Legal Question in Real Estate Law in California

Re: Short Selling to Avoid Foreclosure

You may have a case and I'd like to talk to you about it. Give me a call or email me directly.

-Ben

Re: Short Selling to Avoid Foreclosure

I think you'll get more than just my answer, and hopefully someone from your own county will respond, because title and escrow practices differ between northern and southern California, and to some extent even from county to county. However, I do have a couple of general observations to make to get the ball rolling.

First, regarding "...they put me in a two-year ARM." Maybe this was the best deal you could get, but ultimately it was your own free choice to take it or leave it. There is a disclosure duty, of course, and a lawyer working for you should review the truth-in-lending disclosures for sufficiency and accuracy.

Next, and this is where north-south practices may differ, I don't understand how an escrow holder could bait-and-switch. My understanding of the role of an escrow holder is that they act upon written instructions from the parties, and nothing else. If the escrow holder did anything contrary to the parties' joint instructions, very likely that would be professional negligence and breach of fiduciary duty, and you could sue for any resulting harm. However, I would be very surprised if the escrow company itself is responsible for changing the terms of your deal in the way your facts suggest. Indeed, I do not really understand your facts. Are you trying to say that the escrow holder was supposed to receive and hold sufficient funds to make your payments for two years, but in fact only held and paid three months' worth? What happened to the rest of the money? Have you reviewed your final escrow instructions carefully? How about the escrow closing statement? It should show where all the money went.

My guess is that the blame, if any, may fall on your lender or your loan broker more than the escrow holder, but I also suspect you may have agreed to everything that happened by signing instruments and escrow instructions without reading them thoroughly, while in a rush to close your deal. If this were a purchase-money loan, that is all the more likely, as there is usually more urgency to get a loan when buying than when refinancing.

Re: Short Selling to Avoid Foreclosure

I agree with Mr. Whipple's concerns about any case you might have against the escrow company, but I also am a Northern California attorney. I also do not understand how the facts fit together. How can or why should you have a short sale when you have stayed current with your payments and your mortgage amount is less than the fair market value? If you drop the price the home will likely sell faster; is the lender giving you a discount from the total loan amount because they are afraid you might become delinquent? Will you be able to each the two yea minimum threshhold of it being your principle residence 2 of the last 5 years so that you get a write off against the first $250,000 in profit [$500,000 if married]? If you make a profit on the sale of the house it will be very difficult to convince a jury that you were injured.

Re: Short Selling to Avoid Foreclosure

You likely are not talking about a "true" short sale, which would involve your lender agreeing to accept less than what they are owed in a sale to a "new" buyer because you, the lender's current borrower, cannot pay due to hardship, etc. Many people believe that when they sell for less than what is owed on their loan and make up the difference from their own pocket, or sell for less than the comparable values in the area, they are selling in a "short sale", but that is not so.

It sounds as though you have one of the thousands of Southern California loans put together by glib loan brokers who will tell you that if you find you can't make the payments when it adjusts, just "refi" again, yada, yada. That was true for a nubmer of years, so long as property kept going up, but now it has halted its climb and there is no equity to tap for a refi...The long and the short of it is that you likely know just as much NOW about your loan as you did when you signed all the docs, but you didn't complain then...most borrowers did the same thing and were all too willing to get a loan which was beyond their means, or would be when the interest rate increased...unfortunately, although many will be sympathetic to the scenario, you are the most to blame and it is unlikely that you will prevail in any suit to make someone else pay for your error, and this is not the type of case that most experienced real estate attorneys will take on contingency, so you will be funding it out of pocket.

Re: Short Selling to Avoid Foreclosure

How long do you have before the foreclosure? I may have some ideas!