Real Estate - Lender payed flood insurance for years after closure
Phantom
We sold our house 2 1/2 years ago. We had a lender that maintained an
equity line of credit even after we had paid off the principle (prior to
home sale). Unbeknown to us, the lender, not seeing that we were paying
for flood insurance on that property, started paying for it themselves.
Remember, we owed them nothing. They claim they tried to contact us, but
I guess the new owner just threw out that mail. The total is now $4K.
Their collections department finally decided to call my work phone (why
did they wait 2 1/2 years to do that?). As you might expect, it was a
shock. We even have a credit strike leveled against us by them.
The lender's flood insurance department claims that they never received
signed documents confirming the sale and are asking for those documents
from us now. Unfortunately, the copies we received are not signature
documents. The title company, which would be expected to have signed
documents and should have forwarded them to the lender, is out of business.
Naturally the question arises, are we liable for paying this bill? Is
there any way to obtain the signature documents in the public record?
Thanks,
- Brian
Stuart A. Bronstein
> We sold our house 2 1/2 years ago. We had a lender that
> maintained an equity line of credit even after we had paid off
> the principle (prior to home sale). Unbeknown to us, the lender,
> not seeing that we were paying for flood insurance on that
> property, started paying for it themselves. Remember, we owed
> them nothing.
>
> The lender's flood insurance department claims that they never
> received signed documents confirming the sale and are asking for
> those documents from us now. Unfortunately, the copies we
> received are not signature documents. The title company, which
> would be expected to have signed documents and should have
> forwarded them to the lender, is out of business.
Go to your county recorder. You should be able to get certified
copies of the document showing you sold the property. The title
company would not have approved the transaction without the
lender's consent, though that document might not have been
recorded, it probably should have been.
> Naturally the question arises, are we liable for paying this
> bill? Is there any way to obtain the signature documents in the
> public record?
Tough question. Seems to me that you shouldn't be responsible for
the payment. The bank should have been notified of the sale, and
should have known better.
The title company may be out of business, but I'd think that
another title company took over its assets (and books), or a state
regulatory agency may have documents that would help.
If necessary you can subpoena the bank the title company used, to
show the bank was paid.
Mike Jacobs
> We sold our house 2 1/2 years ago. We had a lender that maintained an
> equity line of credit even after we had paid off the principle
Nitpick - in this meaning it's principAL, not principLE.
> (prior to home sale).
Do you mean, you paid the equity loan off _immediately_ prior to home
sale (as part of the closing), or did you do it some substantial
length of time _before_ that? I will assume the latter, from how you
phrased it.
After you paid it off, did you have them CLOSE THE ACCOUNT or did you
keep it open as a revolving line of credit secured by your home equity
(as most people do)? I will assume the latter, since you didn't SAY
'we closed that account." If you HAD in fact closed that account,
your case would be easy - you would owe nothing further to that bank;
your dealings with them would have been COMPLETELY over and done with,
as of that moment.
But if (as I assume) you still had an open account with that bank, you
had to comply with the contractual terms of that account. Read your
contract and see what those obligations were.
> Unbeknown to us, the lender, not seeing that we were paying
> for flood insurance on that property, started paying for it themselves.
How long before you sold the house, did they start to do that?
Was this something YOU WERE REQUIRED TO DO under the terms of your
contract with that bank? Did you KNOW that? Did you have your _own_
flood insurance in force back when you _did_ have a principal balance
due in your home equity account, but then you cancelled that coverage
when you paid off the loan? Lots of missing facts, here.
Didn't the bank SEND YOU A BILL (adding this cost back into the
PRINCIPAL of your account, showing that you AGAIN owed them money
after paying off what YOU THOUGHT was the whole ball of wax, during
the time while you STILL owned the place? Didn't you get these
statements, MONTHLY, from that bank, up until you moved?
> Remember, we owed them nothing.
I don't remember that. You said you thought you owed them no
PRINCIPAL, having paid it off while keeping the account open, but that
doesn't mean you owed them "nothing." If you maintained an open home
equity credit account with that bank, you continued to owe them
uninterrupted _compliance_ with the terms of the contract that created
that account. _IF_ those terms required you to carry flood insurance,
and gave the bank the right to acquire such insurance to protect their
collateral if you failed to do so, then yes, you owed them for that.
Now, if there is in fact NOTHING in your contract with this bank that
requires maintaining flood insurance on the collateral property at all
times the account remains open, then, IMO, you _don't_ owe the bank
for what they purchased _on_their_own_initiative_. which they
apparently did to protect _their_ interest in the collateral. But, I
seriously doubt that is what you will find when you read the contract.
> They claim they tried to contact us, but
> I guess the new owner just threw out that mail.
Hadn't they tried to contact you, BEFORE you sold the place and moved,
if (as you said) you paid off the principal on that account some time
_before_ the sale? Exactitude in keeping track of such dates would
help us evaluate your case - along with knowing exactly what your
contract with the bank said about flood insurance.
> The total is now $4K.
How much of that was for insurance that was in effect while _you_
still owned the place, before the sale? You, as well as the bank,
benefited from that part of it. So, for that part at least, there is
no real dispute, right? How much of that $4k was incurred AFTER (you
thought) the sale had been properly consummated at settlement, and
escrow closed?
> Their collections department finally decided to call my work phone (why
> did they wait 2 1/2 years to do that?).
Who knows? Are you sure they didn't try to call you at work _before_
that? In any event, the reasons don't matter much. I gather you are
trying to build an argument that you could have nipped this in the bud
if they had contacted you earlier; _that_ is the part that matters,
not _why_ they didn't call you there earlier. Your attorney can
advise you on whether or not such an argument will fly, given all the
other facts and circumstances you will explain to him in detail - we
can't advise you here, based on the limited summary you gave.
> As you might expect, it was a shock.
I don't doubt that.
> We even have a credit strike leveled against us by them.
That sounds like what the bank would do, all right.
> The lender's flood insurance department claims that they never received
> signed documents confirming the sale
Oh dear. Somebody dropped the ball at your settlement on the sale.
That was part of the duty of the person who handled the closing of
escrow, before the title changed hands and the funds all got paid out
to everyone entitled to receive them per the HUD settlement sheet.
Also, for _buyer's_ protection as well as yours, the settlement agent
should have obtained "release of lien" papers BACK from the home
equity bank as well as from your first-mortgage holder (if any) and
_any_other_ lienholders, as part of the closing of the deal; you
should have gotten copies of THOSE papers as well, and if you didn't,
the home equity bank may well ask (if the issue comes up, in a future
suit) why YOU didn't notice the absence of such a lien release, and
point it out THEN, before completing the closing. Otherwise, the
buyer did NOT GET CLEAN, UNENCUMBERED TITLE (apart from the lien the
buyer's OWN lender, if any, then recorded on the property) from you at
closing, and you might _also_ be facing a suit or claim by your
_buyer_ in addition to the fact that YOUR OWN PERSONAL OBLIGATION ON
THE ACCOUNT was not released, either.
Fortunately, that's what title insurance is for. Did the buyer buy
title insurance at your closing? No? Oops.
> and are asking for those documents from us now.
Better late than never...
> Unfortunately, the copies we received are not signature
> documents. The title company, which would be expected to have signed
> documents and should have forwarded them to the lender, is out of business.
Oops again.
However, your state's law may provide that the settlement escrow agent
(a/k/a/ "title company") is YOUR (seller's) agent, so that YOU remain
liable, as a principal, if any part of the transaction gets screwed
up. BTW, the actual attorney or other agent who supervised this
transaction also remains PERSONALLY liable for malpractice in the
event the failure to complete the paperwork was HIS fault, even if the
"title company" he worked for is now out of business.
Your state's Statute Of Limitations for you to do anything about this
may be fairly short, so, don't waste any time dickering over this
before you consult an actual local lawyer to find out what your
options are.
> Naturally the question arises, are we liable for paying this bill?
That's a big MAYBE. You'll need to ask your own lawyer, after
sharing all the facts and answering all his questions.
> Is there any way to obtain the signature documents in the public record?
If these documents are in fact _IN_ the public land record, that's
what being a public record MEANS - yes, anybody off the street can
walk in, look at them, and obtain copies of them. Go down to your
county land records office, which is probably (but not necessarily) an
adjunct of the Court Clerk's office, and ASK. They will let you look
at the file, and they will copy for you anything you need to copy from
it (for a fee of course).
Yes, it's probably a good idea for you to do that yourself, BEFORE
your first visit with your attorney - it will save you money to do it
yourself, and you might learn something too. But don't hesitate to
make that first appointment. Call around NOW to find somebody that
sounds like he knows what he's talking about and find out in advance
what he will charge for the 1st visit (some may offer a free first
consultation, but don't count on it for this type of case). Good
luck,
> Thanks,
You're welcome.
--
This posting is for discussion purposes, not professional advice.
Anything you post on this Newsgroup is public information.
I am not your lawyer, and you are not my client in any specific legal
matter.
For confidential professional advice, consult your own lawyer in a
private communication.
Mike Jacobs
LAW OFFICE OF W. MICHAEL JACOBS
10440 Little Patuxent Pkwy #300
Columbia, MD 21044
(tel) 410-740-5685 (fax) 410-740-4300