I know someone who last Feb. 2008, took out a $111,000 mortgage on property valued at only $86,00 (in Michigan) who now is having to sell the property (1.05 acres/small house) subject to a short sale. In the meantime she has been left in a will, over 16 acres of vacant land, and a house valued at $260,000. They are selling the vacant land, two parcels, one at $59,000, the other $54,000. I do believe that this property is still in her parent's name, but she is in charge of the estate as everything has been left to her. Is this legal to do this? She is just letting the bank take posession of the house she owns (the one with the mortgage) and will be getting the money from the sale of the property eventually. Shouldn't the mortgage company who is losing out be made aware of the circumstances involved here. Doesn't seem fair or legal to be able to walk away from $111,000 free and clear knowing that when the other properties are sold, they can just pocket that money.
1 Answer from Attorneys
First of all, it really doesn't seem to be your business. In a legal sense, if you were to make the call, so to speak, you could be sued for interference with an advantageous business relationship. I would not go that way.
To answer your question, the mortgage company is to blame twice for this situation. First, they loaned money on property not worth their loan. Second, they agreed to a short sale which means the house sells for less than what is owed and they eat the difference. This is also their call.
This is no different than a recently bankrupt person buying a lottery ticket the next day and hitting it big. The creditors are out of luck, but that is how the system works.
www.kliszlaw.com Tim Klisz