Ask a real estate pro: When the bank breaks into your home


Board-certified real estate attorney Gary M. Singer answers housing questions in this space each Friday. To ask him a question about short sales, mortgages, refinancing, homeowner’s associations or any other residential real estate topic, click here.

Q: We started the short sale process about nine months ago. We have the house listed with a Realtor and are in the final stages of negotiating with our lender. About two weeks ago, the lender had its “asset preservation company” go to the house, which is vacant, and cut off the real estate agent’s lock box and changed the lock. Shortly thereafter, our home was broken into and the appliances stolen. Up until then, our home was in perfect condition. Isn’t the lender responsible for this? – Anonymous

A: I believe a strong case can be made to hold your lender responsible for the damage. It is common for a lender to send a vendor to secure an abandoned property, and the mortgage contract that you signed allows the bank to do this. However, there is a big difference between vacant and abandoned. Because you were actively negotiating with your lender on the short sale, and your Realtor had a lock box on it, and the house was being well-maintained, it would seem to me that it was obviously not an abandoned property. Your lender had no business breaking into your house and changing the locks. Because it chose to take on the responsibility of securing your house, the lender has the responsibility to make sure it’s actually secure and to act quickly to put you back in possession of the house when it learned that it was not abandoned. I suggest you contact a lawyer.

Q: When I bought my home, I also had to buy private mortgage insurance. I paid for it as part of my mortgage every month until I went into foreclosure. I lost the house last year. The PMI company just sued me to get back the money that it paid to the bank to cover the difference between the amount I owed and how much the property was worth. Can it do this? – Jordan

A: Yes. This type of lawsuit is known as a subordination claim. Typically when you get a conventional mortgage for more than 80 percent of the value of the house, your lender will require you to obtain and pay for PMI, which is insurance that will reimburse the lender for some or all of the deficiency at foreclosure or short sale. Most insurance contracts of any type allow the insurance carrier to seek reimbursement. Still, you may have legal and factual defenses to this lawsuit, so I strongly recommend seeing a lawyer in your jurisdiction.

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed, nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

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