Expert: Michael Brotherton - 2/26/2009

Question
I am very glad I found this site.  I have a question:  We currently live in PA but had owned property in FL right at the beginning of the housing crisis-bought right before the crash and moved back to PA due to emergency shortly after crash.  Here is my dilema.  We contacted Countrywide Home Loans as soon as we found out we needed to come back to PA-had a workout case worker assigned.  Put the house on the market and had a 90 day period to sell home(we were already back in PA).  When we hit about day 70 and no showings were taking place because of declining market and what we had to ask to pay off property, we contacted our case worker at Countrywide who gave us 3 options:  pay what we owe, deed in lieu of foreclosure or foreclosure.  We obviously didn't have the cash and didn't want to foreclose.  Inquired further about the deed in lieu.  Our case worker made an arrangment with us to do the deed in lieu if we signed a promisary note for $15,000-non-interest loan to be paid back over 60 months, she claimed this would ensure our credit would be saved.  Claimed it would not negatively impact us because we are paying partial money back.  This all took place between October 2006 and February 2007.  My husband and I went to purchase a house and when the mortgage person pulled our credit he said it shows a foreclosure so we cannot purchase anything for 3-4 years......  They also explained they never heard of anyone paying partial money back.  The note has since been sold to Dyck O'neal who I understand is a collector, we are continuing to pay this debt.  I am to the point now that I am wondering why am I peeing money away on this property when it already did what we were told would not happen-it affected our credit.  If we stop paying on this debt, can they place a judgement against us or levy our bank funds?  Help I am at a loss and furious that this has set us back so far.

Answer
I'm afraid you were duped by Countrywide. First, you were talked into signing the note which I would never recommend. In Florida they couldn't come after you for a deficiency anyway.

Second, a deed in lieu of foreclosure will only avoid a foreclosure being executed. They may have already filed the foreclosure action. This is a public record and the bank cannot remove it from your credit. They may have dismissed the case which means you may be able to dispute this with the credit bureaus and get it removed or updated to show it was dismissed.  

Since you signed the note it is a valid debt. They can sell, and the buyer can take whatever action against you they can legally take including judgments, wage garnishments, levies, attach bank accounts, etc. If you own property they may also place liens against the property.

At this point the only option you may have is to renegotiate terms of the note and pay the debt. Or if you have resources you can offer a lump sum settlement for much less than is owed.

The owner of the note has to abide by the laws of the state where the debt was incurred however,. they have to file suit in the county where you live.