We had a simple, rational process to determine who owns what piece of property.
Mostly reliable. Orderly. Insurable.
Then, we got so smart that we somehow managed to completely screw it up.
There’s a lot of wonderful technical stuff involved with wrongful foreclosure claims, but the basic problem is pretty easy to understand: you have to own a mortgage in order to bring a foreclosure action. If you don’t own the mortgage, you don’t have any right to kick someone out of his/her house, even if that person has defaulted on his/her mortgage. And GMAC/JPMChase are sufficiently worried that the trusts they service might not own the mortgages they are foreclosing on that they have put a halt to their foreclosure actions.
Consider, though, what it means if there have been widescale wrongful foreclosures. If these foreclosures were nonjudicial foreclosures (and maybe even for judicial foreclosures), it means that the foreclosure sale purchasers have clouded title. The homeowner still has claim to the property and there might still be a valid mortgage on it. And as many foreclosure sales end up with the lender buying the property and reselling it, what does that mean for the eventual end-buyer? What does that mean for their title insurer?
U.S. courts are clogged with a record number of foreclosures. Next, they may be jammed with suits contesting property rights as procedural mistakes in those cases cloud titles establishing ownership.
“Defective documentation has created millions of blighted titles that will plague the nation for the next decade,” said Richard Kessler, an attorney in Sarasota, Florida, who conducted a study that found errors in about three-fourths of court filings related to home repossessions.” Most of the document errors involved mortgages that had been bundled into securities sold to investors, Kessler said. At the end of the U.S. real estate boom in 2005 and 2006, about 70 percent of the $6.1 trillion in mortgage lending was packaged into bonds, according to the Securities Industry and Financial Markets Association in New York.
Jewish Steel
When I read stories like this, why do I always see myself on my front lawn in my bathrobe with a shotgun holding the rev’nooers at bay?
Maude
I should be amazed at the level of corruption with this, but I’m not.
This is going to be a big mess for a long time.
Thank you all of you financial geniuses that thought the slice and dice of mortgages was so clever.
Also the expedient people that didn’t bother to read the foreclosure papers.
Mojo
I know it must all be the fault of Fannie Mae and Freddie Mac and poor people but I haven’t figured out how yet.
Napoleon
As a real estate attorney I can not imagine that it clouds title in a judicial foreclosure so long as the home owner was served and the time for all appeals have run.
Corner Stone
I’m not sure what people expected to happen. This is normalization of fraud, pushed down from the elite bankster level.
Once they stole everything in sight and faced no punishment, in fact were rewarded, this behavior pushed to the next level.
NonyNony
You know, my family laughed at me when I said I thought it was important to find a bank that actually made money off of loans the “old fashioned way” instead of using a mortgage broker.
This kind of thing (though, admittedly, not at this scale) is what I was worried about almost a decade ago. If your paperwork is being passed around like that someone is guaranteed to fuck it up eventually. I’ll lay odds that paperwork SNAFUs like this are common even for mortgages that aren’t in foreclosure – it’s just that no one has called anyone on it in the past because the issue of who has legal documentation for what isn’t important unless there’s a default or the mortgage gets paid off. And in the latter case it’s more of a “homeowner is demanding official paperwork and getting annoyed that it’s taking so long” than a “OMG we fucked up royally and now three different people seem to own this house” situation…
Omnes Omnibus
@Napoleon: I think in that case the title should not have a cloud but that the home-owners who were foreclosed upon would have a cause of action against those who improperly took their house. Wouldn’t the new owners, as long as they were good faith purchasers, be fine?
Kay
@Napoleon:
Thanks for weighing in. I hoped you would, because I know this is your area.
What do think of this, from Credit Slips?
Are we sure who actually owns in the mortgage, apart from issues of judicial or non judicial foreclosure?
cathyx
This might just be what the country needs to turn the economy around. Think about it, all these homeowners on the brink of foreclose can now stay in their homes for free and save their money, maybe for many years or forever.
Edited to add: think of it as a new kind of stimulus.
scav
hey, that’s only the magic invisible hand signing things lots of things very very quickly, they never went on and on about any invisible eye actually reading anything signed, let alone any invisible brain thinking things through. Ahh, those masters of the universe, rightsizing and cutting the fat and innovating and congratulating themselves with bonus and the paperwork finally catches up with them and it’s eaten away at one of the very bulwarks of their most sacred shrines.
Montysano
@Napoleon:
Let me make sure I understand your statement: as long as the homeowner fails (or is unable) to discern that the foreclosure notice they’re being served is erroneous, and fails to appeal, all is well? Do I have this right?
arguingwithsignposts
@Mojo:
You left out ACORN.
For once in my life, I am glad I am renting. At present, I have no interest in owning a home until some point when this shitstorm dies down, and I have enough money to buy a sizable equity in a house that is well below market value. Fortunately, I live in a town where the high-flying financiers couldn’t be bothered.
I sold a house in 2007, right as the market was beginning to seize up. I wouldn’t want to go through paying rent AND a mortgage payment for 9 months again, ever.
JAHILL10
That’s just it, though. Once you split the mortgage up into tiny securities no one owns the house, no more than the people who are living in it at any rate. The bank or finance company that wrote the ARMs and balloon payment monsters and then quickly sold the mortgage to be securitized certainly doesn’t own it. Are fund managers going to come take a bathroom tile if you default on their small part of the house? This whole securitization thing was just a disaster from the get go. The assumption so far in the courts is that it was the owners’ fault for signing a crappy mortgage. Once we start grappling with the fact that this was a systemic failure, I think we will see an employment boom in the real estate law market.
Anoniminous
Been going on for over a year now.
It’s a fairly straight-forward failure by the lenders to keep track of who owns what and the legal rights (and obligations) granted, assumed, passed, & etc. passed down to the various “investors” as the mortgages were sliced, diced, turned into derivatives, & so forth. So it’s something of an open question who has the legal standing – if anybody does – to bring suit against the mortgagee. Now add the fact some large percentage of the paperwork seems to have vanished; been cases where the foreclosed-upon asked, in court, for the mortgage contract and the plaintiff couldn’t come up with ’em.
It’s an ungodly mess because without title the people sitting in the house, possibly under a mortgage, may not have title. They certainly
do not have a clear title implying there’s no way to sell the property.
At least to a buyer with brains.
numbskull
I remember that back in 1992 (1992!), the closing attorney at our home purchase was absolutely outraged that we took the time to read the entire contract. Now think about this: This is a pile of papers that represent the largest purchase we will probably ever make with the largest loan that we will probably ever use (our thinking at the time). We were never given the entire set until the actual closing. When the fuck were we supposed to read it?
Oh. We’re not supposed to read it, you say? There are other contracts to be signed, with principals out in the waiting room? You’ve got three more to do before your tee time this afternoon?
If memory serves, we found three major errors within the first five pages. The prick of a closing attorney wasn’t going to fix them until the seller’s attorney started to see her commission going away as my wife as I headed for the door. The seller’s attorney then jumped down the throat of the closing attorney for being such an incompetent boob (btw, this was at a silk-stocking firm and the bank was one of the big lenders of the time). She was great and we ended up using her for other business later in life.
Also, I loved all the courier fees, all of which resulted from the closing attorney managing to leave everything until the last minute. No doubt this was usual and customary. We refused to pay them for two reasons: 1) They were 100% his fault and 2) several of the “courier” transactions were moving information/documents within the same building. Made for an interesting afternoon dragging into the evening.
Nice little racket they had going. Again, all usual and customary. We got everything done, but man, even way back then the system was fucked. I don’t recall a single part of the transaction NOT having obvious errors, all generated by the lender or the closing attorney.
Keith
Shit + fan
Kay
@JAHILL10:
Before you even get to the bigger picture, though, if they were this sloppy (well, fraudulent) with foreclosure, how were they on ordinary documentation? This came to light with affadavits filed on non judicial foreclosures, but what’s behind it?
Can they even produce an actual document that says there is an owner, any owner? Down the road, in an ordinary sale? They lied about reviewing the file, but what’s (not) in the file?
Anoniminous
@Maude:
It’s not corruption, per se, it’s stupidity, greed, and incompetence.
I hope I’ve allayed your concerns.
:-)
Anoniminous
@numbskull:
I also read, in painstaking detail, legal documents. And ask questions. And demand answers, sometimes in writing. And refuse to pay absurd and non-relevant fees, charges, & so forth.
Drives members of the lawyer persuasion absolutely crazy.
(I love it.)
Xenos
@Napoleon: If notice is defective, what difference should it make?
But who am I kidding. The simplest way for courts to handle this is to find that buyers are Bona Fide Purchasors for Value. I tried overturning a foreclosure without notice that arose from the 1980s. It was a big waste of time, even if I remain convinced I was right. The courts will do just about anything to avoid stirring up title.
I suppose adverse possession could apply after a few years, too.
Napoleon
@Omnes Omnibus: I would think yes and yes.
Napoleon
@Montysano:
Yes. Keep in mind I am talking about a judicial foreclosure so in addition you have a judge signing an order saying it is so. I have no idea of how likely title is bad if you went a nonjudicial route (In Ohio, where I practice, you need to file a court case and a judge has to make a finding).
Napoleon
@Xenos:
If it is a foreclosure and the homeowner is served it is up to him or her to raise any issue with the court. If they do not it has the effect that they have agreed with what is alleged.
I have no idea how it works in a state where they have things like Deeds of Trust and in some of those states the trustee can just file something and take title.
Napoleon
@Xenos:
Ordinarily that is something like 21 years.
scav
I’ve no doubt there are procedures in place to deal with such issues but what happens when you scale them up, especially in an environment where everyone is going to be hypervigilent? We’ve now got expectations and structures that emphasize quick, easy and cheap and those expectations are built into business plans and the sacred profit margins too. I’m thinking the mess comes from the aggregation effects as well as the basic loss of trust.
MattR
So if I pay my mortgage to GMAC should I just stop paying?
kay
@scav:
Even a year ago I might have believed that. No more. They won’t lift a finger to remedy this. They’ll scream and yell and threaten us all with dire consequences if anyone even suggests they come up with a voluntary solution to the mess they created.
It’ll sort itself out, or it won’t. Finance and lending won’t have any part in any solution. We’ll be lucky if they stay out of the way.
Angry Black Lady
My firm does a fuck ton of JPMorgan foreclosure work (Cal is a nonjudicial foreclosure state, though.) Let’s just say, I did it for 6 months, lost my mind, had to go on medical leave (stress activated my tumor which activated my crazy), I almost quit my job, and I almost quit the law for good.
This was right around this time last year. Needless to say, I couldn’t stomach the work, and I would leave work crying almost every day. I walked around with a knot in my chest for four months; I kept reflexively rubbing my chest, thinking that I could massage the stress away.
That’s all I can really say about THAT. A/C privilege and all that. Although I suppose I should thank JPM… now I get to work at home 3 days a week AND I am no longer working on those cases.
Score + Win.
bkny
frankly, i’m surprised to see so much action across the country in halting these foreclosure proceedings.
when i first read about the florida cases, i wondered how easy it would be to steal someone’s how right out from under them. if judges were accepting every forged doc as legit and denying the homeowner an opportunity to defend her/himself what would stop some asshole who’s been eyeballing a certain property try to gain ownership thru these foreclosure proceedings.
Roger Moore
@Montysano:
Not just the notice. If it’s a Judicial foreclosure, that means it’s gone through a judge, and the homeowner has had a chance to present his side of the story. It’s the defendant’s job to notice problems with the plaintiff’s case, not the court’s. And once one judge has ruled on it (and any appeals have gone through) no other judge is going to question the result. That’s the way of all court cases.
Eric U.
it seems to me that the banks are most reluctant to foreclose on a house where they are going to realize a large loss, i.e. the homeowner doesn’t care. Consequently, there will be a lot of people that have equity in their homes that are being screwed for missing a few payments when they get sick or lose a job.
AK the official business and economics editor emeritus of Carmen Road Elementary School
I guess you could call this the ‘reverse cramdown’ innovation by the masters of the universe.
Either that or we have officially entered the Financial Matrix and the harvesting has started.
kay
@bkny:
This came to light in states that have non judicial foreclosure proceedings. 26 states use a judicial process. The rest use a different method for foreclosure proceedings.
I think we probably revisit the whole non judicial foreclosure process, and how that might not be such a great idea, considering some of the people foreclosed on actually owned the homes outright, with no mortgage at all.
Josh
Following up on bkny, are these characterized as “judicial foreclosures” or something else?
Cello
This reminds me yet again why I rent. The country’s entire economy is built on debt, and virtually all homeowners are slaves to the financial industry. As we continue to lose what’s left of our manufacturing base and outsource our skilled service sector jobs to other countries, all we’ll be left with is a bunch of financial industry “innovation” and paper-pushing . And debt.
It’s hard to be optimistic about this country’s future. End of empire and all that.
JPL
@kay: Recently Bank of America foreclosed on a homeowner who purchased their house with cash. Bank of America did offer to pay all legal fees associated with their error. What a good bank.
bkny
@Josh: thanks, josh. that’s where i read the account. this is what i’m referring to — how easy would it be to scam someone’s house out from under them:
On 8/30, I had a Summary Judgment Foreclosure hearing on Palm Beach County’s “Rocket Docket”. The judge spoke for 14 minutes to the crowd, of mostly pro se defendants, about how they should just agree to the summary judgment and the plaintiffs, (whose attorneys (Shapiro & Fishman had a dedicated courtroom and to whom he referred to as “my attorneys”) would be gracious (Ha!) enough to allow them to stay in their homes for 120 days if needed (even though the statute says he only has to give them 30). When it came to hearing arguments which were fully briefed and provided to the court (pursuant to the instructions of the Divisions head judge) he only allowed 30-60 seconds for argument, failed to read any of the papers, failed to review the plaintiff’s foreclosure package,flatly ignored the Affidavit filed in Opposition, ignored my plea for a trial, signed the judgment and dismissed me. I never was permitted to even read the proposed judgment or to examine the “newly discovered” allonge which Shapiro’s counsel said I had no right to see.
vtr
Don’t worry. Christine O’Donnell has a plan to take care of the whole thing.
Omnes Omnibus
@bkny: If something like that is on a trial transcript, one should be able to overturn the result on appeal. Should.
The Grand Panjandrum
And Title Insurance companies are beginning to take notice of these problematic foreclosures:
Mark
@JPL: Here’s the story:
http://www.kcra.com/station/23688124/detail.html
My mortgage is with Bank of America. They are the biggest bunch of morons, so it is no surprise that they could do something like this.
kay
@Omnes Omnibus:
It looks like the Florida legislature rammed through a provision for special “foreclosure courts” to “clear the backlog”. They had a judicial process. Now it’s sort of a kangeroo court.
That was at Josh’s link.
They used retired judges who held 5 minute hearings, which was probably helpful to lenders, considering they don’t seem to have anything to show they own the property.
Efficiency! That was a genius idea. Keep ’em coming, Florida.
fasteddie9318
Why is what happens to the “end buyer” important? If I’m found in possession of stolen goods, I’m either going to be prosecuted or the goods are going to be taken from me without compensation, yes? These properties should be treated the same way. And, yes, that means whoever did the unlawful foreclosure should be prosecuted for theft.
kay
@Omnes Omnibus:
Well, then. No disputing that. That’s why she’s there, okay?
Omnes Omnibus
@kay: I am just failing to see any semblance of due process in those proceedings.
Omnes Omnibus
@kay: I am just failing to see any semblance of due process in those proceedings.
Ruckus
@Omnes Omnibus:
Good catch. There is none.
KG
We’ve got nonjudicial foreclosure here in California. And a couple of years ago, as the shit was first hitting the fan, the Legislature passed a law that said that the foreclosing entity had to record and serve a notice verify that a) attempted a loan work out with the borrower before foreclosing and that b) they owned the loan or some other right to foreclose. The problem is that there were so many, the servicers just hired people to sign off on these notices without doing the actual verification process.
But here’s the real thing that no one is talking about: MERS. It is effectively a private recording system that you can’t get access to without being a lender/servicer/investor. Your mortgage likely says that MERS is the nominee for the actual owner. There’s actually been a few cases involving MERS the last couple of years, as everyone is trying to figure out just who owns various mortgages. And the fun part is that MERS has come into different courts saying opposite things as to who they are, basically, holding themselves out as whatever screws the borrower over the most. Courts have started to notice this and are not pleased.
Michael
@Napoleon:
We’re a jurisdiction that does mandatory judicial foreclosures.
I practice in a blue city which feeds and employs a pulsating, large and angry surrounding red pustule.
As a result, a lot of the judges I appear before in the real estate aspects of my practice tend to be teabigots. Even then, to man, they’d be infuriated even post decree (they’ve ignored these issues to date), and wouldn’t hesitate to cloud up a title – so it is in fact a big deal here, and would cause clouds on the horizon.
Xenos
@Napoleon:
And so anyone off the street can file a foreclosure action, and it is up to the homeowner head back to court repeatedly to maintain possession? That is exactly the sort of folly judicial foreclosure is supposed to prevent, I would think.
And where non-judicial foreclosure is in effect, the expense of filing a suit and getting an injunction rests on the homeowner. I suppose they can sue for costs, but there is something really fucked up about that. And I say that as an attorney who has only defended lenders, not homeowners.
Michael
@Anoniminous:
The time-tested system was that the note traveled with the mortgage. Thing is, MERS never-ever did it right. They couldn’t even validly attempt it by transferring it all properly into “Trust Whoozits”, because different notes would be paid off or go into default at many times over the life of the trust, really affecting the underling value and spelling out some negative fiduciary duty ramifications for the bundlers.
I remember looking at some early research that showed that the MERS founders were Bush Pioneers, so there ou go.
Michael
@bkny:
Obviously, you hate America and the Troops. A few years ago when we were first raising this, I actually heard judges grumble that “I’m not going to allow these people {defendants} get a free house. If somebody else pops up later on with a better right to the mortgage, we’ll fix it then”.
Of course, when that does arise (and it will), they’ll scream bloody murder at the malefactors, blissfully and deliberately ignorant of the fact that they could have eliminated the issue by nutting up early, when asked.
I’m eagerly awaiting the day when there arises a conflict between a mechanics lienholder I represent and one of these bad assignments. I’ve got two or three of them that will back me on the fees which will be needed to do an appeal on their position in the line of lienholders.
Michael
@KG:
Been there, done that, bought the T-shirt. Its amazing to note the number of foreclosure mill secretaries who are also MERS vice presidents.
Try and depose one of those MERS vice presidents, and see what I mean.
Michael
@Xenos:
His answers irritated me, too, but his location might be completely fucked up with a pile of screaming wingnut retrograde judges.
Tonal Crow
@Xenos: It seems that errors, fraud and/or due process violations in the foreclosure process, combined with a failure to properly record title, are going to cloud title for many bona-fide purchasers.
Imagine this (probably now-common) scenario:
1. A bought her house with a mortgage issued by X. Both the deed from A’s grantor and the mortgage from A to X were properly recorded.
2. X sells the mortgage to Y, but nobody records the sale.
3. Y sells the mortgage to Z, but nobody records the sale.
4. Y forgets that it sold the mortgage to Z, and Z forgets that it bought it.
5. A defaults, and Y (not X, and not Z) forecloses, and records the foreclosure. Y — no longer having an interest in the mortgage — has no standing to foreclose.
6. B buys the house from Y via the usual quitclaim deed.
7. Z eventually realizes that it owns the mortgage, and attempts to foreclose on B.
8. B asserts that she has good title because she’s a bona-fide purchaser.
9. B might lose because she had notice of a defect in the recorded chain of title that was material to the issue being litigated. When she bought, the recorded chain of title showed the deed from A’s grantor to A, the mortgage from A to X, and the foreclosure by *Y*. B’s case isn’t hopeless, however, because she can still argue that she had no notice of Z’s interest.
All of which adds up to a mess.
——
As usual, this is blogging, not legal advice. Consult your favorite
land-sharklawyer for legal advice.KG
@Michael: I got to depose a Person Most Knowledgable for a lender… who was no longer employed by the lender when he was deposed. That one was fun. But yeah, there’s a case from the Kansas Supreme Court (which I don’t quite have the desire to go googling for), where the Court basically tore MERS a new asshole for their games. Having done the litigation, I’m convinced no one really had any fucking clue as to what they were doing.
Michael
@KG:
I read the opinion – it was good, but really didn’t give me the tumescence that the irritated Federal Judge in Ohio did in 21 Cases. That one was a joy to behold, it was so dismissive in tone.
Xenos
@Tonal Crow:
That gets to the nut of it. Y had no right to foreclose, so Z has to seek damages from Y for killing the power to foreclose… which could a problem because it was Z’s duty to protect its security interest by recording it. Of course, there is likely language in Y’s sale of the note to Z that will control here.
But A is out of luck, except that if B wants to clear title it would be worth it to buy a quitclaim deed from A.
But the bigger problem is if Z forecloses, or someone with very little standing, such as Aleph, Gamma, or Thorn files a foreclosure, with or without proper notice or process. Which gets to the question: can you really be a BFP when you buy a house where the lender ‘forecloses’ on a loan they never owned? There have apparently been a number of these, and this could lead to title insurer actually paying on a claim.
Tonal Crow
@Xenos:
You can be a BFP. But sometimes — as my example shows — you won’t be a BFP without notice of the material defect, which is a critical element. And the thing is, this kind of defect isn’t cleared by a succeeding recorded transfer of title, so really it can persist indefinitely, or at least until the party who’s actually last-recorded as owning the mortgage records a discharge.
I suspect that the next few years will be very hard on title insurers.
Ruckus
So as a non lawyer type, you know one of those people who just buy a house and at least has some hope that all that paperwork and title insurance and an actual mortgage means that if I pay my bills I actually own the house, does this mean that no matter what I do, I’m basically fucked? BTW it seems to me the answer is absolutely.
I wonder how anyone can ever again have a clear title. We are only noticing some of the ones going to foreclosure but I’ll bet most of the home title paperwork is in the same crappy shape. As long as payment is being made to the mortgage service company everybody looks the other way. As soon as there is a glitch of any kind the shit pile unravels. I’d bet good money that we have only seen the scab on this wound but that underneath there festers a massive, rotting disease, that is our entire financial services industry. And I’m afraid that a number of people know that and are hoping that no one notices that gangrene is setting in.
Debbie
Check out this from the website Naked Capitalism there is fraud in the process service. This study finds one county in Florida alone there are 9,000 cases where the notice of foreclosure was missing.
SATURDAY, OCTOBER 2, 2010
Homes in Florida Seized Without Notice of Foreclosure: Suspiciously Large Number of “The Dog Ate My Summons” Filings
http://www.nakedcapitalism.com/2010/10/homes-in-florida-seized-without-notice-of-foreclosure-suspicously-large-number-of-the-dog-ate-my-summons-filings.html
and from the website “Foreclosure Fraud” there is an ongoing series documenting fraud in foreclosure notices going to homeowners.
SUPER SEWER SERVICE – I FEEL BAD FOR ALL THE PEOPLE WHO LOST THEIR HOMES AND WERE (OBVIOUSLY) NOT SERVED
http://4closurefraud.org/2010/05/25/another-insider-comes-forward-other-monsters-in-the-sea-sewer-service/
Dustin
I can’t speak to foreclosure servings but considering that just last year I had the wonderful joy of fighting against a utility collections default (for a collection I neither owed or a utility I ever used) I don’t doubt that there are shenanigans being pulled.
It turns out that even if you’re never served and never know about a proceeding it’s a major pain in the ass to convince the legal system that you don’t owe what they just declared you do (due to not knowing about or showing up at the proceedings). I ended up winning, but if it’s that much of a fight for a $400 bill I can only imagine a $400k one.
Tonal Crow
@Ruckus: All other factors being equal, there is more risk in buying property that has a foreclosure in its chain of title, than in buying property without a foreclosure. How much more risk depends upon the particular property’s history. “I’m fucked” certainly overrepresents the *average* homeowner’s risk, though it might be correct for some particularly-unlucky homeowners.
That said, I do think that botched foreclosures are an unappreciated systemic risk, especially to title insurers.
Please consult a lawyer if you’re concerned about property you own or are considering buying.
Johannes
@Napoleon: Well, I’m not a real estate attorney, but I am a litigator, and I’m not sure you’re right. If the grounds for the invalidity of the process served is fraud (i.e., Corporate Jackelope A tells me it owns my mortgage and in fact it does not), and the facts which would have put me on notice of my defense to the claim have been hidden by CJA and its agents, then isn’t my claim against it and them tolled until such time as I know or should know about the facts which have been hidden? Certainly in ordinary civil litigation that would be the case; I don’t know why that wouldn’t be here. It would seem to be an application of the age-old doctrine one cannot profit from one’s crime–see, e.g., Riggs v. Palmer (NY 1889).
Original Lee
@numbskull: We had a similar occurrence in 1991 with our first house. We specifically waived escrow for property taxes, which we were allowed to do because our downpayment was 25% of the purchase price, and as we were merrily looking through the paperwork prior to closing, we noticed that they were trying to set up an escrow account for property taxes. We pulled out our copies of the original documents and pointed this out. Fortunately, our closing attorney (someone we still use to this day for various real estate issues), smacked the fingers of the seller’s closing attorney, and after a 2-hour delay to get the new set of papers to us, we were able to close. IIRC, Coldwell Banker was the realty company and Bank of America was the mortgage originator. We also caught flack for insisting on a 30-year fixed-rate mortgage, but I am so glad we did, because our mortgage was sold 5 times at least in the following 10 years.
Ruckus
@Tonal Crow:
This was more of a “we’re all just fucked” comment.
But think about it. How many of the foreclosed properties have bad paperwork? Even if that was only 15-20% that’s a lot. (And yes I pulled that number out of my ass) And there is no reason to believe that if even a small percentage of the foreclosed properties have bad paper that this doesn’t extend to non foreclosed properties. With so many mortgages resold in bits and pieces to protect the purchasers of them from any liability the paperwork has a pretty good probability of getting screwed up. Now of course in a rational world this could be fixed pretty easily. But someone who doesn’t have enough money to stay in their house is probably going to have a pretty hard time paying for a good lawyer, which they badly need. And as seen a lot of time the courts are not only not a help but a huge part of the problem.
It used to be easy. House built, house sold, bank holds note. Or house sold, note paid off, new loan/owner, bank holds note. If the bank sold the note (which has happened to every mortgage I have had over the last 32 years), it was sold complete. As we all know it is not this way any more. So tracking who owns what, how much they own, becomes much harder. It shouldn’t be but it is.
So what happens next? Is the system broken? I say it is. Not because the note has been sold, but because the convoluted way it has been sold creates confusion and a problem point on all sides. And as we see in FL everyone just threw up their hands and said fuck it, mortgage holders must know more than home buyers.
It will not be fixed until the underlying problem(s) get fixed and that isn’t happening any time soon.
Nutella
This can affect renters too. There were stories in the Chicago papers about a criminal ring that acquired the mortgages for apartment buildings, told the tenants to send the rent to them, and then never paid anything on the mortgages. Eventually the buildings were foreclosed and the renters were evicted without notice. The sheriff and the courts got the ‘without notice’ part straightened out eventually but it was a financial disaster for many of the tenants.
Jay in Oregon
@Michael:
They sound like the number three men in Al-Qaeda…
Odie Hugh Manatee
@Mojo:
Because they have the audacity to exist you silly goose! If they didn’t exist then there wouldn’t have been a problem, it’s as simple as that.
Of course, this line of thought only works if you are simple-minded.
Sasha
And of course the fact that so many judgeships are being held up by the GOP doesn’t help the case overload either.
Sad_Dem
The first house I bought, before the bubble, had its legal description wrong on the paperwork. The legal description was for the house next door. At the time I realized the irony that I, the rube, was the one who had to insist to the professionals that they fix it. After all, I could have defaulted and kept the house because the legal description was wrong, is that not so? If insurance companies can get away with that kind of thing, why can’t I? And that was before the bubble, when contracts that everyone knew were fraudulent, not just sloppy, were getting pushed through as fast as they could be moved.
I wish success to the people who go to court to fight an foreclosure on the ground that the bank doesn’t have title. They have every right to do so. Title used to be a very solid, verified thing before the MBA types messed it up (along with so much else).
Sad_Dem
@KG and Angry Black Lady: Do you see any reason why MERS won’t find itself getting estopped in the near future in CA courts? How have the courts been handling Civil Code 2923.5?