What’s this Letter From Dyke O’Neal?
Did You Get a Mortgage Deficiency Letter From Dyke O’Neal?
Lots of people in Virginia, whose houses were foreclosed three, four, or five years ago, are getting collection letters from Dyke O’Neal.
What’s a Mortgage Deficiency?
When your house goes to foreclosure auction, investors try to buy it cheap. Usually for a whole lot less than what you owe. That leave you on the hook for the deficiency.
When your house goes to a foreclosure auction, investors bid to buy it at a bargain price–a lot less, usually, than what you owe on it. The difference between what you owed the bank, and what the bank got when they sold it, is a deficiency.
In some states, the biggest is California, the bank has to take the loss on what they didn’t get. (Those states are called non-recourse states.)
But in most states, including Virginia, where I am, the bank can come after you for that deficiency.
Usually They Don’t Come After First Mortgage Deficiencies–Until Now?
Just because they can come after you, doesn’t mean they do. Usually, in the last few years, first mortgage companies have rarely chased people in Virginia for first mortgage deficiencies.
(An exception is USDA Rural Development Home Loans. I don’t see many USDA Rural Development Loans; but of the ones I’ve seen, USDA has been very aggressive collecting their deficiencies. And second mortgages are much more aggressive. Second mortgages after foreclosure have long been quick to sue.)
Dyke O’Neal is now going after people in Virginia for foreclosure deficiencies
Now it looks like starting to change. I still don’t see Bank of America or Wells Fargo collecting first mortgage deficiencies. But, an outfit called Dyke O’Neal, is going after people.
Dyke O’Neal seems to be buying those, for pennies on the dollar, from Fannie Mae, the government backed mortgage giant. (They may also be collecting some of them on a commission basis, rather than buying them outright.)
People are in for a shock when they get a letter saying they owe $120,000 on a mortgage deficiency.
But I Thought this was Over?
Most of the people I see who’ve gotten these letters are people who’ve moved on from their foreclosure and gotten back to good credit. Of course, that makes sense. Dyke O’Neal and Fannie want to try to collect from people who can pay. So they look for people whose credit scores show improvement. they don’t want to hit people when they’re down. They wait until you are back up.
What Should I Do?
First, if you are losing your house to foreclosure, that’s the right time to file bankruptcy. Filing bankruptcy at the time of foreclosure won’t hurt your credit score–it probably will help it. And that way you know nobody can come after you once you are back on your feet.
But What Do I Do Now?
You need to talk to a lawyer.
Maybe you can outrun the statute of limitations. The statute of limitations is how long they can leave you alone on a debt before it’s too late to sue. How long is too long? If a mortgage obligation is a promissory note, they have six years since after you stopped paying. On a written contract, it’s five years.
Maybe you can wait for them to sue you–and see if they can really prove you owe the money to them. Sometimes they can’t find the right paperwork.
Maybe you can try to settle. Although settlement risks getting hit with the debt forgiveness tax.
Or maybe you need to file bankruptcy now, if you are still eligible, to get rid of the problem.
If you get something from Dyke O’Neal, you need to talk to a lawyer.