Foreclosure Notice - What is Sufficient?

Question

So we had our monthly auction in Texas yesterday and one of the deals we had tied up got auctioned off.  Apparently the seller had been served notice at the property he was selling to us instead of his homestead.  My coaching client had been to the bank with the seller (local regional bank) and they flat-out told them that they weren't going to foreclose.

We are still sorting out all of the details, but we think that the bank backdated the notice and sent it certified mail a week or so before the auction.  The date on the letter was May 10th, which would have been sufficient notice if it was mailed in a timely fashion.  The trouble is:

1.  It was mailed to the wrong address so he didn't get it until the 28th
2.  They listed the county on the notice as Travis County instead of Williamson County
3.  The bank told my client verbally they weren't going to foreclose on the property with the seller present so he didn't review the letter thoroughly

We also found out that the note was sold recently to a private lender after we got the title commitment.  Apparently the commitment runs 2 weeks behind so this slipped through the cracks.  It seems like the hard money lender is trying to get the deed fraudulenty by backdating the date it was sent.  The timestamp on the certified letter should be the smoking gun, but our attorney seems to think notice getting filed at the wrong address should be sufficient for us to undo things.  The last gasp attempt would be to trump up the fact that the wrong county was on the notice...which we didn't see a copy of until today.

Does anyone have experience with banks doing this sort of thing?  The whole thing stinks to high heaven.  We think that the bank had a buddy in on the thing with some sort of kickback arrangement.  The notice was purposefully mailed to the wrong address 3 times and then to his real address to shorten the window to cure the default OR was backdated to try to meet the 21-day requirement.  The trustee also talked to the seller's daughter (he doesn't speak very good english) this morning and she claimes he seemed very nervous...smacks of something fishy.

Thoughts?  Our attorney is fighting the thing and there is roughly $100k in red meat in the deal so I hope we can get the thing fixed.

Don Konipol · Answer

Whether the notice mixup was intentional or not we may never know, but trustees at Texas foreclosure sales need to be exceptionally vigilant whether the issue is proper notification or proper filing. Sounds like the foreclosure notice was filed in the wrong county.  The notication to the property owner should be sent to the mailing address for the borrower listed on the deed of trust, not neccesarily the address of the subject property.
Sounds like you did a good job for your client - above and beyond what most mentors would do!

Bryan Hancock · Answer

Update -

We closed this puppy out a few weeks back after our attorney called their attorney to force them to give our title company a payoff.  They fought tooth and nail at every step of the process.

We have finished the whole rehab now except for some back-splash in the kitchen, carpet, some work on a wall, vanities, and landscaping.  We expect to put er' up on the MLS in around 2 weeks if it freaking stops raining.

Acquisition and rehab cost....around $160k and should sell for $240k.  I'll post some before and after when she is done if I can figure out how to do it on here.

Bryan Hancock · Answer

Great news!!!

Just got off the phone with our client and our attorney....the senior partner from the firm that acted as the trustee in the foreclosure agreed that the sale was done without sufficient notice.  My guess is that the buyer at the auction agreed to let them off the hook for the sale b/c they knew each other.  They have agreed to undo the sale with the buyer's consent already granted.

We told them we'll waive action if we get the deed back and they pay for our attorney's fees.  If there was fraud involved my guess is that we could sue for triple damages...which I am sure they knew so they capitulated quickly.  We also told them we want a letter to the seller that he can present to the credit bureau if something slips through the cracks and gets reported to one of the bureaus.

A lawyer actually did something constructive!  Never bring a pillow to a gun fight!

Sam M. · Answer

Not sure but gave you a bump anyway :)

Bryan Hancock · Answer

Yeah...I didn't realize that banks could be flat-out liars until this deal.  If they had served notice properly it wouldn't have been an issue anyway.

The whole deal stunk badly from the beginning.  Fortunately the threat of triple damages using a good local attorney allowed us to get this one.  All of the other deals I have done like this were fairly straight forward.  I guess when you get a Boss Hog banker you have to be especially vigilant.

Bill Gulley · Answer

Sorry,...notice is required to the last known address of the maker(s) of the obligation. Such notice is a notice of default and a demand to cure, the cure is the amount owed as of the date mentioned. It should also give a per diem rate, but may not, but that would be the current note rate times the balance divided by 360 for odd days interest.

But, some states require that the loan be in a non-accrual status from the date of demand. so interest stops.

Yes, banks send out letters late and the laon office will swear he did it when iut was required to eb sent, happens all the time.

The attorney for the bank (Trustee) usually has no obligation to speak to anyone, including the maker (borrower) after a notice of demand has been made or notice of foreclosure. Check state stautes on the liability and resposnibility of the mortgage trustee. Thier job then becomes to secure the property and that is what they get paid to do, they do not do mortgage work-outs, refinances, or assist anyone in selling.

If you get a notice by registered mail, return receipt requrested, I suggest leaving it sealed and do not open it. Contact the bank or go there and see if you can get a copy of what was sent, they should have it.

You can call the trustee or the bank till you're blue in the face, they can say anything, and who you are talking to won't have the authority to change anything verbally, so everything needs to be done in writing,a dn amil should be accomplished by regiustered or certified mail, return receipt requrested. Good luck on the next one.

Bill Gulley · Answer

LOL, par for the course....

Glad it worked out Bryan....but I can hear your attorney telling you how he had to fight the other attorney to get a payoff....lol, anyway, if you called, you probably wouldn't get a notta....just par for the course. Good luck on your closing....

Bryan Hancock · Answer

Thanks!

We actually got the contract we expected and excpect to close through our attorney soon.  The 14th is ambitious, but may be doable.  There is a small problem with our first closing so we have to do it through an attorney to get it done.

Account Closed · Answer

Grat story that you've shared, Bryan.  Glad that it worked out well for your client and paints a picture of things to be aware of and hidden challenges that may show up.  Always appreciate your posts and lessons learned.

Bryan Hancock · Answer

Update-

We should get a contract on this property tomorrow for $242.5k.  It sat longer than we expected because a lot of the buyers seem to have been cannibalized by the tax credit.

Closing is going to be January 14th...hopefully it will happen.  This has been one crazy real estate deal!

Foreclosure Notice - What is Sufficient?

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