Advice on Problems with HUD

We received a collection notice for an old loan that we had with the HUD back in 2002. Can they do this now?

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Bill's Answer: Answered by Mark Cappel

Generally speaking, the fact that a home is sold subject to a lien (which is what it sounds like happened in your case — HUD had a lien based on the loan it had provided), does not absolve the original debtor (your husband) from his personal liability for the debt, nor does it make the current owner personally liable. If the new owner sold the home, the new owner would likely be required to pay HUD from the sale proceeds in order to remove the lien so the home can be sold with a clear title. HUD has no ability to pursue the new owner through garnishment, intercepting tax refunds, etc., because the new owner is not personally liable for the debt; this fact is likely what the collection agency means when they state that HUD has no “contract” with the new owner. Your husband, on the other hand, is almost certainly still personally liable for the obligation, so HUD has the right to garnish his wages, intercept tax refunds, levy his bank accounts, etc. Learn more about HUD and FHA loans at

To prevent further collection activity against your husband, you may want to contact the collection agency which is handling the account to try to work out amicable repayment terms. I encourage you to review your budget carefully, determine what you can afford to pay each month, and make an offer to set up a payment plan. If the loan servicer is willing to agree to an extended loan repayment plan, I would encourage you to ask for a written agreement outlining the balance, interest rate, payment amounts and due dates, and stating that as long as payments are made as required, that the creditor will take no further action to try to enforce the outstanding debt.

Again, I strongly encourage you and your husband to consult with an attorney in your area to explain your situation, to confirm whether or not your husband is still liable for the debt, and to help you find the best solution to assist you in resolving the account. I wish you the best of luck in finding a workable solution to this debt, and hope that the information I have provided helps you Find. Learn. Save.



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Comments (6)

September 15, 2009
I do not like to offer my opinion to readers who are working with attorneys. Your attorney is licensed in your state (and I don't know what state you're in), knows the local rules, and is working with a complete set of facts. Here, there may be liens involved, a less than speedy county clerk, an antiquated or defective recording system, or other problems your attorney is fighting through that I cannot know about. Keep checking in with your attorney to get an estimated time to resolve the problem.
Shelley J.
September 15, 2009
I have been approved to buy a HUD home, right at closing, the bank discovers the title is deeded to the double wide but not the property. How long should it take them to straighten out the mess. A lawyer has worked on this issue for three weeks. Thanks,. Shelley
Mark C.
July 29, 2009
Generally speaking, a lien remains attached to the property until the lienee (the party benefited by the lien) is satisfied. In some jurisdictions, a lien prevents the sale of real property. In others, a lien runs with the land. Liens are one of the reasons why people buy title insurance. Regarding your second question, generally speaking, a lienee will not record the release or satisfaction of the lien in the county clerk's office until the debt is paid.
Irma .
July 28, 2009
Can a house be resold with a lien? Also, if the lien was cleared by the current owner to resale the property, is the debt still being collected?
May 11, 2009
There is no way to list out the possible "problems" as each application is unique. You will have to wait to hear from the lender.
Rita .
May 11, 2009
I'm trying to get a fha loan refiance not behind on payments and they said there is a problem with hud just wandering what kind of problem this could be what problems usually occur with fha loans.
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