Recently Discovered Flaw in Recording System Clouds Titles on Previously Foreclosed Properties

Looks like the title industry is starting to catch on…

PRWEB

The modern system of mortgage refinancing and assignments created during the housing boom has left behind a wave of title defects on properties that have ever had a foreclosure in their history, due to a loophole in the property records recording system. This has been detected on a number of properties currently in foreclosure, and found to have been uncorrected on properties previously foreclosed.

“A significant number of previously foreclosed properties have a title defect which could technically affect ownership rights for future owner.”

Dawsonville, GA (PRWEB) February 10, 2010 — A previously undetected title flaw has been discovered on many previously foreclosed properties. As the number of real estate foreclosures skyrockets, the odds are higher that a home you live in today, or at some point in the future may have had a foreclosure in its history. Even if the foreclosure has long since passed, a loophole in the way mortgages are recorded can create a serious title defect for future owners. Title analysis performed this month by AFX Title has detected this error to be common in random samples of properties it reviewed. “This could affect the property ownership of millions of homes nationwide” said David Pelligrinelli, of AFX Title. “The mortgage recording method which created this title flaw did not exist until recently. As title abstractors are just seeing this problem emerge now but a wave of title claims is coming over the next year or so.”

The problem is created through a break in the chain of mortgage ownership. Until the 1980’s, most mortgages were loans between the homeowner and a bank, who lent the money directly. More recently, the mortgage financing system transformed into an international system of securitization, with mortgage lenders packaging their loans into securities, bought and sold by investors like stocks. These transactions even split individual mortgages into sections, where each loan could have parts owned by different investment banks.

The transfer of ownership in these mortgage backed securities (MBS) was done with contracts on the balance sheets of Wall Street investment banks, such as Morgan Stanley and Goldman Sachs. The company who originally appeared to make the loan was normally a retail lending company such as Countrywide or Lending Tree, who typically acted as a sales company, and sometimes remained contracted to service the loan.

In the event that the loan goes into foreclosure at a later date, the then-current owner of the loan files the foreclosure and sells the property to a new owner, often at auction. The land records would show a deed of transfer from the investment bank to the new owner. This creates a break in the chain of ownership of the mortgage rights. In many cases, the transfer of ownership of the mortgage loan has gone from the original lender, through several owners, and then to the foreclosing bank, none of which is recorded on the property title history. Technically, the foreclosing bank has no recorded title rights to foreclose in the first place. Owners of the loan normally do not publicly record each of the transfers out of expediency, and cost. Filing a document of transfer (called an assignment) in the land records incurs a substantial fee paid to the county clerk.

Some delinquent homeowners have used this error to delay the foreclosure, forcing lenders to “produce the note.” In these cases, the bank has to go through the process of getting assignments to the foreclosing bank after the fact. However, the title repair process is not required however in the majority of cases when the homeowner does not contest the foreclosure.

This leaves the break in chain of title dormant in the property records, vulnerable to be contested in the future. A few largely overlooked cases have already been decided by courts on this issue. In Lowell MA, a judge invalidated the foreclosure of homes based on missing and out-of-order assignments (US Bank v Ibanez).

Unraveling the chain of title and clarifying ownership of loans will create challenges for the courts and legislative bodies in all states. In the meantime, homeowners and buyers should be aware of how this could affect their property title. There are reports that some title insurers are indicating that they will not insure for this title defect.

As a national provider of property title searches, AFX Title is seeing an increasing number of files where the chain of title has obvious gaps in the recorded mortgage assignments. According to Pelligrinelli, the issue is serious. “When running searches for clients, we are noticing that a significant number of previously foreclosed properties have unconnected chain of assignments in the mortgage history. This could represent a title defect which could technically affect ownership rights for future owner.

Pelligrinelli adds that some lenders and government institutions are rushing to repair the titles on lender-owned properties as they discover them in their portfolio. This does not help individual owners who own properties previously foreclosed.

Editors note…

I wonder if they are trying to “repair titles” by filing BOGUS (literally) mortgage assignments…

4closureFraud
www.4closureFraud.org

Comments
8 Responses to “Recently Discovered Flaw in Recording System Clouds Titles on Previously Foreclosed Properties”
  1. Sonya says:

    GEORGIA RESIDENTS: If Bank of America has been bullying you. Placing Flood Insurance on you, Sending Letters with Intent to Foreclose…even though you aren’t behind on payments, Escrow charges they can’t or want explain, sending people to your house to verify occupancy even when you are not behind on payments. If they have done anything to you that doesn’t seem right to you. Please contact me, I might be able to help you.
    Sonya sonya36767@yahoo.com

    • Greg says:

      Sonya,

      I’d be very interested in hearing from you or talking to you. You may be interested in the ongoing litigation against BofA. This is not a class action suit but a Mass Joinder lawsuit where each person is actually a named Plaintiff in the case. I’d like to talk to you more about this so please email me when you have a moment gregmoeller2005@yahoo.com
      Greg

  2. Gordon Brooks says:

    Why does this article assume that only previously foreclosed properties are affected? Any property securing a mortgage with unrecorded or invalid assignments is at risk. Why should the recording of a discharge prepared by DOCx or NTC be any more or less valid than an assignment by one of these these same paperwork mills?

    I think anyone with a mortgage, and even those who’ve had a mortgage discharged within the past four or five years, should check the records, regardless of the status of their payments or the value of their property.

  3. smallz says:

    The rationale put forth in this article is part and parcel to mortgage fraud problem itself.

    Although there’s some truth in this article, the writer fails to TELL THE WHOLE TRUTH within the full context of the problem itself.

    According to David Pelligrinelli – “The mortgage recording method which created this title flaw did not exist until recently. As title abstractors are just seeing this problem emerge now but a wave of title claims is coming over the next year or so.”

    Unless I’ve been misinformed, recording paper mortgages in county records has been a staple in American real-estate up until the rabid SECURITIZATION enabled by The MERS business model. Consumer Warning Network has done an excellent presentation on Mortgages between borrower and lender that date back to the 1600’s.

    Nevertheless, as far back as 1993, WAY BEFORE THE HOUSING BOOM, The Mortgage Bankers Association was brainstorming the idea of a “digital clearinghouse” to make “mortgage assignments as extinct as dinosaurs at Jurassic Park” according to Phyllis K. Slesinger, then General Counsel for HUD and Mortgage Banking Association Alumni.

    By that, its reasonable to suspect that “mortgage assignments” were as American as Apple Pie prior to the creation of the SECURITIZED housing bubble with the help of a “digital clearinghouse” now known as MORTGAGE ELECTRONIC REGISTRATION SYSTEMS.

    The article goes on to state:

    “Owners of the loan normally do not publicly record each of the transfers out of expediency, and cost. Filing a document of transfer (called an assignment) in the land records incurs a substantial fee paid to the county clerk.”

    In my opinion, that statement is just plain Hogwash because it justifies the Rationale that got us into this mess with MERS in the first place. One of the excuses to create MERS was to “save customers money”. But nobody stops to ask, who is saving the money and who is being denied the money saved?

    The parties “saving money” on recording FEE’S are the same parties that just walked away with $23.7 Trillion in welfare – The Banks.

    The people being “denied money” are the jobless General Public and furloughed Local Municipalities who depend on revenue to survive. Upon last check, the average cost to Record Documents at a County Recorders is on or about $14.00 for the first page and $3.00 for an additional page. Compared to a substantial fee of $23.7 Trillion Dollars Recording Costs are a drop in the bucket.

    Ever stop to think who’s crying about that “Substantial Fee” anyway? You guessed it: THE SAME BANKS TRYING TO STEAL YOUR PROPERTY.

    So the question is: who is helped from the decision to STOP recording and who is hurt?

    As you can see, this “cloud on title” is great for pretender lenders using the lower courts to take possession of property from borrowers and a nightmare for homeowners and investors looking for concrete answers.

    If GSE’s would not have encouraged this reckless methodology of IGNORING REAL ESTATE LAWS ALREADY ON THE BOOKS, this tremendous cloud on title issue would be a moot point. Why? Because Chain-of-Title would be clearly recorded and evidenced to show who owns what, when they came to own it, and how much it is worth.

    When you buy a car, it must be “registered”.

    When you copyright a movie or story is must be “registered”.

    Should real estate be any different?

    “Don’t Believe The Hype” – Public Enemy

    • starkey says:

      Dont answer a flyer that comes to your house on mortgage refinance or help for forclosure. they get you to pay to represent you then file an answer in court under different company. then give your documents to the bank were they lost your note and yes you pay them to steel your paperwork the lawyer who filled your answer becomes lawyer who steels your house in forclosure. They put fake email to your attorney so you never receive forclosure papers. Fraud upon fraud. Manipulate and swindle a group of lawers to take your home. Canot sell no payoff can not have your day in court. Court puts motions after ffilled later than when you file so they can say yiu did after the fact and file for title befor the date of hearing. See fl barr. Complaints . Group of attorneys these fl mills for forclosures.

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