Neither a Lender Nor a Broker Be

A recent ongoing case pending in the United States Bankruptcy Court in Albuquerque reflects a recurring difficulty borrowers have in dealing with putative lenders. According to a decision in the case of In Re Clark,  Case No. 13-12132-j13, Adversary No. 13-1077 T. (U.S. Bankr. Ct. N.M. 2014), the underlying facts are significantly undisputed. The daughter of the debtor/plaintiff, Carmen A. Clark, passed away on May 23, 2012.  Plaintiff had previously granted Citicorp, her daughter’s lender, a mortgage on her house at 740 E. Lucero, Las Cruces, New Mexico to secure that loan for the daughter.  Plaintiff had been named in a foreclosure action brought by Citicorp but had failed to respond, and a default judgment had been entered against her two days after her daughter’s death. With the foreclosure sale scheduled for August 9, 2012, Plaintiff filed a Chapter 13 bankruptcy action in New Mexico as a means to stop the ordered foreclosure from proceeding.


She then intended to obtain a loan via a reverse mortgage in order to pay off Citicorp. Clark submitted an application for a residential reverse mortgage loan with a loan officer for Envoy Mortgage, Ltd. (hereinafter “Envoy” or “Defendant”). In December of 2012 Envoy ordered an appraisal on Carmen’s house. The loan officer also told her that she needed to dismiss the Chapter 13 bankruptcy case as the loan was about to be approved but could not occur if the bankruptcy case remained pending.  On January 10, 2013, an order was entered dismissing that prior bankruptcy case. Nineteen days later, that same loan officer emailed an agent for Clark stating that getting the death certificate for Plaintiff’s daughter would wrap up the Loan Application and should allow the closing to occur the following week.


Subsequently, when the appraisal was not finished, no closing was set. Then Envoy sought to get a payoff amount from Citicorp to ascertain how much was needed to get the property out of foreclosure status. That process took longer than expected. When the Plaintiff requested the Defendant to proceed with the closing in June of 2013, the Defendant asserted that the duration of their Loan Commitment had lapsed after six months. Further, Defendant had left the Las Cruces market by then and no longer brokered/originated mortgage loans to Las Cruces residents. The loan never closed, and on July 24, 2013, Plaintiff filed this Chapter 13 bankruptcy case as she viewed that as her only available option at the time.


Once this bankruptcy action commenced, Clark sued Envoy within the context of that case. The Court could not determine whether Envoy was a lender -as Clark alleged – or merely broker as Envoy claimed. Clark had covered her bases by pleading alternative theories of recovery for breach of contract and negligence so that, under at least one theory, she may have a chance to prevail. But the unresolved question in the case which requires the bankruptcy court to send the case to trial is whether Envoy was acting as a lender or a broker because each may confer different duties on the Envoy and its agents.


Certain companies aggressively seek to establish themselves as brokers in order to relieve themselves from any possible obligations they would incur if they were lenders. The Clark case demonstrates the ambiguity created by these kinds of efforts by companies such as Envoy. Individuals like Clark who find themselves in financially distressed situations need to confer with legal counsel who possess knowledge and experience in foreclosure and bankruptcy matters when trying to navigate their way through the process of procuring a  reverse mortgage or some other form of debt relief..


At the Law Office of George “Dave” Giddens, P.C. we offer expert, dependable advice on handling real estate transactions. Our attorneys serve Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. And we have bankruptcy attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases in New Mexico. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Our conveniently located office has ample free parking and is easily accessible by public transportation. We offer flexible office hours upon request. To make an appointment for a consultation about your real estate matter, contact us online by visiting the firm’s website at or call us at (505) 633-6298. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.