Short-Sale - Chase Bank Fraud

Asked by Lola, Pearland, TX Tue Jun 12, 2012

We are in the middle of trying to close a short-sale from Chase. We were literally getting ready to sign the papers and our title company found out there was a 2nd lien on the property for an additional $25k from Chase (the 1st lien holder also). Chase had approved the final HUD and did NOT disclose the 2nd lien. Once our title company informed Chase, they said they had no knowledge and are still trying to "find" the loan. It is clearly Chase's loan. What legal ground do we as the buyers have? Is that fraud from Chase? If it's their loan, they had to have known about it, right? If we would have signed we would have unknowingly had an extra $25k on the house. We have terminated our current and lease and will be without a place to live if this deal doesn't go through in the next month. Help

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Candia Lundry, Agent, Houston, TX
Tue Jun 12, 2012
We as Realtors cannot comment or define any legal discussion. We are not and attorney. Seriously, consult your attorney to see if you have grounds. There may be help out there in the legal world that we are not aware. The best advice is always legal advice when there is a big red flag during the transaction.
1 vote
Annette Law…, Agent, Palm Harbor, FL
Wed Jun 13, 2012
Annette Lawrence - Palm Harbor, FL, Agent, Palm Harbor, FL
By this time I'm confident your agent has communicated to you how this issue will be resolved.
As Ron stated, you will get the property with a clean title.
And as Jim advised, make sure you purchase that title insurance.

I love Bruce's quote, "Anything can and will go wrong" in regards to short sales , the 'Wild, Wild, West' of real estate. And each and every one of them can be a show stopper. IT's like a high speed race with a stop sign every 10 feet.

I wish there was a graphical way to demonstrate the exceptional volume of work, resources, cost, risk and aggravation that comes along with short sale as compared with any other real estate purchase option.

And any little thing, from tax consequences to seller frustration and apparently undiscovered liens can derail the process. When the deal closes, please take time to acknowledge the incredible effort of everyone involved. Success in the short sale arena does not happen with out heroic efforts by folks you NEVER see.

I trust you obtained a remarkable deal and can begin moving in.
Best of success to you.

0 votes
Give Chase a chance to correct the cloud on the title. It's their error. It is the best thing to do. Don't let them off the hook.
Flag Thu Sep 19, 2013
Linda Lorenzo, Agent, McKinney, TX
Wed Jun 13, 2012
What great answers from my fellow Realtors. The bottom line is the title company is the one who erred, that is there job to find any liens or problems on title. I hope this gets resolved quickly for you. This just reinforces my belief that short sales are sitll a hugh problem and have not gotten any easier to do in spite of all the supposed reforms to improve the process. Good luck to you.
0 votes
Dallas Texas, Agent, Dallas, TN
Tue Jun 12, 2012
Actually title company should have ID this issues weeks ago IF they completed the search therefore any issues would be resolved.

Chase may not have known about the other lien

TOOOOOOOOOOOO many questions require answers not part of real estate transaction your Realtor should be assisting in resolving all these issues.

Or confer with an attorney

Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
Multimillion Dollar Sales Producer

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0 votes
Bruce Lynn, Agent, Coppell, TX
Tue Jun 12, 2012
This is a common frustration with short sales. All kinds of things can and do go wrong. My suggestions is always if you have deadlines, short sales are not for you. I'm sorry if your realtor did not explain the same to you.

Hopefully you are getting such a great deal on the buy, that it more than makes up for whatever extra expenses you might have in the process and somewhat ease your frustration.

I don't think anyone in the business would consider this fraud. There are lots of places this should have been "caught", but if it isn't I'm not sure there is someone to blame. This too is frustrating.

Short sales are fraught with all kind of risks, so I always suggest to buyers that you want to get a good enough deal to compensate you for this risk. That may not help you in this deal, but maybe on the next one if this one doesn't work out.

Good luck.
0 votes
Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Tue Jun 12, 2012
First mortgages and equity lines originate from different divisions in a large bank/lender like Chase. They could just as easily ask why you didn’t do more research before making an offer. Both mortgages were of public record or else the title company would not have found them. Treat them the same as you would want to be treated if the tables were reversed.

This situation is the reason you do a title search and get owner’s title insurance. If you get this sorted out, make sure you get owner’s title insurance, that is not a requirement and your lender may not have included it in order to make their cost look better. Good luck,

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
0 votes
Thank you for your answer. Now Chase is asking us to pay an additional $6k because they/we discovered the 2nd lien to help cover the extra $25k. How can they ask us for more money after they had already signed the contract?
Flag Tue Jun 12, 2012
Terry and Ka…, Agent, Pearland, TX
Tue Jun 12, 2012
This is something the title company should have found when doing the title search. Having said this, it should be an issue that can be easily solved. Good luck.
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Tue Jun 12, 2012
This could be a load of nothing but papers that were never signed or a home equity loan that was in place that was never used and not released (I had that happen to me once). I doubt it is fraud, that would be a stretch. They do title searches for just this reason and they find things like this. Welcome to the wonderful world of short sales.
0 votes
Ron Thomas, Agent, Fresno, CA
Tue Jun 12, 2012
Unbelievably, Chase may not have known about the loan and lien:
Loans get bundled and sold every day; it is their version of the stock market.
Most often, the loans that get sold are the less-than-AAA loans.

The ones I would blame for the SNAFU is the Title Company:
How can they say that "OH, look what we found?"

Without know the laws and procedures in your State, I couldn't guess as to the outsome;
I would bet that YOU will be Okay, they can't hang it on you. You will either get the house without any encunberances, or you will have to walk away with nothing.

Good luck and may God bless
0 votes
Linda S. Cef…, Agent, Franklin, WI
Tue Jun 12, 2012
Instead of jumping to fraud, I would strongly advise you contact an attorney now! It seems odd that they would sign the final HUD. It is possible that it was a clerical error in entering an account number. It is possible that it is not for this home.

Nevertheless, an attorney should be able to get to the bottom of this with a phone call. Realtors® are not at liberty to give legal advice.

Best wishes
0 votes
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