some money and the lender perversely interferes with the business, rendering it unable to pay all its bills. Which creditors should suffer? Those who are dealing in good faith or the one with unclean hands? The lender with the unclean hands then has the choice of rectifying their bad behavior or going to court and facing an unclean hands defense.

Come August 2, the federal government likely to find itself unable to pay all its bills. People are going to suffer delayed payments until such time as this is resolved. That is a fact and will be unavoidable. Who should suffer? Somebody is going to have to. How about businesses, and their owners, who have been actively working to sabotage this administration at every opportunity, like Koch Industries? If suspending their payments is not enough to make up the difference, go to the lists of contributors to the worst obstructionists and suspend payments to them. Keep working your way down the list until you left with the payments you are able to make.

Those suffering delayed payments then have the choice of spending years in court or else getting their obstructionist allies to back off. Now time is on our side instead of theirs.

The objections, of course are
a) that this smacks of political retribution and
b) False News and co. will bleat about this forevermore.

Let’s start with the second objection. It doesn’t make any difference what Obama, or for that matter any other Democrat, does. False Noise will find something to bleat about. They will make it up if they can’t find some shred of truth to exaggerate.

As to the first objection, oooh, horrible nasty political retribution. Somebody is going to have to not get paid. Let’s get back to the businessman example. To make good faith creditors suffer while making payments to those with the unclean hands would be unfair, as well as terrible business strategy. Why should the federal government be any different? Of course, Obama is the last politician of any stripe that would do anything like this. Be that as it may, this proposal is worth pushing as a better alternative to the other choices out there.


des, while at this time maybe only a handful of cases have been effected by those decision today, i can't see something or some challenge not eventually breaking ground here. as jb states, something's got to give with all this inventory through out this country. interesting enough, if there are different statues of limitations, rulings etc., in each state as to the procedure that will or can be imposed, what an absolute mess this is likely to be,or already is.

the banks are simply to big, after all, even the judges making the decisions on these matters need to borrow or owe them.

[pathfinders]

Wow, that was our fear as well Fortunately with a lot of calling and finding the right contact the bank finally agreed to do a DIL. Wells Fargo, Had a VA loan

Anyone in that situation of chapter 7 BK that has been discharged and has the left the Home I would really try and just get to the correct person in liquidation and they were happy to take it back,

I must have spoken to 15 different people that told me NO or you have to jump through 100 hoops to be approved, I would tell them it has been discharged in chapter 7 I am not looking for a loan modification, I do not want to do a short sale, the house is vacant and broom swept and in good condition please take it back, they kept telling me no When we Officially foreclose we will take title.

Until I stumbled on to a person that said we can do that. (DIL) The bank paid for the appraisal title search and than completed the DIL, it is now in there name has been recorded and on county records it is out of our name.

The HOA was all over US ( Burn out Lawn someone threw trash in the yard a random spare tire??? not sure if they were telling me the truth on the tire, and were going to call code Enforcement, it felt good when the HOA called and I could say go check public records NOT my problem and have a nice day...

[HHM]

Wow, that was our fear as well Fortunately with a lot of calling and finding the right contact the bank finally agreed to do a DIL. Wells Fargo, Had a VA loan

Anyone in that situation of chapter 7 BK that has been discharged and has the left the Home I would really try and just get to the correct person in liquidation and they were happy to take it back,

I must have spoken to 15 different people that told me NO or you have to jump through 100 hoops to be approved, I would tell them it has been discharged in chapter 7 I am not looking for a loan modification, I do not want to do a short sale, the house is vacant and broom swept and in good condition please take it back, they kept telling me no When we Officially foreclose we will take title.

Until I stumbled on to a person that said we can do that. (DIL) The bank paid for the appraisal title search and than completed the DIL, it is now in there name has been recorded and on county records it is out of our name.

The HOA was all over US ( Burn out Lawn someone threw trash in the yard a random spare tire??? not sure if they were telling me the truth on the tire, and were going to call code Enforcement, it felt good when the HOA called and I could say go check public records NOT my problem and have a nice day...

That is the real key, tenacity. Granted, that doesn't mean if you are equally tenacious, you will get a DIL; but it really takes some pushing to even get to the right person. In Pathfinders situation, it probably helped that it was a VA loan, all guarantor agencies have policies and procedures to follow when it comes to DIL.

As to U-QCD (Unilateral - Quit Claim Deed), I really don't think you will find a court to recognize it as a valid transfer. Is it a "tactic" that can stall an HOA and Property tax collection, possibly, is it a valid transfer of real estate, absolutely not. I wish I had a solution, but as I pointed out earlier, the law never really contemplated a secured party not enforcing it's security interest.

I do think that you can bring a claim for damages in the narrow circumstance where there is an HOA and Property Tax Accruing, but it is a pure equitable claim (and possibly a creative breach of contract claim) that by not foreclosing upon event of default, the damages are predictable and known and therefore, you may be able to sue the mortgage servicer. But whether the court will entertain the claim, who knows?

[tobee43]

all i can say, is path is one lucky human, we had a FHA/PMI and chase will not even entertain any such DIL and i have attempted for a few years now. in as much as finding the "right" person, there is no one better at being a pest than i, many can vouch to that one on this site

maybe, also, because i want the transfer to be a warranty deed and not a QCD, nor would i ever consider U-QCD. although, really, at this stage of the game, i frankly don't care anymore. why should i? i have no reason. if they want to keep our names on the deed forever so be it. that is my personal resolve.