Banking conundrum

I have a friend who wanted to make some improvements to his house, so he went to his bank for a loan. He filled out all the paperwork, has great credit, and everything was going along smoothly until the loan officer suddenly informed him they had to deny the loan because there was a lien on his property. The lien was from an old loan (more than a decade old) which had been paid off long ago. The first problem is the lending bank on that old loan neglected to remove the lien when the loan was paid back; the second problem is that bank no longer exists.

So my friend spent a solid week or so trying to figure out how to remedy this situation. The biggest problem he has encountered is that since he is technically not an account holder at the institution that bought the defunct bank they pretty much refuse to deal with him at all. Even when he does get in touch with someone who could assist him, they assure him they will look into it and fix the problem and of course they never get back to him.

So I guess my question is does anyone have any ideas on what the hell he’s supposed to do?

Contact the state banking commissioner.

Your friend should scrape up $100 cash and open a simple account at the other bank. Now, as an account-holder he might have some standing.

I’d talk to a lawyer, preferably one expert in real estate law, to see what my options are.

Not a solution, but something that might be worth following up on:
Was the original loan his or did he buy the house subsequent to that loan being paid? If the latter, he should have received title insurance.

The original loan was his; he used it to build a deck and paid it back within a year. The bank sent him paperwork stating the loan was repaid and cleared off their books, but the lien remained, clearly due to their oversight.

The bank will ask him for his info, then refuse to release any information to him because they don’t have any accounts linked to his information, due to the fact that the account he did have with the original lender was closed. He seems to be trapped in a bureaucratic loop with no simple way out.

I think he needs to start talking to people higher up on the food chain. I would go with a three prong approach:

(1) Call customer support and keep asking for managers until you find someone who can help you. You say he has found people who can help him, but they never get back to him. Well, get a name and a phone number and keep hounding them until they do something.

(2) Find out the real live person who is in charge of their mortgage division and send him a snail mail with all relevant documents (no harm in sending an e-mail as well). That person obviously won’t care, but hopefully it will get to the right person.

(3) Go to one of the new banks branches (the biggest one you can find) and talk to the most senior person there for help. They won’t be able to do anything, but might direct you to someone who can.

If those fail it’s lawyer time unfortunately. If he has title insurance, that company might be willing (or required) to get involved. Wouldn’t hurt to read his contract or call up the company.

The bank is being unbelievably stupid. If they have no account with him, then the bank must believe that he doesn’t owe them any money, and consequently that he cannot have any obligation to the bank which could support the lien. They know very well, therefore, that they have no right to maintain a lien over his property.

The bank is being oppressive. He should put his concerns to them in writing, give them a short deadline to respond to him, tell them that he will take the matter to the banking regulator at the end of that deadline, and follow through.

Certified letters and the threat of a legal action work just fine.

Write a certified letter to the legal department of the new bank. Since they purchased the old bank’s assets, they purchased its obligations as well. They are obligated to remove the lien. Demand that the new bank release the lien within a reasonable amount of time, I’d say one week. If they fail to do so, you will hire an attorney and that you will expect they, the new bank, to pay for their attorney.

If the delay of obtaining the new loan causes financial hardship, I’d pass that along to the new bank as well.

Find an attorney and institute a suit to quiet title.

Get a real estate lawyer.

The lawyer should be able to file certain forms notifying the state and the bank of a lien release that will automatically occur, unless the institution takes action to reassert their lien rights.

Has he contacted the title company that originally cleared the title when he purchased the home? There may be a fee, but I would think they would be able to do another title search and then either be able to help him in clearing the title or at least give him instructions on what he needs to do to clear it. They do this stuff at the last minute for purchases all the time, so I would think they would know more than anybody what to do.

I used to work with Chicago Title all the time and they worked magic.