Signing New Docs Creates New Loan and Waives Prior Defenses

Question from blogger:

In an awkward position and can’t seem to get a straight answer.  We refinanced our property in 2006 and in 2009 received a letter from the title insurers requesting we re-sign all docs.  The note is lost and was never recorded with the county.  I can’t find precedent in such a case and am unsure if quiet title action is the course to pursue.

Any thoughts?

Sounds to me that there are obvious title defects, that the title agent is worried about liability and that the ability of ANY mortgagee to enforce the note and mortgage is in doubt or maybe impossible. Don’t give up your superior position until you speak to a lawyer who understands securitization and mortgages.

It is possible that you don’t have a note or mortgage but that doesn’t mean you have no obligation. If they want to re-establish the formal documentation the burden should be on them, not you. Press the point aggressively since you appear to be in position to demand a very favorable settlement.

4 Responses

  1. My intuitive reaction is to not re-sign anything. You may end up in a situation where you have an obligation and you do have to pay on your obligation but the adverse party may not be able to institute a foreclosure if you get into trouble down the road, and then all they can do is just wait until you sell the property and they get paid then out of those proceeds.

    I think Dave Krieger is not totally accurate in his analysis; it is a toughie to demonstrate Duress if you voluntarily sign anything. The general rule is that a Court will take the view that an adult can sign any contract he pleases, and the Court will not interpose itself into that Contract unless the contract or the circumstances of its making are against public policy. For example, if you sign a contract for dumping of toxic chemicals into the ocean, and you refuse to perform the contract, then the Court will not attempt to enforce the contract or damages flowing from the contract; it is against public policy to dump into the ocean.

    Now someone who signs a contract, a Note and a Mortgagee, is not going to have that disturbed, unless someone else was quite literally holding a gun to your head. Just being threatened with litigation is not typically enough to persuade the Court to set aside the contract. After all, if you don’t like it, your obvious remedy is to go to Court. And you did not do that, you just signed new contracts.

    Now if the new contracts were presented untruthfully, or with untruthful representations, then you have a fraud situation, or at least fraudulent inducement, and that opens up a new Pandora’s box to go play with. But just signing a contract to avoid further litigation is not quite at the threshold of Duress. There has to be something more than that, at least in order to have an easy win in Court.

    Not to say the argument could not prevail; just that it is a toughie.

  2. On the obligation of the title company, they issued a policy guaranteeing marketable title. If that’s not what you’ve found, then you have a claim against them. Short on cash? Let the title company help you pay for your legal fees if you agree to keep them out of the toejam later. The title company after all, has E & O but thousands of claims will probably exhaust it!

  3. I am of the opinion that you will waive your defensive rights if you sign a loan mod or create a new loan. The lender hasn’t even brought all of the proof forward and the burden is on them in a foreclosure. Once you’ve signed new paperwork, the only recourse you might have is that the new paperwork was predicated on old fraudulent paperwork and the only option you were given was a loan mod or refi, as you couldn’t just sell your home just to pay off the equity. This is a tort action waiting to happen called ECONOMIC DURESS. Look it up folks!

  4. Not only do new docs,agreements create new loan, this makes it easier for foreclosing entity to “put it to bed” once and for all, and manufacture whatever chain of title necessary to clear the title. Sort of like money laundering, only with deeds of trust/mortgages.

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