I sold my house in January 2003 in a HUD and lender approved short sale. HUD is saying that I took out a loan with them in December 2001 for over $4000, and now I owe them the money plus interest and late fees. Here's some background about the "loan". When I fell behind in my mortgage, because I was laid off, someone from my mortgage company contacted me with this deal. They would take what I was behind, and roll it back into my mortgage and then give me a bye on my payments for the next 4 months, so I could have a little time to get myself back together monetarily. I went into the office, signed the paperwork, and thought that was that. (I did not read what I was signing just believed what the lady was telling me. Stupid move, I know, lesson learned.) Here's my question: HUD is now saying that I owe them that money back even though the house is sold, do I?

Here is the EXACT quote from part of my closing paperwork, minus my name and document # of course. "Cancellation and release of mortgage from MY NAME, to the Secretary of HUD in the amount of $4235.15, dated December 1, 2001 and filed for record on February 15, 2002 at 1:05 p.m. as Instrument No. 200202.........., Recorder's Office, Franklin County, Ohio."

I have sent these documents to HUD, and they are still stating that I have to pay them. I don't understand, if it was part of the sale of the house how do I owe them any more money? Shouldn't the title company that prepared the closing paperwork be held responsible for not correctly distributing the funds? If I go to court over this, and win, can I make HUD pay my attorney fees?

Send you claim to the title company as well, they should have caught this. Was title insurance paid?

It appears that HUD released the mortgage, which was the security for the loan, but may not have released the mortgage note, which was the actual obligation for you to pay. The release of the mortgage is what allowed your sale to go forward.

If they had released the mortgage note then you should have received the original note marked "Paid in Full".

You need to bring all of your closing paperwork to an attorney for careful review. Prior to the closing there should have been a payoff statement issued by HUD to the closing agent listing the amount that would be necessary for the loan to be paid in full and released. If the closing agent distributed that full amount then HUD should not be able to go after you for any additional balance.

Make sure you also provide your attorney with your copies of the paperwork you signed with HUD back in 2002.

I never received a release notice from HUD or my mortgage company. (Mortgage company was bought out by another company right after my closing. Had to petition their legal dept for the actual release.)

Through all my research I've found that a lot of the paperwork from the sale was never filed with the county. Crappy work on the title company's part. That's why I was wondering if possibly they didn't distribute the funds correctly. (Of course they are no longer in business, and I can't find out what they did with their paperwork.)

Mr. Yet - To answer your question, yes title insurance was paid.