Recently, there have been an increase in reports of lenders entering homes pending foreclosure, changing the locks and removing personal property.
Often, the justification provided by the lenders is that they received a report that the property was vacant and unsecured and that they were simply securing the property by changing the locks and boarding up the property to safeguard the home from property damage, vandalism and theft. In reality, it is often a ruse to secure possession of the property prior to the foreclosure sale.
Here is a copy of a recent e-mail received from an attorney in Washington State:
Hello All - I have received several phone calls from different real estate agents reporting activity that I find hard to believe. If I had heard this story from one agent, I would have discounted it as them misunderstanding the facts. But, I have now heard it from a variety of agents . . . so, of course, now I am wondering if I have missed something. Apparently lenders (xxxx is the only name I have heard) are going into some properties that are pending foreclosure and changing the locks, removing personal property, removing listing signs and keyboxes, etc. All of this is happening prior to the trustee's sale. There has been no receivership or any other court proceeding. These are non-judicial foreclosures and lender is simply taking possession of the property prior to the trustee's sale. In at least one case, a homeowner called the police who came to the home and said that it was a civil matter and did not stop the lender's rep from then taking the homeowner's personal property (or so the story goes).
I can't speak to the legality of this type of action in other states. However, in Missouri, notwithstanding language in the deed of trust stating otherwise, the lender cannot enter an occupied home pending foreclosure. Even after the property is sold at a foreclosure sale, the lender or purchaser at the foreclosure sale, cannot enter an occupied residence and must file suit for unlawful detainer to secure possession of a property sold at foreclosure.
Although I have heard of isolated reports in other states (including Missouri), I am curious to learn if other real estate professional have heard of similar occurrences of this lender practice in their state?
This legal alert provided as a public service announcement courtesy of PREA Signature Realty.
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PREA SIGNATURE REALTY
PREA Signature Realty is a full service brokerage located at 1709 Park Avenue in the Lafayette Square neighborhood of the City of St. Louis. PREA Signature proudly serves the following city neighborhoods: Lafayette Square, Soulard, Benton Park, Benton Park West, Downtown Loft District, Forest Park Southwest, Central West End, Tower Grove East, Tower Grove South, Compton Heights, Shaw, The Hill, Dogtown, Carondelet, Holly Hills, St. Louis Hills, Dutchtown, and the Other Historic Neighborhoods of the City of Saint Louis, Missouri.
The opinions expressed herein represent the opinions of the author only and do not reflect the opinions of PREA Signature Realty. All photos and written content were produced by PREA Signature Realty. All Rights Reserved - PREA Signature Realty (2009). This content may not be reproduced or reprinted, except for Active Rain re-blogging, without express written permission of PREA Signature Realty.
For more information, visit our website at www.PREASignatureRealty.com or contact Ryan Shaughnessy at 314-971-4381 or send an email to Ryan@PREASignatureRealty.com.
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66 Comments on Legal Alert - Lenders Entering Homes Prior to Foreclosure Sale Reported in Washington State
Ryan -
Never heard of this happening here in Chicago. Interesting, however, because often the actual changing of the locks/taking possession here is delayed after Sheriff's Sale and mandatory 30-day notice to defaulted homeowner.
Often times, then, the house is pretty trashed - so there is little to really protect!
DEAN & DEAN'S TEAM CHICAGO
Denise: I pick topics that relate to my current or past projects. It saves time. I typically do 1 blog post per night - usually between 12 midnight and 2 a.m. It is actually best time to do some work. I grew up with it as Hwy 40. But I use Hwy 64 now because the transplants don't seem to get that Fed-40 and I-64 are the same.
Bill - Tenant or owner - pretty much same result.
Dean - Different set up... Missouri is a non-judicial sale state. Send notice of default, accelerate balance on note, give written notice of sale, publish notice of sale for 21 days, cry sale - you are done - approx. 45 days from start to finish. However, possession is the issue. You have to file unlawful detainer action to get possession. In my experience, vandalism to the house is inversely related to its value.
I've heard many tales of this happening here in Florida
Robin - Thanks for reading and sharing the Florida experience.
Robin - Thanks for reading and sharing the Florida experience.
It isa happening here in Montana - The company "securing the property" does more damage to the property then they could have ever prevented.
Don: I have heard the same - they actually have left doors open, broken windows or doors to gain access, or drilled the lock and then drilled a hole in the wall of the home and secured the door with chain and padlock. I get the need to preserve the value of collateral and to prevent waste and vandalism. But, some of these companies are going too far.
Yes, the lender came into a property I had listed prior to the TS and changed one of the locks and placed a keybox on the door. This was about 3 weeks prior to the TS, however, nothing was taken. That would be illegal for them to do that, and I would assume to change the lock. My clients didn't care though, they had already moved out of the house and didn't care. That lender has received their comeuppance: we had an offer 2 weeks prior to TS and the bank didn't take it. They would have lost only $45,000. Now, it is still listed 10 months later for $80,000 less than what we had a good offer for!
Amy: You point out a very real problem. We consider the lender to be the entity that our customers send their payment to. In reality, they may not own the loan or note. They may just be a servicer and loan has been sold to another entity. If that is the case, they have no authority to modify the loan and you will then get bounced from entity to entity. In the meantime, nothing happens. Sale is held.
I would hope that someone on AR could ask this question:
Are foreclosures becoming more prevalent and loan modifications being blocked because the servicer can't make the call (ie. they don't have the authority to modify the loans) or can't make the modification because of a structural reason (ie. loan is pooled - afraid of being sued by investor or PMI carrier won't pay claim unless sale is held)?
I sort of agree with the agent who sees thing getting worse before they get better. Your blog and the President's speech last night make feel that way. Good stuff, I always get good perspectives from rreading your bloags
Thanks Michael - glad to have you back in the rotation.
Hi - I have a SECOND home in Lucerne Valley, Ca. This for those of you who dont know is desert property. I have 5 acres that i use on weekends and holidays to ride ATV's with family and friends. There is a manufactured home on the lot as well that is fully furnished. I am in preforeclosure now. As soon as I missed the first payment I received a letter stating that the house appeared vacant and if I didnt contact GMAC within 7 days they were going to rekey it and winterize it. I called and confirmed that it was a 2nd home and I did not have to be there everyday. Well this happened monthly until December. In December they actually started the foreclosure process. I have not received any letters about rekeying the property. However I got a call from my neighbor who informed me that someone was at my home changing my locks. My neighbor went to the person and told them its a weekend home. They continued changing the locks. I called to verify that there was not a sale date and that the property did not sell without my knowledge. I am under the impression that they (GMAC) is working out a loan modification for me. I print title home is still in my name and no sale date is scheduled. I called GMAC and I was told they didnt have to notify me since I was in foreclosure. Then the rep had the nerve to ask me did I want keys to get in. I can only imagine what would have happened if I would have went there this Friday late at night and not been able to get in my home with my 4 kids. Is this breaking and entering? Who else has a key to my home now? Was this NEVER my property?
One thing I know and you have reenforced is that before proceeding into the morass of legality, one is best advised to consult a real estate attorney
Bernadette: The FannieMae deeds of trust/mortgage forms allow for entry to secure the property for loss and damage. Lenders are taking an expansive view of their rights.
Michael: I absolutely agree - consult an attorney is the right answer.
I just had this happen in San Diego county,CA-I'm the listing agent.
My sign is in the yard,no one calls me -just changed the locks on 3-31-09. Trustees sale date was 4-8-09-we got it postponed- I have 2 short sale offers into the bank!
Yes this property is vacant- but I find this below board.Is it even legal in CA???
Well this has just happened me. My town home is currently in pre-foreclosure. This isn't because I cant pay my mortgage(barely) but because my home is literally worth a fifth of what I paid for it. So now I'm trying to renegotiate my payments. Currently I am not living at the home but I happen to work 2 blocks away from the home and my sister lives in the EXACT SAME complex, so someone checks up on it almost daily. About one month ago after leaving work I stopped by the property and found the gate to the backyard ajar. Upon closer inspection I discover that someone actually broke a piece of the wooden fence to gain entrance into the yard and nothing was taken. That same day I repaired the fence and put a lock on it. This whole event was very strange because the property is on fairly busy street and the blinds were slightly open, so as to reveal NOTHING to steal within the home. Less than one week later I received a letter from my lender informing me that the property was "Vacant & Unsecured". This was also very strange to me because of how quickly it was "reported" to the lender that the home was "unsecured". Once again I emphasize that this property is checked on a daily basis, so the amount of time it was "unsecured" could not have been longer than 24 hours(best case scenario). In any case I disregarded the letter because I had since secured the property. Today(April 13) I arrived at the home to find the deadbolt changed and a lock box on the door handle. I have since setup an appointment with my lawyer tomorrow.
Call me crazy, but too much of this doesnt add up. In my opinion someone broke my fence in an effort to expidiate the foreclosure process. These Banks and Lenders are just begging for a lawsuit and I may be the one to give it to them.
I know someone closely that built 4 luxury condos in great community in Massachusetts. After having all town & state autorities sign off on all on sit and off site improvements and the 4 Condos being 100% complete, locked and secured, the town has refused to issue occupancy permits, the lender has refused to renew the construction loan, but yet wants the borrower to make payments on a loan without knowing any terms. Property has not been foreclosed upon, but lender has enetered the premises and changed all the locks. The borrower was at property daily and sales have been attempted. Even the town attorney told the borrower he knows how to resolve the occupancy permit issue, but refuses to tell borrower.
How do you like that. Crazy world we live in now
Please someone respond with comments and ideas. Is this legal. By the way, the borrower has figured out the answer to the OP problem.
Our lender sent us a letter(08/06/09) that our loan was sold and now starting with September we have to pay to a different lender. That was OK with us, but the problems start: the new lender begins to leave messages that we did not paid the loan three months in row (for May,June,July) We thought must be an error so we got copy of the cleared checks and sent them to the old and the new lender to prove that. We called back and they said that need to investigate,to open a dispute and to wait...
Next,we got another letter from the new lender stating that they will go and change the locks on the property becauseit is VACANT and they are worried about vandalism and FREEZING temperatures...in California ...Sacramento... in summertime .....and this will serve like 5 days notice
We just bought the house like investment 4 months ago,Our house is Not on pre or foreclosure, we never missed or late a payment the title is clear. Seems like the personal property is no longer protected... now the lenders make the law...It is ridiculous...
We just had a high profile case of B of A entering Brentwood homes prior to their foreclosure. They did it under to guise of offering a work out agreement, but none of the agreements ever "worked out"!
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