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Short Sale Approved. Title company found an open Loan. What to do?

I'm closing on a ShortSale but the title company found an old 55K Loan that was not (apparently) paid off.
The lender was World Savings but it was merged with Wachovia, who was merged again with Wells Fargo.
Owners refinanced twice after that loan with CITI Bank for 475K and 680K,
I can't find any document that probe that one loan was paid off for the other.
Any comments?
 
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October 08 2011 - US
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Answers (6)

Best Answer

This is when you hope to have really cooperative sellers.  They need to research all of the re-financings and figure out when the loan should have been covered.  There should be a HUD1 closing statement on the re-finances that shows where the funds went on each transaction. 

Just because they re-financed does not mean they included the loan as part of the payoff.

Are they still getting statements from the lender?  are they making any payments to this $55k loan?  Has there been any foreclosure action regrding this loan?

All questions the title company and seller need to resolve.

Looks like the SS is going to be delayed.

Good luck. 

Craig Fialkowski GRI,CDPE

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October 08 2011
I have run into this before typically when buyers refinanced a loan and "thought" they were saving money by not paying for title insurance on the refi to make sure this didn't occur.

Have patience and hope that everyone communicates and keeps this together as you dig through the pit to find answers.  The title company will work through it with the sellers but they are supposed to be an impartial third party.

Best of luck from Boise!
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October 09 2011
No need to consult any attorney, if your title agent or escrow agent is any good you should do the following:

 1. ZERO BALANCE or ZERO DEMAND LETTER: Have the borrower pull any old stm of the 2nd, Wacovia and call the bank or just use the social security of the borrower to obtain "the 0 demand letter" forget about the account number.
 
2. HUD-1 STM: Have the borrower try to remember which escrow did the refi or the broker did the refi papers and show this to title and if it showed pay-off of the 2nd in the exact amount of the lien that should be fine. They should take that as the Paid Off.
 
3. TITLE INDEMNITY: Call your title agent and ask him or her to use what is call a title indemnity. If he or she is any good the title indemnity is used to cover the 2nd lien since it was paid off but lien holder is not found. Title will indemnify the purchaser of policy and provide clear title. Thus you can close the transaction.







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October 09 2011
Had a similar incident about a month ago. The seller had to find an old statement (account number), contact management at the bank and it was resolved in about 10 days. I hope this helps.
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October 09 2011
You need a clean title before you go to closing.  It may be worthwhile to consult a real estate attorney.
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October 08 2011
Profile picture for sunnyview
You should not close until you have proof that loan was paid off. The title company has to search for those documents or the original bank/merged bank has to be willing to sign off the loan as paid.

These things can get sticky so if you are not sure you may want to ask for legal advice. You might try avvo and see what they say.
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October 08 2011
 
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