Q: How do I resolve a loan balance issue after foreclosure sale?
I obtained a mortgage loan from a bank 10 years ago, but failed to repay it, which resulted in the bank selling my house. I didn't receive any information regarding the sale, but recently, when I applied for a new loan, my credit report showed a write-off of the former loan. The new bank is requesting a clearance letter from the old bank. I contacted the loan officer, who informed me that the house was sold, but the sale amount wasn't enough to cover the loan, leaving a balance. I'm hesitant to engage further with the bank because I fear being asked to pay the remaining balance on a loan related to a home that's already been sold. How should I proceed to obtain the necessary clearance and resolution?
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A:
It's understandable that you're concerned about the remaining loan balance after the foreclosure sale. The first step is to contact the bank to request a detailed statement of the loan balance after the foreclosure, including any deficiency amount that still exists. This will help you understand how much is owed, and whether any further action is required on your part. You should also ask if the bank has forgiven or written off the deficiency, as some banks do in certain circumstances.
Once you have a clear understanding of the balance and the bank’s position, request a clearance letter or letter of satisfaction, explaining that the loan has been settled or that any remaining balance is cleared. This is what the new bank needs to proceed with your new loan application. If the bank insists on you paying the remaining balance, inquire if there are options to settle the debt, such as negotiating a payment plan or seeking debt forgiveness.
If the situation becomes more complicated or if you are being asked to pay an amount you believe is unreasonable, you may want to consult a lawyer for help. They can guide you through the process of resolving the issue with the bank and ensure that your rights are protected. Stay proactive in communicating with the bank and keep all records of correspondence for future reference.
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