The Market Ticker – Oh Oh – Here Comes (More) Trouble On Foreclosure Titles




Oh Oh – Here Comes (More) Trouble On Foreclosure Titles

Eh, I have an update from Fidelity Title – this is for Florida foreclosures.

Here’s the salient “trouble spot” – this is what must be in the foreclosure docket for them to grant a policy:

The plaintiff in the action is: (1) the record holder of the mortgage being foreclosed; or (2) has filed the original promissory note in the foreclosure file; or (3) has obtained a final order reinstating the lost promissory note.

Oh oh.

Note those requirements – if there’s no documentation that the mortgage being foreclosed actually is the record holder (e.g. an “affidavit” isn’t good enough) or the note isn’t there, then you got trouble.  You need a final order reinstating the allegedly-lost note.

#1 is generally only satisfied by a public filing (no, MERS claiming that someone is the “investor” will not do it, nor will a foreclosure in the name of MERS, since MERS is a nominee, not the holder of record – ever.)

#2 is obvious – but if those were being filed there’d be no problem in the first place.

#3 works if you can get judicial notice of the substitution of the “lost note” for the real thing.  I don’t know how often that happens, but I suspect the answer when we’re dealing with “Rocket Dockets” is essentially never.

This ought to make things rather interesting in terms of foreclosure resales…..  Fidelity is one of the big title boys, so where they go, others tend to follow.

Incidentally, their memo references a master-indemnity agreement related to Bank of America and their foreclosures.  I hope Fidelity, and those buyers who use them for owners policies, recognize that such an indemnity stands in the position of an unsecured creditor if Bank of America is taken into receivership…….. (Yes, that means that “indemnity” is worth bupkis should BAC go down.)

I, personally, would not rely on any such “indemnity” to be worth more than a warm bucket of spit.

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I sure could use some…

13 Responses to “The Market Ticker – Oh Oh – Here Comes (More) Trouble On Foreclosure Titles”
  1. James M says:

    This is not much change from before. Many actions have a lost note count.

    Frequently the note is magically “found” and then entered into the record, before the attempt to short circuit the trial by getting a preemptive Summary Judgment. Problem solved.

    The law has always been that if there were two counts (1 for lost note) and (2 for foreclosure) the plaintiff had to prove up the lost note count before it could more for foreclosure.

    This could be done in one hearing, but were separate issues. With no opposition to a affidavit, if the court found the proof sufficient, the lost note count could be granted on the spot…. Except that most smart lawyers pointed out that the plaintiffs had previously stipulated they could not find it after a diligent search so there was a material fact as to possession at time the complaint was filed. This created an issue of material fact which must be resolved in favor of the non-moving party, the defendant, and summary judgement should be denied.

    If defendants and their counsel were smart and educated they knew that on the lost note count they got a jury trial, if their answer included a demand for jury trial. If there were materiel facts in dispute about the lost note, (which precluded a summary judgement on the lost note count), the court had to have a real trial with a jury on that count first – before the court could proceed to hear the foreclosure in equity.

    The third one is maybe the only significant one. “(3) has obtained a final order reinstating the lost promissory note.” This is not much change from before except the requirement to be a FINAL ORDER. Which means they would have to obtain an order, and it would have to become final by the time for appeal running out, before they could come to court for a judgement on the foreclosure.

    Previously plaintiffs were getting both the counts for lost note and summary judgement done in one hearing, if they were smart enough to set both counts for hearing and support both counts with evidence. Not exactly rocket science.

    This case is distinguished because the issue in the instant case, (Joseph Servedio v US Bank National Association) is that the plaintiffs only moved on the foreclosure count and failed to move for the court to grant the count to re-establish the lost note.

    I think that is more of a procedural error on behalf of a sloppy foreclosure mill, rather than a new legal hurdle. It would not present a bar a case that was properly plead, correctly motioned and competently argued. (Not a foreclosure mill specialty.)

    This failure is commonly not evident in the record. This is because it gets glossed over by a motion for summary judgment which fails to identify what counts will be argued and fails to comply with rule 1.510(c) by specifically identifying the evidence to be used by the court and fail to state what will be argued. If not challenged on these grounds the demand for summary judgment sails through and there is no evidence, except maybe in the judgment, that the lost note count was not addressed. (See new wording addressing both counts to appear in Plaintiffs proposed summary judgments, coming next week to a court near you.)

    The reason we are seeing so many fake or fraudulent AOM’s recorded at about the time the Plaintiff wishes to move to foreclose is so they can slide in under the first condition cited (#1 the record holder of the mortgage being foreclosed).

    Personally I believe that even if the note was not lost, a court should require two diffrent proofs: That their is a chain of title or endorsement evident on the note AND that the assignment(s) of mortgage are properly and timely recorded to match the ownership of the note. This would make the plaintiff prove the note and mortgage were not bifurcated, which would destroy the secularization of the note.

    So this does not change the rules. Except that if plaintiff can’t find note, and plaintiff can’t afford the $12.50 fee from LPS for wipping up an official looking ‘Assignment of mortgage’ executed by some fake bank VP, then the Plaintiff must get a FINAL judgement on the lost note count before proceeding with the foreclosure count.

    NOTE: Just filing the the ‘lost note’ later in the action does not prove plaintiff possessed it at the time of filing the complaint. Plaintiff must have standing at time of filing the complaint. This is a structural flaw that is frequently attacked by defendants counsel, who says prove it, especially when the alleged and dubious assignment is recorded or dated after commencement of the action.

    • DebbiCat says:

      If the homeowner has all the papers from the closing, shouldn’t it include at least a copy of the Note they signed? And if that homeowner takes that copy to court during bankruptcy or foreclosure proceedings and it DOES NOT match what the bank files with the court, isn’t that “GAME OVER”?

      • James M says:

        Well signatures must match, etc. But the original note has probably traveled since then. It may now have endorsements on the last page and possibly an along attached to the back.

        To get a SJ a copy of the orignal note and mortgage must be in the record 20 days before the hearing, showing any new endorsements or along. (As must all plaintiffs evidence).

        If your copy note is diffrent from the one the bank has, in what way is it diffrent ?

      • Nathanael says:

        I’m assuming she’s referring to a case where the “note” presented by the lender is blatantly an entirely fabricated document.

  2. kravitz says:

    Fidelity has decided NOT to implement those restrictions.

    They dropped them because their competition did not adopt them, and Fidelity could lose business to title insurers.

    After this morning’s hearings, they may have to adjust plans anyway.

    Fidelity National Drops Plan for Lender Foreclosure Guarantee

    The company won’t require an indemnity agreement before insuring individual foreclosed properties, according to a memorandum to employees yesterday. It will continue the arrangement with Bank of America Corp., the largest U.S. lender.
    Fidelity National reversed course from a requirement put in place a week ago after institutions took steps to police foreclosure paperwork, according to the memo. Failure of other insurers to follow its lead also put the Jacksonville, Florida- based company at a competitive disadvantage, said Peter Sadowski, executive vice president and chief legal officer.

    • Nathanael says:

      “competitive disadvantage”. Absurd. Every title insurer in the country has a major chance of going under because of the number of bad titles. I suppose the title insurer CEOs figure they might as well pull out as much money as possible in CEO salaries and bonuses before their company goes under, isn’t that what most CEOs do?

  3. pelucheven says:

    gretchen morgensen from the new york times will be interviewed regarding the foreeclosure mess.
    she will be today at 3:00pm Eastern standard time
    WAMU 88.5 FM


  4. Stupendous Man - Defender of Liberty - Foe of Tyranny says:

    Number 1) – This is a simple matter of fabricating and forging an assignment of mortgage, something that has already been taking place in literally millions of cases/instances.

    Number 2) – The original note will NEVER be filed in the foreclosure file. EVER!! If the note can be located (I’ll not go into any discussion on the “if” part of this comment) it would be insane to file it anywhere other than the vault of the “institutional custodian” pursuant to the terms of the Pooling and Servicing Agreement. Were I the holder of a note I would not ever let it out of my control, or the control of my custodian.

    In this instance a copy of the note should suffice. But not just a plain old copy. No, it must be a copy that has been certified by the custodian, in affidavit form, AND SUBJECT TO THE PENALTIES OF PERJURY!! This is basically in accordance with the rules of evidence.

    3) This is likely to be easily overcome depending on the level of incompetence, or corruption, of the court in which the subject property is located. A final order of this nature is clearly not that difficult to obtain.

    It is interesting this comes from Fidelity National Title.

    Some years ago there was a spin off of Fidelity National Title – Fidelity National Information Services. For several years FNIS was the defacto “default servicer,” involved in 70% or more of ALL foreclosures nationwide. In 2008 FNIS spun off Lender Processing Services (LPS) which carried on in default servicing.

    Among the “products and services” offered by both FNIS and LPS, as well as a subsidiary recently used by LPS known as DOCX, was the fabrication of missing documents. These included assignments of mortgage, promissory notes, affidavits of merit or account, etc.

    FNIS, LPS, DOCX, and others, have already been fabricating these documents and instruments for use in foreclosure proceedings in courts. How difficult do you think it will be for the foreclosing entity, or purchaser, in an effort to wash a property with a defective title clean, to simply continue the fraud, fabrication and forgery? Answer: Not difficult at all.

    While this is progress in the right direction it still isn’t a “silver bullet.”

  5. indio007 says:

    Denninger is a tool. He has leached on this for political purposes. He talks about everything except the monetization/origination issue. Is he an MBS investor positioning himself for repos? I don’t know but I got banned from Market Ticker in ONE post for bringing it up. I’ve been on internet forums and newsgroups since 1991 and have never been banned or even threatened to be banned. Bring up borrower in custody program through the discount window and instaban. He try to say some crap about Discount Window being short term despite the BIC’s guidelines require yearly inspections. That doesn’t sound like overnight borrowing to me.

    Then I find out he started the tea party…… BEWARE.

    He’s doing what is called by co-intel as a limited hang out.

    • Maybe YOU are a “tool.” Karl actually saved my life. Be nice to him next time, “tool.”

      • Wild Bill says:

        Maybe he does have MBS investments — the gov’t is going to buy them all up, if your job is to make money for your customers you better play the right games. He has every right to ban you for commenting on his site. If you want to comment on him, start your own site and see who shows up.

      • indio007 says:

        Nice of you boys to avoid the substance of my comment just like him.
        Monetization is the core of the issue. The fact that real estate notes where circulated just like the dollars in your pocket privately AND the public dollars in your pocket are backed by those mortgages. Can you say twinning a stream of revenue?

  6. sheila says:

    so all of it happen to me and the new oweners got a specialty tittle. Since the bank could not transfer my tittle they did not own. There was not one pice of court papers filed about a not transfer from my mortage company who was dead,they were sh;ut down and kicked out of 7 states. The bank who took my home sold it six months later for 100 thousand less then I bought it.

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