Mortgage Collection Defense

Rather than foreclose, sometimes mortgage holders choose to seek a money judgment upon a second or subsequent mortgage. This can happen while you are still in the home but most often occurs post foreclosure. Regardless of the when or why, we can help.

Mortgage Collection Defense

If you have a mortgage or deed of trust holder seeking to collect a money judgment against you, we can help. We have a variety of techniques from litigation to settlement to bankruptcy to resolve the issue. Call us today for a free initial phone consultation to see how we can help.

Laying out the law of how they can collect

Installment contracts have a different statute of limitations period than a normal written contract. Normally a written contract has a six year statute of limitations per RCW 4.16.040. However, an installment contract has two separate statutes of limitation that apply. The first is for the overall contract, which typically has a thirty year maturity and would take thirty six years to go beyond the statute of limitations. Fair? No, but that is Washington Law as it stands. The second SOL is for each individual monthly amount due. So for example if you missed your January 2010 payment, that individual payment would be beyond the SOL at this time and could not be collected.
There are only two ways under Washington Law to create a six years statute of limitation (SOL) to foreclose
- The general rule in WA is a note/deed of trust/mortgage has a 30 year SOL unless you either accelerate the note or file for bankruptcy without reaffirming the obligation.
- First Method- Acceleration of the note: This requires a clear, unequivocal act to accelerate the entire amount owed. If the lender or note holder did something like this, they may have converted the note from an installment contract to a sum certain due within six years as a normal written contract.
- Second Method- Bankruptcy: Under WA law (see Jarvis v. FNMA), if you file a bankruptcy and do not reaffirm the loan, it creates a six year statute of limitation for the lender to foreclose.
- Tolling of the SOL: Seeking a loan modification, making payments, or acknowledging the authority of the bank can reset the SOL. For example if you received a bankruptcy discharge in January 2010 but asked for a loan mod in June 2012, that would likely reset the six year SOL to restart in June 2012.
- Quiet Title and SOL Defenses: If you have an acceleration or a bankruptcy, it is possible that the liens are not enforceable and you may have a defense based upon the SOL. You may have other defenses too (standing, procedure, fraud, consumer protection, etc.).
A first mortgage holder is typically limited to foreclosure as its only remedy. A first can foreclosure non-judicially (where no deficiency judgment, which is the amount between what is owed on the contract and what the home sells for, is allowed). A first can also foreclosure judicially where a deficiency judgment is allowed. But they have to foreclosure first expect under special circumstances. If you are curious about foreclosure defense, see our foreclosure defense services page.
A second (or subsequent) mortgage or lien holder can choose to either foreclose or seek a money judgment. In most instances, collection occurs post foreclosure when there is no collateral to foreclosure upon but it can occur when you are still in the home if the home is underwater or if the holder choose to seek a money judgment instead. This is where we come in.
A charge off is not the same as a write off. A charge off is a mere change in accounting status. A write off is where the lender is forgiving the debt and you receive a Form 1099 for the amount written off. If you did receive a From 1099 and paid the taxes, that may present a defense to collection now.

How do we defend against a mortgage or deed of trust holder seeking to collect?

Generally there are four ways to solve any debt: litigation, settlement, bankruptcy, and other out of court options. We analyze your case from all four perspectives. We use a bankruptcy as a last option approach and focus on litigation, procedural defenses, counter claims, and settlement as our first lines of defense.

Litigation Options

Amount demanded includes time barred debt or more than allowed under the contract: If the collector is including amounts more than six years old in the total collection amount, this can be a counterclaim under the FDCPA. Most collectors are wisely ignoring monthly amounts and suing on principal alone to avoid this. Also if interest is compounded incorrectly, includes unauthorized fees, or other errors, these can be the basis of counter claims.
Consumer Protection Counterclaims: This can be based on a failure to modify based upon bad faith actions of the lender, failure to license as a debt collector (if required) under RCW 19.16, violations of the Washington Consumer Protection Act (RCW 19.86), and other defenses.
Produce the note defense: A mortgage or deed or trust needs to be properly endorsed and all signatures and endorsements need to be valid. The party enforcing also needs to possess the documents containing the wet ink signature or have followed the proper UCC procedures relating to a lost note affidavit.
Standing defense: If a note has been sold, you can defend against collection if endorsements are improper, if the note is missing, if there is a break in the chain of title, or if it is incorrectly specifically endorsed.

Settlement Options

Settlement is all about leverage and whether the creditor can profit from the settlement amount. If you have good leverage (ability to avoid payment, retreat to bankruptcy, defend and/or counterclaim) then this is a great option. Settlement can be very effective if a debt buyer has acquired the loan as they often lack paperwork and will settle fairly low. We can review your situation and see how likely a settlement approach would be based on your leverage.

Bankruptcy Options

If there is no leverage to settle, the settlement amount demanded is too high, no defenses or counterclaims, and no viable out of court options, we can use the bankruptcy process for you to avoid liability as well as discharge other debts. We offer chapter 7, chapter 11, and chapter 13 options.

Out of Court Options

Technically, if you are pre-litigation, settlement is an out of court option. However, what we mean here are more advanced techniques. For example, if your entire income is social security or disability and you have no assets above exemption limits, you are judgment proof and the lender cannot collect under the law. There are a variety of avoidance strategies and other techniques that can help you to gain leverage or avoid liability that we can discuss with you.

Common Questions

Can a second mortgage foreclose on my house?
- Yes, if you are not current on the debt or even if the debt was charged off (though if you received a form 1099 you may have a defense) or even if you have not paid for more than six years. The entity foreclosing still has to have the right to foreclose and there may be defenses that you can allege to protect yourself.
I filed bankruptcy, how can they still foreclose?
- A bankruptcy discharges personal liability only.
I received a 1099 on my second mortgage, how can they still collect?
- The 1099 might present a defense. There is split in opinions on whether a creditor can collect if a 1099 is issued. You will want us to look are your specific situation to see if it is a defense in your case.
My second mortgage was charged off, can they still collect?
- A charge off is just a change in accounting status, the debt and obligation are both still alive.
My house was foreclosed more than six years ago, can the second mortgage still collect or is the debt past the statute of limitations?
- They can still collect (subject to defenses) unless you filed for bankruptcy protection or the note is deemed to be validly accelerated. There are other defenses that might apply from standing (meaning they can’t prove they have or own the debt) to consumer protection.

Entities that we have Opposed

We have opposed nearly all major banks and servicers as well as numerous smaller entities, trusts, and debt buyers. Entities that we have opposed includes, but is not limited to:

Bank of America, BECU, Collins Asset Group, Countrywide, Gordon Aylworth & Tami (GAT), Machol & Johannes, McCarthy & Holthus, Midland Funding, Northwest Trustee Services, Real Time Resolutions, Wells Fargo, and many more.