Loan Servicer Drags Feet On "Deed In Lieu" Offer By Delinquent Borrower; Home Sits Vacant For A Year Before Title Finally Passes In Foreclosure Sale

In Hopkins, Minnesota, the Minneapolis Star Tribune reports:

• Bob Lerner knew he couldn't afford the mortgage payments on his family's home in Hopkins. So in January, Lerner told the bank: The house is yours. Eight months later, Lerner is still wondering why the bank wouldn't take it. [...] In October 2008, as they prepared to file for bankruptcy, the couple and their teenaged son moved out of their Cape Cod-style house [...] and into an apartment in Minnetonka.

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• Lerner's attorney sent a letter to Lerner's lender, U.S. Bank, saying the family was prepared to walk away from the house. Called a "deed in lieu of foreclosure," the deal would spare everyone the costly process of foreclosure, which can drag on for months. Lerner said bank employees were agreeable, but wanted to make sure there were no title problems or other hang-ups. He checked back every few weeks but was always told that no decision had been made.

• Then in March, a worker arrived at the empty house and changed the locks. That same month, the bank filed paperwork in Lerner's bankruptcy case to protect its stake in the house, acknowledging "Debtor intends to surrender the property." Lerner figured the deal was finally done. "To me, that means for all intents and purposes, they've taken possession," said Lerner, 48, who works in tech support for Hennepin County.

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• On Sept. 10, U.S. Bank finally made its intentions clear: It bought the house at a sheriff's foreclosure sale. [...] Lerner figures he is out as much as $3,500 in property taxes, home insurance and gas bills -- money he thought he had saved by leaving the property in the hands of U.S. Bank early this year.(1)

For the story, see Owner tried to give house to bank - but bank balked (Hoping to avoid foreclosure, Bob Lerner tried to give his house back to the bank. Eight months and $3,500 later, the bank bought it at auction).

(1) As if it wasn't bad enough that the mortgage servicer's foot-dragging resulted in the home sitting vacant for about a year before the foreclosure sale took place, Minnesota law (see Section 580.23, Minnesota Statutes (2009)) gives foreclosed homeowners a six-month right of redemption period to reclaim their home, which may mean that the home will continue to sit vacant for at least an additional six months before the servicer can legally take possession of the home and prepare it for resale.