Short Sale Second Mortgage Collection

Hi Paul,

I just found your site, and wish I had found it earlier.  We recently went through a short sale due to needing to relocate to another city for work. 

We had a first mortgage and a 2nd (HELOC, both with Wells Fargo.  The process was arduaous, and Wells Fargo was absolutely terrible to deal with, but the bottom line is it finally closed in October. 

The first mortgage is reported as settled, but the 2nd is listed as a charge-off. In our inexperience and zeal to get this thing to close, I inadvertently let them include language giving them the right to attempt to collect on the deficiency after the sale.  I was somewhat relieved when I heard from them in November stating that they have deemed the deficiency amount “uncollectable” and they would be issuing a 1099. 

Now, the other day, I get a letter from a law firm stating that they are pursueing payment for the short amount.  I called them to ask about the situation, and they said that they will be issuing a 1099, and attempting to collect as well. 

Is this legal?  How long do they have to issue the 1099, until January 31st for this year’s taxes? Once I get the 1099, can thye still attempt to collect or pursue a judgment?  If they do elect to pursue the judgment, do you recommend that I demand to them to validate the debt by providing the original documentation? Your help is greatly appreciated!

Phil

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Hello Phil,

I’d request validation now as well as exercising my rights under Section 6 of the RESPA.

Read: Debt Collection after a 1099-C & Post-foreclosure Anagnorisis

Thanks for the questions and hope this helps.

Paul

This author is not an attorney ad this information should not be considered legal advice.  Please consult an attorney for legal advice.