We received a collection notice for an old loan that we had with the HUD back in 2002. Can they do this now?
Hello. My husband purchased a home in Prince George's County Maryland in 1996. A few years later he was injured on his job and was unable to go back to work for awhile. In the process of recuperating, he fell behind on his mortgage payments. In August of 1999 he obtained a loan from HUD which became a second mortgage on the house which was to be paid in full by August 1, 2026. My husband was still not able to return to work, and could not keep up the payments on the mortgage and began to receive notices about his house going into foreclosure. He sold the house in the fall of 2002. The owner is currently in the house. In September of 2007 my husband receives a letter from a collection agency of some money owed. He called to find out it was money owed to HUD. My husband told them that all of that was taken care of at the sale of the house. We recently found a letter that was signed and notarized by the current owner of the house and by the title company that they used to purchase the house that stated that the owner was fully aware that Countrywide Home Loans recorded a second trust in the amount of $9,891.00 on August 19, 1999 and the security instrument was given to HUD with the case number stated. The title company claimed in the letter that Countrywide nor HUD had any recollection or record of a note or requirement for repayment for that amount. The letter ended that the owner that bought the house relieved the title company of all liability relating to this matter and that they (current owner of house now) would be liable for any and all fees related to this situation. My husband filed for taxes in 2007 and his tax rebate and stimulus was garnished by HUD. I called HUD and faxed both HUD and the collection agency the notarized letter and stating that he was not responsible for this debt. HUD claimed that they didn't have any contract with the new owner so they couldn't collect from the current owner of the house. I did find out later that they did in fact contact the current owner and gave her 65 days to pay the loan. She could not pay it, did not deny she owed the money, and they put a lien on her house for the amount owed on the loan. My husband recently received another letter from a different collection agency saying that he owed the money. I sent the same documentation over to them, and they sent me a letter stating that HUD cannot legally collect from the current owner because they do not have a contract with them, so my husband is responsible for the debt. Mind you, this house was sold in 2002, and we find out about this 5 years later. Not only that, how can the title be transferred in her name if a debt is still owed on the house, and how can HUD take this loan in my husband's name and put the lien on the current owner's house? Is my husband liable if we have this notarized letter stating that she is liable for this loan? I don't know what action to take. We have to get ready to file again, and I don't want them to garnish our money. Thanks for your time.
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 Bills.com.
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.