Zombie Debt That Came Back To Life & Bite 'Deed-In-Lieu-Conveying' Homeowner Leads To Suit Against Fannie, BoA, Foreclosure Mill Sweatshop

In Fort Myers, Florida, The News Press reports:

• David Cruz Jr. got what he believed was a great offer in a foreclosure lawsuit filed against him by giant mortgage lender Fannie Mae. If Cruz deeded the modest Fort Myers investment house back to Fannie Mae, the government-backed company would release him from the loan's $123,750 note: the obligation underlying his mortgage.



• He deeded the house back to Fannie Mae, but court records show he didn't get what he bargained for. Now, experts say, he and thousands of others in Florida who took the same deal from Fannie are at risk of being stalked by a so-called "zombie note:" debt that appears dead and gone but still can come back to life.



• Cruz, of Fort Lauderdale, is suing Fannie in Lee circuit court along with its loan servicer Bank of America and their attorney, Fort Lauderdale-based Law Office of Marshall C. Watson, which handled the foreclosure and the deed-back deal.

***

• Even if Fannie has the note, Cruz should take little comfort from the fact he's dealing with a federally backed entity, said Jack Williams, resident scholar at the American Bankruptcy Institute and a bankruptcy professor at Georgia State University. "That note is a legal obligation," he said, and even if Fannie Mae doesn't sue, it could sell the debt to someone who would.



• "We saw something very similar to this in the debacle in the '80s, people buying notes from the government and suing," Williams said. "I won't rule out that could happen again. They sold the note to collection agencies and law firms and places like that."



• In the real estate meltdown of the '80s, he said, it was the Resolution Trust Corp., set up by the federal government to liquidate mortgage loans and other real estate assets held by failed savings and loan associations.



• "Let me tell you, people made millions of dollars suing homeowners back in the day," Williams said. Some of the debt was in the form of deficiency notes: court judgments saying a certain amount was owed even after the property was sold at public auction. But in other cases, Williams said, it was the note, straight up.

For more, see 'Zombie notes' live to haunt deed transfers (Thousands affected by Fannie Mae tactics) (if link expires, TRY HERE).