Q: can a 3rd party judgment creditor sue a mortgage company for granting a VA mortgage to a his judgment debtor?
Lien as a result of Judgment to creditor was in 2009. No payments were ever made on judgment.
Mortgage was approved and closed 6/2017. Judgment was discovered prior to approval and mortgage closing, it was not disclosed by judgment debtor. Letters of explanation submitted by borrower contain misinformation. Motion to vacate judgment filed 2 days prior to closing. Motion to vacate judgment was denied 6 weeks after mortgage was closed. Judgment debtor filed chapter 13 bankruptcy 13 months after getting mortgage. Now the Homestead is exempt and mortgage considered secured debt. Payout to me on judgment is reduced to approximately 30% of judgment after accrued interest. Can I sue the mortgage company for the difference?
A: The short answer is no, you cannot sue the mortgage company. But it appears that your judgment lien is senior to the mortgage. What do you mean about a reduced payout; was the judgment discharged in bankruptcy?
A: Assuming your judgment was part of the bankruptcy estate, if it was the result of the defendant's fraud or deceit (in the underlying lawsuit where you got the judgment), it probably should not have been discharged in bankruptcy. If the judgment wasn't based on fraud, then it probably was properly discharged in the estate. But I agree, the short answer is no, you probably cannot sue the mortgage company for the difference.
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