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…