Foreclosures Stopped?: Relief Bill falls Far Short

Ultimately, title examiners will start raising questions about whether the loan negotiations under this bill have any legal effect on the recorded mortgage from your original loan closing. It is for this reason that I believe that quiet title is the ONLY clear way out of this and that the probability is that you will not only get rid of the nominal lender (i.e., the party who appears as lender on your mortgage and note) but that no further claim can or will be made by third parties (e.g. investors) using this strategy. (see below for caveats)

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The new relief bill passed by congress, has a number of peculiarities, shortcomings and flaws but it IS a good start. However, very few of the people in foreclosure will be helped in the near future by this bill and it is therefore imperative that you NOT sit on your rights and expect that your problems are over.

While I see many problems flaws and defects in the bill, if your lender expresses a willingness to go into the program, I would recommend that, at the very least, you commence negotiations with the help of a knowledgeable lawyer who understands the points raised in this post and the Garfield Glossary. It will, if nothing else, buy you time.

In a nutshell, it allows you and the “lender” to come to an agreement that the new mortgage amount is 85% of the current value of the home and establishes terms that hopefully you will be able to pay on a monthly basis. The new loan is insured by a Federal agency through “premiums” paid by the lender and you. If the value of the house goes up and you sell or refinance later, the Federal Agency shares in the appreciation with you in what some are calling a silent second mortgage. In my opinion it is the lenders who should share in the appreciation since that would impact the value of the asset backed securities that have been written off by so many financial institutions and investors. It would also engage all parties in the securitization process and probably avoid the title problems that are being created by both the current foreclosure market and the future one, as amended by this new relief bill.

The essential provisions of the bill require that your loan fits specified criteria which applies to many mortgages but not nearly enough to stem the flood of foreclosures. It also is moot if the lender says it doesn’t want to do it. You can’t simply say to the lender they must stop the collection or the foreclosure.

The essential flaw of the bill is that it ignores the title problems created by securitization. The “lender” to whom you are addressing your correspondence and who is dunning you for collection or has issued a notice of default or notice of sale has already been paid in full by a third party, PLUS a premium. Whether this lender can enter into negotiations or change the loan terms is dubious at best. Congress has not and cannot change state property laws. Both the servicer and the lender are expressly excluded from being considered real parties in interest in the loan if the loan was transferred, sold or pledged to back asset backed securities (ABS); they are expressly barred from presenting themselves as creditors under TILA and expressly barred from exercising rights of a “lender” if they have no financial interest in the loan. And even if they have  partial financial interest or a contingent financial interest, the REST of the real parties in interest (holders in due course) would have to be included as necessary and indispensable parties.

As you no doubt know, it is my opinion that in many cases you can foreclose on the “lender” through a quiet title action and that the lender will have no valid legal defenses. It is my opinion that any homeowner that was involved in a securitized mortgage transaction from 2001-2008 probably has rights to clear title, damages, attorneys fees, and all the costs of closing includling points. However, this is an opinion, and while it has proved true in about 100 cases across the country, there is no guarantee that your situation will qualify you to pursue this relief.

Because of the problem of clear title and because of the securitized transaction, I think the new bill creates more problems than it solves. Ultimately, title examiners will start raising questions about whether the loan negotiations under this bill have any legal effect on the recorded mortgage from your original loan closing. It is for this reason that I believe that quiet title is the ONLY clear way out of this and that the probability is that you will not only get rid of the nominal lender (i.e., the party who appears as lender on your mortgage and note) but that no further claim can or will be made by third parties (e.g. investors) using this strategy.

This is not rocket science but neither is it as simple as writing a letter. Lawyers are trained to do this and you are not. Lawyers who are licensed to practice where your home is located will know things about local laws and procedures that I don’t know and you don’t know. So this post should be taken as guidance and not a firm legal opinion on which you should base your actions. You should check with local lawyers before making any decisions about taking any steps or entering into any negotiations.

One Response

  1. That is very important section. You are possibly that a good broker. Thanks.

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