Full question:
I returned a home to the bank (deed in lieu of foreclosure), but the bank later sold the loan to a different bank, now the NEW bank is asking us for the money. I checked the title history and it shows the PREVIOUS bank as the current owner, but the NEW bank says that we have to pay to them now.
- Category: Real Property
- Subcategory: Foreclosure
- Date:
- State: California
Answer:
A mortgage loan is a contract, and the parties involved can differ from the ownership of the property securing the loan. A bank can assign its rights to collect loan payments to another bank without transferring ownership of the property. Whether the new bank can collect payment after a deed in lieu of foreclosure depends on the terms of the contract.
A deed in lieu of foreclosure (DIL) allows a borrower to transfer ownership of the property to the bank instead of undergoing a lengthy foreclosure process. This option is typically considered when a borrower cannot make mortgage payments and has exhausted efforts to sell the home at fair market value. However, a borrower must not have another mortgage in default.
When a lender accepts a DIL, it does not automatically mean that any outstanding balance owed will be forgiven. It is common for borrowers to request debt forgiveness, and if the lender agrees, it should be documented in writing.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.