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Lender changes locks while owners seek short sale

Many distressed homeowners across the country have looked for ways to deal with mortgage issues since the economy collapsed. Workers in Cincinnati, and across Ohio, know that the economy has not only affected housing prices, but jobs as well. Layoffs have led many people who have been responsible with their debt to find themselves struggling to make ends meet. But as the housing market crumbled, many homeowners found them underwater on the mortgage, complicating what options may exist.

Many Cincinnati residents are aware of most of the avenues a distressed homeowner can seek in the face of today's economy. Negotiating a loan modification, seeking to sell the home--even on a short-sale--filing for bankruptcy or facing foreclosure are a number of common consequences Ohio homeowners who have experienced changed circumstances may explore as options. However, one issue that seems to be continuing that can complicate a tough situation even more is the idea of "dual-tracking" by mortgage companies.

Dual-tracking came to light on the national scale after the foreclosure scandals over robo-signing were revealed. For instance, many banks would seem to work with homeowners on a loan modification in one department, while the foreclosure department steamrolled forward, without the tow bank department communicating internally.

One Midwestern couple recently experienced a difficult issue while working on a short sale. The short sale idea came about after the husband and wife each lost their jobs and fell behind on their mortgage. They received letters, sometimes up to three in one day, from the mortgage company. Some letters threatened foreclosure.

The couple says the mortgage company repeatedly suggested the two consider a short sale. The lender acknowledged that it may accept less than the couple owed on the home in short sale. The lender reportedly told the Minneapolis StarTribune that it saves an average of 18 percent in a short sale when compared to a foreclosure.

The couple followed up on the short sale idea and even found a buyer. Through the process, the couple kept the lender in the loop and all seemed fine. The couple had decided to rent an apartment, but continued to maintain the home pending the sale. Suddenly, after finding a buyer, the couple arrived at the home in late October and found the locks had been changed and some of their personal property had been removed. In that state, even before foreclosure proceedings are complete, lenders often seize property that has been "abandoned" to protect the property.

The lender says it is working with the couple to try to recover their lost goods. The lender reportedly said that if the borrower requested keys from the home, the lender would mail them out.

The woman says she found an envelope in the bushes in mid-November containing keys for the house.

Source: StarTribune, "Whistleblower: Locked out by lender," Paul Levy, Nov. 19, 2011

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