Foreclosure on credit file, but was never completed

[sefnfot]

What is the name of your state (only U.S. law)? CA
1. The Bank began foreclosure proceedings on an apartment building that I owned because title ownership was transfered from my grandparents to me and my brother.
2. As a result, the bank did not accept mortgage payments once they decided my grandparents were in default of the loan.
3. I obtained a new loan and avoided foreclosure
4. Problem: this incident is being reported as a foreclosure on my grandparents’ credit report.
Specifically: it is being reported as >foreclosure discontinued<
However, the foreclosure was never completed. My grandparents’ have real estate and impeccable credit histories except for this issue. Therefore, the consequences of the banks unfair reporting are much more damaging.
5. Is it fair for the bank to report this as a foreclosure, Isn't the report of foreclosure if you actually loose the property?
6. For example, the credit reporting rules state that bad credit issues remain on a credit report for 7 years, and foreclosures remain for 10 years. So are there rules on when the term foreclosure can be reported on a credit report?

 

[dmiller12]

The bank was within their rights according to the loan agreement to call the note due when they learned of the title transfer. It's called the due-on-sale clause.

When the terms of the mortgage were violated the status of the mortgage transfered from "performing as agreed" to pre-foreclosure and was reported to the credit bureaus - much like a bankruptcy is reported as a bankruptcy at the moment it is filed even if the bankruptcy filing is ultimately canceled or denied.

The purpose of this is to make other creditors aware of potential risk. Violating the terms of the loan in this way does create at least a perceived risk in the eyes of potential credit grantors.

Your grandparents have very little chance of undoing this, unfortunately. You could google Edward Jamison who is an attorney who specializes in the fair credit reporting act and other laws that govern credit reporting. If this can be undone, he might be the one to help.

 

[sefnfot]

Your grandparents have very little chance of undoing this, unfortunately. You could google Edward Jamison who is an attorney who specializes in the fair credit reporting act and other laws that govern credit reporting. If this can be undone, he might be the one to help.

Thanks for the info.
My main concern is, for many lending institutions; foreclosure is a big red ticket item that stands alone in a loan process. But that is only if the actual foreclosure takes place. But is calling in the note and foreclosure the same thing?

 

[dmiller12]

But is calling in the note and foreclosure the same thing?

There is more then one way to be in default on the loan terms. One way is to be in default on payments. Another way it to transfer title without the lenders approval. So, yes. It is the same thing. Foreclosure is the means by which the lender carries out their intention to call the note due.

 

[FlyingRon]

No it's not the same thing. Calling the note just says "Hey, due to the terms of our agreement you now owe us the note balance." If you don't pay after the call, then you are in default. If you still don't pay then a foreclosure will ensue.

If the note is called and you pay it, no derogatory credit information is warranted.