MATTER OF: Request for Relese of Lien Pursuant to 28 U.S.C. 2410(e) FILE: B-180526 DATE: April 3, 1974

B-180526: Apr 3, 1974

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Certification is proper under 28 U.S.C. 2410(e) because proceeds of sale of property would be insufficient to wholly or partly satisfy lien of U.S. That he was in the process of foreclosing a mortgage on real property upon which FHA held a deficiency judgement lien. Rich asserted that the mortgage which he was foreclosing had been recorded on January 20. Was senior to the Government's lien which had not been recorded until February 10. Rich's mortgage is $3. Rich was foreclosing had been satisfied of record on March 10. Rich subsequently informed FHA that the execution and recordation of the satisfaction was a procedural error and without legal effect. He repeated his contention that the mortgage which he was foreclosing was in full force and effect.

MATTER OF: Request for Relese of Lien Pursuant to 28 U.S.C. 2410(e) FILE: B-180526 DATE: April 3, 1974

DIGEST

The Federal Housing Administration (FHA), Department of Housing and Urban Development, has requested this Office to release a judgement lien held by the United States on certain real property located at 711 No. Mary Street, Tempe, Arizona. In a letter dated August 13, 1973 Joseph T. Rich, Jr., Esq., notified the Phoenix Insuring Office, FHA, that he was in the process of foreclosing a mortgage on real property upon which FHA held a deficiency judgement lien. Mr. Rich asserted that the mortgage which he was foreclosing had been recorded on January 20, 1965, and was senior to the Government's lien which had not been recorded until February 10, 1967. The value of Mr. Rich's mortgage is $3,500 plus other amounts payable thereunder. As senior lien holder, Mr. Rich requested that the Government-held lien be extinguished in accordance with the procedures set out in 28 U.S.C. Sec. 2410(e).

FHA began its investigation by researching the title of the subject property and discovering that the mortgage which Mr. Rich was foreclosing had been satisfied of record on March 10, 1972. Mr. Rich subsequently informed FHA that the execution and recordation of the satisfaction was a procedural error and without legal effect, and he repeated his contention that the mortgage which he was foreclosing was in full force and effect. Nevertheless, in a letter dated October 9, 1973, FHA officially notified Mr. Rich that it could not further process his request for extinguishment of the Government lien because he had failed to establish that the mortgage which he was foreclosing remained legally enforeceable.

We have been advised, however, that upon receipt of FHA's letter of October 9, 1973, Mr. Rich produced a Chain of Title Report prepared by Stewart Title and Trust of Phoenix. Item 37 of this report indicates that the satisfaction of the mortgage which Mr. Rich is foreclosing has been cancelled. Thus, it is now clear that the mortgage of Mr. Rich is fully effective and properly the subject of foreclosure proceedings in the Arizona courts.

During the course of its investigation, FHA also discovered the existence of two other judgement liens attached to the subject property. The Chain of Title Report submitted by Mr. Rich confirms FHA's assertion that each of these liens is senior to the lien held by the United States. The two additional liens are held by American Industrial Leasing Company in the amount of $25,148.44, plus interest and attorney's fees, and by Phoenix Newspapers, Inc., in the amount of $2,101.04

FHA has determined the fair market value of the subject property to be between $9,000 and $10,000, "as is." On the basis of the mortgage of Mr. Rich and these two additional liens, FHA has petitioned this Office pursuant to 28 U.S.C. Sec. 2410(e) to certify the release of the subject property from the Government's judgement lien, since "the proceeds from the sale of the subject property would be insufficient to fully or partly satisfy the lien of the United States."

The authority of this Office to release liems in favor of the United States is contained in 28 U.S.C. Sec. 2410(e):

"(e) Whenever any person has a lien upon any real or personal property, duly recorded in the jurisdiction in which the propery is located, and a junior lien, other than a tax lien, in favor of the United States attaches to such property, such person may make a written request to the officer charged with the administration of laws in respect of the lien of the United States arises, to have the same extinguished. If after appropriate investigation, it appears to such officer that the proceeds from the sale of the property would be insufficient to wholly or partly satisfy the lien of the United States, or that the claim of the United States has been satisfied or by lapse of time or otherwise has become unenforceable, such officer shall so report to the Comptroller General who may issue a certificate releasing the property from such lien."

In view of the findings that the combined value of Mr. Rich's mortgage and the two other judgment liens far exceeds the fair market value of the subject, it is clear the proceeds from the sale of the property will be insufficient to wholly or partly satisfy the lien held by the United States. Accordingly, since the procedural requirements of the statute have been otherwise fully satisfied, FHA's request for certification of release of the judgment lien in question is hereby granted.

The certificate of release is enclosed.

R. F. Keller Acting Comptroller General of the United States