Credit Bids and Claims for Overage or Wrongful Foreclosure by Borrowers

INTERESTING NUCLEAR OPTION: “A credit bid submitted by anyone, whether authorized or not, might well be an admission (or at least a question of fact allowing the homeowner to go forward in discovery) that the amount owed was far less than the amount demanded in the Notice of Default and demands for collection. The point is not just that the foreclosure could be overturned or that an overage was created for the benefit of the borrower (because the creditor is only entitled to the amount owed). This issue could lead to the holy grail of discovery requiring the forecloser and other players in the securitization chain to produce the transactions that paid off part or all of the amount due the investor and therefore part or all of the amount due from the borrower.” — Neil F Garfield,

Editor’s Note: This is a puzzle and I am wondering if it might have some significance. The legislature has clearly enunciated the premise that they do not want any creditor to get a windfall at the expense of the borrower. (see below). The case below is a commercial case in which the object for the Bank was to get a deficiency judgment — something that Arizonians and residents of most states don’t need to worry about. But the rest of the discussion is applicable to residential foreclosures and trustee sales.

The credit bid that is submitted is often under Fair  Market Value. I am wondering if that can be turned around to say that the higher amount of fair market value minus the credit bid might be an overpayment. The credit bid is supposed to be the amount that is owed.

“The primary purpose of the statute is to “prohibit a creditor from seeking a windfall by buying property at a trustee’s sale for less than fair market value.” First Interstate Bank of Ariz., N.A. v. Tatum & Bell Ctr. Assoc., 170 Ariz. 99, 103, 821 P.2d 1384, 1388 (App. 1991). Because of the nature of a trustee’s sale, the statute does not contemplate that the purchase price will necessarily reflect the fair market value of the property. Dewey v. Arnold, 159 Ariz. 65, 70, 764 P.2d 1124, 1129 (App. 1988). For this reason, the statute requires a determination by the court of the fair market value before a deficiency judgment may be awarded. A.R.S. § 33-814(A). The court is directed then to subtract from the amount owed the higher of the sales price or the fair market value. Section 33-814(A) defines fair market value as:

[T]he most probable price, as of the date of the execution sale . . . after deduction of prior liens and encumbrances with interest to the date of sale, for which the real property or interest therein would sell after reasonable exposure in the market under conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably and for self-interest, and assuming that neither is under duress.

There is no requirement of which I am aware that the creditor submit the bid at the amount owed, but there is a question of fact as to why they would bid anything else. Is the credit bid an admission that despite prior declarations of default and demands, the real amount owed was less than what had been used?

If that is the case, then is it possible that the issue of fact can be raised as to exactly what was really owed. If that opens the door to a full accounting it might be an admission that the “creditor” received mitigating payments from co-obligors like insurers and counterparties on credit default swaps.

That in turn would be the basis for an attack on the sale in that the Notice of Default and the redemption rights of the borrower were all affected by lies about the amount owed. If the amount owed was really as low as the bid, then did the forecloser get a windfall? Was the borrower prevented from submitting a meaningful proposal for modification since the “Creditor” withheld information about the real balance due.

Discovery might well lead to the conclusion that the figure used was, as Charles Koppa concluded, the amount reported to the investors after computations made by the Master Servicer. That can of worms would lead to the possibility that what they reported to investors was also a lie and that in fact they had been paid multiple times on behalf of the true “creditor.” Thus the action for overturning a foreclosure under a wrongful foreclosure pleading becomes enhanced. If the amounts received through insurance and other means exceed the debt, then the “creditor” was wrong in foreclosing because there was no balance due that was secured by the mortgage or deed of trust.,10&case=12267603999973988233&scilh=0

From Ken McLeod:

I missed this decision……bolds are mine.  I know it was a judicial sale but the Court did take notice of credit bids being lower that reasonable value of the property


Paragraph 4:  ¶ 4 After MidFirst filed its lawsuit, Palo Desert filed for bankruptcy protection. MidFirst obtained an order lifting the automatic stay in the bankruptcy, and a trustee’s sale was held in March 2010. MidFirst purchased the property at the trustee’s sale for a credit bid[3] of $486,000. MidFirst then moved for summary judgment against the Chases, seeking a deficiency judgment of $1,325,044.09. The Chases argued that there was no deficiency because the “value of the Property far exceeds anything that could be owed on the Loan.” The trial court granted MidFirst’s motion, finding that no genuine issue of material fact existed as to the fair market value of the property. The court stated that the Chases’ “contention that the property is worth more than the credit bid is purely speculative, has no foundation, and is based on a date far in the future, not as of the date of the trustee sale. No reasonable juror could find for [the Chases] on the issue of fair market value based upon the record presented herein.” The trial court also granted MidFirst’s request for attorneys’ fees of $80,550.91.

Paragraph 6:  ¶ 6 The Chases contend, inter alia, that the amount realized at a trustee’s sale does not fairly indicate the fair market value of the property conveyed, and that summary judgment granted to MidFirst solely on the basis of the credit bid was inappropriate.

Paragraph 9: Therefore, because the Chases were entitled to a determination of the fair market value of the property, we hold that the trial court erred in finding that MidFirst was entitled to judgment as a matter of law as to its entitlement to a deficiency judgment in the amount sought in its summary judgment motion. Section 33-814(A) requires that a deficiency judgment equal the amount owed minus either the fair market value of the property on the date of the sale or the sale price, whichever is higher. MidFirst only presented evidence of the credit bid, and no evidence as to the value of the property. On these facts, summary judgment was improper.


27 Responses

  1. Testing…

  2. @ All

    “lvent, on October 15, 2012 at 2:33 pm said: The entitlement people…..The only thing that I see are those people who have spread and share such ideologies as ….. ALL of the whites screwed the blacks by making them slaves and we owe them reparations….That is part of what this is all about…Black Supremecy. Obama was a member of a Black Supremecist group that hides behind a religion…it is an ideology called Black Liberation theology and it is hidden behind the walls of Reverend Wrights Church”

    We are in the middle of a WAR. It’s been long hard years and we still have a long long way to go. We know that the seats of power are not going to easily relinquish that power. The so-called “U.S. Federal Reserve” and the other power mongers are not going to go easily. There’s already been a lot of blood, sweat and tears shed and there’ll be a lot more to come. It’s very important that we keep OUR focus and “eye on the prize” – our country, children, grandchildren and great grandchildren. We MUST re-establish our Constitution and the rule of law in our home. Neil and his family and thousands of others have made and are continuing to make great sacrifices to get the truth out and provide weapons to fight the enemy. We have a job, duty and responsibility to guard this site for it’s intended purpose – to educate others. Let not individuals like “Ivent” distract us and corrupt this “well of knowledge” with their HATE. I ask and pray to Almighty God Allah to help us and to protect us and our home – The United States of America – from the whispers of the Shaitan. As Salaamu Alaikum.

    Ivent….you should be wise enough to leave this site and leave us alone. I am not as tolerant as a lot of others here. As Jimmy Cricket would say – “Let your conscience be your guide”.

  3. It could be that the radical views of many types of supremacists are being used to make everyone the culprit. Obama represents ALOT of different elements of society. That is the Obama deception, the fact that no one really knows which one he represents..Obama is the culmination of many radical views that are all different forms of the communist ideology. It is the most severe form of communism that is hidden….Radical Islamic Fundamentalism. That is being covered up and locked away because these severe ideologies are hidden within our own Government. This particular group uses Western Capitalism as an excuse to blame it for all of the worlds economic problems yet, they have used it to gain massive wealth and political power. Certainly the problem with all of these supremicist ideologies is they are all parties to what they claim to despise. The real culprit in society is the greedy investors. Not because they seek wealth but, because what they really seek is ownership. They claim they can solve the worlds problems by owning us and everything that is wrong with the world is because of American exceptionalism.. These apologists are blaming us and using us to apologize to our enemies around the world for the evil they have done…..The truth is …. We The People have done nothing wrong but, these GLOBALIST supremacists have. When it is all said & done and the truth about the reasons for all of their crimes is revealed, the truth is, after all of that fraud they committed, they still do not own US.

  4. I think they have a name for that type of “business”… ops…

  5. LOL…..if that is all you have better re-read your comments…you sound a bit nutty yourself. Bannockburn…..isn’t that the place where F Mae is opening up a legitimate chop shop….? Heard it on a radio commercial…they are hiring people just smart enough to run the machines & do the paperwork..What are those called …?…..LOL….Baa….Baa…..sheeple……

  6. Are you kidding me …. Do you really think I would give a Nut Case like you my location.

  7. Hmmmmmm….cornfields ……hmmmmmmm….bannockburn maybe….?

  8. So……tell me WHO ARE YOU….YOU…YOU…ARE YOU….?????


  10. No Thank You …. Insolvent, I never said I was from Chicago and I’m Not! No cornfields in Chigago. Must be the Alcohal and Drugs messing with your pea brain again. I’m not intrested in your vidio or anything you have to say. You can dodge the Truth all you want, but in the end Reality is going to Bite you in the Ass! But thats ok … you can move on to the next site and tell them all how it was my fault ……

  11. What help is that shadowcat? I don’t know what you are taking about……However……they have been playing this song a lot on the radio lately….I found this you tube video of it & thought you might enjoy it being you say you are from Chicago…….hope you enjoy it…

  12. Lets Face Facts Ivent …. Your Dead In The Water! When are you going to come out of the Denial Stage and Face Reality? Become a Productive Member of Society? If thats possible …. The only place there is a debt jubilee is in your Head. You carry on about the US paying its bills … you want them to stop like you did. If they did it .. somehow in your pea brain it justifies you doing it to. You’ve been Living in the Bottom of a Bottle to Long. Time to Face the Music! My offer still stands to help you …. with the ” U-Haul U’r Own Carcus Moving Truck”. Do you want my help or not?

  13. Enraged just loves to make it rain toxic waste…..WELL AMERICA IS NOT GOING TO BE TURNED INTO YOUR OR ANYONE ELSES TOXIC DUMPING GROUND…!

  14. Hey everyone, some SPECIAL SERVICER who I never heard of sent me a letter and is claiming that there is ….A LAW IN EQUITY FOR IMPOSTERS……I know of no such law….. I think they might be confusing CHINESE OR RUSSIAN LAW with U.S. LAW……..Ha……..They are clearly very confused……..What do they think this is, HITLERS GERMANY or something…?

  15. Imbecile


  17. Enraged….the shape of an L (for LIAR) is showing up on all of your foreheads…..


  19. @Ivent,

    Since you like your doom-and-gloom well done, here is one for you:

    Knock yourself out and orgasm as much as you want on this. Isn’t that wonderful? You’re gonna croak in a few weeks. And since you don’t know where you’ll end up afterwards, may I suggest you start spending less time here bugging honest people looking for serious foreclosure defense information and more time in church confessing your sins…? The way I see it, you’ve got a load on your plate.

  20. The entitlement people…..The only thing that I see are those people who have spread and share such ideologies as ….. ALL of the whites screwed the blacks by making them slaves and we owe them reparations….That is part of what this is all about…Black Supremecy. Obama was a member of a Black Supremecist group that hides behind a religion…it is an ideology called Black Liberation theology and it is hidden behind the walls of Reverend Wrights Church

    This is all about general…Those who wear a clever disguise and call themselves progressives or other names…They are also called Globalists but hide their true identities behind other names…They share a Global Ideology and share a common goal they call SOCIAL JUSTICE…. that takes their radical beliefs and wants us to believe they are owed something FOREVER because they were somehow harmed by all of us, when the truth is…. they were never harmed by any of us… These people are communists who believe enslaving mankind for their beliefs is justified. It is not… . ….

  21. Are we sick of the progressive meme yet..? Just move on and pretend this crime spree with our signatures never happened.. Here..take some food stamps & move on….take a lousy JOB…(JUST OVER BONDAGE), and just move on, take OBAMACARE as a replacement for overpriced private healthcare and move on….Give us your property and move on, GO BE A RENTER,…take your pension losses and move on…you can always work to get it back..because you screwed up and there is nothing to see here…..B.S…..GO BE A COMMIE SOMEWHERE ELSE…!…..


    Ivent said:

    “…They were 10 year bonds sold as conventional mortgages….They sold us junk……period….end of story. Subprime is a fictional story. We weren’t sold mortgages, we were sold junk bonds…”

    my friend’s response:

    “…Yes — the person who wrote this is correct. Subprime is a fictional story. The bonds that were sold were not backed (collateral) by ACTUAL MORTGAGES. They were backed by JUNK — collection rights to already (falsely) charged off debt, which paid a higher rate of return than the bonds that were actually backed by valid mortgages.

    SO SIMPLE, I do not know why some do not get it. If the subprime were actually backed by valid mortgages — the interest rate charged borrowers would not be higher — it would be the SAME. The reason the interest rate was higher on subprime is because these borrowers could not get a valid mortgage. Subprime was nothing more than JUNK DEBT…”


    Not to mention all kinds of insurance fraud—and nobody in jail…

  23. When is the cuffing? I want a front row seat…We were all permanently harmed in one way or another by this credit crime spree. We were all sold a BIG LIE for the sole benefit of the LARGE INSTITUTIONAL INVESTORS and their criminal friends. There is no legal or monetary fix for this. The damage has already been done. Time to stop kicking this can of shit down the road and end this cover up by a criminal device known as control fraud….You can’t control or cover up a quadrillion dollars worth or fraud committed by Wall Street……..Time to clear the titles back to the American people.. If Obama would have made this fraud extinguisgable in a bankruptcy when he had the chance, this crime spree would have ended a long time ago. The truth is clear….., this is not and never was about the money. This is another eliteist Hitler Plan and this is about nothing else other than stealing everything from the American people for the benefit of these greedy eliteist sheister felons who want us to believe they own us..They don’t….and either does Obama or any of these politiicans. Though they want us to believe they do….they don’t. It’s all a giant fraud by deception….It is all deceptive fascism…for example, the so called Fiscal Cliff is a very deceptive form of fascism…it is terrorism in the form of what they are calling OUR fiscal responsibilty… They are using that Fiscal Cliff threat to terrorize the American people with what amounts to no more than PROGRESSIVE TAXATION hidden in the form of……no more Bush tax cuts….!.Make these crooks pay US back…or just stop paying these crooks….

    Kudlow is having a program tonight about ENTITLEMENTS..These things they are calling ENTITLEMENTS are NOT ENTITLEMENTS because we already paid for them…… a**hole……… .

  24. there should be NO credit bids !!!!…..that will put an end to the FRAUD

  25. Neil… My daughter is Not happy about this article. She did everything right and she should not live knowing that any day the previous owners ghost might reappear. This is the main reason to stop the corruption of titles and quit giving 1st time homeowners false hope of home ownership. She is required by law to pay the debt .. while the chrony attorney sets all smug. She has to pay .. for something she didnt buy because the seller didnt own it. The Madness is Coming to A Stop!

  26. I saw a greedy bank attorney have the nerve to admit they will seek a deficiency judgment for $2 million dollars on a piece of commercial property after being granted a fraudclosure… The judge wasn’t buying it.. Bottom Line, they can only be deemed to be seeking unjust enrichment without that LEGAL ASSIGNMENT….AKA….THE LEGAL TRUST AGREEMENT..without that…this is all just acid rain for the benefit of some fictitious investors…these folks are imposters……Credit bids should not be occurring and are fraud without the LEGAL TRUST AGREEMENT…..

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