Oh boy, if you think the Massachusetts Supreme Judicial Court decision on Ibanez, which raised serious questions about the validity of transfers in mortgage securitizations, turned heads in the banking industry, you ain’t seen nothin’ yet.
The SJC is considering what has the potential to be another widely-watched case, Bevilacqua v. Rodriguez. Note this case was heard at the lower court level by the same land court judge, Keith Long, that ruled on Ibanez, and the SJC in large measure affirmed Long’s take in that case. The issue is key: whether a buyer can own a piece of real estate acquired from a party that lacked the right to foreclose upon the previous owner.
The background via Bloomberg (hat tip April Charney):
Francis J. Bevilacqua III went to Long’s court to force the original owner to say whether he had a claim on the property in Haverhill, about 36 miles (58 kilometers) north of Boston. A city assessment website lists four condominiums at the location with a total value of $600,300.
Bevilacqua asked Long whether he could try to find the original owner through newspaper notices, said his lawyer Jeffrey B. Loeb, of Rich May PC in Boston, in a phone interview.
In August, Long ruled that Bevilacqua wasn’t the property’s owner and didn’t have standing to inquire about claims. U.S. Bancorp, which sold Bevilacqua the property in 2006, conducted an invalid foreclosure because it didn’t properly own the mortgage at the time, Long said.
The mortgage transfer to U.S. Bancorp, which oversees the mortgage-backed trust containing the loan, happened after the foreclosure, Long said. All Bevilacqua had was a deed from an invalid foreclosure sale, the judge said.
“I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote.
The really funny part here is that when contacted, the bank that sold the property to Bevilacqua, US Bank, piously said it wasn’t a party to the lawsuit, as if it and other servicers won’t be in the crosshair of a lot of litigation if this ruling goes against them.
This is the plaintiff’s argument, which presumably would also hew with the banks’ position:
In their appeal brief, Bevilacqua’s lawyers argue that Long confused requirements for the law used to prove one’s title to a property with those for the law their client sued under, the so- called try-title statute, through which one party seeks to force another to assert or waive a potential claim on the property.
“The Land Court made this finding despite the existence of a recorded deed conveying the property to Bevilacqua,” they wrote. The lawyers said that even if the Ibanez ruling means Bevilacqua doesn’t have “legal title,” he has “record title” because of the deed.
“Anyone conducting a title search would be led to believe that Bevilacqua is the record owner of the property,” they wrote. “Bevilacqua recognizes, without conceding, that Rodriguez may have a claim to the property.”
A ruling against Bevilacqua would cast a shadow over sales of property in foreclosure out of real estate securitizations and would create a major impetus for legislative intervention, aka yet another bailout, in the foreclosure mess. It could even raise questions about whether loan mods and short sales are valid since the servicer in securitizations may not be acting on behalf of the owner, which may not be the trust, but instead an entity earlier in the securitization chain.
This sword of Damocles will hang over the banks for some months; oral arguments in Bevilacqua are slotted for April. Stay tuned.
86 comments
Comments are closed.
Did the title insurers put exclusions in the policies written on REO for this type of thing?
Yeah, Wells Fargo started putting in a clause that has the buyer assuming all risk, should the transfer prove to be predicated on ownership that WF did not actually have.
How this will stand up in court is anyone’s guess–“your honor, just because I fraudulently sold Joe Schmoe a house that WF didn’t own, WF is golden because in clause 142.2, it says we might be robbing him and he agreed to sign it! Case closed!”
Going to be fun watching how plays out in a courtroom with a judge who actually believes in the rule of law.
I’m looking forward to reading the comments but this looks like the rule of law is similar to a rat’s nest uncovered.
So what exactly are you getting when you buy title insurance?
an bill for the paper, but not much else. Title companies have been bamboozled by the same bankioso crime families. But they can’t get out of it easily because they know about the “different” sets of documents handed the grantor and the grantee. They can’t allow anyone to see them, as it may indicate complicity.
Seems to me ruling FOR Bevilacqua would even be deadly to the banks!
All Bevilacqua is claiming is the right to go to court to determine who has a claim. Even if he wins, the result is that… he loses the main case when the real owner shows up.
Interesting – I thought the plaintiff’s position was settled law. Once a property transfers, it should be final.
Also, I knew you didn’t make the decision to add Read the Rest links casually, but they greatly reduce the readability of the blog. I’m sure I’ll miss lots of content because the headline won’t fully convey the content beneat – I wish you would reconsider.
Also, I knew you didn’t make the decision to add Read the Rest links casually, but they greatly reduce the readability of the blog. I’m sure I’ll miss lots of content because the headline won’t fully convey the content beneat – I wish you would reconsider.
I agree.
Huge fan, but ditto on the ‘read the rest’ links. I like to occupy myself reading NC as a single page cached on my iPhone. I frequently do not have a net connection and don’t always have the option of loading the ‘read the rest’ link. I liked the old format much better.
Ditto.
I don’t go to Pravda or Izvestia for my first read of the day. I come to NC because the Links of the Day are the best aggregation for what I want to know about; they are my “front page.” So I want to see them all and completely in one sweeping glance; I do not want to have to click through.
Ditto on Eagle, Dave, Jerry and Lambert. Usually, the rationale for doing it this way is to drive pageviews (read, eyeballs for advertisers) as with Huffington Post or The Daily Beast and their slideshows. Maybe you aspire to be the next Arianna, er, Joe Lieberman’s new sweetheart, but it doesn’t look like there is so much advertising here that the expansion of an entry must, in view of the economics, be done this way.
A vastly more reader-friendly way is the way Andrew Sullivan now has the Daily Dish, where an entry expands on the home page, without opening a new page.
Please consider that approach. Pretty please. With sugar…
Me too on the new blog format. The older style is much more preferred.
I usually read everything anyway. All the clicking back and forth is just annoying.
Of course, if a preponderance of your readers prefer the new style, I can go back into my cave.
i agree re the new click-through format: NO good. I really prefer the ‘old’ format. The site was MUCH easier, nicer to read. Can the format get changed back to the original style (partly contributing to this blog being #1).
Same here… I liked the earlier format better, especially for the Links part…
You are right, Eagle — it is settled law. I’m not sure about Mass., but in Texas the new owners own that house, period. The people who were defrauded out of it get damages. End of story.
If the foreclosure was void ab initio, then any deed purporting to convey the property to a 3rd party is also void, no?
Anyway – in Illinois at least, BFP protection is questionable in some/many/all? of these REO sales.
I wonder if that’s true for California as well. We have, more or less, one eighth of the nation’s houses and more than our share of delinquent mortgages.
So if I steal something and then sell it, the person that had the property stolen from them can no longer recover? The person buying the stolen property is the one who should sue me for selling then something fraudulently.
Absolutely not settled law! Under ancient English law, if you have bad title, you have to return the property to the true owner. Only way to prevent this is through quiet-title actions. This case actually appears to be about whether the phony owner is allowed to even initiate something similar to a quiet title action….
“Maybe the court will throw up its hands and say the legislature must come up with a solution,” said Bloom, a partner at Sherin & Lodgen LLP in Boston.
The legislature already came up with a solution, centuries ago.
And we have a simple, rational, equitable solution available today. It’s called holding the banks to the law.
To anyone who was taught about “law and order” and “good guys vs. bad guys” as a kid, it must still be astounding on some level, the way it’s so accepted, so matter-of-fact, that this level of organized crime must simply be accepted as a fact of life. “If the gangsters screwed up so badly according to their own already-rigged law, then the law will just have to be changed again to accommodate them.”
What is this “Law” you speak of? I have heard tell of it, but have not seen its footprints about.
Good.
We can impose justice on the banksters any time we choose.
Bevilacqua’s recourse is to US Bancorp.
Curious, should not the Judge have rendered a referral to the AG against US Bancorp for the perpetration of a fraud upon the court?
US Bancorp cannot commit fraud. It is a Corporation. It is like a brick building. It has no motives, hence can commit no crimes.
It can buy votes and judges and politicians, it can be embarrassed, and has a right to privacy. But it can’t commit a crime.
You are good, I hope you continue to post.
The Nuremburg tribunal disagrees with you. It indicted and convicted the Nazi party and several of its organizations.
So a corporation can most definitely be declared a criminal.
But since they’re anti-sovereign, we should just go the more direct route of declaring them non-existent.
But the opinion during the Nuremberg Trials is as relevant as my opinion on the best kind of cookie: The only opinions that matter are ultimately, those of SCOTUS, and we know what the conservative majority in SCOTUS think.
Spitzer threatened lots of companies such as AIG with criminal indictments. They all settled because the consequences of a trail, let alone a guilty verdict would have been devastating, particularly for a financial services firm.
Not true, see this, http://www.onelbriefs.com/outlines/crim/fraud.htm
* Corporate Liability
o Common law method…
+ A corporation can be held liable in criminal law.
+ A corporation can be found guilty of a crime requiring specific intent for actions committed by its agent if… (State v. Christy Pontiac-GMC)
# The agent was acting within the course and scope of his employment, having the authority to act for the corporation with respect to the particular corporate business which was conducted criminally,
# The agent was acting, at least in part, in furtherance of the corporation’s business interests, AND
# The criminal acts were authorized, tolerated, or ratified by corporate management.
o MPC Method (2.07)
+ A corporation may be convicted of the commission of an offense if…
# The offense clearly shows the legislature’s intent to impose liability on corporations AND
* Conduct is performed by an agent of the corporation acting in behalf of the corporation within the scope of his office or employment OR
* The offense consists of an omission to discharge a specific duty of affirmative performance imposed on corporations by law OR
* The commission of the offense was authorized, requested, commanded, performed, or recklessly tolerated by the board of directors or by a high managerial agent acting in behalf of the corporation within the scope of his office or employment.
* Collective Knowledge of a Corporation (U.S. v. Bank of New England)
o The knowledge of a corporation is the sum of the knowledge of all of its employees; totality of what all of the employees know within the scope of their employment.
o A corporation cannot plead innocence by asserting that the information obtained by several employees was not acquired by any one individual who then would have comprehended the full import.
and see this, http://ago.mo.gov/newsreleases/2010/Cathedrad_Rock_Nursing_Homes_Pleads_Guilty/
Jefferson City, Mo.—Attorney General Chris Koster said today five nursing homes operated by Cathedral Rock, a Texas corporation, pled guilty to felony health care fraud following a federal investigation.
The bona-fide purchaser laws that protect buyers from this very thing should come into play here. Not saying the banks don’t have liability but I think its doubtful houses can be taken from bona-fide buyers of Foreclosure resales.
A bona fide purchaser (BFP) – referred to more completely as a bona fide purchaser for value without notice – is a term used in the law of real property and personal property to refer to an innocent party who purchases property without notice of any other party’s claim to the title of that property. A BFP must purchase for value, meaning that he or she must pay for the property rather than simply be the beneficiary of a gift. Even when a party fraudulently conveys property to a BFP (for example, by selling to the BFP property that has already been conveyed to someone else), that BFP will, depending on the laws of the relevant jurisdiction, take good (valid) title to the property despite the competing claims of the other party, so long as the BFP properly records the transaction pursuant to local property law. However, parties with claim to ownership in the property will retain a cause of action (a right to sue) against the party who made the fraudulent conveyance.
A BFP will not be bound by equitable interests of which he/she does not have actual or imputed notice, as long as he/she has made “such inspections as ought reasonably to have been made”.[1]
BFPs are also sometimes referred to as “Equity’s Darling”. However, as Jeffrey Hackney has pointed out,[2] the title is somewhat misleading; in cases where legal title is passed to a bona fide purchaser for value without notice, it is not so much that equity has any great affection for the purchaser – it is simply that equity refuses to intervene to preserve any rights held by the former beneficial owner of the property. The relationship between the courts of equity and the BFP are better characterised as benign neglect. However, equity still undoubtedly recognises the right of the beneficial owner to claim against the former legal owner where the sale was improper.
In the United States, the patent law codifies the bona fide purchaser rule, 35 U.S.C. § 261. Unlike the common law, the statute cuts off both equitable and legal claims to the title.
You are absolutely right. There would be damages for the defrauded former mortgagor, but they don’t get back the house. The bona fide purchaser just does not have a problem. If they go screwing around with this law now, we genuinely have opened pandora’s box.
We’ve never suggested that buyers out of FC sales would lose their homes, and have pointed to comments by bankruptcy experts saying that foreclosure sales enjoy a very strong degree of legal protection.
if the foreclosure was void ab initio, can there be a BFP?
read the case law
Do you have any citations? As a non-lawyer, I have no idea where to look for the relevant case law, even in my own state never mind MA.
Mark H:
I’m not sure that Bevilacqua would qualify as a bona fide purchaser. The foreclosure deed is from “US Bank National Association as Trustee . . . holder of a mortgage from Pablo Rodriguez to [MERS] as nominee for Finance America, LLC . . . grants to US Bank National Association as Trustee under the securitization Servicing Agreement . . .” US Bank, as Trustee for the securitization trust, then deeded the property to Bevilacqua. However, it appears that MERS never assigned the mortgage to US Bank. This is the same situation as Ibanez. Under Mass. law, only a current mortgagee can foreclose, and US Bank wasn’t the current mortgagee (at least of record) at the time of the foreclosure. If the above is accurate, there would have been a title defect that Bevilacqua knew or should have known about when he bought the property. That might disqualify him as a bona fide purchaser since he should have known there was an adverse claim to the property.
This. It’s evident that Bevilacqua had knowledge that there were other claims. (Hey, he brought the freaking case!) I don’t think he gets the BFP exemption.
Ah, but there are questions of whether the purchaser *was* a bona fide purchaser for value. In this case the key questions relate to whether the purchaser had notice, or constructive notice, that there may have been other claims on the property.
*This is why it is critical not to move out* if you are being illegally foreclosed on. You will provide damned clear notice to any prospective purchasers, and can at least argue that they *should have known* of your claim.
I believe the SJC will uphold the Judge on this case because to do otherwise opens up too many possible bad outcomes in other cases.
Bevilacqua is starting from the position that he has a deed which is a nullity. It is a nullity because on the record at the registry of deeds the “foreclosing bank” never acquired title to the mortgage it foreclosed on.
Since Massachusetts is a title theory state, this is the equivalent of my drawing up a deed to your house in Massachusetts and conveying your house to some third party. Even if I record this deed, it should be obvious from the record that I had no right to do that. Allowing the person to whom I “conveyed” your house to force you to go to court and defend your title under those circumstances is ridiculous and unfair to you. That is why the lower court judge in Bevilacqua refused to allow the case to go forward.
Quote from the memorandum of decision in the lower court:
“Otherwise, in the classic example, a litigant could go to the registry, record a deed to the Brooklyn Bridge, commence suit, hope that the true owners either ignored the suit or (as here, discussed more fully below) could not readily be located and be defaulted, and secure a judgment.”
Like the Ibanez case, this analysis is not new or complicated law. It is as old as the recording statutes in Massachusetts (i.e. really old).
I have to disagree Mark, fraud in the inducement, fraudulent sale and no legal right to act regarding the property. It was all based on fraud, thus the BFP has to go to the seller for redress. There is no BFP when the party knew what it was offering was bogus.
There are only a few hundred thousand of these pending. With a business model of fraud and the appearance of RICO activity, will we finally see any perp walks?
Brian writes:
Only when there is a catastrophic fail by one of the legacy parties, whether D or R, that opens space for an independent force, at the state or local level. We saw what happened with the Iowa AG, and there’s no hope at all at the Federal level, since Versailles is completely captured. I mean, if Grayson, or Kaptur, or Kucinich, or Sanders et al, were going to do anything like that, they would have already done it.
I’m sooo tired of reading all the books, the articles by economists, the blogs, the posts about this enormus fraud on the american people. When is someone going to jail for this? What can we do? I think we are all past the point of reading about HOW this happend. Now what is the solution so we can move past this? The first bankster to be indited will bring an enormous sigh of relief and a rallying (pitchforks?) of americans, feeling like they will get some power, some control and some justice back into our lives!
I have read the bevilacqua decision, It is straightforward. You can not sell something you do not own,the foreclosure was a nullity and the bank had no interest to sell.
While the courts/banks/MBS investors/foreclosed homeowners try and get it right that leaves Fannie/Freddie/FHA and cash to finance homes. Have no idea how long this venting process will take but the impact on financing the American Dream purchase and what innovations are in store to keep the scheme afloat should prove interesting.
We need to see many more actions such as the following video, where some 200 members of the Sheetmetal Workers Union crashed a private meeting of mortgage banksters to protest layoffs by a homebuilding company that got $900 million in federal funds that was supposed to go for job creation. And banksters fled the scene….
http://workinprogress.firedoglake.com/2011/01/19/union-members-disrupt-mortgage-banksters-meeting-in-dc-video
Hah, looks like all it took to scare the living beejeezus out of those bankster criminals was to show up in person and say “boo”. Imagine if these blue collar workers had actually threatened them with violence.
Or imagine if NPR liberals had organized this protest instead. In the first place, they would’ve tried to talk the protestors out of it. Tried to defend the mortgage bankers and their point of view. Next they would’ve insisted that the Sheet Metal Workers wear business suits and wait politely outside, instead of crashing the party. And rather than hold up signs that *demanded* “Give us the $900 million back”, NPR liberals would’ve advised them to have signs that read: “Please can we sit down at a time and place of your convenience and politely talk about that $900 million? Pretty please??”
Speaking of those loathsome NPR “liberals” (who refused to do even one story on single-payer health insurance because it might have offended the insurance companies who sponsor them), I found this over at the “stop me before I vote again” blog:
National Puppet Radio.
National Process-maven Radio
Nugatory “Professional” Recruitment
Nothing Petroleum Retires
Nattering Puerile Repugnance
Nice Profiteering, Really
NPR and PBS should just go ahead an dispense with their first letters.
Very nice, thank you!
“The disconnect between what’s real and what’s broadcast becomes more obscene by the day.” – Linh Dinh
And so while even a “senior adviser” to General David Petraeus admits that 98 percent of the people being killed by Obama’s drones are civilians, the stories that NPR is currently leading with on its website are “Obama Turns To GE’s CEO For Job-Creation Advice” and (appropriately) “The Fairy Tale Struggles To Live Happily Ever After” (about fairy tales).
You people are right , it is settled law just not in the way you think.
I can guarantee this Mass SJC will rule the following,
YOU CAN NOT PASS BETTER TITLE THAN YOU HAVE.
US bank never had title to pass.
The sale is void.
The guy’s only chance is a claim of adverse possession. I think you need to be there 20 years for that to fly.
If that’s true, what happens with the title policy written on the sale? Is there a claim against the policy? Or does the bank wind up covering/reimbursing?
I guess he would have to sue the “seller” for fraudulent misrepresentation, unjust enrichment etc…. You can’t contract to do something unlawful so the bank is on the hook regardless. How the title insurance thing works out depends on the policy agreed to and who enjoys the indemnity from it. Either way someone is going to have to make this guy whole. If he can get proof of willful negligence he might be able to get damages.
A lot of cash buyers out of foreclosure didn’t get title insurance. This guy clearly did not have it if he is in court trying to get quiet title…
Assuming the title insurance policy has an exclusion for this, hopefully the purchaser has a warranty deed and an affidavit of title. Sue the seller (bank). They swore that they had a good title, and a legal right to sell.
If no exclusion in the title policy, then make a claim to the title company, and then sue the seller for whatever difference there is (if any).
Am sure banks have nothing to get worked out about .. Equally sure Geithner, Bernanke and Congress will come up with appropriate solutions be it a front-door bailout, backdoor bailout, law change .. after all what for are stooges if not for such jobs…
I” just throw this legal maxim out there that supports my previous post.
Nemo dat quod non habet
http://en.wikipedia.org/wiki/Nemo_dat_quod_non_habet
The problem is that the original seller was defrauded by the bank that originally foreclosed. His title was legitimate (unlike the Brooklyn Bridge analogy) and the bank illegitimately sold it to an unwitting buyer.
You need to re-check the premise of your logic.
This recalls an old brokerage adage..
“He who sells what isn’t his’n buys it back or goes to pris’n”
Just to complete the quote is by Dan Drew, one of the first manipulators on the stock market. He was involved in the great Erie Railroad scam.
I think this is a stupid question!
HOW CAN THE BANK SELL SOMETHING THEY DO NOT RIGHTFULLY OWN?
They need to be arrested for dealing in stolen goods. The bank knew that what they were doing was illegal but thought we were all to stupid to figure it out.
To all:
See this link from today’s Daily Bail:
http://www.suethefed.com/
May be something, may be nothing….
Looks a lot more like ambitious lawyers than a grass roots revolt???
Great post Yves and comments. Maybe this ship can turn around.
Around 1988 in Brooklyn, New York, a crook filed phony deeds transfering unoccupied houses to himself. He then sold the houses to innocent purchasers. Around twenty or more, if my memory serves me. The county registers any deed presented for filing. The county does not evaluate whether the deed records an actual transfer of property.
The innocent purchasers buy title insurance to protect themselves and a title search is done. In this case, the title search showed the fraudulent seller to be entilted to sell the property, soley because he was the registered owner as recorded with the County Registrar.
In NYS, a person cannot transfer what they don’t own. So, the title insurance companies had to make good. It is the case that the true owners had to go to court to remove the cloud on their title. In this case, the Assistant Brooklyn Attorney (a cousin of mine) moved sucessfully in court to void all of the fraudulent titles. This left the true owners to get clear title from the innocent purchasers. My client had to sue the innocent owner in court to get clear title to her property.
THe crook represented himself in a criminal trial, got convicted, and sentenced to a substantial time in jail. Had he taken the money and run, he never would have been caught.
I’m an English rather than an American lawyer, but as the law in the US is based on English common law I would suggest the situation, simplified, is this:
Where title depends upon documentation – having an unbroken, properly documented chain of title from someone whose title to the land was unquestioned – it is for the purchaser (or rather his lawyer) to ensure the seller has good title to pass on. If the seller hasn’t good title he cannot pass it to the buyer in which case the buyer’s only remedies are to sue the seller for misrepresentation/fraud, his lawyer for negligence and/or if he can occupy the land for long enough without challenge, obtain ‘squatter’s rights.’
However where title depends upon registration with the State in some form the State guarantees good title, thus if the State accepts registration of a purchase the purchaser gets good title while the previous ‘true’ owner’s action is against the State for accepting a registration against his title by the wrongful seller, and the State also has a possible cause of action against him (and his lawyers) for
wrongful registration.
I’ve no idea what the position is in Massachusetts, although the reference to the article to ‘title search’ suggests it is a registered system with some sort of State guarantee, for if the result of proper searches was not conclusive there would be no point in having them at all.
Which suggests that the State might/should be very concerned indeed as it could find itself liable for incorrectly registering transfers to foreclosing mortgagees who had no right to apply for one.
Look up the acronym ‘MERs’.
No, the state should probably not be concerned. Massachusetts made a half-assed attempt to set up an official system of Regsitered Land, similar to what prevails in Europe. IIRC, something less than 10% of property in the state is accounted for in the Commonwealth’s Registered Land books. The rest is still under the old system — which prevails in the vast majority of US states, with the exception, I believe, of Illinois — where there exists a registrar of deeds who records a public record of private land transfers, but which does not make guarantees related to the veracity of the records. Recording a lein or transfer gives you a leg to stand on if you subsequently want to foreclose or prove ownership, and title insurers check the land records before issuing title to be sure there aren’t any open claims. But the Commonwealth itself does not stand behind the registrar and say “whatever’s in the books is how it is.” That’s why you need title insurance in the first place.
First Example: When you buy stolen goods from a thief, then the original owner can reclaim his stolen goods (i.e.: any kind of property that is stolen).
Second Example: If I receive a counterfeit $100 bill and accept it in good faith and then try to deposit the counterfeit $100 bill in the bank, I will have that bill taken away from me. I will not be given any compensation.
If I bought a house from someone who stole it from the rightful owner, then the original owner can reclaim his stolen goods (i.e.: the house).
Title Law and Property Law originated from landowners selling farm land to other landowners. Ask any farmer what happens if it is discovered that one part of the farm has bad title?
But that is the goal isn’t it? The rulers of this country always wanted to make private-property ownership a thing of the past.
US Bancorp Statement on Ibanez, January 7, 2011.
“Our role in this case is solely as trustee for a securitization trust that owned the mortgage at issue. U.S. Bank is not the originator, owner or servicer of the loan in question, nor is it the sponsor or depositor for the securitization trust. The foreclosure in question was conducted by the servicer on behalf of, and in the name of, the securitization trust. That is the only reason our name appears in this case. As trustee, U.S. Bank has no responsibility for the terms of the underlying mortgage, foreclosure procedure, the conduct of the servicer, the process by which the mortgage is transferred to the trust, or the sufficiency of the mortgage documentation.”
Yves, isn’t this basically the same claim?
That’s inadvertently funny. By their own testimony, their only job was to make sure they received the note and that it had been properly conveyed to them (though evidently they’re trying to renounce that second part of their responsibility), and they refused to do even that.
So how exactly do they claim to have “earned” a fee?
If the loans were not physically delivered to US Bank ( which we learned from the Kemp case was the industry practice) the breach of the PSA was obvious and undeniable.
I think I get it. Ounce a property transfers (mistakenly or not) to a new owner/buyer that ends the old chain of custody and begins a new one.
And since no insurance policy allows practice of fraud and negligence then past entities and parties are going to sue the snot out of each other in wake of an improper handling of the old mortgage/title. Sounds reasonable to me as it lifts part of the fog of any future RE sales besides following longstanding and existing law. (We have enough laws for this sector, we don’t need any new ‘tailored’ legislation)
But, as I said before, this would be a great time to start another banking system. Have the Federal Reserve handle all the bad paper until settled (decades) and start a (non-compounding) interest free, fee based (lacking usury) banking system via the US Treasury. If you don’t rid the the system of untrustworthy banks then this scenario just continues with fraud and deceit, bailout, more fraud and deceit, bailout…{Gee, I wonder if that helps an economy prosper?}
No, that doesn’t sound so reasonable to me, given how shockingly easy it seems to be to GET a foreclosure!
The stuff we’ve been reading about people being foreclosed on and not even knowing it until someone shows up to kick them out, or finding out only by luck (one couple happened to look out the window and see the notice being attached to a small tree out in the front yard – while it was raining!), is very scary. Especially since some of those people DIDN’T EVEN HAVE A MORTGAGE!!!!
Back in 2000 or 2001, WaMu foreclosed on a property described as being in quadrant such-and-such etc. etc., county of such-and-such in Washington State, “otherwise known as” MY address which was in an entirely different county!
A realtor showed up on my doorstep offering “cash for key”, but when we looked over his foreclosure documents and I pointed out the discrepancy, he said he’d already noticed the documents looked funny to him and that was why he hadn’t taken a sheriff’s deputy(!) with him this time to help kick out the residents.
I’m not sure whose job it is to make sure foreclosures are handled with the care they deserve, given that a bad foreclosure does serious harm to an innocent victim either way (whether it’s the wrongfully-foreclosed-on homeowner or the innocent new purchaser). Whoever it is, it would sure be nice if they’d get off their butts and discipline some judges.
I am not a lawyer but have studied Law.
From memory under the British system of Land Laws, the answer is ‘no’. If the land was transfered by theft, fraud or illegal means, the new buyer is unprotected and has no rights under Law in respect to the said land – apart from bringing legal action against the party he purchased from. The latter being entirely different in essence.
Of course, this may be more complex and parochially varied under US State (relevant) Law, but under British Law, there are much, much precedented law cases to be drawn from, so much so, I would think it a no-brainer.
I own a property like this, a foreclosed property from Deutsche Bank even though the recorded mortgage documents were all from Washington Mutual. I knew it was an issue when I bought, but the price was right.
I am not too worried. My tenants are paying rent and I have no intention of selling in the short to medium terms.
I can’t see the former owners coming back, as their purchase of the property reeked of mortgage fraud. (they paid and borrowed more than $50,000 over the asking price)
I would go back to who you bought it from and demand some sort of warranty,guarantee or sworn affirmation that they owned the property when they sold it. If the don’t give it to you , Be scared.
I looked at the foreclosure documents and they are clearly marked as “Deutsche Bank as trustee for Washington Mutual, etc.,” so if there was any challenge to my ownership, I could always turn around and sue Deutsche Bank for fraudulent misrepresentation. I did not sign any disclaimers. I’m a lawyer and have some background in business fraud litigation, so I could do this pro-se and not spend a lot of money. It would be fun.
There is another issue that follows from the Ibenez decision in the MA Land Court, that is, since the bank Land trust did not hold the mortgages could they securitize a mortgage they did not hold and sell it to investors? The bonds the investors bought were represented to them as shares of a pool of mortgages held by a trust. All the assignments in the chain to the Land Trust were ruled invalid by Long. He wonders about this requirement too and says in his memorandum and order, “I am puzzled at this since, as noted above and discussed more fully below, the plaintiffs’ own securitization documents required mortgage assignments to be made to the plaintiffs in recordable form for each and every loan at the time the plaintiffs acquired them. Surely, compliance with this requirement would (and certainly should) have been a priority for an entity issuing securities dependent on recoveries from loans, such as these, known from the start to have a higher than normal risk of delinquency and default. See Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z Private Placement Memorandum at 21-43 (Dec. 26, 2006)”
You are absolutely correct. This is the elephant in the room, and I am surprised there are not more investors suing for their money back, having been sold fraudulent securities backed by nothing but referred to as “mortgage-backed”.
If these “tainted” forecloure sales do not pass good title, we can forget about any revival in real estate. Nobody will ever buy another property which has been subject to foreclosure during the past five (ten?) years. Forget about title insurance; all the title insurers are insolvent. They could not pay even 1% of the potential claims.
There appears to be mass confusion about what exactly is wrong with the vast majority of these foreclosure sales. No one disputes that the mortgagor has failed to pay. Yet, the claim is made that because the chain of title from sponsor to trust was not completed, the party asserting the right to foreclose lacks that legal right because it does not own the note. Let’s assume this is true. The legal question is what happens when this defect is ignored during the foreclosure process, either because the foreclosure was undefended, the defendant failed to raise the defense, the judge was incompetent and ignored it. For whatever reason, once you have a judgment of foreclosure, the foreclosing party gets good title and can pass good title to a purchaser for value without notice.
No other possible decision makes any legal sense where the borrower is actually in default. A more difficult case is raised by foreclosure against a borrower who was never in default. He may be left with a claim against the foreclosing bank or its agent, which may often be a shell.
Point of clarity
Your post included, “For whatever reason, once you have a judgment for foreclosure, the foreclosing party gets good title and can pass good title to a purchaser for value without notice”.
Unfortunately, that is what most folks assume but it is not true. Just because a bank has prevailed in a foreclosure action does not mean that they had or have good title. That is exactly the issue addressed by Ibanez. Since courts have not historically been ruling on the validity of the chain of title when a foreclosure action was brought (they ruled on the validity of the debt and relied upon the documentation presented by the plaintiff as being accurate.)
Deeds for property which have been foreclosed upon are ‘special’ for this very reason. Consequently, foreclosure deeds which are provided after the auction of a property, are issued without the guarantee of clear title; instead being issued with what is called ‘marketable title’. The deeds themselves even have ‘special’ names: a sheriff’s deed/bargain and sale deed or special warranty deed. Either if these names (as opposed to a GENERAL warranty) mean they are not guaranteed to be deeds which convey clear title.
A buyer of ANY REO property is getting a ‘special deal’ in more than one way. The seller of an REO can only transfer the rights which they have. If they do not have clear title (and they do not) then they can only pass tainted title (which is what they do).
Foreclosure intervention training is what I have been doing professionally for the past 8 years. Teaching on this specific problem for the past 5 years regularly I have been saddened by the fact that consumers have been so misled by the banks who clearly knew what they were doing and by the professionals who did not know but were not particularly interested in hearing that this segment of the market was always a bad idea for buyers. Essentially, real estate agents, both those who sell REOS and those representing buyers of REOs have helped facilitate the bank disposing of
properties with bad titles. Not a message either group wanted to hear but it is nonetheless the truth.
I have wearied of trying to get professionals to respond appropriately once enlightened and decided to focus on direct consumer education. I am grateful that so mush information has come out in the past 4 months which clearly demonstrates that the banks have been lying for forever and that consumers must take aggressive steps to protect themselves in any and all real estate transactions. NEVER believe anything a bank is telling you. NEVER.
I didn’t have any point for posting expect to clarify that just because you got a title does not mean you got a GOOD title if the house was previously foreclosed. If the home was securitized or ever linked to MERS, you got a home with the chain of title broken and it cannot be fixed.
You own it but you cannot sell it with clear title. You can only pass on marketeable title, if you can find a fool who will buy it after all the coverage this issue has gotten.
Best of luck to anyone who has purchased an REO within the past 15 years. that’s how far back the problem goes.
http://www.HOMPCIblog.org
If you’re interested in the “collecting quitclaims” method of buying property, go ahead and buy REOs. But to get clear title, you’re going to have to get quitclaims from the original (foreclosed) owners and probably a whole lot of banks….
Has anyone heard of any similar issues with homes purchased from the government as in HUD homes or USDA homes concerning these problems? I purchased a USDA foreclosure last year through the Dept of Rural Development.It was a repo and was a steal-I only hope this was not a REAL steal.
Sometimes too good to be true-is.
Hi,
Sorry to hear about your purchase of the REO last year. Your question indicates you were unaware that you could have tried to get an expanded title policy which would have provided coverage in case there were any issues with the title of the home later. I say, tried, because many title companies were already refusing to sell such policies on REO by last year because of the problems which are now being uncovered as wide spread.
I have been teaching about the risks of buying REO properties for several years and urging REALTORS to either advise their clients to steer clear of them altogether or to get the expanded title coverage (not the coverage offered by the bank which is LIMITED AND EXCLUDED and issues related to possible clouds on the title.
A buyer could get such coverage a year or two ago because there was not broad knowledge of the existence of the problem by anyone other than the title companies who worked FOR the banks or guarantors such as HUD, USDA, Fannie Mae etc. These guarantors have always known that they were selling properties with suspect titles (I worked for Fannie Mae as a REALTOR selling their REO homes which is how I learned this ten years ago). I have been trying to get folks to listen to me for the past 8 years with warnings about the risks but have mostly been viewed as an emotional woman who couldn’t possibly have her infor straight since everyone else, including most title companies were saying it couldn’t be true.
So, unless you have such an expanded policy, you got yourself a bargain, which you will likely own for forever because the title is not likely to past muster for you to sell it. Worse yet, you signed documents as part of the purchase which totally let the seller off the hook for any risk after the closing.
Check your paperwork. If you received a special warranty deed or a sheriff’s deed or bargain and sale deed, you got took. The only deed worth anything is a GENERAL warranty deed which is associated with an expanded title policy which includes ‘gap coverage’ (meaning if there are gaps in the chain of title then the title company will defend your rights against any party who asserts some right against your new purchase.
I am not aware of any option–after the fact. Lawsuit is likely worthless since you signed papers saying you accepted the 5th rate title coverage and deed you were given.
Sorry!
To the buyer: as I noted above, if you have piles of time and money, you can buy out the rights of every previous person with a potential claim, file all the quitclaims, and make your title good “by hand”. But you probably didn’t plan to do that, did you?