Consumer complaint received 2019-10-08
Company: UNITED SERVICES AUTOMOBILE ASSOCIATION
State: AL
Product: Mortgage
Sub-product: Home equity loan or line of credit (HELOC)
Issue: Closing on a mortgage

Complaint:
I have been a member with USAA since XXXX. I would like to sell my home but USAA insists on enforcing a lien in the amount of {$91000.00}, even though it has discharged the debt and issued IRS Form XXXX, discharging that same debt. In XXXX USAA financed the purchase of my home and extended a home equity line of credit that was increased to {$120000.00}, based on the value of my home. In XXXX, USAA froze the home equity loan due to home value decreased. I had a 15 % pay cut and XXXX ( serviced the home loan ) modified it around XXXX. In XXXX and XXXX, I tried to refinance the home loan to get a lower interest rate ( the mortgage was at 6.25 % and interest rates were in the 3 % range. USAA refused on the basis the home was worth less than the loan. USAA offered that I could short sale the home when I told them I wanted to relocate to the east coast. The home went into escrow in XX/XX/XXXX and I was told by my realtor to stop payments on the mortgage and home equity loan. Bad advice, I now know. In XX/XX/XXXX, we were informed USAA refused to release the lien on the home equity loan. The home went into escrow again and USAA agreed to the sale for 12 % of the home equity loan, which was approximately {$91000.00}. XXXX explained they were not allowed to pay more than {$6000.00} on a junior lien. Efforts to short sale the home were discontinued. I had moved to a short term rental, thinking I would soon leave the area but when the sale failed, I moved back to the home, thinking I would save my credit score/reputation. When I returned to the home, XXXX offered to modify the loan to a lower interest rate - finally. The modification increased the mortgage from {$350000.00} to {$380000.00}, and extended the term to 40 years. I had asked about the home equity balance and was told there was no paperwork from USAA regarding the home equity loan. 
I signed the modification and submitted it on XX/XX/XXXX. Within a few days, I received a telephone call from XXXX, a collection agency and a letter dated XX/XX/XXXX, demanding {$91000.00}. USAA had sent my home equity loan to collection without any notice to me. I consulted legal counsel and explained to XXXX that the home equity debt was not subject to collection agency activities. I have never heard from XXXX again. 
USAA also terminated my credit card, restricted my online access to my accounts, and limited my checking account activity. I left my home insurance and auto insurance policies with USAA but opened a checking account with other financial institution. 
In XX/XX/XXXX, I received a XXXX Form XXXX, Cancellation of Debt in the amount of {$91000.00}. The debt description, at box 4 states XXXX XXXX XXXX XXXX, I am the stated debtor. Box 5 is checked, which indicates USAA assigned that I was personally liable for the debt. Box 6 states " G ''. IRS Section 6050P states " Event code " G '' means " A discharge of indebtedness pursuant to a decision by the credit or, or the application of a defined policy of the creditor, to discontinue collection activity and discharge debt. '' When I have contacted USAA to remove the lien associated with home equity loan, given the USAA first sent the debt to collection and then discharged the debt, evidenced by the XXXX Form XXXX, I am told that the debt was discharged to me but the USAA policy is to collect the debt from the house ; and that USAA only issued the form because it is required by the IRS. Given USAA receives the tax benefits when discharging the debt I can understand why the IRS requires notification. However, the lien for the debt was not removed against me and the home. In XX/XX/XXXX, I received a Home Equity Line of Credit Statement showing {$0.00} due for a principle balance. USAA sent a letter dated XX/XX/XXXX, stating the statement had been issued in error, due to a systems upgrade and that it was not an attempt to collect a debt against me. However, USAA continues to refuse to remove the lien. When I contact USAA I am told the policy is to collect the debt and I am offered an opportunity to request a negotiated settlement. 
I want CVPB to assist me in settling this matter. My legal counsel advise that USAA can not legally continue to collect on a debt that has been discharged via a Form XXXX, but also that USAA has a reputation for being very difficult to work with. I hope CFPB can resolve this issue. I will attach documents for the above referenced events.

Company public response: Company believes it acted appropriately as authorized by contract or law
Company response to consumer: Closed with explanation