Rae Jean vs. The Loan Mod Machine

Hi Paul,

I’ve written to you several times over the last year or more. I have an interest only option arm, I filed ch. 7 bk that was discharged 4.08 in which the mortgage was included and no re-affirmed. I am still in the home and had paid on time up until 2 months ago. I did have a forensic audit done by Patrick Pulate and I do have multiple tila violations. I did send a recission notice to Countrywide within the 3 year recission period but they just blew me off and never acknowledged it. I did hire an attorney here in Colorado to help me but he quit the case after a few months of being jerked around by CW. I have since tried to get a loan modification 4 times (2 on my own and the 3rd and 4th via NACA). 1 modification was denied by CW, the 2nd attempt was never answered, the 3rd via NACA I got an offer of 5% fixed but it raised my payment $200 per month (was only paying and affording minimum on interest only) so I rejected the offer (NACA submitted my self employment income wrong-too high- which made the payments too high), Also I am about 40k-45k upside down.

The loan will eventually reset and be so unaffordable there is no way we could stay.

Because I was in a modification mode (the one they offered) they took my mortgage payment for March (funds were withdrawn from my bank) but they do not show that payment was ever made. Therefore since they are not showing that payment, and I dont know if they will modify at an affordable rate I have not made my April or May payemnts. The March payment still shows as un-paid on the web-site.

Those are the condensed lengthy facts!!

Here are the condensed lenthy questions:

1- Since I have tila violations and I did submit the notice of recission or recission request letter within the 3 year period, shouldnt I be able to recind the loan?

2- If so, it is all great in theory but how do I accomplish such a task? My last attorney quit! Its almost comical. I have to laugh or I will cry and not stop

3- I am on the fence about even accepting a new modification offer (Naca is requesting 3% fixed which would keep the payment just a few dollars higher than the minimum I have been paying for the last 4 years) but not sure its financially even worth it since we are 40k+ upside down.

So if I dont take the offer and decide to walk am I correct that I can let it foreclose and I am not legally liable for the balance due to my chapter 7 bk?

4- Is there any benefit to doing a short sale? I live in Colorado and it looks to me from reading other posts that CO is a power of sale state and there really wouldnt be a huge benefit in short selling?

5- If I short sale or foreclose will my credit report show a bk and a forecloser? (I understand I will have to honestly answer the question about if I have ever foreclosed when applying for a loan in the future)

6- Also when I did this mistake of a refinance 4 years ago the loan was put in only my name. The bk is only in my name too, and we did a quit claim deed to take my husband off the deed since he would no longer be on the loan, but they messed that up too and he is still on the deed. I have the quit claim I signed and you can see that they charged my $6 to process it on the hud1, but it was never filed/processed because they filled the form out wrong. If I decide to walk how do I get my husband off of the deed so he isnt liable for taxes, etc? Can I just take the papers to the county and show them we filed, filled out the forms and were charged for it?

I am so tired of all of this it is making me physically ill. Best case I would like the loan rescinded but dont know how to make that happen or how to find a lawyer capable of making that happen. If offered a loan mod of 3% fixed I may take it just so we dont have to move, but I’ve been waiting forever and I am really thinking about walking away. If I walk away I just need some advise on the best way to do it. Can I just let it foreclose since I am in Colorado and the house was in the bk or should I short sell? Then how long before we can apply for a loan? I am thinking of walking and trying a rent to own, or lease option, possibly owner fincanced due to my credit issues.

I just want my life back, and want this all over with. Its been a nightmare to say the least!

Sorry for the long long story. Just alot involved and too many questions that nobody seems to know the answers to.

Thanks for a great web site with tons of good info!

Rae Jean

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Hi Rae Jean,

How were you going to tender the remaining balance due upon rescission?  If you’ve already had a recent discharged bankruptcy, then tender may not be made through another bankruptcy.  Without a means of tendering the reduced payoff, the lender is not required to rescind the loan. 

You are correct that Colorado foreclosure is through power of sale by public trustee, but a ‘Public Trustee’s Deed’ or ‘Deed of Trust to Public Trustee’ is public record and picked up by credit bureau contractors to record in the public records section of a credit report.  As a result and in the event of foreclosure, the credit bureau will list a foreclosure and bankruptcy in the public records section, but the tradeline itself is required to be frozen at time of bankruptcy – no more late payments beyond the issuance of the case number. 

Regarding obtaining another mortgage: according to Fannie Mae, a foreclosure is a five year wait, whereas a short sale is a two year wait.  FHA permits a borrower to obtain another mortgage three years after the date the balance was zero on a foreclosure.

The failure of the settlement agent on that last refinance to record the quit claim deed may create a cause of action for your husband against the title company or possibly the lender if either one of them are still in business, the property goes to foreclosure, and the foreclosure shows on your husband’s credit report.  If it were me, I’d record the deed now.

Although I know that borrowers often feel that a loan modification on an upside down home effectively turns a homeowner into a renter; nevertheless, if the loan mod payments are affordable then my vote tends towards accepting the loan mod as opposed to rejecting it and completing a short sale, deed-in-lieu, or foreclosing.

Thanks for the questions and don’t be a Shelton.

Paul Jerome

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