George and Barbara Dawson purchased their home "subject to" a first mortgage with Great Western Bank, a predecessor of Washington Mutual Bank (WaMu), one of the nation's largest home loan lenders. The loan fell into default for nonpayment. WaMu held its foreclosure sale on Feb. 8 by submitting a "credit bid" for the mortgage balance. No bidders showed up so WaMu took title to the home. Purchase Bob Bruss reports online. But, unknown to WaMu, borrower George Dawson filed Chapter 7 bankruptcy on Feb. 6. WaMu was therefore in violation of the bankruptcy "automatic stay" prohibiting further foreclosure proceedings. On Feb. 20, WaMu served a "Notice to Quit" on the Dawsons, claiming ownership of the house. On March 1, WaMu was notified that George Dawson had filed Chapter 7 bankruptcy on Fe...
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