楊清泉律師 - CAN DEBTOR COMPEL BANK TO FORECLOSE PART 1

Why would a debtor want to compel bank to foreclose on his house? Recently, the LA times ran a story about a man who filed for Chapter 7 bankruptcy in 2009. He had purchased a condo loft in little Tokyo in downtown LA for $670,000 with no money down. His monthly mortgage payment was $3,000. Due to a reduction in income, he could not pay the mortgage and decided to get a fresh start without debt so he filed for Chapter 7 bankruptcy in 2009 and walked away from the condo. Several months ago, he and his wife saw that the lights were on in the condo that they thought they used to own. They also found out that the bank had not yet foreclosed after 3 years and that they still owned the condo. So, they knocked on the door of their condo to find out who was living in their condo. A man opened the door and said that he had been renting the condo for the last 3 years. Apparently, the tenant had leased the unit from a realtor who said the unit was for rent. And guess who the rent payments were going to for the last 3 years? The realtor named “Honest Abe” who is now nowhere to be found. This reminds me of my client whose house was “purchased” by a man in Riverside who paid another realtor the purchase price. A grant deed bearing the signature of my client transferring his house to the purchaser and notarized was recorded. My client had no idea that his house was “sold” until the treasurer’s office stopped sending him his real estate tax bill. It turned out that my client’s signature, as well as the notary’s signature; on the grant deed was forged.

A debtor would want to compel bank to foreclose on his house because as long debtor owns the house, the real estate taxes continue to accrue in his name, and the HOA fees continue to accrue in his name. The City might also cite him for not maintaining his backyard. Once the house is foreclosed, both real estate taxes and HOA fees stop accruing in his name. So, if you think bank will not foreclose for a long time, you might as well just stay in the house rent free instead of walking away from it. If you walk away from the house, an “Honest Abe” realtor will take over your house and rent it out and collect and pocket rent that should be going to you. Or, instead of staying in the house yourself for free, you might as well be the landlord and rent it out to a tenant who will pay you rent since you still own the house.