Category: Real Estate

Being Sued by a Mortgage Insurance Company for an Insurance Policy you Paid for?

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As attorneys who provide a variety of real estate and mortgage related services, including foreclosures and post-foreclosure disputes, we know that many (most?) borrowers really don’t understand private mortgage insurance. Known as PMI, private mortgage insurance is to benefit the lender, not the borrower – even though the borrower is paying for it.

What makes it worse from the borrower’s perspective is that, in addition to being foreclosed on, a borrower can end up being sued by the mortgage insurance company in relation to the very same policy the borrower paid for. The highly technical terms we use to describe this include:

Technical terms

We’ve advised and defended borrowers in these cases. The most common fact scenario is this one:

  • a foreclosure takes place (or sometimes even a short sale or a deed-in-lieu of foreclosure);

 

  • the loan is not paid off in full;

 

  • the creditor (lender / loan note holder) makes a claim against the private mortgage insurance policy;

 

  • the mortgage insurance company pays the creditor to reimburse it for its losses on the loan;

 

  • the mortgage insurance company sues the borrower / former homeowner, under the theory of “We only had to pay out on this policy because you didn’t pay the loan off in full, so you owe us”; and
  • the borrower is shocked, comes to us for help.

We’ve seen cases in which the mortgage insurance company may not actually have paid out the money it was seeking to recover, in which the mortgage insurance company was unable to even produce the insurance policy at issue, and in which the borrower has been assured by the persons involved in the deal (before our involvement) that the borrower was going to be “free and clear” after a foreclosure, short sale, or deed-in-lieu. However, we’ve also seen cases in which the borrower did appear to legally owe the monies being sought by the insurance company.

These cases usually – in our experience and based on our assistance – go away without the borrower having to pay what the mortgage insurance company is seeking. However, each case and each client is different, and no guarantees or predictions can be made. The bottom line is that anyone wanting to reach a settlement with the lender / note holder before the property is disposed of and anyone who has been notified of a claim against them related to PMI should be educated and informed and perhaps seek professional assistance. 

McGrath & Spielberger, PLLC provides legal services in Florida, Georgia, North Carolina, Ohio, South Carolina, and Tennessee, as well as in some Federal courts. The Firm offers full scale representation, as well as limited scope services, as appropriate for the situation. Please be advised that the content on this website is not legal advice, but rather informational, and no attorney-client relationship is formed without the express agreement of this law firm. Thank you.

Hearing on Partition of Real Property and Result

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The following is a summary of a hearing on Partition of Real Property that McGrath & Spielberger assisted a client with, and is provided for informational purposes only. Each case, each client, each situation is different, and each matter may have a different outcome.

Basic Facts. The Petitioner is trying to force a sale of the real property at issue so she can receive a portion of the sale proceeds.

Basics of the Applicable Law. The default setting in North Carolina law is that an owner of real property (even a minority owner) has a right to force a partition of that property, whether a partition in kind (physical division) or partition by sale (sell the property and divide the proceeds).

The Challenge. To not have the case follow the default setting (a partition being ordered).

Owner 1. The Respondent (Brother) who owns 11/12 of the real property, lives on the property with his family, takes care of the property, pays the taxes, etc.

Owner 2. The Petitioner (Sister), who owns 1/12 of the real property, does not reside there, does not contribute to the care of the property.

Property Location. Charlotte, Mecklenburg County, North Carolina

Property Type. Primary residence

Who McGrath & Spielberger Attorney Jason McGrath Represents. Owner 2, the Respondent

Hearing Date. November, 2016

Actions Taken by McGrath & Spielberger on Behalf of Client in Relation to the Partition Hearing. Mr. McGrath filed Motions to Dismiss and Objections to the Petition for Partition and attended the hearing with the Client. The strategy to oppose the Petition for Partition was not revealed to the other side until necessary at the hearing itself.

Partition Hearing Outcome. Mr. McGrath successfully prevented an Order for Partition from being entered. The case remains pending, as do our Motions to Dismiss.

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After the Foreclosure Sale: A Puzzling Time for Former Homeowners

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As attorneys who represent many borrowers in foreclosure cases, although we have been fortunate to have great success in avoiding foreclosure for our clients, one of the most common questions our clients ask is, understandably,

 

“If we are foreclosed upon, do we have to immediately vacate the property?”  
Foreclosure Misery

The answer to that question isn’t as straightforward as one may think.

Generally, there are two different paths to remove the former homeowner after being foreclosed upon: (1) formal eviction process, and (2) informal negotiations between former homeowner and new owner (usually the lender bank or the highest bidder at the foreclosure sale). The first option of formal eviction can be costly and requires additional involvement of the justice system. It is comparable to the process for evicting a tenant who has overstayed his/her welcome. The second route will generally take the form of the new owner making a monetary offer to the former owner in exchange for an agreement to vacate the premises peacefully and without causing any damage. This “cash for keys” option saves all parties from having to go through the hassle and costs of the eviction process.

Depending on the path chosen, a homeowner will be able to stay in his or her home for a short time period of perhaps a few weeks; others may continue to live in the foreclosed upon home for longer and even indefinite periods of time. Each case is different, and the length of time will depend on the laws of the state where the property is located, how aggressive the new owner is in ensuring the vacancy of the property, and any agreement entered into.